Proposed Placement of 64,250,000 New Ordinary Shares

A. PLACEMENT

The Board of Directors of AusGroup Limited (the "Company") wishes to announce that the Company has entered into subscription agreements dated 23 March 2011 ("Subscription Agreements") with the following persons (collectively, the "Placees"), whereby the Placees have agreed to subscribe for the following respective amounts of new ordinary shares in the capital of the Company (“Placement Shares”) (totaling 64,250,000 new Placement Shares) at the issue price of S$0.306 for each Placement Share (“Issue Price”), subject to and upon the terms of the Subscription Agreements (the “Proposed Placement”):-

Notes:-
(1)  Based on existing issued share capital of 404,856,979 Shares of the Company
(2)  Based on enlarged issued share capital of 469,106,979 Shares after the placement of 64,250,000 Placement Shares

The Company is undertaking the Proposed Placement to raise funds for working capital purposes and to reduce the borrowings of the Company and its subsidiaries (“Group”).

The Proposed Placement will be undertaken by way of a private placement in accordance with Section 272B of the Securities and Futures Act (Cap 289). As such, no prospectus or offer information statement will be issued by the Company in connection with the Proposed Placement.

B. ISSUE PRICE

The Issue Price represents a discount of 10% to the volume weighted average price of S$0.3399 for trades done on the ordinary shares in the capital (“Shares”) of the Company on the Singapore Exchange Securities Trading Limited (“SGX-ST”) for the full market day on 23 March 2011 (being the market day or preceding the day on which the Subscription Agreements were signed).

C. AUTHORITY TO ISSUE PLACEMENT SHARES

The Placement Shares will be issued pursuant to the general mandate (“General Mandate”) obtained at the annual general meeting of the Company held on 15 October 2010 (“Date of AGM 2010”) which authorises the Directors to allot and issue new Shares in the capital of the Company in accordance with, and subject to, the provisions of Rule 806 of the Listing Manual of the SGX-ST.

The issued share capital of the Company (in terms of number of Shares) as at the Date of AGM 2010 was 404,525,979 Shares and the total number of outstanding employee share options of the Company on the Date of AGM 2010 was 5,694,500. Therefore, the share capital base of the Company for the computation of the number of Shares which may be issued pursuant to the General Mandate is 410,220,479 Shares (after adjustment for 5,694,500 outstanding employee share options).

As at the date of this Announcement, the Company has not utilised the General Mandate obtained on the Date of AGM 2010. As such, the maximum number of new Shares which may be issued pursuant to the General Mandate is 82,044,095 Shares.

For the avoidance of doubt, the issued share capital of the Company (in terms of the number of Shares) as at the date of this Announcement is 404,856,979 as it includes 331,000 Shares which were issued after the Date of AGM 2010 upon the exercise of outstanding employee share options which were granted prior to the Date of AGM 2010.

When completed, the Proposed Placement will increase the issued and paid up share capital of the Company to 469,106,979 Shares.

The Placement Shares will represent (i) approximately 15.9% of the existing issued share capital of the Company as at the date of this announcement; and (ii) approximately 13.7% of the enlarged issued share capital of the Company after the issue of the Placement Shares.

The Placement Shares when issued and fully paid will rank pari passu in all respects with the existing Shares of the Company.

D. CONDITION PRECEDENT

The Proposed Placement is conditional upon the approval of the SGX-ST for the listing and quotation of the Placement Shares on the SGX-ST. The Company will be making an application to the SGX-ST for the listing and quotation of the Placement Shares on the SGX-ST.

E.  INFORMATION ON THE PLACEES

The backgrounds of the Placees are as follows:-

No placement agent has been appointed by the Company in respect of the Proposed Placement and no placement commission will be payable for the Proposed Placement. ANZ Corporate Advisory is the financial adviser to AusGroup Limited and has made the introduction of the Placees to the Company.

As at the date of the Subscription Agreements, none of the Placees has any interest, direct or indirect, in the Shares of the Company.

Pursuant to the Subscription Agreements, each of the Placees has represented that:- (a) such Placee does not fall within the class of restricted persons to whom placements must not be made by the Company pursuant to Rule 812 of the Listing Manual of the SGX-ST; and (b) the Placee is subscribing for the Placement Shares purely for the purposes of investment.

F. PROCEEDS FROM PROPOSED PLACEMENT AND INTENDED USE

The estimated net proceeds from the Proposed Placement, after deducting estimated expenses pertaining to the Proposed Placement of S$700,000, will be S$18,960,500.

The net proceeds will be used entirely for working capital purposes and to reduce the borrowings of the Group.

G. FINANCIAL EFFECTS

For illustration purposes only, the table below sets out the financial effects of the Proposed Placement based on the following bases and assumptions:-

(i) The audited consolidated financial statements of the Company for the financial year ended 30 June 2010; and

(ii) The financial impact on the consolidated net tangible assets (“NTA”) per Share of the Company is computed based on the assumption that the Proposed Placement was completed on 30 June 2010 and in relation to the Company’s consolidated earnings per Share ("EPS"), computed based on the assumption that the Proposed Placement was completed on 1 July 2009.

Note: (1) EPS is calculated by dividing the Company’s consolidated net earnings attributable to equity holders of the Company by the weighted average number of ordinary shares.

The financial effects of the Proposed Placement on the Company are for illustrative purposes only and are, therefore, not indicative of the actual financial performance or position of the Company after the completion of the Proposed Placement.

H. INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS

None of the Directors or substantial shareholders of the Company (other than in their capacity as director or shareholders of the Company) has any interest, direct or indirect, in the Proposed Placement.

BY ORDER OF THE BOARD
John Sheridan
CEO and Managing Director
24 March 2011