MANAGEPAY SYSTEMS BERHAD - Bursa Malaysia

MANAGEPAY SYSTEMS BERHAD (“ManagePay” or the “Company”) (Company No. 887689-D) - Acquisition of 29.50% equity interests in Trustgate Berhad

1.

INTRODUCTION The Board of Directors of ManagePay wishes to announce that ManagePay had on 22 September 2015 entered into a conditional share purchase agreement (“SPA”) with Mr Lo Nyan Tjing (“Mr. Lo” or “Vendor”) for the purchase of 8,849,997 ordinary shares of RM0.10 each (“Sale Shares”) in Trustgate Berhad (“Trustgate”), representing 29.50% equity interest in Trustgate, by ManagePay from the Vendor for a total cash consideration of RM1,800,000 (“Consideration”) subject to the terms and conditions of the SPA (the “Acquisition”).

2.

INFORMATION ON TRUSTGATE Trustgate was incorporated on 15 August 2005 in Malaysia under the Companies Act, 1965. The authorised share capital of Trustgate as at 22 September 2015, being the latest practicable date prior to this announcement (“LPD”) is RM25,000,000 divided into 250,000,000 ordinary shares of RM0.10 each. The total issued and paid-up share capital is RM3,000,000 divided into 30,000,000 ordinary shares of RM0.10 each. As at LPD, the principal activity of Trustgate is investment holding, while its subsidiary and associated companies are as follows: Name of company MSC Trustgate.com Sdn Bhd (“MSC Trustgate”)

Country of incorporation Malaysia

Effective equity interest 94.43%

Malaysia

30%

SignCharge Sdn Bhd

Principal activities Provision of digital certification services Provision of two factors authentication solution for online business

As at the LPD, the directors of Trustgate are Dato’ Dr Mohd Aminuddin bin Mohd Rouse and Dato’ Mohamad Kamarudin bin Hassan. Mr. Lo, who is the Vendor, is the Chief Executive Officer of Trustgate. As at the LPD, the shareholders of Trustgate are as follows: Name Mr. Lo Sigmaview Diversified Sdn Bhd

Equity interest in Trustgate 33.33% 66.67%

Based on the audited consolidated financial statements of Trustgate for financial year ended 31 December 2014, Trustgate registered a loss of RM612,756 while the net assets was RM5,494,713.

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SALIENT TERMS OF THE SPA The salient terms of the SPA include, amongst others, the following: (a)

ManagePay shall pay the Vendor a fully-refundable deposit of RM180,000.00, representing 10% of the Consideration, upon signing of the SPA. The balance of the Consideration shall be paid within 30 days upon fulfillment of all terms and conditions of the SPA.

(b)

At completion, the Vendor shall deliver the Sale Shares free and clear of all encumbrances and together with all rights and benefits attaching thereto.

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(c)

Subject to the fulfillment of the terms and conditions of the SPA, the Acquisition shall be completed within 3 months from the date of the SPA, unless mutually extended by ManagePay and the Vendor.

(d)

ManagePay shall be given the full access to conduct a due diligence investigation and enquiry, whether conducted by ManagePay or through its agent or agents, on the business and operations of Trustgate and MSC Trustgate, and all of Trustgate’s other subsidiaries. It is the Vendor’s responsibility to cause Trustgate and MSC Trustgate to provide ManagePay with full access to information and management of Trustgate and MSC Trustgate to enable ManagePay to conduct the aforementioned due diligence investigation and enquiry exercise.

4.

(e)

Pending completion of the Acquisition, the Vendor shall act in good faith and best interest of Trustgate, and shall ensure that Trustgate does not dispose of any of its assets, including its shareholdings in MSC Trustgate, without prior consent from ManagePay.

(f)

It is a condition precedent that MSC Trustgate successfully renews and obtains its licence as Certification Authority (“CA”) from the relevant authorities for a further period of 5 years from 24 July 2015.

BASIS OF ARRIVING AT THE CONSIDERATION The Consideration is based on Time Revenue Method from the latest available audited consolidated financial statements of Trustgate and the Consideration is arrived at on a willing buyer and willing seller basis as well as the business and revenue prospects of MSC Trustgate.

5.

SOURCE OF FUNDING FOR THE CONSIDERATION The Consideration shall be satisfied in cash and funded through internally generated funds of ManagePay.

6.

DETAILS OF THE VENDOR AND ORIGINAL COST OF THE SALE SHARES AND THE DATE OF INVESTMENT Mr. Lo, aged 49, Malaysian, is currently a 33.33% shareholder of Trustgate and is the Chief Executive Officer of Trustgate. Mr. Lo’s original cost of investment for his 33.33% shareholding in Trustgate is RM1,600,000.00 which was incurred on 10 December 2014. After the Acquisition, Mr. Lo will retain approximately 3.83% equity interest in Trustgate.

7.

TRANSACTION WITH THE SAME RELATED PARTY FOR THE PRECEDING TWELVE (12) MONTHS The ManagePay Group has not entered into any transaction with the Vendor for the twelve (12) months preceding the LPD.

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8.

LIABILITIES TO BE ASSUMED BY MANAGEPAY There are no liabilities, including contingent liabilities and guarantees, to be assumed by ManagePay pursuant to the Acquisition, save for the existing liabilities including contingent liabilities and guarantees of Trustgate group.

9.

EFFECTS OF THE ACQUISITION

9.1

Share capital The Acquisition will not have any effect on the issued and paid-up share capital of ManagePay as the purchase consideration for the Acquisition is to be fully satisfied in cash and does not involve any issuance of new ordinary shares of RM0.10 each in ManagePay (“ManagePay Shares” or the “Shares”).

9.2

Substantial shareholders’ shareholdings The Acquisition will not have any effect on the substantial shareholders’ shareholdings of ManagePay as the Acquisition does not involve any issuance of new ManagePay Shares.

9.3

Net assets per Share and gearing The Acquisition will not have any material effect on the net assets per Share and gearing of ManagePay for the financial year ending 31 December 2015.

9.4

Earnings per Share The Acquisition is not expected to have any material effect on the earnings per Share (“EPS”) for the financial year ending 31 December 2015. Notwithstanding the above and barring any unforeseen circumstances, the Acquisition is expected to contribute positively to the earnings and EPS of ManagePay Group in the ensuing financial years.

10.

RATIONALE The inter-connected world has continued to see a marked increase in the number of major data breaches and cyberattacks including high-profile penetrations at major retailers and attacks on media and government websites. In 2014 alone, major data breaches that hit PlayStation, Target, Kmart, and Home Depot among others have resulted in tens of millions of credit and debit card database being compromised. These data security breaches have scaled from victimizing individuals towards large-scale companies. The Acquisition will enable the ManagePay Group to leapfrog into the cyber security business supplying to financial institutions and payee organizations. Apart from that, the Internet of Things (IoT) real world applications in healthcare, smart city, surveillance, home automation, wearables, automotive and others has attracted increasing data security threats. Recent attacks like the “smart” light bulb password leaks, hacks of Foscam baby monitors, Belkin home automation systems, and hacks of smart cars systems are just the beginning. Gartner has predicted that there will be 26 billion IoT devicesexcluding PCs, tablets and smart phones by year 2020 globally. As the number of IoT devices rises, the potential damage caused by security breaches will be amplified.

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MSC Trustgate, 94.43% owned subsidiary of Trustgate, being one of only three licensed Certificate Authorities approved by MCMC (Malaysian Communications and Multimedia Commission), has been in the business of providing Cyber Security products and services for more than 10 years in Malaysia and has established strong clientele which includes major financial institutions in Malaysia. The Acquisition will enable ManagePay to tap into a trusted and proven platform for securing IoT devices and infrastructure in Malaysia for the near future. In addition to providing ManagePay Group with additional revenue source, the Acquisition will enable ManagePay Group to derive business synergies through the cross selling and bundling of product offerings. The Acquisition will enable ManagePay to offer its existing customers a proven security product solution to preserve the integrity of the clients’ data and infrastructure. At the same time it allows access to the SSL enterprise customers’ base of MSC Trustgate for cross-selling of online payment gateway services as well as bank customers for the cross-selling of payment and finance technologies (Fintech) of ManagePay.

11.

PROSPECTS AND RISKS FACTORS RELATING TO THE ACQUISITION

11.1 Prospects of the industry and enlarged Managepay Group Payment security has always been a main concern in financial industry especially for online and mobile payment, which is relatively vulnerable as compared to in-store payment card acceptance. Issuers and acquirers are required to implement measures to authenticate cardholders for online transactions using strong authentication method, such as dynamic password/PIN and multi-factor authentication (e.g. mobile PKI), to mitigate the risk of unauthorised use of cards for online or mobile transactions. ManagePay’s investment in Trustgate allows the cross selling of ManagePay mobile and online payment solution which is certified with PCIDSS level 1 highest security standard, bundled with strong two-factor authentication method to bank customers. On the other hand, the Malaysia National IoT blueprint indicated that by the year 2020 the total IoT eco system market size consisting of hardwares, protocols, networks, cloud systems, storage, big data applications, services and managed support is approximately RM th th 9.5 billion. (source: The Star July 10 2015 newsprint and The Edge July 20 2015 newsprint) ManagePay’s investment in Trustgate offers the best opportunity to set up a trusted and proven platform for securing IoT devices and infrastructure in the next five years in Malaysia. The use of digital security certificates is a scalable solution, securing millions of connected IoT devices. In addition, the Acquisition would bode well for ManagePay due to the additional revenue source as well as the potential business synergies that can be derived as set out in Section 10 of this announcement.

11.2 Risk factors relating to the Acquisition 11.2.1 Non-completion of the Acquisition / Renewal of licence by Trustgate As set out in Section 3 above, the Acquisition is subject to amongst others, the renewal of CA licence by MSC Trustgate from the authority MCMC. In the event the licence renewal is not successful, ManagePay will not proceed with the Acquisition and the deposit paid by ManagePay shall be fully refunded by the Vendor.

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11.2.2 Integration risk One of the rationale of the Proposed Acquisition is the synergistic benefits that are expected to be derived from the cross selling and up selling of each other products and services to respective customer bases. Although there is no requirement to integrate the existing business functions and personnel of both companies except of the technical system integration, there can be no assurance that the technical system integration will be a smooth and seamless effort, which may result in ManagePay Group not being able to fully realise the anticipated benefits and value from the Proposed Acquisition. 11.2.3 Dependency on existing management of Trustgate and ability to turnaround the business The turnaround of Trustgate solely depends on their existing management staff and the failure to do so will have a small adverse effect on the financial of ManagePay Group.

12.

HIGHEST PERCENTAGE RATIO APPLICABLE TO THE ACQUISITION Pursuant to Rule 10.02(g) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad, the highest percentage ratio applicable to the Acquisition is 3.50% based on the Audited Financial Statements of ManagePay for the financial year ended 31 December 2014 and Audited Financial Statements of Trustgate for the financial year ended 31 December 2014.

13.

ESTIMATED TIME FRAME FOR COMPLETION OF THE ACQUISITION Barring any unforeseen circumstances, the Acquisition is expected to be completed in the fourth quarter of 2015.

14.

INTEREST OF DIRECTORS, CONNECTED WITH THEM

MAJOR

SHAREHOLDERS

AND/OR

PERSONS

Dato’ Dr Mohd Aminuddin bin Mohd Rouse (“DMAR”) and Dato’ Mohamad Kamarudin bin Hassan (“DMK”) (collectively “Interested Directors”) who are Directors of ManagePay are also Directors of Trustgate. In addition, DMAR and DMK each hold 49,000 ordinary shares of RM1.00 each, representing 49% each, in the issued and paid-up share capital of Sigmaview Diversified Sdn Bhd which in turn holds 66.67% of the issued and paid-up share capital of Trustgate. As DMAR and DMK are deemed interested in the Acquisition, they have abstained from all board deliberations pertaining to the Acquisition. Save as disclosed above, none of the Directors and/or major shareholders of ManagePay and/or persons connected with them have any interests, direct or indirect, in the Acquisition.

15.

STATEMENT BY AUDIT COMMITTEE The Audit Committee (save for the Interested Directors who are also members of the Audit Committee), having considered all aspects of the Acquisition, is of the opinion that the Acquisition is:-

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(i) (ii) (iii)

in the best interest of ManagePay; fair, reasonable and on normal commercial terms; and not detrimental to the interest of the minority shareholders.

The Audit Committee concluded that the financial terms of the Acquisition are fair and reasonable and not detrimental to the non-interested shareholders of ManagePay. 16.

STATEMENT BY BOARD OF DIRECTORS The Board (save for the Interested Directors), having considered all aspects of the Acquisition including the salient terms of the Acquisition, the basis and justification of the Consideration, rationale and benefits of the Acquisition and prospects of Trustgate as well as the effects from the Acquisition, is of the opinion that the Acquisition is in the best interest of ManagePay Group.

17.

APPROVALS REQUIRED As the highest percentage ratio for the Acquisition is less than 5%, the Acquisition will not require the approval of the shareholders of ManagePay. The approvals of any other relevant authorities, if any, will be sought by ManagePay. The Acquisition is not conditional upon any other corporate exercise undertaken by ManagePay.

18.

DOCUMENTS FOR INSPECTION The SPA dated 22 September 2015 may be inspected at the Registered Office of ManagePay at Lot 6.05, Level 6, KPMG Tower, 8 First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan, during normal business hours from Mondays to Fridays (except public holidays) within three (3) months from the date of this announcement. This announcement is dated 23 September 2015.

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