VIVOCOM IN TL HOLDINGS BERHADir.chartnexus.com/vivocom/website_HTML/attachments/...UOB Kay Hian...

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt as to the course of action to take, you should consult your stockbroker, solicitor, accountant, bank manager or other professional adviser immediately.

This Circular has been reviewed and approved by UOB Kay Hian Securities (M) Sdn Bhd as the Adviser of Vivocom Intl Holdings Berhad for the Proposed Rights Issue with Warrants (as defined herein).

Bursa Malaysia Securities Berhad takes no responsibility for the contents of this Circular, 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.

VIVOCOM INTL HOLDINGS BERHAD (Company No.: 596299-D)

(Incorporated in Malaysia)

CIRCULAR TO SHAREHOLDERS

IN RELATION TO THE

PROPOSED RENOUNCEABLE RIGHTS ISSUE OF UP TO 3,010,706,070 NEW ORDINARY SHARES IN VIVOCOM INTL HOLDINGS BERHAD ("VIVOCOM SHARE(S)" OR "SHARE(S)") ("RIGHTS SHARE(S)") ON THE BASIS OF 2 RIGHTS SHARES FOR EVERY 3 EXISTING VIVOCOM SHARES HELD TOGETHER WITH UP TO 1,505,353,035 FREE DETACHABLE WARRANTS ("WARRANT(S) E") ON THE BASIS OF 1 WARRANT E FOR EVERY 2 RIGHTS SHARES SUBSCRIBED FOR, ON AN ENTITLEMENT DATE TO BE DETERMINED AND ANNOUNCED LATER

AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

Adviser

UOB Kay Hian Securities (M) Sdn Bhd (Company No. 194990-K)

(A Participating Organisation of Bursa Malaysia Securities Berhad)

The Notice of the Extraordinary General Meeting ("EGM") of Vivocom Intl Holdings Berhad ("Company") which is scheduled to be held at Gunung Gading, Level 4, Tower A, M Hotels, Hock Lee Centre, Jalan Datuk Abang Abdul Rahim, 93450 Kuching, Sarawak on Wednesday, 6 June 2018 at 2.30 p.m., together with the Form of Proxy are enclosed herein.A member entitled to attend, participate, speak and vote at the EGM is entitled to appoint a proxy or proxies to attend, participate,speak and vote on his/ her behalf. In such event, the Form of Proxy should be lodged at the Registered Office of the Company at 149A, Jalan Aminuddin Baki, Taman Tun Dr Ismail, 60000 Kuala Lumpur not less than 48 hours before the time set for holding the EGM as indicated below. The lodging of the Form of Proxy shall not preclude you from attending, participating, speaking and voting in person at the EGM should you subsequently wish to do so.

Last date and time for lodging the Form of Proxy ......................: Monday, 4 June 2018 at 2.30 p.m.Date and time of the EGM ..........................................................: Wednesday, 6 June 2018 at 2.30 p.m.

This Circular is dated 23 May 2018








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DEFINITIONS

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Except where the context otherwise requires, the following definitions shall apply throughout this Circular:-

"Act" : The Companies Act 2016, as amended from time to time, including any re-enactment thereof

"Board" : The Board of Directors of Vivocom

"Bursa Depository" or "Depository"

: Bursa Malaysia Depository Sdn Bhd

"Bursa Securities" : Bursa Malaysia Securities Berhad

"Circular" : This circular dated 23 May 2018

"Deed Poll B" : The deed poll dated 19 August 2013 executed by Vivocom constituting the Warrants B

"Deed Poll C" : The deed poll dated 9 January 2015 executed by Vivocom constituting the Warrants C

"Deed Poll D" : The deed poll dated 1 June 2015 executed by Vivocom constituting the Warrants D

"Deed Poll E" : The deed poll to be executed by the Company, constituting the WarrantsE

"Director(s)" : The director(s) of Vivocom and shall have the meaning given in Section 2(1) of the Act and Section 2(1) of the Capital Markets and Services Act, 2007

"EGM" : Extraordinary General Meeting

"Entitled Shareholder(s)"

: The shareholders of Vivocom who are registered as a member and whose names appear in the Record of Depositors of the Company on the Entitlement Date

"Entitlement Date" : The date as at the close of business on which shareholders of Vivocommust be registered as a member and whose names appear in the Record of Depositors in order to participate in the Proposed Rights Issue with Warrants

"EPS" : Earnings per Share

"FPE" : Financial period ended

"FYE" : Financial year ended/ ending

"Golden Oasis Resources"

: Golden Oasis Resources Sdn Bhd, a major shareholder of Vivocom

"Listing Requirements" : ACE Market Listing Requirements of Bursa Securities, including any amendments thereto that may be made from time to time

"LPD" : 8 May 2018, being the latest practicable date prior to the printing and despatch of this Circular

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DEFINITIONS (CONT'D)

ii

"Market Day(s)" : Any day from Mondays to Fridays (inclusive of both days) which is not a public holiday and on which Bursa Securities is open for the trading of securities

"Maximum Scenario 1" : Assuming none of the outstanding Warrants B, Warrants C and Warrants D are exercised prior to the implementation of the Proposed Rights Issue with Warrants and the Proposed Rights Issue with Warrants is undertaken on a maximum subscription level basis

"Maximum Scenario 2" : Assuming all the outstanding Warrants B, Warrants C and Warrants D are exercised prior to the implementation of the Proposed Rights Issue with Warrants and the Proposed Rights Issue with Warrants is undertaken on a maximum subscription level basis

"Minimum Scenario" : Assuming none of the outstanding Warrants B, Warrants C and Warrants D are exercised prior to the implementation of the Proposed Rights Issue with Warrants and the Proposed Rights Issue with Warrants is undertaken on the Minimum Subscription Level

"Minimum Subscription Level"

: A minimum level of subscription based upon the irrevocable and unconditional undertakings provided by the major shareholders of Vivocom, namely Golden Oasis Resources and Ang Li-Hann, to subscribe in full for their respective entitlements under the Proposed Rights Issue with Warrants. As at the LPD, Golden Oasis Resources and Ang Li-Hann holds directly, 757,301,608 Vivocom Shares representing approximately 22.28% of the total issued shares of the Company and 340,940,161 Vivocom Shares representing approximately 10.03% of the total issued shares of the Company and pursuant to their irrevocable and unconditional undertakings, they will collectively subscribe for 732,161,178 Rights Shares. As such, on the minimum level of subscription, the minimum amount to be raised by the Company will amount to RM18,304,029 based on an indicative issue price of RM0.025 per Rights Share

"NA" : Net assets

"Proposed Rights Issue with Warrants"

: The proposed renounceable rights issue of up to 3,010,706,070 Rights Shares on the basis of 2 Rights Shares for every 3 existing Vivocom Shares held together with up to 1,505,353,035 Warrants E on the basis of 1 Warrant E for every 2 Rights Shares subscribed for on the Entitlement Date to be determined later

"Record of Depositors" : A record of depositors established by Bursa Depository under the Rules of Depository

"Rights Share(s)" : Up to 3,010,706,070 new Vivocom Shares to be issued pursuant to the Proposed Rights Issue with Warrants

"RM" and "sen" : Ringgit Malaysia and sen, respectively

"Rules" : Rules on Take-overs, Mergers and Compulsory Acquisitions issued by the Securities Commission of Malaysia

"TERP" : Theoretical ex-rights price

"Undertaking Shareholders"

: The major shareholders of Vivocom, namely, Golden Oasis Resources and Ang Li-Hann, collectively

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iii

"UOBKH" or the "Adviser"

: UOB Kay Hian Securities (M) Sdn Bhd

"Vivocom" or the "Company"

: Vivocom Intl Holdings Berhad

"Vivocom Group" or the "Group"

: Vivocom and its subsidiary companies, collectively

"Vivocom Share(s)" or "Share(s)"

: Ordinary share(s) in Vivocom

"VWAMP" : Volume weighted average market price

"Warrant(s) B" : 626,145,878 outstanding warrants 2013/2018 in Vivocom as at the LPD, constituted by the Deed Poll B. Each Warrant B provides the right to the holder of the warrant to subscribe for 1 new Vivocom Share during the 5-year exercise period of the Warrants B up to 8 September 2018 at an exercise price of RM0.20 per Warrant B

"Warrant(s) C" : 250,367,513 outstanding warrants 2015/2020 in Vivocom as at the LPD, constituted by the Deed Poll C. Each Warrant C provides the right to the holder of the warrant to subscribe for 1 new Vivocom Share during the 5-year exercise period of the Warrants C up to 22 January 2020 at anexercise price of RM0.10 per Warrant C

"Warrant(s) D" : 240,824,301 outstanding warrants 2015/2020 in Vivocom as at the LPD, constituted by the Deed Poll D. Each Warrant D provides the right to the holder of the warrant to subscribe for 1 new Vivocom Share during the 5-year exercise period of the Warrants D up to 8 July 2020 at an exercise price of RM0.10 per Warrant D

"Warrant(s) E" : Up to 1,505,353,035 free detachable warrants in Vivocom with a proposed tenure of 5 years to be issued pursuant to the Proposed Rights Issue with Warrants

Words incorporating the singular shall, where applicable, include the plural and vice versa. Words incorporating the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. Any reference to persons shall include a corporation, unless otherwise specified.

Any reference in this Circular to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any reference to a time of day in this Circular shall be a reference to Malaysian time, unless otherwise specified.


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"UOBKH" or the "Adviser"

: UOB Kay Hian Securities (M) Sdn Bhd

"Vivocom" or the "Company"

: Vivocom Intl Holdings Berhad

"Vivocom Group" or the "Group"

: Vivocom and its subsidiary companies, collectively

"Vivocom Share(s)" or "Share(s)"

: Ordinary share(s) in Vivocom

"VWAMP" : Volume weighted average market price

"Warrant(s) B" : 626,145,878 outstanding warrants 2013/2018 in Vivocom as at the LPD, constituted by the Deed Poll B. Each Warrant B provides the right to the holder of the warrant to subscribe for 1 new Vivocom Share during the 5-year exercise period of the Warrants B up to 8 September 2018 at an exercise price of RM0.20 per Warrant B

"Warrant(s) C" : 250,367,513 outstanding warrants 2015/2020 in Vivocom as at the LPD, constituted by the Deed Poll C. Each Warrant C provides the right to the holder of the warrant to subscribe for 1 new Vivocom Share during the 5-year exercise period of the Warrants C up to 22 January 2020 at anexercise price of RM0.10 per Warrant C

"Warrant(s) D" : 240,824,301 outstanding warrants 2015/2020 in Vivocom as at the LPD, constituted by the Deed Poll D. Each Warrant D provides the right to the holder of the warrant to subscribe for 1 new Vivocom Share during the 5-year exercise period of the Warrants D up to 8 July 2020 at an exercise price of RM0.10 per Warrant D

"Warrant(s) E" : Up to 1,505,353,035 free detachable warrants in Vivocom with a proposed tenure of 5 years to be issued pursuant to the Proposed Rights Issue with Warrants

Words incorporating the singular shall, where applicable, include the plural and vice versa. Words incorporating the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. Any reference to persons shall include a corporation, unless otherwise specified.

Any reference in this Circular to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any reference to a time of day in this Circular shall be a reference to Malaysian time, unless otherwise specified.

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TABLE OF CONTENTS

iv

PAGE LETTER TO THE SHAREHOLDERS OF VIVOCOM IN RELATION TO THE PROPOSED RIGHTS ISSUE WITH WARRANTS CONTAINING:-

1. INTRODUCTION 1 2. DETAILS OF THE PROPOSED RIGHTS ISSUE WITH WARRANTS 2 3. RATIONALE AND JUSTIFICATION FOR THE PROPOSED RIGHTS ISSUE

WITH WARRANTS 12

4. INDUSTRY OVERVIEW AND OUTLOOK AND FUTURE PROSPECTS OF

VIVOCOM GROUP 13

5. EFFECTS OF THE PROPOSED RIGHTS ISSUE WITH WARRANTS 18 6. HISTORICAL SHARE PRICES 26 7. APPROVALS REQUIRED/ OBTAINED AND INTER-CONDITIONALITY OF THE

PROPOSED RIGHTS ISSUE WITH WARRANTS 26

8. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/ OR PERSONS

CONNECTED TO THEM 27

9. ESTIMATED TIME FRAME FOR COMPLETION 28 10. CORPORATE PROPOSALS ANNOUNCED BUT PENDING COMPLETION 28 11. DIRECTORS' RECOMMENDATION 28 12. EGM 28 13. FURTHER INFORMATION 29

APPENDICES

I. PRO FORMA CONSOLIDATED STATEMENTS OF FINANCIAL POSITION OF

VIVOCOM GROUP AS AT 31 DECEMBER 2017 TOGETHER WITH THE REPORTING ACCOUNTANTS' LETTER

30

II. FURTHER INFORMATION 49

NOTICE OF EGM ENCLOSED

FORM OF PROXY ENCLOSED

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Registered Office

149A, Jalan Aminuddin Baki Taman Tun Dr Ismail 60000 Kuala Lumpur

23 May 2018

Board of Directors

Ar. Lim Tong Hock (Chairman/ Independent Non-Executive Director) Choo Seng Choon (Executive Director) Dato Nor Mohd Amin bin Shaharudin (Executive Director) Dato' Azahar bin Rasul (Senior Independent Non-Executive Director) Tay Mun Kit (Independent Non-Executive Director)

To: The shareholders of Vivocom Intl Holdings Berhad

Dear Sir/ Madam,

PROPOSED RIGHTS ISSUE WITH WARRANTS

1. INTRODUCTION

On 22 February 2018, UOBKH had, on behalf of the Board, announced that the Company proposed to undertake a renounceable rights issue of up to 3,010,706,070 Rights Shares on the basis of 2 Rights Shares for every 3 existing Vivocom Shares held together with up to 1,505,353,035 Warrants E on the basis of 1 Warrant E for every 2 Rights Shares subscribed for on the Entitlement Date to be determined later.

On 8 May 2018, UOBKH had, on behalf of the Board, announced that Bursa Securities had, vide its letter dated 8 May 2018, resolved to approve the following:-

(a) Admission to the official list of Bursa Securities and the initial listing of and quotation for up to 1,505,353,035 Warrants E to be issued pursuant to the Proposed Rights Issue with Warrants; and

(b) Listing of:-

i. Up to 3,010,706,070 Rights Shares to be issued pursuant to the Proposed Rights Issue with Warrants;

ii. Up to 313,072,939 additional Warrants B to be issued arising from the adjustments in accordance with the provisions of the Deed Poll B, pursuant to the Proposed Rights Issue with Warrants;

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Registered Office

149A, Jalan Aminuddin Baki Taman Tun Dr Ismail 60000 Kuala Lumpur

23 May 2018

Board of Directors

Ar. Lim Tong Hock (Chairman/ Independent Non-Executive Director) Choo Seng Choon (Executive Director) Dato Nor Mohd Amin bin Shaharudin (Executive Director) Dato' Azahar bin Rasul (Senior Independent Non-Executive Director) Tay Mun Kit (Independent Non-Executive Director)

To: The shareholders of Vivocom Intl Holdings Berhad

Dear Sir/ Madam,

PROPOSED RIGHTS ISSUE WITH WARRANTS

1. INTRODUCTION

On 22 February 2018, UOBKH had, on behalf of the Board, announced that the Company proposed to undertake a renounceable rights issue of up to 3,010,706,070 Rights Shares on the basis of 2 Rights Shares for every 3 existing Vivocom Shares held together with up to 1,505,353,035 Warrants E on the basis of 1 Warrant E for every 2 Rights Shares subscribed for on the Entitlement Date to be determined later.

On 8 May 2018, UOBKH had, on behalf of the Board, announced that Bursa Securities had, vide its letter dated 8 May 2018, resolved to approve the following:-

(a) Admission to the official list of Bursa Securities and the initial listing of and quotation for up to 1,505,353,035 Warrants E to be issued pursuant to the Proposed Rights Issue with Warrants; and

(b) Listing of:-

i. Up to 3,010,706,070 Rights Shares to be issued pursuant to the Proposed Rights Issue with Warrants;

ii. Up to 313,072,939 additional Warrants B to be issued arising from the adjustments in accordance with the provisions of the Deed Poll B, pursuant to the Proposed Rights Issue with Warrants;

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iii. Up to 125,183,756 additional Warrants C to be issued arising from the adjustments in accordance with the provisions of the Deed Poll C, pursuant to the Proposed Rights Issue with Warrants;

iv. Up to 120,412,150 additional Warrants D to be issued arising from the adjustments in accordance with the provisions of the Deed Poll D, pursuant to the Proposed Rights Issue with Warrants;

v. Up to 1,505,353,035 new Vivocom Shares to be issued arising from the exercise of the Warrants E;

vi. Up to 313,072,939 new Vivocom Shares to be issued arising from the exercise of the additional Warrants B;

vii. Up to 125,183,756 new Vivocom Shares to be issued arising from the exercise of the additional Warrants C; and

viii. Up to 120,412,150 new Vivocom Shares to be issued arising from the exercise of the additional Warrants D,

on the ACE Market of Bursa Securities, subject to the conditions as disclosed in Section 7 of this Circular.

The purpose of this Circular is to provide the shareholders of Vivocom with the relevant information on the Proposed Rights Issue with Warrants, as well as to seek the approval from the shareholders of Vivocom for the resolution pertaining to the Proposed Rights Issue with Warrants to be tabled at the forthcoming EGM of the Company. The notice of the forthcoming EGM and the Form of Proxy are enclosed together with this Circular.

SHAREHOLDERS OF VIVOCOM ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS OF THIS CIRCULAR TOGETHER WITH THE APPENDICES CONTAINED HEREIN BEFORE VOTING ON THE RESOLUTION PERTAINING TO THE PROPOSED RIGHTS ISSUE WITH WARRANTS TO BE TABLED AT THE FORTHCOMING EGM OF THE COMPANY.

2. DETAILS OF THE PROPOSED RIGHTS ISSUE WITH WARRANTS

2.1 Basis and number of Rights Shares and Warrants E to be issued

The Proposed Rights Issue with Warrants entails an issuance of up to 3,010,706,070 Rights Shares on a renounceable basis of 2 Rights Shares for every 3 existing Vivocom Shares held together with up to 1,505,353,035 Warrants E on the basis of 1 Warrant E for every 2 Rights Shares subscribed for by the Entitled Shareholders on the Entitlement Date to be determined later.

The total issued share capital of Vivocom as at the LPD is RM360,736,392 comprising 3,398,721,413 Vivocom Shares. In addition, as at the LPD, the Company has the following outstanding convertible securities:-

i. A total of 626,145,878 outstanding Warrants B. Each Warrant B carries the entitlement to subscribe for 1 new Vivocom Share during the 5-year exercise period of the Warrants B up to 8 September 2018 at the exercise price of RM0.20 per Warrant B;

ii. A total of 250,367,513 outstanding Warrants C. Each Warrant C carries the entitlement to subscribe for 1 new Vivocom Share during the 5-year exercise period of the Warrants C up to 22 January 2020 at the exercise price of RM0.10 per Warrant C; and

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iii. A total of 240,824,301 outstanding Warrants D. Each Warrant D carries the entitlement to subscribe for 1 new Vivocom Share during the 5-year exercise period of the Warrants D up to 8 July 2020 at the exercise price of RM0.10 per Warrant D;

The actual number of the Rights Shares and the Warrants E to be issued pursuant to the Proposed Rights Issue with Warrants will depend on the total issued Shares of the Company as at the Entitlement Date.

Assuming all the outstanding Warrants B, Warrants C and Warrants D are exercised prior to the implementation of the Proposed Rights Issue with Warrants, a total of up to 3,010,706,070 Rights Shares together with a total of up to 1,505,353,035 Warrants E may be issued in the event the Proposed Rights Issue with Warrants is undertaken on a maximum subscription level basis. In addition, assuming all the 1,505,353,035 Warrants E are exercised, a total of 1,505,353,035 new Vivocom Shares will be issued therefrom.

The Warrants E will be immediately detached from the Rights Shares upon issuance and will be traded separately. The Warrants E will be issued in registered form and constituted by the Deed Poll E to be executed by the Company as may be supplemented from time to time.

The Proposed Rights Issue with Warrants is renounceable in full or in part. Accordingly, the Entitled Shareholders who renounce all or any part of their entitlements to the Rights Shares provisionally allotted to them under the Proposed Rights Issue with Warrants will simultaneously relinquish any accompanying entitlement to the Warrants E. For avoidance of doubt, the Rights Shares and the Warrants E are not separately renounceable.

Any unsubscribed Rights Shares together with the Warrants E will be made available to other Entitled Shareholders and/ or their renouncee(s) under the excess Rights Shares with Warrants E application. Fractional entitlements of the Rights Shares and the Warrants E arising from the Proposed Rights Issue with Warrants, if any, shall be disregarded and dealt with in such manner as the Board shall in their absolute discretion deem fit and expedient, and to be in the best interest of the Company.

2.2 Basis of determining and justification for the issue price of the Rights Shares

The final issue price of the Rights Shares shall 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, at a price that is deemed appropriate after taking into consideration the TERP of Vivocom Shares based on the 5-day VWAMP of Vivocom Shares immediately preceding the price fixing date.

For illustrative purposes only, the Rights Shares are assumed to be issued at an indicative issue price of RM0.025 per Rights Share, which represents a discount of approximately 50.00% to the TERP of Vivocom Shares of RM0.05, calculated based on the 5-day VWAMP of Vivocom Shares up to and including the LPD of RM0.065.

The final issue price of the Rights Shares, if any, shall be determined by the Board after taking into consideration the following:-

i. The minimum amount to be raised from the Proposed Rights Issue with Warrants for the intended utilisation under the Minimum Scenario as set out in Section 2.8 of this Circular;

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ii. The final issue price of the Rights Shares shall be deemed sufficiently attractive to encourage the subscription of the Rights Shares by the Entitled Shareholders and/ or their renouncee(s) whilst taking into consideration the funding requirements of Vivocom Group under the Minimum Scenario as set out in Section 2.8 of this Circular;

iii. The historical trading prices of Vivocom Shares for the past 12 months; and

iv. The maximum discount for the final issue price of the Rights Shares shall not be more than 75% to the TERP of Vivocom Shares based on the 5-day VWAMP of Vivocom Shares immediately preceding the price-fixing date. The said maximum discount of not more than 75% was determined by the Board after taking into consideration the need of the Company to price the Rights Shares at an issue price deemed sufficiently attractive to encourage the subscription of the Rights Shares. In any event, it is the intention of the Company to raise the minimum amount of funds from the Proposed Rights Issue with Warrants for the intended utilisation under the Minimum Scenario as set out in Section 2.8 of this Circular.

For avoidance of doubt, the current indicative issue price of RM0.025 per Rights Shares which represents a discount of approximately 50.00% to the TERP of Vivocom Shares of RM0.05, calculated based on the 5-day VWAMP of Vivocom Shares up to and including the LPD of RM0.065. The aforementioned indicative issue price was arrived at after taking into consideration the Company's intention to raise the minimum amount of RM18,304,029 from the Proposed Rights Issue with Warrants.

In the event that the Board decides to fix the final issue price lower than RM0.025 (subject to the discount of the final issue price shall not be more than 75% to the TERP of Vivocom Shares based on the 5-day VWAMP of Vivocom Shares immediately preceding the price-fixing date as highlighted in Section 2.2(iv) above), the Undertaking Shareholders have provided their undertakings to subscribe in full for their respective entitlements and any additional Rights Shares by way of excess application ("Additional Rights Shares") to facilitate the Company's intention to raise the minimum amount of RM18,304,029 from the Proposed Rights Issue with Warrants.

The excess application of the Rights Shares by the Undertaking Shareholders and the Entitled Shareholders and/ or their renounce(s) will be allocated on a fair and equitable basis and in the following priority:-

i. Firstly, to minimise the incidence of odd lots;

ii. Secondly, for allocation to Entitled Shareholders who have applied for excess Rights Shares, on a pro-rata basis and in board lot, calculated based on their respective shareholdings as at the Entitlement Date;

iii. Thirdly, for allocation to Entitled Shareholders who have applied for excess rights shares, on a pro-rata basis and in board lot, calculated based on the quantum of their respective excess rights shares applied for; and

iv. Finally, for allocation to renouncee(s) who have applied for excess rights shares, on a pro-rata basis and in board lot, calculated based on the quantum of their respective excess rights shares applied for.

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2.3 Basis of determining and justification for the exercise price of the Warrants E

The Warrants E attached to the Rights Shares will be issued at no cost to the Entitled Shareholders and/ or their renouncee(s) who subscribe for the Rights Shares.

For illustrative purposes only, the exercise price of the Warrants E are assumed to be at an indicative exercise price of RM0.05 per Warrant E, which represents the TERP of Vivocom Shares, calculated based on the 5-day VWAMP of Vivocom Shares up to and including the LPD of RM0.065.

The final exercise price of the Warrants E 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. The Warrants E will be issued at no cost to the Entitled Shareholders and/ or their renouncee(s) who successfully subscribe for the Rights Shares;

ii. The historical trading prices of Vivocom Shares for the past 12 months and the TERP of Vivocom Shares based on the 5-day VWAMP of Vivocom Shares immediately preceding the price-fixing date; and

iii. The maximum discount for the exercise price of the Warrants E shall not be more than 25% to the TERP of Vivocom Shares based on the 5-day VWAMP of Vivocom Shares immediately preceding the price-fixing date.

2.4 Minimum subscription level, major shareholders' undertakings and underwriting arrangements

The Board has determined to undertake the Proposed Rights Issue with Warrants on the Minimum Subscription Level via the issuance of 732,161,178 Rights Shares. The Minimum Subscription Level had been determined by the Board after taking into consideration the minimum amount of funds of RM18,304,029 that the Company intends to raise from the Proposed Rights Issue with Warrants which will be channelled towards the proposed utilisation of proceeds as set out in Section 2.8 of this Circular. The Undertaking Shareholders have provided their respective undertakings to subscribe in full for their respective entitlements such that the Company will raise the minimum amount of RM18,304,029 from the Proposed Rights Issue with Warrants.

The Undertaking Shareholders had, on 22 February 2018, provided their respective irrevocable and unconditional undertakings to subscribe in full for their respective entitlements under the Proposed Rights Issue with Warrants based on their shareholdings as at 22 February 2018, and also any additional entitlements under the Proposed Rights Issue with Warrants, in the event that they increase their shareholdings in Vivocom from 22 February 2018 up to and including the Entitlement Date ("Undertakings").

As at the LPD, the Undertaking Shareholders, namely Golden Oasis Resources and Ang Li-Hann holds directly, 757,301,608 Vivocom Shares representing approximately 22.28% of the total issued Shares of the Company and 340,940,161 Vivocom Shares representing approximately 10.03% of the total issued Shares of the Company, respectively. For avoidance of doubt, Golden Oasis Resources and Ang Li-Hann are not persons acting in concert ("PAC").

A summary of the Undertakings is set out below:-

Undertaking Shareholders

Shareholdings as at the LPD

Entitlements and Undertakings under the Proposed Rights Issue

with WarrantsFunding

requirementsNo. of Shares % No. of Rights Shares %*1 RM*2

Golden Oasis Resources 757,301,608 22.28 504,867,738 68.96 12,621,693Ang Li-Hann 340,940,161 10.03 227,293,440 31.04 5,682,336

Total 1,098,241,769 32.31 732,161,178 100.00 18,304,029

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Notes:-

*1 Computed based on 732,161,178 Rights Shares available for subscription under the Minimum Scenario

*2 Computed based on the indicative issue price of RM0.025 per Rights Share

Accordingly, for illustrative purposes only, based on the indicative issue price of RM0.025 per Rights Share, the funding requirements for the Undertaking Shareholders pursuant to their Undertakings is approximately RM18.30 million. The Undertaking Shareholders had, on 22 February 2018, provided confirmations that they have sufficient financial resources to take up their respective entitlements and any additional entitlements should they increase their shareholdings in Vivocom from 22 February 2018 up to and including the Entitlement Date as mentioned above. All the said confirmations have been verified by UOBKH, being the Adviser for the Proposed Rights Issue with Warrants.

As mentioned above, Golden Oasis Resources and Ang Li-Hann are not PAC. Upon completion of the Proposed Rights Issue with Warrants under the Minimum Scenario, Golden Oasis Resources equity interest in Vivocom may increase from approximately 22.28% to 30.55% and Ang Li-Hann's equity interest in Vivocom may increase from approximately 10.03% to 13.76%.

Further details on their respective shareholdings as at the LPD and after the Proposed Rights Issue with Warrants are set out in Section 5.4 of this Circular. Based on the aforementioned, they do no trigger the obligation to undertake a mandatory take-over offer for all the remaining Vivocom Shares and Warrants B, Warrants C and Warrants D not already held by them pursuant to Paragraph 4.01(a) of the Rules, upon completion of the Proposed Rights Issue with Warrants under the Minimum Scenario.

Further, assuming full exercise of the Warrants E held by Golden Oasis Resources upon completion of the Proposed Rights Issue with Warrants under the Minimum Scenario, Golden Oasis Resources' equity interest in Vivocom may increase further from approximately 30.55% to 33.68% and in such event, it shall have an obligation to undertake a mandatory take-over offer pursuant to the Rules.

However, it is not the intention of Golden Oasis Resources to undertake a mandatory take-over offer in such event. In this regard, Golden Oasis Resources shall observe its shareholdings in the Company at all times as well as prior to any exercise of the Warrants E in Vivocom held, to avoid triggering the obligation to undertake a mandatory take-over offer pursuant to the Rules. In addition, should the need arises, Golden Oasis Resources may make an application to the Securities Commission Malaysia to seek an exemption under Paragraph 4.08(1) of the Rules from the obligation to undertake a mandatory take-over offer prior to any exercise of the Warrants E in Vivocom held by it.

In addition, Vivocom will still be in compliance with the minimum public shareholding spread of 25% pursuant to Rule 8.02(1) of the Listing Requirements ("Public Spread Requirement") upon completion of the Proposed Rights Issue with Warrants as well as assuming upon full exercise of the Warrants E by Golden Oasis Resources and Ang Li-Hann under the Minimum Scenario. For shareholders' further information, under the Minimum Scenario, the public shareholding spread of the Company may reduce from approximately 67.57% to approximately 55.59% upon completion of the Proposed Rights Issue with Warrants, and it may further reduce to approximately 51.07%assuming full exercise of the Warrants E held by Golden Oasis Resources and Ang Li-Hann.

As the Proposed Rights Issue with Warrants will be implemented based on the Minimum Subscription Level, Vivocom does not intend to procure any underwriting arrangement for the remaining Rights Shares not subscribed for by the other Entitled Shareholders and/ or their renouncee(s).

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For avoidance of doubt, regardless of the final issue price of the Rights Shares, theUndertaking Shareholders have provided their irrevocable and unconditional undertaking to subscribe in full for their respective entitlements and Additional Rights,of which the quantum of the Additional Rights Shares to be subscribed by the Undertaking Shareholders will be determined by the Board, so that the Undertaking Shareholders will, collectively, undertake to subscribe for such number of Rights Shares and Additional Rights Shares to facilitate the Company's intention to raise the minimum amount of RM18,304,029 from the Proposed Rights Issue with Warrants for the intended utilisation of proceeds as set out in Section 2.8 of this Circular, subject to the following:-

i. The Undertaking Shareholders do no trigger the obligation to undertake a mandatory take-over offer for all the remaining Vivocom Shares and Warrants B, Warrants C and Warrants D not already held by them pursuant to Paragraph 4.01(a) of the Rules, upon completion of the Proposed Rights Issue with Warrants under the Minimum Scenario; and

ii. Vivocom will be in compliance with the Public Spread Requirement upon completion of the Proposed Rights Issue with Warrants.

2.5 Ranking of the Rights Shares and new Vivocom Shares to be issued arising from the exercise of the Warrants E

The Rights Shares will, upon allotment and issuance, rank pari passu in all respects with the existing Vivocom Shares, save and except that the Rights Shares will not be entitled to any dividends, rights, allotments and/ or any other forms of distribution ("Distribution") that may be declared, made or paid for which the entitlement date for the said Distribution precedes the date of allotment and issuance of the Rights Shares.

The new Vivocom Shares to be issued arising from the exercise of the Warrants E will, upon allotment and issuance, rank pari passu in all respects with the existing Vivocom Shares, save and except that the new Vivocom Shares to be issued arising from the exercise of the Warrants E will not be entitled to any Distribution that may be declared, made or paid for which the entitlement date for the said Distribution precedes the date of allotment and issuance of the said new Vivocom Shares.

For shareholder's information, the total number of new Vivocom Shares that may be issued pursuant to the exercise of the Warrants E are set out below:-

Minimum Scenario

Maximum Scenario 1

Maximum Scenario 2

No. of Warrants E 366,080,589 1,132,907,137 1,505,353,035

No. of new Vivocom Shares upon exercise of the Warrants E

366,080,589 1,132,907,137 1,505,353,035

2.6 Listing of and quotation for the Rights Shares, Warrants E, new Vivocom Shares to be issued arising from the exercise of the Warrants E and other securities arising from consequential adjustment

The approval from Bursa Securities was obtained vide its letter dated 8 May 2018 for the admission of the Warrants E to the official list of Bursa Securities as well as the listing of and quotation for the Rights Shares, the Warrants E and the additional Warrants B, additional Warrants C and the additional Warrants D to be issued arising from such adjustments as may be made pursuant to the Deed Poll B, Deed Poll C and Deed Poll D, respectively, and the new Vivocom Shares to be issued arising from the exercise of the Warrants E, the additional Warrants B, the additional Warrants C and the additional Warrants D, on the ACE Market of Bursa Securities.

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2.7 Indicative salient terms of the Warrants E

Issue size : Up to 1,505,353,035 Warrants E.

Form : The Warrants E will be issued in registered form and constituted by the Deed Poll E.

Exercise period : The Warrants E may be exercised at any time within 5 years commencing on and including the date of issuance of the Warrants E ("Issue Date") and ending at the close of business at 5.00 p.m. in Kuala Lumpur on a date preceding the fifth (5th) anniversary of the Issue Date, and if such a day is not a market day, on the immediately preceding market day. Any Warrants E not exercised during the exercise period will thereafter lapse and cease to be valid.

Mode of exercise : The registered holder of the Warrant E is required to lodge a subscription form, as set out in the Deed Poll E, with the Company's registrar, duly completed, signed and stamped together with payment of the exercise price by bankers' draft or cashier's order drawn on a bank operating in Malaysia or a money order or postal order issued by a post office in Malaysia in accordance with the Deed Poll E.

Exercise price : The exercise price of the Warrants E shall 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, subject to adjustments in accordance with the provisions of the Deed Poll E.

Exercise rights : Each Warrant E carries the entitlement, at any time during the exercise period, to subscribe for 1 new Vivocom Share at the exercise price, subject to the terms and conditions of the Deed Poll E.

Board lot : For the purpose of trading on Bursa Securities, 1 board lot of Warrants E shall comprise 100 Warrants E carrying the right to subscribe for 100new Vivocom Shares at any time during the exercise period, or such other denomination as determined by Bursa Securities.

Participating rights of the holders of Warrants E in any distribution and/ or offer of further securities

: The holders of the Warrants E are not entitled to vote in any general meeting of Vivocom and/ or to participate in any distribution other than on winding-up, compromise or arrangement of the Company as set out below and/ or in any offer of further securities in the Company unless and until the holder of the Warrants E becomes a shareholder of the Company by exercising his/ her Warrants E into new Vivocom Shares or unless otherwise resolved by the Company in a general meeting.

Adjustments in the exercise price and/ or number of Warrants E

: The exercise price and/ or number of unexercised Warrants E shall be adjusted in the event of alteration to the share capital of the Company, capital distribution or issue of shares in accordance with the provisions of the Deed Poll E. If the Company in any way modify the rights attached to any share or loan capital which is not described in the Deed Poll E so as to convert or make convertible such share or loan capital into, or attached thereto any rights to acquire or subscribe for newshares, the Company must appoint an adviser or auditors (who shall act as experts) to consider whether any adjustment is appropriate, and if the Directors after such consultation determines that any adjustment is appropriate, the exercise price or the number of Warrants E or both, will be adjusted accordingly.

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Rights in the event of winding-up, liquidation, compromise and/ or arrangement

: Where a resolution has been passed for a members' voluntary winding-up of the Company, or where 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 to the extent permitted by law every holder of the Warrants E shall be entitled upon and subject to the provisions of the Deed Poll E 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 the irrevocable surrender of his/ her Warrants E to the Company, elect to be treated as if he/ she had immediately prior to the commencement of such winding-up, compromise or arrangement exercised the exercise rights represented by his/ her Warrants E to the extent specified in the relevant subscription forms and be entitled to receive out of the assets of the Company which would be available in liquidation as if he/ she had on such date been the holder of the new Vivocom Shares to which he/ she would have been entitled to pursuant to such exercise.

Ranking of the new Vivocom Shares to be issued pursuant to the exercise of Warrants E

The new ordinary shares to be issued arising from the exercise of the Warrants E, shall upon allotment and issue rank pari passu in all respects with the existing ordinary shares, save and except that the new ordinary shares will not be entitled to any dividend, right, allotment and/or any other forms of distribution where the entitlement date of such dividend, right, allotment and/or other forms of distribution precedes the relevant date of allotment and issuance of the new ordinary shares.

Listing status : The Warrants E shall be listed and quoted on the ACE Market of Bursa Securities.

Modifications : Save for manifest error, any modification, amendment, deletion or addition to the Deed Poll E shall require the approval of the holders of Warrants E sanctioned by special resolution and may be effected only by the Deed Poll E, executed by the Company and expressed to be supplemental hereto and subject to the approval of the relevant authorities, if necessary.

Governing law : Laws and regulations of Malaysia.

2.8 Utilisation of proceeds

The intended utilisation of proceeds based on the Minimum Scenario, Maximum Scenario 1 and Maximum Scenario 2 are set out in the table below. For avoidance of doubt, the Minimum Scenario was based on the minimum amount that the Company intends to raise for the intended utilisation as set out in the following table.

In any event, the gross proceeds to be raised is dependent on the final issue price fixed for the Rights Shares which will not be at a discount of more than 75% to the TERP of Vivocom Shares based on the 5-day VWAMP of Vivocom Shares immediately preceding the price-fixing date, details of which are set out in Section 2.2(iv) of this Circular. As set out above, the Proposed Rights Issue with Warrants is undertaken on a Minimum Subscription Level, based on the minimum amount that the Company intends to raise. Accordingly, the Company will raise the minimum amount of approximately RM18.30 million under the Proposed Rights Issue with Warrants as set out in the table below.

Timeframe for utilisation from completion of the Proposed Rights Issue with Warrants

Minimum Scenario

Maximum Scenario 1

Maximum Scenario 2

RM'000 RM'000 RM'000

Future viable investments*1 Within 24 months - 25,000 25,000

Working capital*2 Within 24 months 17,104 30,445 49,068

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Timeframe for utilisation from completion of the Proposed Rights Issue with Warrants

Minimum Scenario

Maximum Scenario 1

Maximum Scenario 2

RM'000 RM'000 RM'000

Estimated expenses in relation to the Proposed Rights Issue with Warrants*3

Within 1 month 1,200 1,200 1,200

Total 18,304 56,645 75,268

Notes:-

*1 Apart from expanding Vivocom Group's business organically via the internal growth of its existing businesses, the Group's future plans also includes expanding inorganically, via mergers and acquisitions of businesses or investments that will be in the same, similar or complementary industry to that of Vivocom's existing business. In line with the above, up to RM25.00 million of the proceeds raised from the Proposed Rights Issue with Warrants shall be utilised to finance any suitable and viable potential business(es)/ investment(s), within 24 months from completion of the Proposed Rights Issue with Warrants. As potential acquisition(s) of business(es)/ investment(s) may cost a substantial amount, the proceeds raised from the Proposed Rights Issue with Warrants may allow the Group to capitalise on suitable and viable investment opportunities as and when it arises, which in turn may generate positive returns to the Group in the future, thereby increasing shareholders' value.

As at the LPD, the management of Vivocom is still exploring options for identifying suitable business(es)/ investment(s) or strategic acquisition(s) and will continuously seek and identify such opportunities. The Company shall make the necessary announcements in accordance with the Listing Requirements as and when new business(es)/ investment(s) which are likely to materialise have been identified by the Group. If the nature of the transaction requires shareholders' approval pursuant to the Listing Requirements, the Company will seek the necessary approval from its shareholders.

Once the management of Vivocom has identified any suitable business(es)/ investment(s) or strategic acquisition(s), the management of Vivocom will firstly present the proposal to the Audit Committee for their review, deliberation and approval. Upon procuring the approval from the Audit Committee, only then will the management of Vivocom present the proposal to the Board for their review, deliberation and approval.

In the event the management of Vivocom is not able to identify any suitable business(es)/ investment(s) or strategic acquisition(s) within the time frame of 24 months from completion of the Proposed Rights Issue with Warrants, the Board intends to channel the funds to expand the Company's existing business, amongst others, our construction and aluminium segments. In any event should the Board wishes to vary the utilisation of proceeds for the purposes of internal expansion of construction and aluminium segments as mentioned above, the Company will firstly make the relevant announcement and procure shareholders' approval for the variation of the use of funds, if required.

Pending the utilisation of the proceeds of RM25.00 million earmarked for future viable investments, the proceeds will be placed in interest-bearing bank deposits and/ or money market financial instruments under a separate bank account from other proceeds earmarked for working capital and estimated expenses in relation to the Proposed Rights Issue with Warrants. Further, any form of utilisation from this account shall be subject to the approval of the Audit Committee. The status of utilisation will also be reported in the quarterly financial results announcements as well as annual reports.

*2 The proceeds earmarked for working capital will be utilised to finance the Group's day-to-day operations and is expected to be utilised in the following manner:-

Minimum Scenario

Maximum Scenario 1

Maximum Scenario 2

RM'000 RM'000 RM'000

Procurement of raw materials (e.g. cement, tiles, steel bars and other construction related materials)

10,000 20,000 30,000

Other operating expenses (e.g. utilities, administrative overheads, payment to subcontractor for construction works)

7,104 10,445 19,068

Total 17,104 30,445 49,068

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*3 The proceeds earmarked for estimated expenses in relation to the Proposed Rights Issue with Warrants shall be utilised as follows:-

RM'000

Professional fees (i.e. adviser, reporting accountant and solicitors) 600

Regulatory fees 80

Other incidental expenses in relation to the Proposed Rights Issue with Warrants 520

Total 1,200

Pending utilisation of the proceeds from the Proposed Rights Issue with Warrants for the above purposes, the proceeds will be placed in deposits with licensed financial institutions or short-term money market instruments. The interests derived from the deposits with licensed financial institutions or any gains arising from the short-term money market instruments will be used as additional working capital for the Group.

The gross proceeds to be raised from the exercise of the Warrants E is dependent on the total number of Warrants E exercised during the tenure of the Warrants E as well as the final exercise price of the Warrants E. As such, the exact amount to be raised and timeframe for utilisation of the proceeds from the exercise of the Warrants E is not determinable at this juncture. For illustrative purposes only, the gross proceeds that is expected to be raised upon the full exercise of the Warrants E based on the indicative exercise price of RM0.05 per Warrant E under the Minimum Scenario, Maximum Scenario 1 and Maximum Scenario 2 is set out below:-

Minimum Scenario

Maximum Scenario 1

Maximum Scenario 2

No. of Warrants E 366,080,589 1,132,907,137 1,505,353,035

Total gross proceeds raised assuming all outstanding Warrants E are exercised (RM)

18,304,029 56,645,357 75,267,652

Such gross proceeds to be raised from the exercise of Warrants E will be utilised as additional working capital to finance the Group's day to day operations. The proceeds may be utilised to finance, amongst others, employee salaries, payment to trade creditors as well as general expenses such as utilities and office expenses, the breakdown of which have not been determined at this juncture.

2.9 Foreign Entitled Shareholders

This Circular is issued for the purposes of, inter-alia, explaining the details of the Proposed Rights Issue with Warrants and does not constitute the making available of, an offer of, or an invitation by or on behalf of Vivocom for the subscription or purchase of any securities.

The abridged prospectus which will be issued in connection with the Proposed Rights Issue with Warrants, together with its accompanying documents, have not and will not be made to comply with the laws of any jurisdiction other than Malaysia, and have not and will not be registered under any applicable securities legislation of any jurisdiction other than Malaysia or with or by any regulatory authorities or other relevant bodies of any jurisdiction other than Malaysia, and the Proposed Rights Issue with Warrants will not be offered for subscription in any country other than Malaysia.

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Accordingly, the documents relating to the Proposed Rights Issue with Warrants will only be sent to the Entitled Shareholders who have a registered address or an address for service in Malaysia as registered in the Record of Depositors of Vivocom on the Entitlement Date. The Entitled Shareholders who do not have a registered address or an address for service in Malaysia as registered in the Record of Depositors of Vivocom on the Entitlement Date ("Foreign Entitled Shareholders") and who wish to change their addresses to Malaysia should inform their respective stockbrokers to effect the change of address. Such notification should be done prior to the Entitlement Date.

Alternatively, such Foreign Entitled Shareholders may collect the abridged prospectus from the Company's share registrar who shall be entitled to request for such evidence as they deem necessary to satisfy themselves as to the identity and authority of the person collecting the abridged prospectus.

Foreign Entitled Shareholders may only exercise their rights in respect of the Proposed Rights Issue with Warrants to the extent that it would be lawful to do so, and Vivocom and/ or UOBKH would not, in connection with the Proposed Rights Issue with Warrants, be in breach of the laws of any jurisdiction which the Foreign Entitled Shareholders and/ or their renouncee(s) might be subject to.

Foreign Entitled Shareholders will be responsible for payment of any issue, transfer or any other taxes or other requisite payments due in such jurisdiction and Vivocom shall be entitled to be fully indemnified and held harmless by such foreign applicants for any such issue, transfer or any other taxes or duties. They will have no claims whatsoever against Vivocom, Vivocom's share registrar and/ or UOBKH in respect of their rights or entitlement under the Proposed Rights Issue with Warrants. Such applicants should also consult their professional advisers as to whether they require any governmental, exchange control or other consents or need to comply with any other applicable legal requirements to enable them to exercise their rights in respect of the Proposed Rights Issue with Warrants.

Foreign Entitled Shareholders shall be solely responsible to seek advice as to the laws of any jurisdiction to which they may be subject to, and participation by the Foreign Entitled Shareholders in the Proposed Rights Issue with Warrants shall be on the basis of a warranty by them that they may lawfully so participate without Vivocom and/ or UOBKH being in breach of the laws of any jurisdictions.

Neither Vivocom, UOBKH nor any other advisers to the Proposed Rights Issue with Warrants shall accept any responsibility or liability in the event that any acceptance of a Foreign Entitled Shareholder of his/ her rights in respect of the Proposed Rights Issue with Warrants is or shall become illegal, unenforceable, voidable or void in any country or jurisdiction.

3. RATIONALE AND JUSTIFICATION FOR THE PROPOSED RIGHTS ISSUE WITH WARRANTS

The Proposed Rights Issue with Warrants is undertaken to raise proceeds to be utilised in the manner as set out in Section 2.8 of this Circular. After due consideration of the various options available as well as the capital structure of the Company, the Board is of the opinion that the Proposed Rights Issue with Warrants is the most appropriate means of raising funds for the following reasons:-

i. Enable the Company to raise funds without incurring interest expense as compared to bank borrowings;

ii. The Proposed Rights Issue with Warrants will involve the issuance of new Vivocom Shares without diluting the existing shareholders' percentage shareholdings provided that all the Entitled Shareholders subscribe in full for their respective entitlements under the Proposed Rights Issue with Warrants;

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iii. The Proposed Rights Issue with Warrants will provide the Entitled Shareholders with an opportunity to participate in an equity offering in the Company on a pro rata basis and ultimately, participate in the prospects and future growth of Vivocom Group by subscribing to the Rights Shares; and

iv. The Proposed Rights Issue with Warrants will strengthen Vivocom Group's financial position with enhanced shareholders' funds which is expected to facilitate thecontinuous long term growth and expansion plans of Vivocom Group.

The Warrants E have been attached to the Rights Shares to provide the Entitled Shareholders with additional incentive to subscribe for the Rights Shares. The Warrants E will potentially allow the Entitled Shareholders who subscribe for the Rights Shares to benefit from the possible capital appreciation of the Warrants E and increase their equity participation in the Company at a predetermined price over the tenure of the Warrants E. The Company would also be able to raise additional proceeds as and when the Warrants E are exercised.

4. INDUSTRY OVERVIEW AND OUTLOOK AND FUTURE PROSPECTS OF VIVOCOM GROUP

Vivocom is an investment holding company and its subsidiary companies are principally involved in the construction services, aluminium design and fabrication and the provision of telecommunication engineering services.

4.1 Overview and outlook of the Malaysian economy

The Malaysian economy registered a robust growth of 5.9% in 2017 (2016: 4.2%). Domestic demand continued to anchor growth during the year, supported by faster expansion in both private and public sector spending. On the external front, real exports registered the strongest growth rate since 2010, underpinned by strong global expansion, particularly in the case of Malaysia’s key trading partners, and higher global commodity prices.

Private consumption growth improved to 7.0% in 2017 (2016: 6.0%), supported mainly by continued wage and employment growth, with additional impetus from Government measures. Aggregate nominal wages in the private and public sectors grew by 6.4% and 6.2%, respectively in 2017 (2016: 4.3% and 6.4%, respectively). Civil servants continued to benefit from the upward revision in their salaries that took place in July 2016. Consumer spending was further supported by Government measures to increase household disposable income, such as the reduction in employees' contribution to the Employees Provident Fund (EPF) by three percentage points (11% to 8%) and higher Bantuan Rakyat 1Malaysia (BR1M) payouts. Some of these measures were enacted to support the economy in March 2016 on account of the more challenging outlook. The recovery in consumer sentiments from its lowest level in 2015 also contributed to the stronger private consumption growth in 2017.

Public consumption growth expanded by 5.4% in 2017 (2016: 0.9%) due to higher spending on supplies and services by the Federal Government amid sustained growth in the emoluments. The increased expenditure on supplies and services was mainly attributable to spending on maintenance and minor repair works.

Public investment recovered to register a marginal growth of 0.1% in 2017 (2016: -0.5%). This was supported by continued spending by both the General Government and public corporations, mainly in the downstream oil and gas (O&G) and transport & utilities sub-sectors. The continued capital outlays were also to accelerate urban and rural development.

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Private investment growth accelerated to 9.3% in 2017 (2016: 4.3%), as firms benefited from the conducive external and domestic operating environment. The strong growth in exports led to positive spill-overs to the domestic economy, as firms embarked upon capacity expansion to cater to higher orders. Financing conditions, profitability and business sentiments also improved during the year. On a sectoral basis, private investment growth continued to be underpinned by the implementation of new and ongoing projects in the manufacturing and services sectors.

Malaysia is projected to remain firmly on a steady growth path to grow by 5.5% – 6.0% in 2018 (2017: 5.9%). Malaysia’s strong economic fundamentals, diversified structure and inherent dynamism have always been key factors to deliver economic growth. For 2018, growth prospects are further lifted by strengthening global economic conditions. Growth will be underpinned by continued expansion in private sector activity. The strong growth momentum will also be supported by the continued positive spill-overs from the external sector to the domestic economic activity. Malaysia’s trade performance will benefit from favourable global demand, exposure to the global technology cycle and new export production capacity. On the domestic front, continued income and employment growth will sustain household spending, amid the continuation of Government measures and improving consumer sentiments. Private investment activity is also projected to be sustained by capital spending for ongoing and new projects amid elevated business sentiments. On the other hand, public sector spending is expected to moderate given the continuation of fiscal consolidation efforts and the near completion of several major projects by public corporations.

Private investment growth is projected to be sustained at 9.1% in 2018, supported by ongoing and new capital spending in both the manufacturing and services sectors, and strengthened by continued positive business sentiments. Mining investment, while remaining moderate, is estimated to exert a lesser drag to growth following the improvement in commodity prices. Investments in the export-oriented industries (for example, the E&E and resource-based industries) would continue to benefit from the expected expansion in global growth. By type of asset, investments in machinery and equipment (M&E) are expected to receive further impetus from the recent Government measures to encourage automation and innovation. Investments in structures would be supported mainly by ongoing multi-year projects in the broad property sector.

Public consumption is expected to register a marginal expansion of 0.6% in 2018 on account of more moderate growth in emoluments amid prudent spending on supplies and services. This is in line with the Government’s commitment to reprioritise and rationalise non-critical expenditure.

Public investment is projected to decline by 3.2% in 2018 due to lower capital spending by public corporations following the near completion of large-scale projects. Investmentby the General Government is expected to increase, reflecting mainly higher investment to improve public infrastructure and transportation network.

(Source: Bank Negara Malaysia Annual Report 2017)

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4.2 Overview and outlook of the construction industry

The construction sector expanded 5.8% during the fourth quarter of 2017 (Q4 2016: 5.1%) attributed to positive growth in all subsectors, particularly civil engineering (14.2%) and specialised construction activities at 8.5% (Q4 2016: 10%; 2.5%). Civil engineering subsector was mainly supported by construction of utility and transport infrastructure projects. Meanwhile, the specialised construction activities expanded further mainly driven by electrical wiring and sanitary equipment, installation of solar energy collectors and interior design projects. The non-residential subsector continued to expand at a moderate pace of 0.3% (Q4 2016: 0.1%) following lower incoming supply, particularly in Klang Valley and Johor region. However, the residential subsector moderated 1.1% (Q4 2016: 7.1%) weighed down by lower sales in high-end properties but cushioned by construction of service apartments and Government affordable housing schemes.

During the quarter, the total value of completed construction work expanded 7.7% toregister RM35.1 billion involving 8,747 projects (Q4 2016: 8.1%; RM32.6 billion; 9,791 projects). Of which, civil engineering subsector and special trades activities grew 18.4% and 9.5%, respectively. In terms of ownership of the projects, the private sector continues to lead the construction activity with a share of 63.3% (RM22.2 billion) while the remaining by the public sector.

(Source: Quarterly update on the Malaysian Economy, 4th Quarter 2017, Ministry of Finance Malaysia)

The construction sector registered a moderate growth of 6.7% in 2017 (2016: 7.4%). Growth was supported mainly by the civil engineering sub-sector, due to steady progress of large petrochemical, transportation, and utility projects. The special trade sub-sector benefited from increased activity from projects in the early stages of construction, such as land clearing, piling and land reclamation work. Growth in the residential sub-sector moderated, consistent with the record-high number of unsold residential properties. In the non-residential sub-sector, growth was sustained by higher activity from mixed developments, industrial and social projects such as theme parks and sports complexes, which was offset by the ongoing weakness in the commercial segment due to an oversupply of office space and shopping complexes.

The construction sector is expected to record a stronger growth. This will be driven primarily by large new and existing multi-year civil engineering projects. These projects are mainly in the transportation and utilities segment. The construction sector is projected to grow at 7.3% in 2018.

(Source: Bank Negara Malaysia Annual Report 2017)

4.3 Overview and outlook of the telecommunication industry

The information and communication subsector recorded a strong growth of 8.3% in the first half of 2017 (January – June 2016: 8.6%). The communication segment remained as the major contributor to growth, sustaining its pace at 9.3% in the first half of 2017 (January – June 2016: 9.8%) following aggressive promotional activities by telecommunication companies and introduction of new telephone models. Meanwhile, information segment grew 5.7% in the first half of 2017 (January – June 2016: 3.6%) and computer services rose 6.4% in the first half of 2017 (January – June 2016: 7%).The subsector is expected to sustain its strong growth momentum expanding 8.5% in 2017 supported by the launching of latest smartphone models, price reductions on earlier premium models and an increase in subscriptions to value added services offered by telecommunication companies.

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Information and communication technology is one of the fastest growing subsectors in Asia, registering a growth of 12.8% between 2012 and 2016. Over the same period, MSC Malaysia registered a strong export growth of 13.5%. Of this, creative content and technologies was the fastest growing segment expanding 26.3%. As at end August 2017, a total of 367 companies were involved in the creative content and technologies cluster of MSC Malaysia specialising in animation game development; e-learning; and mobile and interactive content. Malaysian information and communication technology exporters are gaining momentum and capabilities, particularly in supplying digital content, software development and testing.

Other services gaining traction include Internet of Things; data centres and cloud services; cyber security; and big data analytics. The increasing uptake of mobile computing is expected to boost demand for new and improved content applications, providing a broad range of opportunities for local content designers, engineers and developers to further enhance exports of creative content.

The information and communication subsector is expected to expand 8.8% in 2018 on account of promotional campaigns and more offerings of digital products.

(Source: Chapter 3: Economic Performance and Prospects, Economic Report 2017/ 2018, Ministry of Finance Malaysia)

4.4 Future prospects of Vivocom Group

The construction services and aluminium design and fabrication segments contributed approximately 57.42% and 30.39%, respectively, to the Group's total revenue for the FYE 31 December 2017 and is expected to continue to be the main revenue and profit driver for the Group with its current order book and recent contracts secured. As at the LPD, the Group's outstanding order book for the construction services and aluminium design and segment is approximately RM707.11 million of which approximately RM436.41 million was secured in 2017 and 2018 which will provide the Group with earning visibility for the next 3 years. Further details of the projects secured are set out below:-

SegmentMonth of

commencementEstimated month

of completion

Total contract

value

Outstanding order book as

at the LPDRM'000 RM'000

Construction November 2015 December 2020 116,400 86,696

Aluminium installation

March 2016 February 2019 12,800 7,816

Construction May 2016 April 2019 156,180 116,857

Construction May 2016 December 2020 25,000 21,200


November 2016 December 2018 10,100 4,780

Construction December 2016 January 2020 52,000 33,350


March 2017 March 2019 13,531 7,855


March 2017 March 2019 6,010 2,764

Construction June 2017 January 2021 195,000 170,000


July 2017 March 2019 14,326 5,080

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SegmentMonth of

commencementEstimated month

of completion

Total contract

value

Outstanding order book as

at the LPDRM'000 RM'000

Construction September 2017 August 2020 75,000 75,000


November 2017 November 2019 3,20

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