Incorporated in Malaysia under the Companies Act, Property developer in Malaysia and Mould manufacturer for European automotive segment

Transcription

1 (Company No K) Incorporated in Malaysia under the Companies Act, 1965 Property developer in Malaysia and Mould manufacturer for European automotive segment ANNUAL REPORT 2014

2 CONTENTS 2 NOTICE OF TENTH ANNUAL GENERAL MEETING 4 CORPORATE STRUCTURE 5 CORPORATE INFOATION 6 DIRECTORS PROFILE 9 CHAIAN S STATEMENT 10 AUDIT COMMITTEE REPORT 13 CORPORATE GOVERNANCE STATEMENT 22 ADDITIONAL COMPLIANCE INFOATION 23 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL 25 STATEMENT OF DIRECTORS RESPONSIBILITY 26 FINANCIAL STATEMENTS 98 LIST OF PROPERTIES 99 ANALYSIS OF SHAREHOLDINGS 101 ANALYSIS OF WARRANT HOLDINGS PROXY FO

3 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTICE OF TENTH ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Tenth Annual General Meeting of the Company will be held at PLO 135 Jalan Cyber 5, Kawasan Perindustrian Senai Fasa 3, Senai, Johor on Friday, 19 December 2014 at a.m. to transact the following business:- AS ORDINARY BUSINESS AGENDA 1. To receive the Audited Financial Statements for the financial year ended 30 June 2014 together with the Reports of the Directors and Auditors thereon. 2. To approve the payment of Directors Fees amounting to 180, in respect of the financial year ended 30 June 2014 (2013 : 138,375.00). 3. To re-elect Tan Sri Dato Sri Abdul Halil bin Abd Mutalif, who retires pursuant to Article 127 of the Company s Articles of Association and being eligible, offers himself for re-election. 4. To re-elect Datuk Seri Ahmad Said bin Hamdan, who retires pursuant to Article 127 of the Company s Articles of Association and being eligible, offers himself for re-election. 5. To re-appoint Messrs Baker Tilly Monteiro Heng as Auditors of the Company for the ensuing year and to authorise the Directors to fix their remuneration. (Please refer to Note 1) (Resolution 1) (Resolution 2) (Resolution 3) (Resolution 4) AS SPECIAL BUSINESS: To consider and if thought fit, to pass the following resolution: 6. Ordinary Resolution - Authority to Issue Shares pursuant to Section 132D of the Companies Act, 1965 (Resolution 5) THAT, subject always to the Companies Act, 1965, ( the Act ) (as may be amended, modified or re-enacted from time to time), the Articles of Association of the Company and the approvals of relevant government/regulatory authorities, the Directors be and are hereby empowered, pursuant to Section 132D of the Act, to issue shares in the Company at any time at such price, upon such terms and conditions, for such purposes and to such person or persons whomsoever the Directors may in their absolute discretion deem fit provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the issued share capital of the Company for the time being and that the Directors be empowered to obtain the approval for the listing and quotation for the additional shares so issued on the Bursa Malaysia Securities Berhad ( Bursa Securities ) and that such authority shall continue to be in force until the conclusion of the next Annual General Meeting ( AGM ) of the Company. 7. To transact any other business of which due notice shall have been given. By Order of the Board SANICHI TECHNOLOGY BERHAD Foo Siew Loon (MAICSA No.: ) Company Secretary Kuala Lumpur 27 November

4 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTICE OF TENTH ANNUAL GENERAL MEETING (CONT D) Note: 1. The Agenda item 1 is meant for discussion only as the provision of Section 169(1) of the Act does not require a formal approval of the shareholders and hence, is not put forward for voting. 2. A member entitled to attend and vote at this meeting is entitled to appoint up to two (2) proxies to attend and vote in his stead. Where a member appoints two (2) proxies, the appointment shall be invalid unless he specifies the proportion of his holdings to be represented by each proxy. 3. A proxy may but need not be a member of the Company. There shall be no restriction as to the qualification of the proxy and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. A proxy appointed to attend and vote at the meeting of the Company shall have the same rights as the member to speak at the meeting. 4. A member of the Company who, is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account ( omnibus account ), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. 5. Where the Form of Proxy is executed by a corporation, it must be executed under its seal or under the hand of its attorney. 6. The instruments appointing a proxy must be deposited at the Registered Office of the Company located at Level 33A, Menara 1MK, Kompleks 1 Mont Kiara, No.1 Jalan Kiara, Mont Kiara, Kuala Lumpur, not less than forty-eight (48) hours before the time for holding the meeting or at any adjournment thereof. 7. Only depositors whose names appear in the Record of Depositors as at 12 December 2014 shall be regarded as members and entitled to attend, speak and vote at the meeting or appoint a proxy or proxies to attend and vote in his/her stead. Explanatory Notes to Special Business Ordinary Resolution - Authority to Issue Shares pursuant to Section 132D of the Companies Act, 1965 The proposed Resolution 5 is a renewal mandate of the previous general mandate obtained from the shareholders at the Ninth AGM of the Company held on 19 December 2013, which is expiring at the conclusion of the forthcoming AGM. The proposed Ordinary Resolution 5, if passed, will empower the Directors from the date of the Tenth AGM, to allot and issue up to a maximum of 10% of the issued and paid-up share capital of the Company for the time being for such purposes as they consider would be in the best interest of the Company without having to convene a separate general meeting. This authority, unless revoked or varied at a general meeting, will expire at the conclusion of the next AGM of the Company. The renewal of this mandate will provide flexibility to the Company to undertake any possible fund raising activities, including but not limited to further placing of shares, for purpose of funding current and/or future investment project(s), working capital and/or acquisitions. As at the date of this Notice, no new shares in the company were issued pursuant to the mandate granted to the Directors at the Ninth AGM held on 19 December 2013 and which will lapse at the conclusion of the Tenth AGM. Statement Accompanying Notice of Annual General Meeting (pursuant to Paragraph 8.29(2) of the ACE Market Listing Requirements of Bursa Securities) There are no individuals who are standing for election as directors (other than directors standing for re-election). 1. Directors standing for re-election a) The Directors retiring by rotation and standing for re-election pursuant to Article 127 of the Articles of Association of the Company are:- i) Tan Sri Dato Sri Abdul Halil bin Abd Mutalif ii) Datuk Seri Ahmad Said bin Hamdan Further details of the above named Directors are set out on page 6 and page 7 of the Annual Report. 3

5 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) CORPORATE STRUCTURE (Company No K) (Incorporated in Malaysia under the Companies Act, 1965) 100% 100% 100% 100% Sanichi Precision Mould Sdn Bhd Asia Pinnacle Sdn Bhd Sanichi Mould (Thailand) Co. Ltd Sanichi Property Sdn Bhd Design and Fabrication of Advanced Plastic Injection Mould and Conventional Plastic Injection Mould Design and Fabrication of Advanced Plastic Injection Mould Design And Fabrication of Advanced Plastic Injection Mould and Conventional Plastic Injection Mould Property Investment and Development 4

6 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 CORPORATE INFOATION BOARD OF DIRECTORS Tan Sri Dato Sri Abdul Halil bin Abd Mutalif Dato Dr. Pang Chow Huat Datuk Seri Ahmad Said bin Hamdan Dato Abd Halim bin Abd Hamid Mr. Ong Tee Kein Chairman/Independent Non-Executive Director Managing Director Executive Director Independent Non-executive Director Independent Non-executive Director AUDIT COMMITTEE Tan Sri Dato Sri Abdul Halil bin Abd Mutalif Chairman/Independent Non-Executive Director Dato Abd Halim bin Abd Hamid Member/Independent Non-Executive Director Mr. Ong Tee Kein Member/Independent Non-Executive Director NOMINATION AND REMUNERATION COMMITTEE Tan Sri Dato Sri Abdul Halil bin Abd Mutalif Chairman/Independent Non-Executive Director Dato Dr. Pang Chow Huat Member/Executive Director Dato Abd Halim bin Abd Hamid Member/Independent Non-Executive Director COMPANY SECRETARY Ms. Foo Siew Loon (MAICSA No ) AUDITORS Baker Tilly Monteiro Heng (AF 0117) Baker Tilly MH Tower Level 10, Tower 1, Avenue 5 Bangsar South City Kuala Lumpur Tel : Fax : STOCK EXCHANGE LISTING ACE Market of Bursa Malaysia Securities Berhad SHARE REGISTRAR Shareworks Sdn Bhd 2-1, Jalan Sri Hartamas 8 Sri Hartamas Kuala Lumpur Tel : Fax : PRINCIPAL BANKER United Overseas Bank (Malaysia) Berhad 2 Jalan Wong Ah Fook Johor Bahru Tel : WEBSITE REGISTERED OFFICE Level 33A, Menara 1 MK Kompleks 1 Mont Kiara No.1 Jalan Kiara, Mont Kiara Kuala Lumpur Tel : Fax :

7 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) DIRECTORS PROFILE Tan Sri Dato Sri Abdul Halil bin Abd Mutalif Independent Non-Executive Chairman Malaysian, aged 68 Tan Sri Dato Sri Abdul Halil bin Abd Mutalif was appointed to the Board on 20 June He is the Chairman of the Board of Sanichi and also the Chairman of the Audit Committee, Nomination and Remuneration Committee of the Company. He was formerly the Director-General of the Royal Malaysian Customs for five (5) years before he retired in October After graduating from University Malaya with B.A (Hons) in History in 1970, he began his career as an Administrative and Diplomatic Services Officer and served at various government departments and ministries, where he held key positions. From 1990 to 2000, he was seconded to Langkawi Development Authority ( LADA ) which was under the purview of the Ministry of Finance as General Manager. During the secondment to LADA, he was responsible for the overall development of the Langkawi Islands. In 2000, he was subsequently seconded to the Royal Malaysian Customs to assume the position of Director-General of Customs. During his tenure as Director- General of the Royal Malaysian Customs, yearly revenue collections increased from 16 billion prior to his appointment to 25 billion upon his retirement. He also sits on the board of several private limited companies. Tan Sri Dato Sri Halil attended all Board Meetings held during the financial year ended 30 June Dato Dr. Pang Chow Huat Managing Director Malaysian, aged 41 Dato Dr. Pang Chow Huat is the founder and Managing Director of Sanichi and was appointed to the Board on 20 June He is also a member of the Nomination and Remuneration Committee of the Company. Equipped with more than twenty (20) years of experience in precision engineering in the plastic mould and tool industry, he is currently responsible for the overall strategy and direction of the Group as well as client relationship management. He was conferred a Doctor of Philosophy in Design Technology from the InterAmerican University, Washington D.C. in December He began his career in 1991 as an apprentice with a local company specialising in the fabrication of plastic moulds and dies as well as plastic injection moulding, and later joined a Singapore-based mould manufacturer as Head of the Mould Fabrication Department. In 1996, with his in-depth knowledge in plastic moulding and fabrication, he founded Sanichi Precision Mould Industries, specialising in the servicing and repairs of moulds and tools. He has experience exposure to advanced design and technology of high-quality precision moulds and parts. He is the Managing Director of DGB Asia Berhad (formerly known as DSC Solutions Berhad) and the Executive Director of ETI Tech Corporation Berhad and also sits on the Board of several private limited companies. In February 2000, he established Sanichi Precision Mould Sdn. Bhd. ( SPMSB ) and ventured into the design, engineering and fabrication of plastic mould products through Research and Development ( R&D ). He is also the initiator for many of the in-house developed solutions in SPMSB, which is attributed to his hands-on technical know-how garnered in his years of working in the industry. Dato Pang attended all Board Meetings held during the financial year ended 30 June Notes: None of the Directors has any family relationship with any Director and/or Major Shareholder of the Company. None of the Directors has any conflict of interest with the Company. None of the Directors has been convicted for any offences (other than traffic offences) within the past 10 years. 6

8 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 DIRECTORS PROFILE (CONT D) Dato Abd Halim bin Abd Hamid Independent Non-Executive Director Malaysian, aged 65 Dato Abd Halim bin Abd Hamid was appointed to the Board on 28 May He is also a member of the Audit Committee, Nomination and Remuneration Committee of the Company. He was formerly a senior police officer who had served over a span of 36 years in various parts of Malaysia since Throughout the period of service, he had served at various levels of commanding positions and gained wide range of experiences in management, criminal investigation, as well as administration in the police force. He is a Diploma holder from the Malaysian Armed Forces Staff College and later obtained a Bachelor of Laws (Hons.) from the International Islamic University of Malaysia ("IIUM"). Besides the academic qualifications, he had also attended various training courses organized by the police force and Institut Tadbiran Awam Negara. Since his retirement as the Deputy Commissioner of Police ("DCP") in Bukit Aman in September 2005, he was appointed as the Chief Executive Officer of UNIKOP College, a private institution of higher learning fully owned by the PD Cooperative with effect from October 2005 until today. Dato Abd Halim attended all Board Meetings held during the financial year ended 30 June Datuk Seri Ahmad Said bin Hamdan Executive Director Malaysian, aged 62 Datuk Seri Ahmad Said bin Hamdan is an Executive Director of Sanichi and was appointed to the Board on 9 January He started as an Assistant Superintendent of Custom, Penang in early Later, he joined the Anti-Corruption Agency of Malaysia ( ACA ) as Superintendent of Investigation. He has served the government service for 34 years in various divisions such as investigation, intelligence, preventions and prosecution. He also headed a few states in Malaysia as Director of States including Sabah, Perak and Selangor. He has been the Director of Investigation of ACA Malaysia since 1992 and was promoted to Deputy Director General in In 2008, he was promoted to Director General of ACA. He has been the first Chief Commissioner of Malaysian Anti- Corruption Commission ( MACC ) when it was formed in He obtained a B.A (Hons) in Humanities in 1975 from Universiti Sains Malaysia ( USM ), Pulau Pinang. During his service, he was awarded by the Public Service Department, a full scholarship to pursue his studies in Master of Science in Criminology from the Indiana State of University, United States of America from 1986 to He also has the opportunity to do an attachment at the Terre Haute City Police Department (Fraud Investigation Division), Indiana as part of his studies requirements. Datuk Seri Ahmad Said was also entrusted to participate in the Senior Executive Course conducted by the Central Office Training Centre in Seoul, South Korea in Datuk Seri Ahmad Said was awarded medal of honours by the States and Federal Government. Datuk Seri Ahmad Said currently served as the Board Deputy Advisor for Koperasi Tanjong Keramat, Kota Kinabalu, Sabah. He is the Chairman and Director of AT Systematization Berhad and Director of DGB Asia Berhad (formerly known as DSC Solutions Berhad) and also sits on the Board of several private limited companies. Datuk Seri Ahmad Said attended all Board Meetings held during the financial year ended 30 June Notes: None of the Directors has any family relationship with any Director and/or Major Shareholder of the Company. None of the Directors has any conflict of interest with the Company. None of the Directors has been convicted for any offences (other than traffic offences) within the past 10 years. 7

9 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) DIRECTORS PROFILE (CONT D) Ong Tee Kein Independent Non-Executive Director Malaysian, aged 57 Mr. Ong Tee Kein is an Independent Non-Executive Director of Sanichi and was appointed to the Board on 3 November He is also a member of Audit Committee of Sanichi. He has several years of experience in industry and consultancy practice. He holds a Master Degree in Business Administration and is a member of the Malaysian Institute of Accountants and an Associate of The Institute of Chartered Secretaries and Administrators. After qualifying as an accountant in the United Kingdom, Mr. Ong joined a management consultancy practice based in United Kingdom specialising in providing consultancy services to governments and international funding agencies. Since 1994, he was a principal consultant in the corporate advisory division of an international accounting firm. He is also the director of Mlabs Systems Berhad, Biosis Group Berhad, Patimas Computers Bhd and DGB Asia Berhad (formerly known as DSC Solutions Berhad). Mr. Ong attended all Board Meetings held during the financial year ended 30 June Notes: None of the Directors has any family relationship with any Director and/or Major Shareholder of the Company. None of the Directors has any conflict of interest with the Company. None of the Directors has been convicted for any offences (other than traffic offences) within the past 10 years. 8

10 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 CHAIAN S STATEMENT Dear Shareholders, On behalf of the Board of Directors of Sanichi Technology Berhad ( Sanichi or Group ), I would like to present the Annual Report, incorporating the financial statements of the Group and the Company for the financial year ended 30 June OPERATIONAL REVIEW For the financial year under review, the Group recorded revenue of million, which represents an increase of 140.9% over the preceding year revenue of million. The profit from operations also increase from million in 2013 to million in After accounting for finance charges and taxation the Group profit after taxation for 2014 was million compared to million in the preceding year. CORPORATE DEVELOPMENTS The Board of Directors had on 26 February 2014 announced that the Company proposes to undertake a) a proposed renounceable rights issue of up to 644,891,820 new ordinary shares of 0.10 each together with up to 429,927,880 free detachable warrants at an issue price of 0.10 each per Rights Shares on the basis of three Rights Shares together with two Warrants for every two existing shares of the Company (Proposed Rights Issue with Warrants); b) proposed diversification of the business of the Company and its subsidiaries into property development and property investment (Proposed Diversification); c) proposed acquisition of a parcel of freehold land in Malacca measuring approximately 93,345 sq feet by Top Creation Property Sdn Bhd a wholly owned subsidiary of the Company (Proposed Acquisition); d) proposed establishment of an employee share option scheme (ESOS) of up to 30% of the prevailing issued and paid-up capital of the Company (excluding treasury shares) for eligible employees (including directors) of the Company after the proposed Rights Issue with Warrants (Proposed ESOS); e) proposed increase in the authorised share capital of the Company; and f) proposed amendments to the Memorandum and Articles of Association of the Company to facilitate the Proposed Diversification, the Proposed Increase in Authorised Capital and Proposed ESOS (Proposed M&A Amendments), collectively referred to as (the Proposals). As at the date of this Statement all except the Proposed ESOS, the rest of the proposals have been completed. INDUSTRY TRENDS AND DEVELOPMENT The Group continues to operate in the automotive and electronics moulding industry. Economic recoveries in the United States and Europe have had a positive impact on our financial performance in the year under review. Our regional, European and American markets continue to expand and we expect this trend to continue in the coming year. PROSPECTS To broaden our revenue base we have diversified into property development. Our property development project is expected to commence in the coming financial year. We are optimistic that this project will generate profits and at the same time reduce our dependence on our manufacturing business. We are also confident that our ongoing association with Protev Asia will continue to result in generating increased revenues and earnings from this business segment. APPRECIATION On behalf of the Board of Directors, I would like to thank the management and staff for their dedication and perseverance in facing the challenges during the year under review. We would also like to record our appreciation to our shareholders, bankers, business associates and regulatory and government authorities for their continuing support to the Group. TAN SRI DATO SRI ABDUL HALIL BIN ABD MUTALIF Chairman November

11 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) AUDIT COMMITTEE REPORT The Board of Sanichi Technology Berhad is pleased to present the report on the Audit Committee ( AC ) for the financial year ended 30 June COMPOSITION OF MEMBERS AND MEETINGS The Audit Committee of Sanichi Technology Berhad ( the Committee ) comprise of three (3) Directors, all of whom are Independent Non-Executive Directors. Name Tan Sri Dato Sri Abdul Halil Bin Abd Mutalif Dato Abd Halim bin Abd Hamid Mr. Ong Tee Kein Position Chairman / Independent Non-Executive Director Member / Independent Non-Executive Director Member / Independent Non-Executive Director During the financial year, the Committee met five (5) times and details of the attendance of the AC members are as follows:- (i) Tan Sri Dato Sri Abdul Halil bin Abd Mutalif 5/5 (ii) Dato Abd Halim bin Abd Hamid 5/5 (iii) Mr. Ong Tee Kein 5/5 TES OF REFERENCE OF THE AUDIT COMMITTEE Objective The objective of the AC is to assist the Board to discharge its responsibilities by reviewing the adequacy and integrity of the Company and the Group s financial statements as well as the internal control systems including compliance with applicable laws, regulations, directives and guidelines. The presence of the AC is also to reinforce the independence of both the internal and external auditors and thereby helps to assure that they will have rein in the audit process and to provide, by way of regular meetings and a line of communication between the Board and both the external and internal auditors. Membership The Committee shall be appointed by the Board and fulfils the following requirements: (1) The AC must compose of no fewer than 3 members; (2) Majority of the AC shall be independent; (3) At least one member of the AC must be a member of the MIA or any other equivalent qualifications recognised by the MIA; and (4) All members must be Non-Executive Directors. Retirement and Resignation In the event of any vacancy resulting in the number of members being reduced to below 3, the vacancy must be filled within 3 months. The Chairman, who shall be elected by the AC, must be an Independent Director. 10

12 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 AUDIT COMMITTEE REPORT (CONT D) Attendance at Meeting 1. The Company Secretary of Sanichi Technology Berhad shall be the secretary of the AC and will be responsible for the co-ordination of administrative details including calling the meeting and keeping of minutes. 2. The agenda for AC meetings shall be circulated before each meeting to members of the Committee. The Committee may require the internal and external auditors and any officer of the Company or of the Group to attend any of its meetings as it deems fit. 3. The external auditors shall have the right to attend and be heard at any of the AC meeting and shall appear before the committee when required to do so by the committee. The external auditors normally attend meetings at the invitation of the AC. 4. In addition, the Chairman may call a meeting of the AC if a request is made by any committee member, the Group s Managing Director or the internal or external auditors. Duties and Responsibilities of AC The following are the main duties and responsibilities of the AC: 1. To recommend to the Board on the appointment and annual reappointment of both the external and internal auditors and the review of their fees, after taking into consideration the independence and objectivity of the external and internal auditors and cost effectiveness. 2. To discuss with the external auditors before the commencement of audit, the nature and scope of the audit. 3. To review the quarterly interim results and annual financial statements of the Company and of the Group prior to approval by the Board whilst ensuring that they are prepared in a timely and accurate manner, complying with all accounting and regulatory requirements and are promptly published. 4. To discuss issues arising from the interim and final audits and any matter the external auditors may wish to discuss in the absence of the Management where necessary. 5. To review the external auditors management letter and management s response. 6. To evaluate the standards of internal controls and financial reporting of the Sanichi Group of Companies. 7. To consider the major findings of internal audits and/or investigations and Management s response. 8. To review any related party transactions and conflict of interest situation that may arise within Sanichi Group, including any transaction, procedure or source of conduct that raises questions of management integrity. 9. To verify any allocation of options in accordance with ESOS of the Company. 10. To consider other issues as defined by the Board. Power of AC 1. Have explicit authority to investigate any matter within its terms of reference. 2. Have the resources required to perform its duties. 3. Have full and unrestricted access to any information, records and personnel of Sanichi Technology Berhad and any of other companies within the Group. 4. Have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity. 5. Be able to obtain independent professional or other advice and to invite outsiders with relevant experience and expertise to attend the AC meeting (if required) and to brief the AC. 6. Be able to convene meetings with external auditors without the presence of the executive board members, whenever deemed necessary. Frequency of Meetings The AC shall hold a minimum of 4 meetings in a financial year. The number of AC meetings held during the financial year and the details of attendance of each individual member in respect of meetings held shall be disclosed annually. The meeting shall be chaired by the Chairman of AC or in the absence of the Chairman, another committee member nominated by the committee members. The quorum of the meeting shall consist of at least 2 members. The Chairman also has the discretion to call for additional meetings at any time. Reporting Procedures The Company Secretary shall circulate the minutes of meetings of the AC to all members of the Board. 11

13 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) AUDIT COMMITTEE REPORT (CONT D) SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE During the financial year, the AC carried out the following activities to discharge their duties and responsibilities: 1. Reviewed the unaudited quarterly financial results and the annual audited financial statements for the Board s approval prior to their release to Bursa Malaysia Securities Berhad. 2. Reviewed the audit plan of the external auditors. 3. Reviewed report and findings of the external auditors. 4. Reviewed and recommended the re-appointment of the external auditors for the Board s consideration. 5. Reviewed the AC Report and Statement on Risk Management and Internal Control before recommending for Board approval for the purpose of inclusion in the Annual Report. 6. Reviewed the status report of Internal Audit ( IA ) activities to ensure all the planned activities were properly carried out. 7. Reviewed the recommendations by the IA and correction action taken by management in addressing and resolving issues. Internal Audit Function The Group has engaged an external independent internal audit service provider to carry out the internal audit function to assist the AC. Amongst the responsibilities of the internal auditors were to assist the AC in reviewing, identifying and evaluating the existing internal control system of the Groups. Internal audit report, incorporating the audit recommendations and management responses with regards to audit findings relating to the weaknesses in the internal control systems were issued to the AC. This statement is made in accordance with the resolution of the Board dated 24 October

14 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 CORPORATE GOVERNANCE STATEMENT The Board of Directors ( the Board ) of Sanichi Technology Berhad ( Group or Company ) is continuously committed to promote the highest standard of corporate governance within the Group by supporting and implementing the principles and best practices as outlined in the Malaysian Code of Corporate Governance 2012 ( the Code ) and relevant provisions of Bursa Malaysia Securities Berhad ( Bursa Securities ) as a fundamental part of discharging its duties to safeguard the interest of its shareholders as well as to enhance shareholders value and financial performance of the Group. In implementing its governance system and ensuring compliance with the ACE Market Listing Requirements ( AMLR ) of Bursa Securities, the Board has applied the key principles and the extent of its compliance with the best practices set out in the Code throughout the financial year under review. A. ESTABLISH CLEAR ROLES AND RESPONSIBILITIES 1. Clear Functions Of The Board And Management The Board is responsible for the Group s objectives, policies and stewardship by utilizing the Group s resources. The Board is obligated to establish an effective corporate governance practice and control of the Company and has established terms of reference to assist in the discharge of its responsibilities. These include a review and assessment of the strategic position of the Group, setting out short term and long term plans, overseeing the business operations, formulate policies and evaluating whether these are being properly and effectively managed. The Board delegates the authority to the Group Managing Director and supported by the Senior Management Team to ensure the Group s objectives are achieved. In order to facilitate expeditious decisions, the Board has delegated certain functions to the Senior Management. The members of the Senior Management are duly authorized to approve businesses and make operational and administrative decisions to ensure the adherence to of policies and strategies approved by the Board. 2. Board Duties And Responsibilities The Board leads the Group with the following key responsibilities in discharging its stewardship role for the best interest of the Group: i) Overseeing the conduct of the Group s business including evaluating whether the business is being properly managed, where the Board comprise professionals of various background and industries who are able to provide broader and independent views, advice and judgment and ultimately the enhancement of shareholders value. ii) iii) iv) Identifying principal risks and ensuring the implementation of appropriate system to manage these risks. Reviewing and adopting a strategic business plan for the Group. Succession planning, including appointing, training, fixing compensation and replacing senior management where appropriate. v) Developing and implementation of an investor relations programme and shareholders communications policy for the Group. vi) Reviewing the adequacy and integrity of management information and internal control system including applicable laws, regulations, rules and guidelines of the Group. 13

15 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) CORPORATE GOVERNANCE STATEMENT (CONT D) A. ESTABLISH CLEAR ROLES AND RESPONSIBILITIES (CONT D) 3. Code Of Ethics And Conduct The Board continues to govern the standards of business conduct and ethical behaviour expected from the Directors in the performance and exercise of their duties and responsibilities for the Group. The Board is adhered to the Directors Code of Ethics and Conduct introduced by the Companies Commission of Malaysia ( CCM ) which include but not limited to the following: i) to act honestly and with integrity; ii) accountability and responsibility; iii) compliance with legislation, regulatory and listing requirements; iv) to act in the best interest of the Group; v) recognize importance of corporate social responsibility. The Board shall periodically review and reassess the adequacy of the Code of Ethics and Conduct and make such amendment as the Board may deem appropriate. 4. Business Sustainability The Board recognizes the importance of sustainability practices and the impact on the environment, social and governance aspects in conducting the business is taken into consideration. The Group will continue its commitment to ensure wider community will benefit from its efforts in enhancing the value of social responsibility. 5. Access To Information And Advice The Board particularly the Independent Non-Executive Director, has unrestricted access to all information relating to the Group s business and affairs on an on-going basis, interact with the management team to seek further information, updates and explanation on any aspect of the Group s operations to discharge their responsibilities. The Board is supplied with all relevant information and reports on the Group s financial result, strategic and business plan by way of board papers tabled at Board meetings, senior management is invited if necessary. All the Directors have direct access to the advice and services of the Company Secretary and/ or senior management, and if deemed necessary, may seek independent professional advices, at the expense of the Group in the discharge of their duties. 6. Qualified And Competent Company Secretary The Board has access to the advice and services of the Company Secretary at all time and is satisfied with its performance and support rendered in the discharge of his/her functions. The Company Secretary ensures that all Board Meetings are properly convened in accordance with the Board procedures and terms of reference of the respective Board Committees. A record of the Board s deliberations of the issues discussed and conclusion reached in discharging its duties and responsibilities is captured in the minutes of each meeting, prepared by the Company Secretary, who ensures that accurate and proper records of the proceedings of Board meetings are recorded and kept in the statutory register at the registered office of the Company. 14

16 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 CORPORATE GOVERNANCE STATEMENT (CONT D) A. ESTABLISH CLEAR ROLES AND RESPONSIBILITIES (CONT D) 7. Board Charter The Board has established the Board Charter to safeguard the interest of the Group s stakeholders. The Board Charter will be reviewed and updated from time to time in accordance with the needs of the Group and any new regulations that may have impact on the role and responsibilities of the Board. In order to facilitate the effective discharge of its duties, the Board is guided by the Board Charter. The Board Charter shall be reviewed periodically and updated in accordance with any changes in regulations that may have an impact on the discharge of the Board s responsibilities. A copy of the Board Charter is available at the Group s official website at B. STRENGTHEN COMPOSITION Board Committees In order for the Board to discharge its functions effectively, the Board has delegated certain functions to the Committees which operate within clearly defined terms of reference. The Board Committees deliberate issues on a broad and in-depth basis before putting up any recommendation to the Board for approval. 1. Audit Committee The composition, terms of reference and summary of the activities of the Audit Committee are set out in the Audit Committee Report on page 10 to page 12 of this Annual Report. 2. Nomination Committee The Nomination Committee ( NC ) comprises the following members: No of Meetings Attended Tan Sri Dato Sri Abdul Halil Bin Abd Mutalif 1/1 (Chairman/Independent Non-Executive Director) Dato Dr. Pang Chow Huat 1/1 (Executive Director) Dato Abd Halim Bin Abd Hamid 1/1 (Independent Non-Executive Director) The NC is responsible for recommending new Directors to the Board and assessing Directors in accordance with the terms of reference of the Committee. However, the decision on new Director s appointment remains the responsibility of the Board after considering the recommendations by the NC. The NC met once during the year and resolved a few matters via Circular Resolutions. The following activities were carried out:- reviewed the balance mix of skills and experience of the Board and its committees; assessed the effectiveness of the Board as a whole and the committees of the Board; and reviewed and recommended to the Board the tabling of the resolutions for the re-election and re-appointment of the directors retiring at the Company s annual general meeting. 15

17 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) CORPORATE GOVERNANCE STATEMENT (CONT D) B. STRENGTHEN COMPOSITION (CONT D) 3. Appointment and Re-election to the Board The Nomination Committee ( NC ) was established to assist the Board in recommending of new candidates to the Board. The NC will assess the effectiveness of the Board in reviewing the balance mix of skills and experience of the Board and committees. The Board takes into consideration the relevant skills and experience, knowledge, educational background, expertise, character and integrity during the recruitment of the new Directors. The Board is satisfied with the performance of the Committee including views that the training programmes attended by the Directors were appropriate and relevant to the needs of the Group. The Board has accepted the recommendation of the NC to nominate the Directors retiring under the Articles of Association at the forthcoming Annual General Meeting ( AGM ) of the Company as disclosed in the Notice of AGM. 4. Gender Diversity The Board does not have gender diversity policy nor implemented any gender diversity policy during the year under review. However, the Group always emphasize on equal opportunity and appointment are based on merits, capabilities, experience, competencies and other qualities which are not driven by any racial or gender biased. 5. Remuneration Committee ( RC ) The RC comprises of the following members: No of Meetings Attended Tan Sri Dato Sri Abdul Halil Bin Abd Mutalif (Chairman/Independent Non-Executive Director) 1/1 Dato Dr. Pang Chow Huat (Executive Director) 1/1 Dato Abd Halim Bin Abd Hamid (Independent Non-Executive Director) 1/1 The RC is delegated the responsibility to review and develop the Group s remuneration policy and recommend to the Board the remuneration packages and the terms of employment for the Board and shareholders approval at the Annual General Meeting. Individual Directors do not participate in the discussion and decision in the respect of their own remuneration package. A detail of the Directors remuneration for the financial year under review, distinguishing between the Executive and Non-Executive Directors in aggregate categorization into appropriate components and the number of Directors whose remuneration falls into each successive band of 50,000, is shown below: Executive Non-Executive Director Director Total Fees Salary and other remuneration Total

18 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 CORPORATE GOVERNANCE STATEMENT (CONT D) B. STRENGTHEN COMPOSITION (CONT D) 5. Remuneration Committee ( RC ) (Cont d) Executive Non-Executive Remuneration Band Director Director Total Below 50, , , , , Total Employees Share Option Scheme ( ESOS ) Committee The Company, with approval from shareholders in its Extraordinary General Meeting held on 25 June 2014, had established the Employees Share Option Scheme Committee ( ESOS Committee ). ESOS Committee appointed by the Board continued to oversee the administration as well as to ensure proper implementation of ESOS according to the By-Laws of ESOS. Currently, the ESOS Committee comprises the following members: 1) Dato Dr. Pang Chow Huat (Chairman) 2) Datuk Seri Ahmad Said bin Hamdan (Member) 3) Mr. Kua Khai Loon (Member) 4) Mr. Ho Kee Wee (Member) C. REINFORCE INDEPENDENCE 1. Assessment of Independence Annually The Board through the NC had assessed the contribution and performance of the independent Directors annually. Each Director regularly update the Board all information regarding personal interest that is relevant to independent status. The Board is satisfied with the level of independent status for all the Independent Directors. Independent Directors did not compromise their independent status and ability to act in the best interest of the Group. 2. Tenure of Independence The Board does not impose a limit on the length of service of the Independent Directors as their attributes in terms of skills including core competencies in exercise and judgement to discharge their duties as Independent Directors. Currently, the Board complies with Recommendation 3.2 of the Code that none of the Independent Directors have served the Board exceeding a cumulative term of nine (9) years. 3. Separation of Roles of Chairman and Group Managing Director The positions of Chairman and Group Managing Director are held by two (2) different individuals during the financial year ended 30 June 2014, and to ensure a balance of power and authority of the Board. 4. Composition of the Board The Board consists of five (5) members whom three (3) are Independent Non-Executive Directors under the financial year under review. 17

19 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) CORPORATE GOVERNANCE STATEMENT (CONT D) D. FOSTER COMMITMENT 1. Time Commitment The Board meets regularly on a quarterly basic with additional meetings held whenever necessary. All the Directors have committed sufficient time to carry out their duties during the tenure of their appointments. At the end of each calendar year, the Company Secretary would draw a proposed timetable for the Board and Committee meetings, including annual general meeting to be held in the next calendar year, to ease the Directors in planning their attendances at the Board and Committee meetings. Agenda and Board papers are circulated to the Board in advance of each meeting which provided the Board sufficient time to access, study and understand the key issues to be raised at the Board meeting. A record of the Board s deliberations of the issues discussed and conclusion reached in discharging its duties and responsibilities is captured in the minutes of each meeting, prepared by the Company Secretary, who ensures that accurate and proper records of the proceedings of Board meetings are recorded and kept in the statutory register at the registered office of the Company. During the financial year under review, the Board met five (5) times and details of each Director s attendance are tabled below: No. of Meetings Attended Tan Sri Dato Sri Abdul Halil Bin Abd Mutalif 5/5 Dato Dr. Pang Chow Huat 5/5 Dato Abd Halim Bin Abd Hamid 5/5 Mr. Ong Tee Kein 5/5 Datuk Seri Ahmad Said Bin Hamdan 5/5 2. Training All Directors have attended the Mandatory Accreditation Programme ( MAP ). The Directors are aware and encouraged to attend relevant training programmes to keep abreast with the latest developments in the industry, changes in laws, regulations and business environment to discharge their duties. During the financial year under review, all Directors have attended seminars, training or presentations as stated below: Directors Tan Sri Dato Sri Abdul Halil Bin Abd Mutalif Dato Dr. Pang Chow Huat Dato Abd Halim Bin Abd Hamid Mr. Ong Tee Kein Datuk Seri Ahmad Said Bin Hamdan Training / Seminar / Presentation Education Seminar: Overview of ESG index and industry clarification Benchmark Governance in Action What every Director should know Education Seminar: Overview of ESG index and industry clarification Benchmark 9th Tricor Tax & Corporate Seminar Session on Corporate Governance guide: Towards boardroom / excellence (2nd edition) 18

20 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 CORPORATE GOVERNANCE STATEMENT (CONT D) E. UPHOLD INTEGRITY IN FINANCIAL REPORTING 1. Compliance with Applicable Financial Reporting Standards The Board has a responsibility to provide and present a true and fair view on the Group s annual audited financial statements to the shareholders. These include a clear, balanced, understandable and meaningful assessment of the Group s financial position and prospects primarily through the quarterly announcement of financial results to Bursa Securities, annual audited financial statements as well as the Chairman s statement and review of operations in the Annual Report. The Directors are also responsible to ensuring the annual financial statements are prepared in accordance with the provisions of the Companies Act, 1965 ( The Act ) and applicable accounting standards in Malaysia, which are reviewed by the AC and approved by the Board prior to their release to Bursa Securities within the stipulated time frame. The Directors are also responsible for safeguarding the assets of the Group and undertook an independent assessment of the internal control system. AC has been assured that no material issue and fraud had been detected as well as other irregularities. In addition to the above, the Board is responsible for the Directors Responsibility Statement pursuant to AMLR is as set out on page 25 in this Annual Report. 2. Assessment of Suitability and Independence of External Auditors The Board through the establishment of AC maintains a close and transparent relationship with the External Auditors. The Board had sought professional advice and ensured compliance with the applicable accounting standards and statutory requirements in Malaysia. The AC has explicitly the power to communicate directly with the External Auditors. The AC meets the external auditors at least once a year to discuss their audit plan, audit findings and the financial statements. 3. Corporate Social Responsibilities ( CSR ) The Board acknowledges the significance of CSR and views it as an extension to the Group s efforts in promoting a strong social relationship and responsibilities. The Group is committed to the welfare of its employees, the community and environment. F. RECOGNISE AND MANAGE RISKS 1. Sound Framework to Manage Risks The risk management and internal control system is regularly reviewed by senior management and recommendations are made to AC and Board for approval. The Board continued to be committed to maintain and review its internal audit procedures to safeguard shareholders investments. 2. Risk Management and Internal Audit Functions The Board recognises its responsibilities for the overall internal control system and risk management of the Group. The Board has committed and continued to enhance its risk management process. During the financial year under review, the Group has outsourced the internal audit function to an independent consultancy firm. The tasks of the independent consultancy firm was to provide assurance and assist the AC in reviewing the effectiveness of the internal control system as well as risk management of the Group. The Statement on Risk Management and Internal Control is set out on page 23 and page 24 of this Annual Report, which provides an overview of the state of internal control within the Group. 19

21 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) CORPORATE GOVERNANCE STATEMENT (CONT D) G. ENSURE TIMELY AND HIGH QUALITY DISCLOSURE 1. Corporate Disclosure Policy The Board recognizes the importance of timely disclosure and accurate material information to shareholders and investors and compliance with AMLR. The Board is responsible to ensure that high quality and relevant information are made available to shareholders and investors to keep them abreast of all material business matters affecting the Group through annual report, appropriate announcement, circulars to shareholders as well as quarterly announcements. 2. Leverage On Information Technology For Effective Dissemination Of Information The Board had used information technology to disseminate information to the public with the aim to enhance investor relations of the Group. In addition, all shareholders and investors can also obtain relevant and up-to-date information from the Group s official website at and is accessible by all its stakeholders and the public in general, which contained essential corporate information about the Group and its products. H. STRENGTHEN RELATIONSHIP BETWEEN COMPANY AND SHAREHOLDERS 1. Shareholders Participation at General Meetings The AGM is the principal forum and crucial mechanism for dialogue between the Company and its shareholders. The shareholders are encouraged to attend the AGM and participate in the proceedings and take the opportunity to raise questions in relation to the operation of the Group. The Directors and senior management are available to respond to those queries. It also serves as a platform for shareholders to have direct access to the Board. Shareholders who are unable to attend the AGM are allowed to appoint proxies to attend and vote on their behalf. 2. Encourage Poll Voting The Board recognizes and encourage that poll voting would enforce greater shareholders right during the AGM. Poll voting would allow shareholders who are unable to attend the AGM but had appointed the Chairman of the meeting as proxy to vote on their behalf in accordance with their instruction as exercising their right as shareholders of the Company. 3. Effective Communication and Proactive Engagement The Company recognizes the importance of effective communication with its shareholders by way present in person for all the Directors. Senior Management and External Auditors were invited to attend the meeting to respond to the shareholders queries. This statement is made in accordance with the resolution of the Board dated 24 October

22 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 CORPORATE GOVERNANCE STATEMENT (CONT D) COMPLIANCE STATEMENT As at end of the financial year, the Board is of the opinion that the following Corporate Governance Principles and Recommendations ( Recommendations ) have not been complied with: Reference to the Recommendations Recommendation 2.1 and 2.2 Recommendation 2.3 Summary of the Principle / Best Practice Nomination Committee to comprise exclusively of nonexecutive Directors and to evaluate the effectiveness of members of the Board Disclosure of each Director s remuneration Board Comments The Board is of the view that it is sufficient for the Nomination Committee to assess the effectiveness of the Board and the committees of the Board as a whole. It is the Board s opinion that individual Directors should be exempted from this process. The Board is also of the opinion that the participation of Dato Dr. Pang Chow Huat is important in the Nomination Committee meetings. Details of the remuneration of each Director are not disclosed in the Annual Report as the Board is of the opinion this infringes on the privacy of the individual Directors. As an alternative, the Annual Report discloses the annual remuneration of Directors in bands of 50,000 and the number of Executive / Non-Executive Directors receiving annual remuneration in that particular band. This statement is made in accordance with the resolution of the Board dated 24 October

23 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) ADDITIONAL COMPLIANCE INFOATION Utilisation of Proceeds from Private Placement During the financial year, the Company had fully utilised the proceeds of 3,000,000 raised from the Private Placement of 30,000,000 new ordinary shares of 0.10 each in the Company. The said Private Placement announced on 14 June 2013 and completed on 13 September 2013 was approved by the shareholders at the Eighth Annual General Meeting held on 28 December 2012 pursuant to Section 132D of the Companies Act, Employees Share Option Scheme ( ESOS ) The Company had on 7 November 2014 offered 260,000,000 options at an exercise price of 0.10 to eligible employees. The Audit Committee has verified that the allocation of options pursuant to the ESOS is in accordance with the criteria set out in the By-Laws of ESOS. Recurrent Related Party Transaction There were no recurrent related party transactions involved in the financial year ended 30 June Share Buy-backs There were no share buy-backs transactions involved in the financial year ended 30 June Options, Warrants of Convertible Securities Exercised During the financial year, 16,260,950 Irredeemable Convertible Unsecured Loan Stocks ( ICULS ) were converted to 16,260,950 ordinary shares. American Depository Receipt ( ADR ) of Global Depository Receipt ( GDR ) The Company has not sponsored any ADR or GDR programme for the financial year ended 30 June Sanctions and/or Penalties There were no sanctions or penalties imposed on the Company, its subsidiaries, Directors and management by any regulatory bodies during the financial year. Material Contracts Involving Directors and Major Shareholders Interest There were no material contracts entered into by the Company and its subsidiaries involving Directors and major shareholders interests. Non-Audit Fees During the financial year under review, there is no non-audit fee being paid to the external auditors of the Group. Variation in results There were no significant variance between the reported results for the financial year and the unaudited results previously announced by the Company for the financial year ended 30 June Profit Guarantee There was no profit guarantee given by the Group in respect of the financial year 22

24 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL INTRODUCTION This Statement on Risk Management and Internal Control is made pursuant to Paragraph 15.26(b) of the ACE Market Listing Requirements ( AMLR ) of Bursa Malaysia Securities Berhad ( Bursa Securities ) in compliance with the Malaysian Code on Corporate Governance 2012 ( Code ) as the best practices of internal control. The Board of Directors ( the Board ) of Sanichi Technology Berhad ( Group or Sanichi ) is pleased to provide the following statement, which outlined the nature and scope of risk management and internal control of the Group during the financial year under review. BOARD OF DIRECTORS RESPONSIBILITY The Board acknowledges its responsibility for the Group s system of risk management and internal controls and the need to review its adequacy and integrity regularly. However, such a system is designed to manage rather than eliminate the risk of failure to achieve the Group s objectives and the system by its nature can only provide reasonable but not absolute assurance against material misstatement, fraud or loss. The risk management and internal control systems are maintained to achieve the following objectives:- 1. Safeguard shareholders interests and assets of the Group. 2. Ensure the achievement of corporate objectives. 3. Ensure compliance with regulatory requirements. 4. Identify and manage risks affecting the Group. RISK MANAGEMENT The Board recognises the importance of establishing a structured risk management framework to sustain and continuously identifying, evaluating and managing significant business risks which affect the daily operations of the Group. The Board has a structured Risk Management framework that undertakes the Group s desires to identify evaluate and manage significant business risks. The Board is committed in strengthening the Group s risk management and process with the assistance of Audit Committee ( AC ). The Board reviews the internal control issues identified by the internal auditors and management and evaluates the adequacy and effectiveness of the Group s risk management and internal control system. INTERNAL AUDIT FUNCTION The Group has outsourced its internal audit function to ATA Corporate Services Sdn. Bhd. ( ATA ). ATA is an independent professional firm that supports the Audit Committee, and by extension, the Board, by providing an independent assurance on the effectiveness of the Group s systems of internal control. During the year under review, ATA assessed the adequacy and effectiveness of the Group s internal control system on fixed assets. ATA reports to the Audit Committee who in turn reports to the Board on its activities, significant audit results or findings and the necessary recommendations or actions needed to be taken by the management to rectify highlighted issues. The approximate cost incurred by the Group for the internal audit function during the financial year was 10,960. In the planning and throughout the course of their audit work, ATA made reference to the guidelines of The International Professional Practices Framework, International Standards for the Professional Practice of Internal Auditing and Code of Ethics as well as the Group s policies. 23

25 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONT D) INTERNAL CONTROL In order to achieve a sound control environment, the key elements in the framework of the Group s internal control systems are identified as follows:- The Group has a well-defined organisation structure with clear lines of reporting responsibility which are aligned to the Group business and operational requirements. The proper segregation of duties and responsibilities to eliminate the incidence of an employee having a total control of a business process. Senior Management, comprising the Group Managing Director cum Group CEO and Operations Director, assumed an active management and decision making role in the day-to-day operations of the Group. The Group maintained documented policies and procedures for key business processes as part of the internal controls of the Group. Other than Board meetings, management and operational meetings are held regularly to ensure activities and risk mitigation actions are to be executed as proposed and to keep the Board updated on the Group s activities. The Group maintained an effective reporting system to ensure timely generation and aggregation of financial information as required for Senior Management review. The Group maintained an open communication channel between the Board, Senior Management, Accountants and the auditors (both internal and external) to ensure timely conveyance of information for internal control disclosures and financial reporting. CONCLUSION Several internal control improvements and risk areas were identified by internal auditors during the financial year ended 30 June These were reviewed by the Audit Committee and Board and then were closely monitored by Management to ensure the integrity of internal controls and minimisation of risks. The Management will continue to take adequate measures to strengthen the control environment in which the Group operates. The Board is committed to an effective internal control system and is of the view that there is a continuous process in evaluating and managing significant risks faced by the Group and the underlying controls to mitigate these risks. The Board will take cognizance of the continuous process for identifying, evaluating and managing the significant risks faced by the Company. In addition to the above, the Board received assurances from the Group Managing Director that the Group s risk management and internal control system is operating adequately and effectively, in all the material aspects based on the risk management and internal control system of the Group. Based on the foregoing, the Board is of the opinion that the system of internal control and risk management processes are adequate to provide reasonable assurance in safeguarding shareholders investments, the Group s assets and other stakeholders interests. There were no major internal control weaknesses identified that may result in any material loss or uncertainties for the financial year 30 June 2014 that would require disclosure in this annual report. REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS Pursuant to Paragraph of AMLR of Bursa Securities, the external auditors have reviewed this Statement on Risk Management and Internal Control for the inclusion in this Annual Report for the financial year ended 30 June This Statement on Risk Management and Internal Control is made in accordance with the resolution of the Board dated 24 October

26 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 STATEMENT OF DIRECTORS RESPONSIBILITY The Directors are required to prepare the financial statements of the Group and of the Company, are drawn up in accordance with the provision of the Companies Act, 1965 and requirement of the applicable approved accounting standards in Malaysia and Bursa Securities Listing Requirement. The Board is responsible for ensuring that the financial statements give a true and fair view of the state of affairs of the Group and Company at the end of the financial year, and of the results and cash flows for the financial year then ended. In preparing the financial statements, the Board had ensured: Applied the appropriate and relevant accounting policies on a consistent basis; Made reasonable and prudent judgments and estimates; and Applicable approved accounting standards in Malaysia have been followed. The Directors are responsible for ensuring that proper accounting records are kept which disclose with reasonable accuracy the financial position of the Group and comply with the Act. The Directors are also responsible for taking reasonable steps to safeguard the assets of the Group, to prevent and detect fraud and other irregularities. 25

27 FINANCIAL STATEMENTS 27 DIRECTORS REPORT 31 STATEMENT BY DIRECTORS 31 STATUTORY DECLARATION 32 INDEPENDENT AUDITORS REPORT to the members 34 STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 36 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 38 STATEMENT OF FINANCIAL POSITION 39 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 40 STATEMENT OF CHANGES IN EQUITY 41 STATEMENTS OF CASH FLOWS 43 NOTES TO THE FINANCIAL STATEMENTS 97 SUPPLEMENTARY INFOATION ON THE DISCLOSURE OF REALISED AND UNREALISED PROFITS OR LOSSES

28 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 DIRECTORS REPORT The directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 30 June PRINCIPAL ACTIVITIES The principal activities of the Company are investment holding and the provision of management services. The principal activities of the subsidiaries are set out in Note 10 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. RESULTS Group Company Profit/(Loss) for the financial year 2,277,669 (1,643,584) Profit/(Loss) attributable to: Owners of the parent 2,277,669 (1,643,584) DIVIDENDS No dividend has been paid or declared by the Company since the end of the previous financial year. RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year. BAD AND DOUBTFUL DEBTS Before the statements of profit or loss and other comprehensive income and statements of financial position of the Group and of the Company were made out, the directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and have satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts. At the date of this report, the directors are not aware of any circumstances which would render the amount written off as bad debts or the amount of provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent. 27

29 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) DIRECTORS REPORT (CONT D) CURRENT ASSETS Before the statements of profit or loss and other comprehensive income and statements of financial position of the Group and of the Company were made out, the directors took reasonable steps to ensure that any current assets which were unlikely to realise in the ordinary course of business including their values as shown in the accounting records of the Group and of the Company had been written down to an amount which they might be expected so to realise. At the date of this report, the directors are not aware of any circumstances which would render the values attributed to the current assets in the financial statements of the Group and of the Company misleading. VALUATION METHODS At the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. CONTINGENT AND OTHER LIABILITIES At the date of this report, there does not exist: (i) (ii) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or any contingent liability in respect of the Group or of the Company which has arisen since the end of the financial year. No contingent liability or other liability of the Group or of the Company has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may affect the ability of the Group or of the Company to meet their obligations as and when they fall due. CHANGE OF CIRCUMSTANCES At the date of this report, the directors are not aware of any circumstances, not otherwise dealt with in this report or the financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. ITEMS OF AN UNUSUAL NATURE In the opinion of the directors: (i) (ii) the results of the operations of the Group and of the Company for the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made. 28

30 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 DIRECTORS REPORT (CONT D) ISSUE OF SHARES AND DEBENTURES During the financial year, the following shares were issued:- Number of Term of Date Purpose of issue Class of shares shares issue Conversion of ICULS Ordinary shares of 410,130 Cash 0.10 each Conversion of ICULS Ordinary shares of 394,200 Cash 0.10 each Conversion of ICULS Ordinary shares of 292,040 Cash 0.10 each Conversion of ICULS Ordinary shares of 430,660 Cash 0.10 each Private placement Ordinary shares of 30,000,000 Cash for working capital 0.10 each Conversion of ICULS Ordinary shares of 14,352,280 Cash 0.10 each Conversion of ICULS Ordinary shares of 102,360 Cash 0.10 each Conversion of ICULS Ordinary shares of 279,280 Cash 0.10 each The new ordinary shares issued during the financial year ranked pari passu in all respect with the existing ordinary shares of the Company. No debentures were issued during the financial year. WARRANTS AND IRREDEEMABLE CONVERTIBLE UNSECURED LOAN STOCKS The details of Warrants and Irredeemable Convertible Unsecured Loan Stocks ( ICULS ) are as disclosed in Notes 26 and 27 to the financial statements respectively. The Company has been granted exemption by the Companies Commission of Malaysia from having to disclose the names of warrants and ICULS holders, other than the directors, who have been granted warrants and ICULS to subscribe for the ordinary shares of the Company. DIRECTORS OF THE COMPANY The directors in office since the date of the last report are: DATO DR. PANG CHOW HUAT TAN SRI DATO SRI ABDUL HALIL BIN ABD MUTALIF DATUK SERI AHMAD SAID BIN HAMDAN DATO ABD HALIM BIN ABD HAMID ONG TEE KEIN 29

31 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) DIRECTORS REPORT (CONT D) DIRECTORS INTERESTS The interest of a director in office at the end of the financial year in the ordinary shares of the Company during the financial year according to the registers required to be kept under Section 134 of the Companies Act, 1965 are as follow: Number of Ordinary Shares of 0.10 each At At Bought Sold Direct Interest Dato Dr. Pang Chow Huat 3,595,414 3,595,414 By virtue of his interest in the ordinary shares of the Company and pursuant to Section 6A of the Companies Act, 1965, Dato Dr. Pang Chow Huat is deemed to be interested in the ordinary shares of the subsidiaries to the extent that the Company has an interest. None of the other directors holding office at the end of the financial year had any interest in the ordinary shares of the Company or its related corporations during the financial year. DIRECTORS BENEFITS Since the end of the previous financial year, no director of the Company has received or become entitled to receive any benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors as disclosed in Note 5 to the financial statements) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial. Neither during nor at the end of the financial year, was the Company a party to any arrangements whose object is to enable the directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR Details of significant events during financial year are disclosed in Note 35 to the financial statements. SIGNIFICANT EVENTS SUBSEQUENT TO THE FINANCIAL YEAR Details of significant events subsequent to the financial year are disclosed in Note 36 to the financial statements. AUDITORS The auditors, Messrs. Baker Tilly Monteiro Heng, have expressed their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution dated 24 October DATO DR. PANG CHOW HUAT TAN SRI DATO SRI ABDUL HALIL BIN ABD MUTALIF 30

32 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 STATEMENT BY DIRECTORS Pursuant to Section 169(15) of the Companies Act, 1965 We, the undersigned, being two of the directors of the Company, do hereby state that, in the opinion of the directors, the accompanying financial statements as set out on pages 34 to 96 are drawn up in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 30 June 2014 and of their financial performance and cash flows for the financial year then ended. The supplementary information set out on page 97 has been prepared in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad ( Bursa Securities ) Listing Requirements, as issued by the Malaysian Institute of Accountants and presented based on the format as prescribed by Bursa Securities. Signed on behalf of the Board in accordance with a resolution dated 24 October DATO DR. PANG CHOW HUAT TAN SRI DATO SRI ABDUL HALIL BIN ABD MUTALIF STATUTORY DECLARATION Pursuant to Section 169(16) of the Companies Act, 1965 I, Dato Dr. Pang Chow Huat, being the director primarily responsible for the financial management of the Company, do solemnly and sincerely declare that the financial statements as set out on pages 34 to 96 and the supplementary information as set out on page 97 are to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, Subscribed and solemnly declared at Kuala Lumpur in the Federal Territory on 24 October 2014 Before me Tan Kim Chooi (No. W 661) Commissioner for Oaths DATO DR. PANG CHOW HUAT 31

33 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) INDEPENDENT AUDITORS REPORT to the members of Sanichi Technology Berhad Report on the Financial Statements We have audited the financial statements of Sanichi Technology Berhad, which comprise the statements of financial position as at 30 June 2014 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 34 to 96. Directors Responsibility for the Financial Statements The directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The directors are also responsible for such internal controls as the directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the Company s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as at 30 June 2014 and of their financial performance and cash flows for the financial year then ended in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. 32

34 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 INDEPENDENT AUDITORS REPORT to the members of Sanichi Technology Berhad (CONT D) Report on Other Legal and Regulatory Requirements In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following: a) In our opinion, the accounting and other records and the registers required by the Companies Act, 1965 in Malaysia to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Companies Act, 1965 in Malaysia. b) We have considered the financial statements and the auditors report of a subsidiary of which we have not acted as auditors, which are indicated in Note 10 to the financial statements. c) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company s financial statements are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes. d) The auditors reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Companies Act, 1965 in Malaysia. Other Reporting Responsibilities The supplementary information set out on page 97 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad ( Bursa Securities ) and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Securities Listing Requirements, as issued by the Malaysian Institute of Accountants ( MIA Guidance ) and the directive of Bursa Securities. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Securities. Other Matters 1. The financial statements of the Group and of the Company for the financial year ended 30 June 2013 were audited by another firm of chartered accountants whose report dated 18 October 2013 expressed an unmodified opinion on the financial statements. 2. This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the contents of this report. BAKER TILLY MONTEIRO HENG AF 0117 Chartered Accountants lock PENG KUAN 2819/10/16(J) Chartered Accountant Kuala Lumpur 24 October

35 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the financial year ended 30 June 2014 Group Company Note Revenue 4 22,413,104 9,304,172 Cost of sales (15,759,804) (11,306,191) Gross profit/(loss) 6,653,300 (2,002,019) Other income 1,396,249 9,300,001 4,152 14,370 Selling and distribution costs (73,308) (47,340) Administrative expenses (4,145,367) (5,145,365) (1,364,257) (2,242,972) Other expenses (779,964) (863,817) (857,600) (4,998,639) (6,056,522) (1,364,257) (3,100,572) Profit/(Loss) from operations 3,050,910 1,241,460 (1,360,105) (3,086,202) Finance costs (1,200,706) (329,880) (115,594) (42,177) Profit/(Loss) before tax 5 1,850, ,580 (1,475,699) (3,128,379) Tax credit/(expense) 6 427,465 (5,480) (167,885) (5,480) Profit/(Loss) for the financial year 2,277, ,100 (1,643,584) (3,133,859) Other comprehensive income, net of tax Items that may be reclassified subsequently to profit or loss Foreign currency translation 326,453 (34,241) Total comprehensive income/ (loss) for the financial year 2,604, ,859 (1,643,584) (3,133,859) 34

36 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the financial year ended 30 June 2014 (Cont d) Group Company Note Profit/(Loss) attributable to owners of the parent 2,277, ,100 (1,643,584) (3,133,859) Total comprehensive income/(loss) attributable to owners of the parent 2,604, ,859 (1,643,584) (3,133,859) Earnings per ordinary share attributable to owners of the parent Basic (sen) Diluted (sen) The annexed notes form an integral part of, and should be read in conjunction with, these financial statements. 35

37 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June 2014 ASSETS Non-current assets Note Property, plant and equipment 8 34,250,826 35,136,320 Development expenditure 9 Goodwill on consolidation 11 6,711 Deferred tax assets 12 1,504, ,585 Current assets 35,755,706 35,487,616 Inventories 13 1,948,747 1,297,599 Trade receivables 14 17,902,870 10,197,138 Other receivables, deposits and prepayments 15 6,084,526 4,686,268 Tax assets 69, Cash and cash equivalents 17 1,528,479 4,944,100 27,534,052 21,125,701 Non-current assets classified as held for sale 18 4,615,885 4,615,885 TOTAL ASSETS 67,905,643 61,229,202 36

38 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June 2014 (Cont d) EQUITY AND LIABILITIES EQUITY Note Share capital 19 34,797,167 30,171,072 Retained earnings 20 6,539,296 4,261,627 Other reserves 20 7,011,945 7,764,709 Total Equity 48,348,408 42,197,408 LIABILITIES Non-current liabilities Borrowings 21 8,954,049 11,736,709 Deferred tax liabilities ,700 Current liabilities 9,817,749 11,736,709 Trade payables , ,243 Other payables and accruals 29 3,363,305 1,959,871 Borrowings 21 3,510,036 2,816,787 Tax liabilities 22,136 7,533,251 5,145,037 Liabilities directly associated with non-current assets classified as held for sale 18 2,206,235 2,150,048 Total Liabilities 19,557,235 19,031,794 TOTAL EQUITY AND LIABILITIES 67,905,643 61,229,202 The annexed notes form an integral part of, and should be read in conjunction with, these financial statements. 37

39 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) STATEMENT OF FINANCIAL POSITION as at 30 June 2014 ASSETS Non-current assets Note Property, plant and equipment Investment in subsidiaries 10 2 Deferred tax assets 12 39, ,585 Current assets 40, ,323 Other receivables, deposits and prepayments , ,789 Amounts owing by subsidiaries 16 29,793,698 23,343,543 Tax assets 24,892 Cash and cash equivalents ,657 4,667,267 30,319,047 28,554,599 TOTAL ASSETS 30,359,616 28,899,922 EQUITY AND LIABILITIES EQUITY Share capital 19 34,797,167 30,171,072 Accumulated losses 20 (12,641,234) (10,997,650) Other reserves 20 6,809,493 7,888,710 Total Equity 28,965,426 27,062,132 LIABILITIES Current liabilities Other payables and accruals , ,135 Borrowings ,921 1,420,519 Tax liabilities 22,136 1,394,190 1,837,790 Total Liabilities 1,394,190 1,837,790 TOTAL EQUITY AND LIABILITIES 30,359,616 28,899,922 The annexed notes form an integral part of, and should be read in conjunction with, these financial statements. 38

40 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the financial year ended 30 June 2014 Attributable to owners of the Parent Non-distributable Currency Distributable Share Share Translation Warrant Retained Total Capital Premium Reserve Reserve ICULS Earnings Equity Group As at ,985,000 10,586,318 (89,760) (16,469,541) 12,012,017 Comprehensive income Profit for the financial year 906, ,100 Other comprehensive income Foreign currency translation (34,241) (34,241) Total comprehensive income for the financial year (34,241) 906, ,859 Transactions with owners Issuance of shares pursuant to the conversion of ICULS 850,440 (718,197) 132,243 Exercise of Warrants A 4,250,000 2,125,000 (2,125,000) 4,250,000 Issuance of ICULS 3,457,657 3,457,657 Issuance of settlement shares 876, ,632 Par value reduction and consolidation of shares (14,388,000) 14,388,000 Restricted issue with Warrants A 8,500,000 2,125,000 (2,125,000) 8,500,000 Rights issue with Warrants B 12,097,000 3,024,250 (3,024,250) 12,097,000 Share premium reduction (10,586,318) 10,586,318 Total transactions with owners 12,186,072 (8,461,318) 3,024,250 2,739,460 19,825,068 29,313,532 At ,171,072 2,125,000 (124,001) 3,024,250 2,739,460 4,261,627 42,197,408 Comprehensive income Profit for the financial year 2,277,669 2,277,669 Other comprehensive income Foreign currency translation 326, ,453 Total comprehensive income for the financial year 326,453 2,277,669 2,604,122 Transactions with owners Issuance of shares pursuant to the conversion of ICULS 1,626,095 (1,079,217) 546,878 Issuance of shares pursuant to private placement 3,000,000 3,000,000 Total transactions with owners 4,626,095 (1,079,217) 3,546,878 At ,797,167 2,125, ,452 3,024,250 1,660,243 6,539,296 48,348,408 The annexed notes form an integral part of, and should be read in conjunction with, these financial statements. 39

41 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) STATEMENT OF CHANGES IN EQUITY for the financial year ended 30 June 2014 Company Attributable to owners of the Parent Non-distributable Share Share Warrant Accumulated Total Capital Premium Reserve ICULS Losses Equity As at ,985,000 10,586,318 (27,688,859) 882,459 Comprehensive loss Loss for the financial year (3,133,859) (3,133,859) Total comprehensive loss for the financial year (3,133,859) (3,133,859) Transactions with owners Issuance of shares pursuant to the conversion of ICULS 850,440 (718,197) 132,243 Exercise of Warrants A 4,250,000 2,125,000 (2,125,000) 4,250,000 Issuance of ICULS 3,457,657 3,457,657 Issuance of settlement shares 876, ,632 Par value reduction and consolidation of shares (14,388,000) 14,388,000 Restricted issue with Warrants A 8,500,000 2,125,000 (2,125,000) 8,500,000 Rights issue with Warrants B 12,097,000 3,024,250 (3,024,250) 12,097,000 Share premium reduction (10,586,318) 10,586,318 Total transactions with owners 12,186,072 (8,461,318) 3,024,250 2,739,460 19,825,068 29,313,532 At ,171,072 2,125,000 3,024,250 2,739,460 (10,997,650) 27,062,132 Comprehensive loss Loss for the financial year (1,643,584) (1,643,584) Total comprehensive loss for the financial year (1,643,584) (1,643,584) Transactions with owners Issuance of shares pursuant to the conversion of ICULS 1,626,095 (1,079,217) 546,878 Issuance of shares pursuant to private placement 3,000,000 3,000,000 Total transactions with owners 4,626,095 (1,079,217) 3,546,878 At ,797,167 2,125,000 3,024,250 1,660,243 (12,641,234) 28,965,426 The annexed notes form an integral part of, and should be read in conjunction with, these financial statements. 40

42 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 STATEMENTS OF CASH FLOWS for the financial year ended 30 June 2014 Group Company Note Cash Flows from Operating Activities Profit/(Loss) before tax 1,850, ,580 (1,475,699) (3,128,379) Adjustments for: Bad debts written off 9,232 49,344 Deposits written off 12,000 Depreciation of property, plant and equipment 8 3,029,672 2,628, Fixed deposit written off 61,507 Goodwill written off 11 6,711 Impairment loss on: - investment in subsidiaries 857,600 - trade receivables , ,402 Interest expense 1,199, , ,594 42,177 Interest income (3,805) (38,567) (3,797) (14,370) Inventories written off 13 3,334 Loss on disposal of property, plant and equipment 13, ,623 Reversal of impairment loss on trade receivables 14 (767,445) (118,962) Unrealised (gain)/loss on foreign exchange (435,627) 314,865 Waiver of debts (9,037,879) Operating profit/(loss) before working capital changes 5,650,314 (4,525,694) (1,363,751) (2,242,774) Inventories (654,482) 1,376,635 Receivables (8,594,667) (4,855,846) (6,199,166) (19,685,925) Payables 1,717,888 (1,706,153) 262,134 1,834,984 Cash used in operations (1,880,947) (9,711,058) (7,300,783) (20,093,715) Interest paid (1,199,616) (328,550) (115,594) (42,177) Interest received 3,805 19,031 3,797 14,370 Tax paid (96,820) (47,028) (68,774) Tax refunded 496,099 Net cash used in operating activities (3,173,578) (9,524,478) (7,459,608) (20,190,296) Cash Flows from Investing Activities Proceeds from disposal of property, plant and equipment 23, ,000 Purchase of property, plant and equipment 8 (2,181,133) (8,255,471) Net cash used in investing activities (2,157,791) (7,955,471) 41

43 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) STATEMENTS OF CASH FLOWS for the financial year ended 30 June 2014 (Cont d) Cash Flows from Financing Activities Group Company Note Investment in a subsidiary 10 (2) Proceeds from issuance of shares 3,000,000 24,847,000 3,000,000 24,847,000 Payment of hire purchase liablities (11,901) (11,178) Repayment of term loans (1,392,862) (1,598,420) Net cash from financing activities 1,595,237 23,237,402 2,999,998 24,847,000 Effect of exchange rate changes 326, ,653 Net (decrease)/increase in cash and cash equivalents (3,409,251) 5,932,106 (4,459,610) 4,656,704 Cash and cash equivalents at beginning of financial year 4,240,910 (1,691,196) 4,667,267 10,563 Cash and cash equivalents at end of financial year ,659 4,240, ,657 4,667,267 The annexed notes form an integral part of, and should be read in conjunction with, these financial statements. 42

44 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June CORPORATE INFOATION The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the ACE Market of Bursa Malaysia Securities Berhad. The registered office of the Company is located at Level 33A, Menara 1MK, Kompleks 1 Mont Kiara, No.1, Jalan Kiara, Mont Kiara, Kuala Lumpur. The principal place of business is located at PLO 135, Jalan Cyber 5, Kawasan Perindustrian Senai Fasa 3, Senai, Johor Darul Takzim. The principal activities of the Company are investment holding and the provision of management services. The principal activities of the subsidiaries are set out in Note 10. There have been no significant changes in the nature of these activities during the financial year. The financial statements were authorised for issue in accordance with a resolution by the Board of Directors dated 24 October SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of preparation The financial statements of the Group and of the Company have been prepared in accordance with the Malaysian Financial Reporting Standards ( MFRSs ), International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The financial statements of the Group and of the Company have been prepared under the historical cost basis, except as otherwise disclosed in the significant accounting policies. The preparation of financial statements in conformity with MFRSs requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of the revenue and expenses during the reporting period. It also requires directors to exercise their judgement in the process of applying the Group s and the Company s accounting policies. Although these estimates and judgement are based on the directors best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note New and Revised MFRSs, Amendments/improvements to MFRSs, New IC Interpretations ( IC Int ) and Amendments to IC Int (a) Adoption of New and Revised MFRSs, Amendments/Improvements to MFRSs, New IC Int and Amendments to IC Int The Group and the Company had adopted the following new and revised MFRSs, amendments/improvements to MFRSs, new IC Int and amendments to IC Int that are mandatory for the current financial year:- New MFRS MFRS 10 MFRS 11 MFRS 12 MFRS 13 Consolidated Financial Statements Joint Arrangements Disclosure of Interests in Other Entities Fair Value Measurement Revised MFRSs MFRS 119 Employee Benefits MFRS 127 Separate Financial Statements MFRS 128 Investments in Associates and Joint Ventures 43

45 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) 2.2 New and Revised MFRSs, Amendments/improvements to MFRSs, New IC Interpretations ( IC Int ) and Amendments to IC Int (Cont d) (a) Adoption of New and Revised MFRSs, Amendments/Improvements to MFRSs, New IC Int and Amendments to IC Int (Cont d) The Group and the Company had adopted the following new and revised MFRSs, amendments/improvements to MFRSs, new IC Int and amendments to IC Int that are mandatory for the current financial year:- (Cont d) Amendments/Improvements to MFRSs MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards MFRS 7 Financial Instruments: Disclosures MFRS 10 Consolidated Financial Statements MFRS 11 Joint Arrangements MFRS 12 Disclosure of Interests in Other Entities MFRS 101 Presentation of Financial Statements MFRS 116 Property, Plant and Equipment MFRS 132 Financial Instruments: Presentation MFRS 134 Interim Financial Reporting New IC Int IC Int 20 Stripping Costs in the Production Phase of a Surface Mine Amendments to IC Int IC Int 2 Members Shares in Co-operative Entities & Similar Instruments The adoption of the above new and revised MFRSs, amendments/improvements to MFRSs, new IC Int and amendments to IC Int do not have any effect on the financial statements of the Group and of the Company except for those as discussed below. MFRS 10 Consolidated Financial Statements and MFRS 127 Separate Financial Statements (Revised) MFRS 10 replaces the consolidation part of the former MFRS 127 Consolidated and Separate Financial Statements. The revised MFRS 127 will deal only with accounting for investment in subsidiaries, joint controlled entities and associates in the separate financial statements of an investor and require the entity to account for such investments either at cost, or in accordance with MFRS 139 Financial Instruments: Recognition and Measurement. MFRS 10 brings about convergence between MFRS 127 and IC Int 112 Consolidation - Special Purpose Entities, which interprets the requirements of MFRS 10 in relation to special purpose entities. MFRS 10 introduces a new single control model to identify a parent-subsidiary relationship by specifying that an investor controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. It provides guidance on situations when control is difficult to assess such as those involving potential voting rights, or in circumstances involving agency relationships, or where the investor has control over specific assets of the entity, or where the investee entity is designed in such a manner where voting rights are not the dominant factor in determining control. The Group adopted MFRS 10 in the current financial year. This resulted in changes to the accounting policies as disclosed in Note 2.3. The adoption of MFRS 10 has no significant impact to the financial statements of the Group. 44

46 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) 2.2 New and Revised MFRSs, Amendments/improvements to MFRSs, New IC Interpretations ( IC Int ) and Amendments to IC Int (Cont d) (a) Adoption of New and Revised MFRSs, Amendments/Improvements to MFRSs, New IC Int and Amendments to IC Int (Cont d) MFRS 12 Disclosures of Interests in Other Entities MFRS 12 is a single disclosure standard for interests in subsidiaries, jointly controlled entities, associates and unconsolidated structured entities. The disclosure requirements in this MFRS are aimed at providing standardised and comparable information that enable users of financial statements to evaluate the nature of, and risks associated with, the entity s interests in other entities, and the effects of those interests on its financial position, financial performance and cash flows. The requirements in MFRS 12 are more comprehensive than the previously existing disclosure requirements for subsidiaries. MFRS 12 disclosures are provided in Note 10. MFRS 13 Fair Value Measurement MFRS 13 defines fair value and sets out a framework for measuring fair value, and the disclosure requirements about fair value. This standard is intended to address the inconsistencies in the requirements for measuring fair value across different accounting standards. As defined in this standard, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As a result of the guidance in MFRS 13, the Group and the Company reassessed their policies for measuring fair values, in particular, its valuation inputs such as non-performance risk for fair values measurement of liabilities. Application of MFRS 13 has not materially impacted the fair value measurements of the Group and of the Company. MFRS 13 requires more extensive disclosures. Additional disclosures where required, are provided in the individual notes relating to the assets and liabilities whose fair values were determined. Fair value hierarchy is provided in Note 39. (b) New MFRSs, Amendments/Improvements to MFRSs and New IC Int that are issued, but not yet effective and have not been early adopted The Group and the Company have not adopted the following new MFRSs, amendments/ improvements to MFRSs and new IC Int that have been issued by the Malaysian Accounting Standards Board ( MASB ) as at the date of authorisation of these financial statements but are not yet effective for the Group and the Company:- Effective for financial periods beginning on or after New MFRSs MFRS 9 Financial Instruments To be announced by the MASB MFRS 14 Regulatory Deferral Accounts 1 January 2016 MFRS 15 Revenue from Contracts with Customers 1 January

47 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) 2.2 New and Revised MFRSs, Amendments/improvements to MFRSs, New IC Interpretations ( IC Int ) and Amendments to IC Int (Cont d) (b) New MFRSs, Amendments/Improvements to MFRSs and New IC Int that are issued, but not yet effective and have not been early adopted (Cont d) The Group and the Company have not adopted the following new MFRSs, amendments/ improvements to MFRSs and new IC Int that have been issued by the Malaysian Accounting Standards Board ( MASB ) as at the date of authorisation of these financial statements but are not yet effective for the Group and the Company:- (Cont d) Effective for financial periods beginning on or after Amendments/Improvements to MFRSs MFRS 1 First-time Adoption of Malaysian Financial 1 July 2014 Reporting Standards MFRS 2 Share-based Payment 1 July 2014 MFRS 3 Business Combinations 1 July 2014 MFRS 7 Financial Instruments: Disclosures Effective upon application of MFRS9 MFRS 8 Operation Segments 1 July 2014 MFRS 9 Financial Instruments To be announced by the MASB MFRS 10 Consolidated Financial Statements 1 January 2014 MFRS 11 Joint Arrangements 1 January 2016 MFRS 12 Disclosure of Interests in Other Entities 1 January 2014 MFRS 13 Fair Value Measurement 1 July 2014 MFRS 116 Property, Plant and Equipment 1 July 2014/ 1 January 2016 MFRS 119 Employee Benefits 1 July 2014 MFRS 124 Related Party Disclosures 1 July 2014 MFRS 127 Separate Financial Statements 1 January 2014 MFRS 132 Financial Instruments: Presentation 1 January 2014 MFRS 136 Impairment of Assets 1 January 2014 MFRS 138 Intangible Assets 1 July 2014/ 1 January 2016 MFRS 139 Financial Instruments: Recognition and Measurement 1 January 2014 MFRS 139 Financial Instruments: Recognition and Measurement Applies when MFRS 9 is applied MFRS 140 Investment Property 1 July 2014 MFRS 141 Agriculture 1 January 2016 New IC Int IC Int 21 Levies 1 January

48 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) 2.2 New and Revised MFRSs, Amendments/improvements to MFRSs, New IC Interpretations ( IC Int ) and Amendments to IC Int (Cont d) (b) New MFRSs, Amendments/Improvements to MFRSs and New IC Int that are issued, but not yet effective and have not been early adopted (Cont d) A brief discussion on the above significant new MFRSs, amendments/improvements to MFRSs and new IC Int are summarised below. Due to the complexity of these new standards, the financial effects of their adoption are currently still being assessed by the Group and the Company. MFRS 9 Financial Instruments MFRS 9 specifies how an entity should classify and measure financial assets and financial liabilities. This standard requires all financial assets to be classified based on how an entity manages its financial assets (its business model) and the contractual cash flow characteristics of the financial asset. Financial assets are to be initially measured at fair value. Subsequent to initial recognition, depending on the business model under which these assets are acquired, they will be measured at either fair value or at amortised cost. In respect of the financial liabilities, the requirements are generally similar to the former MFRS 139. However, this standard requires that for financial liabilities designated as at fair value through profit or loss, changes in fair value attributable to the credit risk of that liability are to be presented in other comprehensive income, whereas the remaining amount of the change in fair value will be presented in the profit or loss. MFRS 9 Financial Instruments (Hedge Accounting and amendments to MFRS 9, MFRS 7 and MFRS 139) The new hedge accounting model represents a substantial overhaul of hedge accounting that will enable entities to better reflect their risk management activities in their financial statements. The most significant improvements apply to those that hedge non-financial risk, and they are expected to be of particular interest to non-financial institutions. As a result of these changes, users of the financial statements will be provided with better information about risk management and about the effect of hedge accounting on the financial statements. The MFRS 9 hedge accounting model, if adopted, applies prospectively with limited exceptions. As part of the amendments, an entity is now allowed to change the accounting for liabilities that it has elected to measure at fair value, before applying any of the other requirements in MFRS 9. This change in accounting would mean that gains caused by a worsening in the entity s own credit risk on such liabilities are no longer recognised in profit or loss. The amendments will facilitate earlier application of this long-awaited improvement to financial reporting. The amendments also remove the mandatory effective date of MFRS 9. MFRS 14 Regulatory Deferral Accounts MFRS 14 permits first-time adopters of MFRSs to continue to recognise amounts related to rate regulation in accordance with their previous GAAP requirements when they adopt MFRSs. An entity that already presents MFRSs financial statements is not eligible to apply this Standard. As regulatory deferral account balances were not recognised in the MFRS financial statements, the principles specified in MFRS 14 would have no impact to the Malaysian entities. 47

49 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) 2.2 New and Revised MFRSs, Amendments/improvements to MFRSs, New IC Interpretations ( IC Int ) and Amendments to IC Int (Cont d) (b) New MFRSs, Amendments/Improvements to MFRSs and New IC Int that are issued, but not yet effective and have not been early adopted (Cont d) MFRS 15 Revenue from Contracts with Customers The core principle of MFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with the core principle by applying the following steps: Identify the contracts with a customer. Identify the performance obligation in the contract. Determine the transaction price. Allocate the transaction price to the performance obligations in the contract. Recognise revenue when (or as) the entity satisfies a performance obligation. MFRS 15 also includes new disclosures that would result in an entity providing users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers. The following MFRSs and IC Interpretations will be withdrawn on the application of MFRS 15: MFRS 111 MFRS 118 IC Interpretation 13 IC Interpretation 15 IC Interpretation 18 IC Interpretation 131 Construction Contracts Revenue Customer Loyalty Programmes Agreement for the Construction of Real Estate Transfer of Assets from Customers Revenue Barter Transactions Involving Advertising Services Amendments to MFRS 3 Business Combinations Amendments to MFRS 3 clarify that when contingent consideration meets the definition of financial instrument, its classification as a liability or equity is determined by reference to MFRS 132 Financial Instruments: Presentation. It also clarifies that contingent consideration that is classified as an asset or a liability shall be subsequently measured at fair value at each reporting date and changes in fair value shall be recognised in profit or loss. In addition, amendments to MFRS 3 clarify that MFRS 3 excludes from its scope the accounting for the formation of all types of joint arrangements (as defined in MFRS 11 Joint Arrangements) in the financial statements of the joint arrangement itself. Amendments to MFRS 8 Operating Segments Amendments to MFRS 8 require an entity to disclose the judgements made by management in applying the aggregation criteria to operating segments. This includes a brief description of the operating segments that have been aggregated and the economic indicators that have been assessed in determining that the aggregated operating segments share similar economic characteristics. The amendments also clarify that an entity shall provide reconciliations of the total of the reportable segments assets to the entity s assets if the segment assets are reported regularly to the chief operating decision maker. 48

50 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) 2.2 New and Revised MFRSs, Amendments/improvements to MFRSs, New IC Interpretations ( IC Int ) and Amendments to IC Int (Cont d) (b) New MFRSs, Amendments/Improvements to MFRSs and New IC Int that are issued, but not yet effective and have not been early adopted (Cont d) Amendments to MFRS 10 Consolidated Financial Statements, MFRS 12 Disclosure of Interests in Other Entities and MFRS 127 Separate Financial Statements Amendments to MFRS 10 introduce an exception to the principle that all subsidiaries shall be consolidated. The amendments define an investment entity and require a parent that is an investment entity to measure its investment in particular subsidiaries at fair value thorough profit or loss in accordance with MFRS 139 Financial Instruments: Recognition and Measurement instead of consolidating those subsidiaries in its consolidated financial statements. Consequently, new disclosure requirements related to investment entities are introduced in amendments to MFRS 12 and MFRS 127. In addition, amendments to MFRS 127 also clarify that if a parent is required, in accordance with paragraph 31 of MFRS 10, to measure its investment in a subsidiary at fair value through profit or loss in accordance with MFRS 139, it shall also account for its investment in that subsidiary in the same way in its separate financial statements. Amendments to MFRS 13 Fair Value Measurement Amendments to MFRS 13 relate to the IASB s Basis for Conclusions which is not an integral part of the Standard. The Basis for Conclusions clarifies that when IASB issued IFRS 13, it did not remove the practical ability to measure short-term receivables and payables with no stated interest rate at invoice amounts without discounting, if the effect of discounting is immaterial. The amendments also clarify that the scope of the portfolio exception of MFRS 13 includes all contracts accounted for within the scope of MFRS 139 Financial Instruments: Recognition and Measurement or MFRS 9 Financial Instruments, regardless of whether they meet the definition of financial assets or financial liabilities as defined in MFRS 132 Financial Instruments: Presentation. Amendments to MFRS 116 Property, Plant and Equipment Amendments to MFRS 116 clarify the accounting for the accumulated depreciation when an asset is revalued. It clarifies that: the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount of the asset; and the accumulated depreciation is calculated as the difference between the gross carrying amount and the carrying amount of the asset after taking into account accumulated impairment losses. Amendments to MFRS 116 prohibit revenue-based depreciation because revenue does not reflect the way in which an item of property, plant and equipment is used or consumed. In addition, the amendments to MFRS 116 also clarify that bearer plants would come under the scope of MFRS 116 and would be accounted for in the same way as property, plant and equipment. A bearer plant is defined as a living plant that is used in the production or supply of agricultural produce, is expected to bear produce for more than one period and has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales. 49

51 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) 2.2 New and Revised MFRSs, Amendments/improvements to MFRSs, New IC Interpretations ( IC Int ) and Amendments to IC Int (Cont d) (b) New MFRSs, Amendments/Improvements to MFRSs and New IC Int that are issued, but not yet effective and have not been early adopted (Cont d) Amendments to MFRS 124 Related Party Disclosures Amendments to MFRS 124 clarify that an entity providing key management personnel services to the reporting entity or to the parent of the reporting entity is a related party of the reporting entity. Amendments to MFRS 132 Financial Instruments: Presentation Amendments to MFRS 132 do not change the current offsetting model in MFRS 132. The amendments clarify the meaning of currently has a legally enforceable right of set-off, that the right of set-off must be available today (not contingent on a future event) and legally enforceable for all counterparties in the normal course of business. The amendments clarify that some gross settlement mechanisms with features that are effectively equivalent to net settlement will satisfy the MFRS 132 offsetting criteria. Amendments to MFRS 136 Impairment of Assets Amendments to MFRS 136 clarify that disclosure of the recoverable amount (based on fair value less costs of disposal) of an asset or cash generating unit is required to be disclosed only when an impairment loss is recognised or reversed. In addition, there are new disclosure requirements about fair value measurement when impairment or reversal of impairment is recognised. Amendments to MFRS 139 Financial Instruments: Recognition and Measurement Amendments to MFRS 139 provide relief from discontinuing hedge accounting in a situation where a derivative, which has been designated as a hedging instrument, is novated to effect clearing with a central counterparty as a result of laws or regulation, if specific conditions are met. As a result of the amendments, continuation of hedge accounting is permitted if as a consequence of laws or regulations, the parties to hedging instrument agree to have one or more clearing counterparties replace their original counterparty and the changes to the terms arising from the novation are consistent with the terms that would have existed if the novated derivative were originally cleared with the central counterparty. IC Int 21 Levies IC Int 21 addresses the accounting for a liability to pay a government levy (other than income taxes and fine or other penalties that imposed for breaches of the legislation) if that liability is within the scope of MFRS 137 Provisions, Contingent Liabilities and Contingent Assets. This interpretation clarifies that an entity recognises a liability for a levy when the activity that triggers the payment of the levy, as identified by the relevant legislation, occurs. It also clarifies that a levy liability is recognised progressively only if the activity that triggers payment occurs over a period of time, in accordance with the relevant legislation. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be recognised before the specific minimum threshold is reached. 50

52 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) 2.3 Basis of Consolidation and Subsidiaries The consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries which are disclosed in Note 10 made up to the end of the financial year. The financial statements of the Company and its subsidiaries are all drawn up to the same reporting date. Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Specifically, the Group controls an investee if and only if the Group has:- (i) (ii) (iii) Power over the investee; Exposure, or rights, to variable returns from its involvement with the investee; and The ability to use its power over the investee to affect its returns. If the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:- (i) (ii) (iii) The contractual arrangement with the other vote holders of the investee; Rights arising from other contractual agreements; and The voting rights of the Group and potential voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The assets, liabilities and contingent liabilities assumed from a subsidiary are measured at their fair values at the date of acquisition and these values are reflected in the consolidated financial statements. Uniform accounting policies are adopted in the consolidated financial statements for like transactions and events in similar circumstances. In the Company s separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses, unless the investments are classified as held for sale (or included in a disposal group that is classified as held for sale). Acquisition related costs are recognised as expenses in the period in which the costs are incurred. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is recognised in profit or loss. All intra group balances, transactions and resulting unrealised profits and losses (unless cost cannot be recovered) are eliminated on consolidation and the consolidated financial statements reflect external transactions only. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at the acquisition date either at fair value or at the proportionate share of the acquiree s identifiable net assets. Any excess of the cost of the acquisition over the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill. Any excess of the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in profit or loss. 51

53 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) 2.3 Basis of Consolidation and Subsidiaries (Cont d) Changes in the parent s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company. The Group has applied the revised MFRS 127 prospectively on 1 January 2011 in accordance with the transitional provisions. Accordingly, transactions with non-controlling interests prior to the respective effective date have not been restated to comply with the Standard. 2.4 Functional Currency (i) Functional and Presentation Currency The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The consolidated financial statements are presented in Ringgit Malaysia ( ), which is also the Company s functional currency. All financial information presented in has been rounded to the nearest, unless otherwise stated. (ii) Foreign Currency Transactions In preparing the financial statements of the individual entities, transactions in currencies other than the entity s functional currency (foreign currencies) are recorded in Ringgit Malaysia using the exchange rates prevailing at the dates of the transactions. Monetary items denominated in foreign currencies at the reporting date are translated to the functional currencies at the exchange rates on the reporting date. Non-monetary items denominated in foreign currencies are not retranslated at the reporting date except for those that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Exchange differences arising on monetary items that form part of the Group s net investment in foreign operation are initially taken directly to the foreign currency translation reserve within equity until the disposal of the foreign operations, at which time they are recognised in profit or loss. Exchange differences arising on monetary items that form part of the Group s net investment in foreign operations are recognised in profit or loss in the Company s separate financial statements or the individual financial statements of the foreign operation, as appropriate. Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity. (iii) Foreign Operations Denominated in Functional Currencies other than Ringgit Malaysia The results and financial position of foreign operations that have a functional currency different from the presentation currency () of the consolidated financial statements are translated into as follows:- (i) (ii) (iii) Assets and liabilities for each reporting date presented are translated at the closing rate prevailing at the reporting date; Income and expenses are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions; and All resulting exchange differences are taken to other comprehensive income. 52

54 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) 2.5 Revenue Recognition i. Goods Sold Revenue from the sale of goods is measured at fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods. ii. Interest Income Interest income is recognised on an accrual basis using the effective interest method. 2.6 Employee Benefits i. Short Term Employee Benefits Wages, salaries, social security contributions and bonuses are recognised as an expense in the financial year in which the associated services are rendered by employees of the Group and of the Company. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur. ii. Defined Contribution Plans 2.7 Tax Expense As required by law, companies in Malaysia make contributions to the state pension scheme, the Employees Provident Fund ( EPF ). Such contributions are recognised as an expense in the profit or loss as incurred. Tax expense in profit or loss represents the aggregate amount of current and deferred tax. Current tax is the expected amount payable in respect of taxable income for the financial year, using tax rates enacted or substantially enacted by the reporting date, and any adjustments recognised for prior financial years tax. When an item is recognised outside profit or loss, the related tax effect is recognised either in other comprehensive income or directly in equity. Deferred tax is recognised using the liability method, on all temporary differences between the tax base of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is not recognised if the temporary difference arises from goodwill or from the initial recognition of an asset or liability in a transaction, which is not a business combination and at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to apply in the period in which the assets are realised or the liabilities are settled, based on tax rates and tax laws that have been enacted or substantially enacted by the reporting date. Deferred tax assets are recognised only to the extent that there are sufficient taxable temporary differences relating to the same taxable entity and the same taxation authority to offset or when it is probable that future taxable profits will be available against which the assets can be utilised. 53

55 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) 2.7 Tax Expense (Cont d) Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will be available for the assets to be utilised. Deferred tax assets relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transactions either in other comprehensive income or directly in equity and deferred tax arising from business combination is adjusted against goodwill on acquisition or the amount of any excess of the acquirer s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities over the acquisition cost. 2.8 Property, Plant and Equipment and Depreciation Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes expenditure that are directly attributable to the acquisition of the asset. Subsequent costs are included in the assets carrying amount or recognised as separate asset as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the Company and the cost of the item can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in the profit or loss as incurred. Property, plant and equipment are depreciated on the straight line method to write off the cost of the property, plant and equipment over their estimated useful lives. The principal annual rates used for this purpose are: Buildings 2% Long-term leasehold land 60 years Plant and machinery 8 to 19 years Furniture and fittings and office equipment 15% Motor vehicles 20% The residual values, useful lives and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. These are adjusted prospectively, if appropriate. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any, and the net carrying amount is recognised in profit or loss. Fully depreciated property, plant and equipment are retained in the financial statements until they are no longer in use and no further charge for depreciation is made in respect of these property, plant and equipment. 54

56 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) 2.9 Goodwill Goodwill acquired in a business combination represents the difference between the purchase consideration and the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities in the subsidiary companies at the date of acquisition. Goodwill is allocated to cash generating units and is stated at cost less accumulated impairment losses, if any. Impairment test is performed annually. Goodwill is also tested for impairment when indication of impairment exists. Impairment losses recognised are not reversed in subsequent periods. Upon the disposal of investment in the subsidiary, the related goodwill will be included in the computation of gain or loss on disposal of investment in the subsidiary in the consolidated statement of profit or loss and other comprehensive income Impairment of Non-Financial Assets The carrying amounts of non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If such an indication exists, the asset s recoverable amount is estimated. The recoverable amount is the higher of fair value less cost to sell and the value in use, which is measured by reference to discounted future cash flows and is determined on an individual asset basis, unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for the cash-generating unit to which the asset belongs to. An impairment loss is recognised whenever the carrying amount of an item of asset exceeds its recoverable amount. An impairment loss is recognised as an expense in the profit or loss. Any subsequent increase in recoverable amount due to a reversal of impairment loss is restricted to the carrying amount that would have been determined (net of accumulated depreciation, where applicable) had no impairment loss been recognised in prior financial years. The reversal of impairment loss is recognised as revenue in the profit or loss Inventories Inventories are stated at the lower of cost and net realisable value and cost is determined on the first-in-first-out basis. Cost includes the actual cost of purchase and incidentals in bringing the inventories into store. The cost of finished goods and work-in-progress comprise costs of raw materials, direct labour, other direct costs and appropriate proportions of manufacturing overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale Financial Assets Financial assets are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. The Group s and the Company s financial assets include trade and other receivables and cash and cash equivalents. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Group and the Company determine the classification of their financial assets at initial recognition, and the categories include financial assets at fair value through profit or loss and loans and receivables. 55

57 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) 2.12 Financial Assets (Cont d) i. Financial Assets at Fair Value through Profit or Loss Financial assets are classified as financial assets at fair value through profit or loss if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term. Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value are recognised in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on financial assets at fair value through profit or loss are recognised separately in profit or loss as part of other losses or other income. Financial assets at fair value through profit or loss could be presented as current or non-current. Financial assets that are held primarily for trading purposes are presented as current whereas financial assets that are not held primarily for trading purposes are presented as current or non-current based on the settlement date. ii. Loans and Receivables Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process. Loans and receivables are classified as current assets, except for those having maturity dates later than 12 months after the reporting date which are classified as non-current. A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss. Regular way purchases or sales are purchases and sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e. the date that the Group and the Company commit to purchase or sell the asset. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument, or where appropriate, a shorter period to the net carrying amount on initial recognition. 56

58 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) 2.13 Fair value measurement The Group adopted MFRS 13, Fair Value Measurement which prescribed that fair value of an asset or a liability, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market Impairment of Financial Assets The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group s and the Company s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate. The impairment loss is recognised in profit or loss. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account. If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss Non-Current Assets Classified as Held For Sale Non-current assets, or disposal group comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. Immediately before classification as held for sale or distribution, the assets, or components of a disposal group, are remeasured in accordance with the Group s accounting policies. Thereafter generally the assets, or disposal group, are measured at the lower of their carrying amount and fair value less costs of disposal. 57

59 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) 2.15 Non-Current Assets Classified as Held For Sale (Cont d) Any impairment loss on a disposal group is first allocated to goodwill, and then to remaining assets and liabilities on pro rate basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets and investment property, which continue to be measured in accordance with the Group s accounting policies. Impairment losses on initial classification as held for sale or distribution and subsequent gains or losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss. Intangible assets and property, plant and equipment once classified as held for sales are not amortised or depreciated. In addition, equity accounting of equity-accounted associates ceases once reclassified as held for sale or distribution Cash and Cash Equivalents Cash and cash equivalents comprise cash at bank and on hand and demand deposits that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. These also include bank overdrafts that form an integral part of the Group s and the Company s cash management Share Capital An equity instrument is any contract that evidences a residual interest in the assets of the Group and of the Company after deducting all of its liabilities. Ordinary shares are equity instruments. Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared Provisions Provisions are recognised when the Group and the Company have a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditure expected to be required to settle the obligation. The increase in the provision due to the passage of time is recognised as finance costs Leases i. Finance Leases the Group as Lessee Assets acquired by way of finance leases where the Group assumes substantially all the benefits and risks of ownership are classified as property, plant and equipment. Finance lease are capitalised at the inception of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges. The corresponding finance lease obligations, net of finance charges, are included in borrowings. The interest element of the finance charge is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Property, plant and equipment acquired under finance lease is depreciated in accordance with the depreciation policy for property, plant and equipment. 58

60 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) 2.19 Leases (Cont d) ii. Operating Leases the Group as Lessee Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis Financial Liabilities Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. The Group s and the Company s financial liabilities include trade and other payables and borrowings. Payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. Term loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the Group and the Company have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss Borrowing Costs Borrowing costs in respect of expenditure incurred on acquisition of property, plant and equipment is capitalised during the period when activities to plan, develop and construct these assets are undertaken. Capitalisation of borrowing costs ceases when these assets are ready for their intended use or sale. All other borrowings costs are recognised in profit or loss in the period in which they are incurred. Borrowing costs consist of interest and other costs that the Group and the Company incurred in connection with the borrowing of funds Segment reporting For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by their respective segment managers responsible for the performance of the respective segments under their charge. The segment manager report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are disclosed in Note 34, including the factors used to identify the reportable segments and the measurement basis of segment information. 59

61 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) 2.23 Contingencies A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group and the Company. Contingent liabilities and assets are not recognised in the statements of financial positions. 3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES The preparation of financial statements of the Group and of the Company require management to make assumptions, estimates and judgements that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis and are recognised in the period in which the assumption or estimate is revised. Significant areas of estimation, uncertainty and critical judgements used in applying accounting principles that have significant effect on the amount recognised in the financial statements are as follows: (i) Depreciation of property, plant and equipment (Note 8) The cost of property, plant and equipment is depreciated on a straight line method over the assets useful lives. Management estimates the useful lives of these property, plant and equipment to be within 5 to 60 years. These are common life expectancies applied generally. Changes in the expected level of usage could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. (ii) Impairment of loans and receivables and amounts owing by subsidiaries (Notes 14, 15 and 16) The Group and the Company assess at each reporting date whether there is any objective evidence that a receivable is impaired. Allowances are applied where events or changes in circumstances indicate that the balances may not be collectible. To determine whether there is objective evidence of impairment, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. Where the expectation is different from the original estimate, such difference will impact the carrying amount of receivables at the reporting date. (iii) Deferred tax assets (Note 12) Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based on the likely timing and level of future taxable profits together with future tax planning strategies. Assumptions about generation of future taxable profits depend on management s estimates of future cash flows. These depends on estimates of future production and sales volume, operating costs, capital expenditure, dividends and other capital management transactions. Judgement is also required about application of income tax legislation. These judgements and assumptions are subject to risks and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets recognised in the statements of financial position and the amount of unrecognised tax losses and unrecognised temporary differences. 60

62 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (CONT D) Significant areas of estimation, uncertainty and critical judgements used in applying accounting principles that have significant effect on the amount recognised in the financial statements are as follows: (Cont d) (iv) Write down for obsolete or slow moving inventories (Note 13) The Group writes down its obsolete or slow moving inventories based on assessment of their estimated net selling price. Inventories are written down when events or changes in circumstances indicate that the carrying amounts may not be recoverable. The management specifically analyses sales trend and current economic trends when making a judgement to evaluate the adequacy of the write down for obsolete or slow moving inventories. Where expectations differ from the original estimates, the differences will impact the carrying amount of inventories. (v) Non-current assets classified as held for sale (Note 18) In the previous financial year, the Group entered into an asset disposal agreement with RHB Bank Berhad ( RHB ) in accordance to the restructuring scheme to dispose the leasehold property of the Group. It is intended that the proceeds from the asset disposal programme shall be utilised to repay the debts of the Group which are due and payable to RHB. Under this scheme of arrangement, the Group shall, within an agreed duration commencing on 30 September 2012 and expiring on 31 March 2013 ( the Disposal Period ), use its best endeavours either to actively and diligently take all necessary steps to dispose of the said property to a third party purchaser for an agreed minimum selling price of 1,700,000. In the event that the Group shall despite its best endeavours to actively and diligently take all necessary steps to dispose of the said property to a third party purchaser be unable to dispose the said property or redeem the property at the expiration of the Disposal Period, RHB shall thereafter be entitled and is hereby irrevocably authorised and entitled to, but without any obligation to do so, take steps to dispose of the said property on behalf of the Group. As at 30 June 2014, the asset disposal programme has not been completed as RHB is still in the progress of looking for active buyer. The directors are of the opinion that the extension of the period required to complete the sale beyond one year from the date of classification is the delay in asset disposal programme which is an event or circumstances beyond the Group s control and the Group remains committed to its plan to sell the said property. Hence, the directors continue to classify the said property as non-current assets classified as held for sale in the current financial year even though the period of the completion of the sale have extended beyond one year since the date of its reclassification. (vi) Computation and the equity and liability component on ICULS The Group has recognised the compound instruments consisting of an equity and liability component. At the issue date, the value of the liability component is determined using a prevailing market interest rate. The judgment is made on the market interest rate used in determining the equity and liability components. (vii) Valuation of warrants The Group and the Company measures the value of the warrants as disclosed in Note 26 to the financial statements using the Black Scholes Model. The following basis are used in respect of the key assumptions: (a) The risk free interest rate is based on the prevailing Malaysian Government Securities of similar tenure; (b) The expected share price volatility is based on the available historical volatility of the share price of the Company; and (c) The expected dividend yield is based on management s expectation. 61

63 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (CONT D) Significant areas of estimation, uncertainty and critical judgements used in applying accounting principles that have significant effect on the amount recognised in the financial statements are as follows: (Cont d) (viii) Fair values of borrowings The fair values of borrowings are estimated by discounting future contractual cash flows at the current market interest rates available to the Group for similar financial instruments. It is assumed that the effective interest rates approximate the current market interest rates available to the Group based on its size and its business risk. 4. REVENUE This represents invoiced value of goods sold less discount and returns. 5. PROFIT/(LOSS) BEFORE TAX Profit/(Loss) before tax is arrived at after charging/(crediting): Group Company Auditors remuneration: - statutory audit 84,186 60,168 30,000 22,000 - non-statutory audit 10,000 10,000 Bad debts written off 9,232 49,344 Deposits written off 12,000 Depreciation of property, plant and equipment 3,029,672 2,628, Employee benefits expense (Note (a)) 3,526,555 3,299, , ,875 Fixed deposit written off 61,507 (Gain)/Loss on foreign exchange: - realised (170,082) 29,818 (11) - unrealised (435,627) 314,865 Goodwill written off 6,711 Impairment loss on: - investment in subsidiaries 857,600 - trade receivables 671, ,402 Interest expense: - bank overdrafts 66,971 83,734 - finance lease payable 5,151 19,813 - ICULS 115,594 42, ,594 42,177 - term loans 1,011, ,826 Interest income (3,805) (38,567) (3,797) (14,370) Inventories written off 3,334 Loss on disposal of property, plant and equipment 13, ,623 Rental of equipment 8,863 15,912 Rental of hostel 22,100 20,600 Rental of motor vehicle 4,951 Rental of premises 143, ,188 Reversal of impairment loss on trade receivables (767,445) (118,962) Waiver of debts (9,037,879) 62

64 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 5. PROFIT/(LOSS) BEFORE TAX (CONT D) (a) Employee benefits expense are: Group Company Salaries and wages 2,745,184 2,466,277 30,000 Contributions to defined contribution plans 202, ,961 Executive directors remuneration (Note (b)) 511, , , ,875 Other benefits 67,212 59,611 3,526,555 3,299, , ,875 (b) The aggregate amount of emoluments received and receivable by the directors of the Group and of the Company during the financial year as follows: Group Company Executive Directors: - fees 180, , , ,375 - remuneration 289, ,500 25,000 5,500 - contributions to defined contribution plans 31,680 49,440 - other emoluments 10, , , , , TAX (CREDIT)/EXPENSE Group Company Current income tax: Under provision in prior financial year 5,850 5,480 5,480 Deferred tax (Note 12): Origination and reversal of temporary differences (845,900) 153,900 Relating to changes in tax rate 26,900 13,800 Under provision in prior financial year 385, (433,315) 167,885 Tax (credit)/expense (427,465) 5, ,885 5,480 63

65 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 6. TAX (CREDIT)/EXPENSE (CONT D) The reconciliation of tax amount at statutory income tax rate to the Group s and Company s tax (credit)/expense are as follows: Group Company Profit/(Loss) before tax 1,850, ,580 (1,475,699) (3,128,379) Tax at the Malaysian statutory income tax rate of 25% (2013: 25%) 462, ,895 (368,900) (782,100) Tax effects arising from: - non-deductible expenses 800, , , ,100 - non-taxable income (191,900) (266,720) Effect of changes in tax rate on opening balance of deferred tax 26,900 13,800 Deferred tax recognised at different tax rates (3,502) (6,413) Deferred tax assets not recognised during the financial year 112,382 99,022 Utilisation of previously unrecognised deferred tax asset (2,025,600) (860,550) Under provision in prior financial year: - income tax 5,850 5,480 5,480 - deferred tax 385, Tax (credit)/expense (427,465) 5, ,885 5,480 Domestic income tax is calculated at the Malaysian statutory income tax rate of 25% (2013: 25%) of the estimated assessable profit for the financial year. In the Budget Speech 2014, the Government announced that the domestic statutory tax rate would be reduced to 24% from the current year s rate of 25% with effect from the year of assessment The computation of deferred tax as at 30 June 2014 has reflected these changes. Tax expense for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. The Group has an estimated unutilised tax losses and unabsorbed reinvestment allowances of 902,408 (2013: 434,150) and Nil (2013: 8,440,000) respectively, available to be carried forward to set-off against future taxable profits. 64

66 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 7. EARNINGS PER SHARE (a) Basic earnings per share amounts are calculated by dividing profit for the financial year, net of tax, attributable to owners of the parent by the weighted average number of ordinary shares in issue during the financial year. Group Basic earnings per share Net profit attributable to owners of the parent 2,277, ,100 Weighted average number of ordinary shares for basic earnings per share computation 337,014, ,656,962 Basic earnings per share (sen) (b) Diluted Diluted earnings per share of the Group for the financial year is calculated by dividing the profit for the financial year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the financial year adjusted for the effects of dilutive potential ordinary shares. The diluted earnings per share is the same as basic earnings per share as the exercise price of warrants is higher than the average market price of the ordinary shares during the financial year. 65

67 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 8. PROPERTY, PLANT AND EQUIPMENT Group Cost Furniture and L long-term fittings and Building leasehold Plant and office Motor under Buildings land machinery equipment vehicles construction Total At ,336,450 1,370,000 32,544,024 2,985,155 1,409,999 41,645,628 Additions 48,346 1,573, , ,196 2,181,133 Disposals (60,010) (60,010) Translation adjustments (2,447) (3,955) (765) (7,167) At ,384,796 1,370,000 34,114,707 3,081,661 1,808,420 43,759,584 Accumulated Depreciation At ,385 53,249 3,625,239 2,415, ,140 6,509,308 Charge for the financial year 67,344 25,849 2,358, , ,640 3,029,672 Disposals (23,483) (23,483) Translation adjustments (3,034) (3,159) (546) (6,739) At ,729 79,098 5,980,270 2,658, ,751 9,508,758 Net Carrying Amount At ,188,067 1,290,902 28,134, ,751 1,214,669 34,250,826 Cost At ,230,000 2,670,000 26,174,986 2,894, ,355 3,368,968 38,684,135 Additions 106,450 6,983,678 99,019 1,066,324 8,255,471 Disposals (600,000) (600,000) Translation adjustments (14,640) (8,690) (1,680) (25,010) Reclassified to non-current assets held for sale (Note 18) (1,300,000) (3,368,968) (4,668,968) At ,336,450 1,370,000 32,544,024 2,985,155 1,409,999 41,645,628 Accumulated Depreciation At ,600 53,400 1,564,076 2,129, ,730 3,964,693 Charge for the financial year 64,785 52,932 2,085, , ,121 2,628,350 Disposals (23,377) (23,377) Translation adjustments (793) (5,771) (711) (7,275) Reclassified to non-current assets held for sale (Note 18) (53,083) (53,083) At ,385 53,249 3,625,239 2,415, ,140 6,509,308 Net Carrying Amount At ,207,065 1,316,751 28,918, ,860 1,123,859 35,136,320 66

68 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 8. PROPERTY, PLANT AND EQUIPMENT (CONT D) Office equipment Total Company Cost At / ,325 1,325 Accumulated Depreciation At Charge for the financial year At Net Carrying Amount At Cost At / ,325 1,325 Accumulated Depreciation At Charge for the financial year At Net Carrying Amount At (a) (b) During the financial year, the Group acquired property, plant and equipment with an aggregate cost of 2,181,133 (2013: 8,255,471) which are satisfied by cash. Net carrying amount of property, plant and equipment of the Group held under finance lease arrangements and restructured term loans is as follows: Group Motor vehicle 71, ,860 Plant and machinery 4,037,314 4,379,832 67

69 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 8. PROPERTY, PLANT AND EQUIPMENT (CONT D) (c) As at 30 June 2014, the property, plant and equipment of the Group have been charged to licensed banks for credit facilities granted to the subsidiaries (Notes 22, 23 and 25): Group Buildings 3,188,066 3,207,065 Long-term leasehold land 1,290,902 1,316,751 Plant and machinery 4,395,775 4,813,717 8,874,743 9,337, DEVELOPMENT EXPENDITURE Cost Group At 1 July/30 June 135, ,335 Accumulated amortisation At 1 July/30 June (135,335) (135,335) Net carrying amount The development expenditure relates to costs incurred for the development of the injection mould project. 10. INVESTMENT IN SUBSIDIARIES Unquoted shares, at cost Company At 1 July 2013/ ,657,600 11,657,600 Addition 2 11,657,602 11,657,600 Less: Impairment loss (11,657,600) (11,657,600) At 30 June 2 68

70 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 10. INVESTMENT IN SUBSIDIARIES (CONT D) Particulars of the subsidiaries are as follows: Effective Country of Equity Interest Name of Company incorporation Principal activities Sanichi Precision Malaysia Design and fabrication of 100% 100% Mould Sdn. Bhd. prevision moulds and tooling Asia Pinnacle Malaysia Design and fabrication of 100% 100% Sdn. Bhd. prevision moulds and tooling Sanichi Mould Thailand Design and fabrication of 100% 100% (Thailand) Co., Ltd. * prevision moulds and tooling Sanichi Property Malaysia Property investment and 100% Sdn. Bhd. development * Subsidiary not audited by Baker Tilly Monteiro Heng. Incorporation of a new subsidiary On 30 October 2013, the Company had incorporated a wholly-owned subsidiary, Sanichi Property Sdn. Bhd., a company incorporated and domiciled in Malaysia with an authorised share capital of 400,000 comprising 400,000 ordinary shares of 1.00 each of which 2 shares have been issued and fully paid-up. 11. GOODWILL ON CONSOLIDATION Cost Group At 1 July 2013/2012 6,711 6,711 Less: Written off (6,711) At 30 June 6, DEFERRED TAX ASSETS/(LIABILITIES) Deferred tax assets/(liabilities) Group Company At 1 July 2013/ , ,585 Recognised in ICULS (Note 27) (136,720) 344,585 (136,720) 344,585 Recognised in profit or loss (Note 6) 433,315 (167,885) At 30 June 641, ,585 39, ,585 69

71 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 12. DEFERRED TAX ASSETS/(LIABILITIES) (CONT D) Presented after appropriate off-setting as follows: Group Company Deferred tax assets 1,504, ,585 39, ,585 Deferred tax liabilities (863,700) 641, ,585 39, ,585 The components of deferred tax assets/(liabilities) prior to offsetting are as follow: Group Company Deferred tax assets Effect of ICULS 39, ,585 39, ,585 Unabsorbed reinvestment allowances 1,464,900 1,504, ,585 39, ,585 Deferred tax liabilities Difference between the carrying amounts of property, plant and equipment and their tax base (863,700) 13. INVENTORIES Group Cost Raw materials 1,029,721 1,157,403 Work-in-progress 329, ,196 1,358,747 1,297,599 Net realisable value Finished goods 590,000 1,948,747 1,297,599 (a) During the financial year, inventories of the Group recognised as cost of sales amounted to 15,759,804 (2013: 11,306,191). (b) The amount of inventories written off which was recognised in cost of sales was 3,334 (2013: Nil). 70

72 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 14. TRADE RECEIVABLES Group Third parties 26,859,261 19,249,244 Less: Allowance for impairment loss (8,956,391) (9,052,106) Trade receivable, net 17,902,870 10,197,138 (a) Credit term of trade receivables The Group s normal trade credit term ranges from 30 to 60 days (2013: 30 to 60 days). Other credit terms are assessed and approved on a case-by-case basis. The credit term varies from customers to customers after taking into consideration their background, business relationship, potential future additional business and size of transactions. They are recognised at their original invoiced amounts which represent their fair values on initial recognition. (b) Ageing analysis of trade receivables The ageing analysis of the Group s trade receivables are as follows: Group Neither past due nor impaired 14,956,222 7,107,876 1 to 30 days past due not impaired 9, to 60 days past due not impaired 985,060 22, to 90 days past due not impaired 2,226 More than 90 days past due not impaired 1,961,588 3,054,773 2,946,648 3,089,262 Impaired 8,956,391 9,052,106 26,859,261 19,249,244 Receivables that are neither past due nor impaired Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group. None of the Group s trade receivables that are neither past due nor impaired have been renegotiated during the financial year. Receivables that are past due but not impaired The Group has trade receivables amounting to 2,946,648 (2013: 3,089,262) that are past due at the reporting date but not impaired. No impairment loss on trade receivables has been made as, in the opinion of the directors, the debts would be collected in full within the next twelve months. 71

73 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 14. TRADE RECEIVABLES (CONT D) (b) Ageing analysis of trade receivables (Cont d) Receivables that are impaired The trade receivables that are impaired at the end of each reporting date are as follows: Individually impaired Group Trade receivables (nominal amounts) 8,956,391 13,497,501 Less: Allowance for impairment loss (8,956,391) (9,052,106) 4,445,395 Trade receivables that are individually determined to be impaired at the reporting date relate to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements. The Group has no debtors that are collectively determined to be impaired at the reporting date. Movement in impairment loss: Group At 1 July 2013/2012 9,052,106 9,010,666 Charge for the financial year (Note 5) 671, ,402 Reversal of impairment losses (Note 5) (767,445) (118,962) At 30 June 8,956,391 9,052,106 (c) The foreign currency exposure profile for trade receivables is as follows: Group Euro 4,352,102 2,878,772 Singapore Dollars 76,604 Thai Baht 383,325 48,675 United States Dollars 3,873,768 4,744,574 72

74 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 15. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS Group Company Other receivables 686, , , ,000 Deposits 4,456,423 3,656,160 1,000 1,000 Deposits for acquisition of land 693,000 Prepayments 248, ,583 10, ,789 6,084,526 4,686, , ,789 (a) (b) Included in deposits of the Group are security deposit paid to a customer and deposits paid for the purchase of materials amounting to 4,144,220 (2013: Nil) and Nil (2013: 3,027,057) respectively. The foreign currency exposure profile for other receivables is as follows: Group Thai Baht 194, , AMOUNTS OWING BY SUBSIDIARIES Company Amounts owing by subsidiaries 46,506,482 40,056,327 Less: Allowance for impairment loss (16,712,784) (16,712,784) 29,793,698 23,343,543 These amounts are non-trade in nature, unsecured, interest free, payable upon demand in cash and cash equivalents. 17. CASH AND CASH EQUIVALENTS Group Company Cash and bank balances 1,527, , , ,267 Cash deposits with licensed banks 1,008 4,062,523 4,000,000 1,528,479 4,944, ,657 4,667,267 Less: Bank overdrafts (Notes 18 and 25) (696,820) (641,683) Less: Fixed deposit pledged to a licensed bank (61,507) 831,659 4,240, ,657 4,667,267 (a) In the previous financial year, fixed deposit amounting to 61,507 has been pledged as security for banking facilities granted to the Group. 73

75 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 17. CASH AND CASH EQUIVALENTS (CONT D) (b) The foreign currency exposure profile for cash and cash equivalents is as follows: Group Thai Baht 17,675 73, NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE As at the end of the reporting period, the assets and liabilities of the non-current assets are as follows:- Non-current assets classified as held for sale Group Long-term leasehold land 1,246,917 1,246,917 Building under construction 3,368,968 3,368,968 4,615,885 4,615,885 Liabilities directly associated with non-current assets classified as held for sale Bankers acceptance (Note 22) 1,035,917 1,035,917 Term loan 473, ,448 Bank overdrafts (Notes 17 and 25) 696, ,683 2,206,235 2,150,048 The bankers acceptance, term loan and bank overdrafts of the Group amounting to 2,206,235 (2013: 2,150,048) are to be settled by way of utilisation of proceeds from the disposal of the noncurrent assets. In the previous financial year, the Group entered into an asset disposal agreement with RHB Bank Berhad ( RHB ) in accordance to the restructuring scheme to dispose the leasehold property of the Group. It is intended that the proceeds from the asset disposal programme shall be utilised to repay the debts of the Group which are due and payable to RHB. Under this scheme of arrangement, the Group shall, within an agreed duration commencing on 30 September 2012 and expiring on 31 March 2013 ( the Disposal Period ), use its best endeavours either to actively and diligently take all necessary steps to dispose of the said property to a third party purchaser for an agreed minimum selling price of 1,700,000. In the event that the Group shall despite its best endeavours to actively and diligently take all necessary steps to dispose of the said property to a third party purchaser be unable to dispose the said property or redeem the property at the expiration of the Disposal Period, RHB shall thereafter be entitled and is hereby irrevocably authorised and entitled to, but without any obligation to do so, take steps to dispose of the said property on behalf of the Group. As at 30 June 2014, the asset disposal programme has not been completed as RHB is still in the progress of looking for active buyer. 74

76 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 18. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE (CONT D) The directors are of the opinion that the extension of the period required to complete the sale beyond one year from the date of classification is the delay in asset disposal programme which is an event or circumstances beyond the Group s control and the Group remains committed to its plan to sell the said property. Hence, the directors continue to classify the said property as assets held for sale in the current financial year even though the period of the completion of the sale have extended beyond one year since the date of its reclassification. 19. SHARE CAPITAL Ordinary shares of 0.10 each Group/Company Number of shares Amount Unit Unit Authorised At 1 July 2013/2012 1,000,000, ,000, ,000,000 25,000,000 Created during the financial year 750,000,000 75,000,000 At 30 June 1,000,000,000 1,000,000, ,000, ,000,000 Issued and fully paid At 1 July 2013/ ,710, ,850,000 30,171,072 17,985,000 Issued during the financial year: - conversion of ICULS 16,260,950 42,500,000 1,626,095 4,250,000 - exercise of Warrants A 8,504, ,440 - issuance of settlement shares 8,766, ,632 - private placement 30,000,000 3,000,000 - restricted issue with Warrants A 85,000,000 8,500,000 - rights issue with Warrants B 120,970,000 12,097,000 Reduction of share capital (143,880,000) (14,388,000) At 30 June 347,971, ,710,720 34,797,167 30,171,072 During the financial year, the issued and fully paid up ordinary share capital of the Company was increased from 30,171,072 to 34,797,167 by way of private placement of 30,000,000 new ordinary shares of 0.10 each and conversion of ICULS of 16,260,950 new ordinary shares of 0.10 each for working capital purposes. The holder of ordinary shares is entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restriction and rank equally with regard to the Company s residual assets. 75

77 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 20. RESERVES Distributable Group Company Retained earnings/ (accumulated losses) 6,539,296 4,261,627 (12,641,234) (10,997,650) Non-distributable Share premium 2,125,000 2,125,000 2,125,000 2,125,000 Foreign currency translation reserve 202,452 (124,001) Warrant reserve (Note 26) 3,024,250 3,024,250 3,024,250 3,024,250 Equity component of ICULS (Note 27) 1,660,243 2,739,460 1,660,243 2,739,460 7,011,945 7,764,709 6,809,493 7,888,710 13,551,241 12,026,336 (5,831,741) (3,108,940) (a) Share premium Share premium of the Group and of the Company represent capitalisation of warrants reserve arising from Warrants A pursuant to exercise of entire 42,500,000 Warrants A to 42,500,000 of new ordinary shares of 0.10 at an issue price of 0.10 per ordinary share at fair value of 0.05 per warrant. (b) Foreign currency translation reserve The translation reserve is used to record foreign currency exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group s presentation currency. (c) Warrant reserve Warrant reserve arose from the issuance of 85,000,000 Restricted Issue Shares and 120,970,000 Right Shares respectively together with free warrants on the basis of one (1) free warrant for every two (2) shares subscribed by the shareholders of the Company pursuant to the Restricted Issue and Rights Issue with Warrants at a fair value of 0.05 per warrant. The warrant reserve is transferred to the share premium account upon the exercise of warrants and the warrant reserve in relation to the unexercised warrants at the expiry of the warrants will be transferred to retained earnings. The salient features of the warrants are disclosed in Note

78 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 21. BORROWINGS Group Company Current liabilities Secured Term loans (Note 23) 2,760,491 1,384,367 Finance lease payable (Note 24) 12,624 11,901 ICULS (Note 27) 736,921 1,420, ,921 1,420,519 Non-current liabilities 3,510,036 2,816, ,921 1,420,519 Secured Term loans (Note 23) 8,870,297 11,640,332 Finance lease payable (Note 24) 83,752 96,377 8,954,049 11,736,709 12,464,085 14,553, ,921 1,420,519 Total borrowings Secured Term loans (Note 23) 11,630,788 13,024,699 Finance lease payable (Note 24) 96, ,278 ICULS (Note 27) 736,921 1,420, ,921 1,420,519 12,464,085 14,553, ,921 1,420,519 Pursuant to debt restructuring scheme during the previous financial year, certain balances of bankers acceptance, finance lease payables and term loans have been restructured by ways of issuance of settlement shares of the Company, waiver of debts by the finance institutions, issuance of ICULS of the Company and conversion of restructured term loans. 22. BANKERS ACCEPTANCE (a) The bankers acceptance are secured by way of:- (i) facilities agreements; (ii) open all monies first party legal charge over a leasehold land and building of the Group; (iii) corporate guarantee by the Company; (iv) joint and several guarantee by certain directors of the Company; (v) first party first legal and second legal charge over the building of the Group; (vi) third party forth and sixth legal charge over a leasehold industrial land with a factory building of a third party; (vii) loan and advances given to subsidiaries by the Company; (viii) specific debenture creating fixed charge over the assets financed; and (viiii) guarantee from Syarikat Jaminan Pembiayaan Perniagaan Berhad. 77

79 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 22. BANKERS ACCEPTANCE (CONT D) (b) The secured bankers acceptance bears effective interest rate of 4.42% (2013: 4.42%) per annum. (c) Information on financial risks of bankers acceptance is disclosed in Note TE LOANS Group Term loans - restructured (Note 21) 11,630,788 13,024,699 Secured - Due within 1 year 2,760,491 1,384,367 - Due after 1 year 8,870,297 11,640,332 11,630,788 13,024,699 (a) The term loans are secured by way of:- (i) facilities agreements; (ii) open all monies first party legal charge over a leasehold land and building of the Group; (iii) corporate guarantee by the Company; (iv) joint and several guarantee by certain directors of the Company; (v) first party first legal and second legal charge over the building of the Group; (vi) third party forth and sixth legal charge over a leasehold industrial land with a factory building of a third party; (vii) loan and advances given to subsidiaries by the Company; (viii) specific debenture creating fixed charge over the assets financed; and (viiii) guarantee from Syarikat Jaminan Pembiayaan Perniagaan Berhad. (b) The secured term loans bear effective interest rates ranging from 4.20% to 8.10% (2013: 6.34% to 8.10%) per annum. (c) Information on financial risks of term loans is disclosed in Note

80 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 24. FINANCE LEASE PAYABLE Group Future minimum lease payments 112, ,293 Less: Future finance charges (15,865) (21,015) Total present value of minimum lease payments 96, ,278 Payable within one year Future minimum lease payments 17,052 17,052 Less: Future finance charges (4,428) (5,151) Present value of minimum lease payments 12,624 11,901 Payable more than 1 year but not more than 5 years Future minimum lease payments 95, ,241 Less: Future finance charges (11,437) (15,864) Present value of minimum lease payments 83,752 96,377 Total present value of minimum lease payments 96, ,278 (a) The finance lease payable of the Group bears effective interest rate of 4.90% (2013: 4.90%) per annum. (b) Information on financial risks of finance lease payable is disclosed in Note BANK OVERDRAFTS (a) The bank overdrafts are secured by way of:- (i) facilities agreements; (ii) open all monies first party legal charge over a land and building of the Group; (iii) corporate guarantee by the Company; (iv) letter of authorisation; (v) joint and several guarantee by certain directors of the Company; (vi) third party forth and sixth legal charge over a leasehold industrial land with a factory building of a third party; (vii) loan and advances given to subsidiaries by the Company; (viii) specific debenture over two units of machineries; and (viiii) guarantee from Syarikat Jaminan Pembiayaan Perniagaan Berhad. (b) The bank overdrafts bear effective interest rate of 7.85% (2013: 7.85%) per annum. (c) Information on financial risks of banker overdrafts is disclosed in Note

81 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 26. WARRANTS The warrants (Warrant A and Warrant B) were constituted under the Deed Poll dated 21 November Salient features of the above warrants are as follows:- (a) Each of the warrant entitles the holder to the right of exercise of one ordinary share in the Company. The number of warrants are subject to adjustments under certain circumstances in accordance with the provisions of the Deed Poll. (b) (c) (d) The close of business on the warrants is five (5) years from the date of issuance of the warrants; thereafter the outstanding warrants will cease to be valid for any purpose. The new ordinary shares allotted and issued upon exercise of the warrants shall be fully paid and rank pari passu with the then existing ordinary shares of the Company. The warrant holders will not have any voting rights in any general meeting of the Company unless the warrants are exercised into new ordinary shares and registered prior to the date of the general meeting of the Company. The warrants are quoted on the ACE Market of Bursa Malaysia Securities Berhad on 20 March Each warrant entitles its holder the right to subscribe for one ordinary share of 0.10 each in the Company at any time up to the expiry date of 13 March 2018 at an exercise price of 0.10 payable in cash. Warrant A have been fully exercised during the previous financial year. The number of Warrants B remain unexercised at the end of the financial year are 60,485,000 (2013: 60,485,000). 27. IRREDEEMABLE CONVERTIBLE UNSECURED LOAN STOCKS ( ICULS ) On 20 March 2013, the Company issued 46,236,560 five (5)-years 4.0%, irredeemable convertible unsecured loan stocks ( ICULS ) at a nominal value of 0.10 per ICULS pursuant to debt restructuring scheme. The salient terms of the ICULS are as follows: (a) (b) (c) (d) The ICULS shall bear a coupon rate of 4.0% per annum from date of issue ( Issued Date ) up to the maturity date. The interest is payable semi-annually in arrears; The ICULS are convertible at any time on or after its issuance date into new ordinary shares of the Company at the conversion price, which is fixed at 0.10 each; Any remaining ICULS not converted at the end of the Conversion Period shall be mandatorily converted into new ordinary shares at the Conversion Price on the maturity date; and The new ordinary shares issued from the conversion of ICULS will be deemed fully paid-up and rank pari passu in all respects with all existing ordinary shares of the Company. 80

82 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 27. IRREDEEMABLE CONVERTIBLE UNSECURED LOAN STOCKS ( ICULS ) (CONT D) The ICULS have been split between the liability component and the equity component as follows: Group/Company Liability component of ICULS At 1 July/date of issue 1,420,519 1,555,000 Interest expense recognised during the financial year 42,177 Conversion of ICULS to ordinary shares (683,598) (176,658) At 30 June 736,921 1,420,519 Equity component of ICULS At 1 July/date of issue 2,739,460 3,457,657 Conversion of ICULS to ordinary shares (1,079,217) (718,197) At 30 June 1,660,243 2,739,460 2,397,164 4,159, TRADE PAYABLES (a) The normal trade credit term granted to the Group ranges from 60 to 90 days (2013: 60 to 90 days). (b) The foreign currency exposure profile for trade payables is as follows: Group Singapore Dollar 6,588 9,287 Thai Baht 268, , OTHER PAYABLES AND ACCRUALS Group Company Other payables 1,678, , , ,800 Accruals 1,236,574 1,137, , ,335 2,914,695 1,908, , ,135 Amount owing to a director 448,610 51, ,750 3,363,305 1,959, , ,135 81

83 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 29. OTHER PAYABLES AND ACCRUALS (cont d) (a) Included in other payables is an amount owing to a director which is non-trade in nature, unsecured, interest free and repayable upon demand in cash and cash equivalents. (b) The foreign currency exposure profile for other payables is as follows: Group Singapore Dollar 891,112 2,890 Thai Baht 98,289 64, CAPITAL COMMITMENTS Group In respect of capital expenditure approved and contracted for: - Property, plant and equipment 10,124,560 3,117, OPERATING LEASE COMMITMENTS The Group has entered into a commercial lease for its office premises. This lease has a tenure of 3 financial years with a renewal option included in the contract. There are no restrictions placed upon the Group by entering into this lease. Future minimum rental payable under the non-cancellable operating lease at the reporting date is as follows: Group Not later than one year 143, ,896 Later than one year and not later than five years 119, , , , FINANCIAL GUARANTEE Company Financial guarantee given to licensed banks for facilities granted to subsidiaries 33,960,000 33,960,000 82

84 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 33. RELATED PARTIES TRANSACTIONS (a) Identity of related parties For the purpose of these financial statements, parties are considered to be related to the Group and the Company if the Group and the Company have the ability to directly control the party or exercise significant influence over the party in making financial and operating decision, or vice versa, or where the Group and the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. The Group and the Company have a related party relationship with their direct subsidiaries and directors of the Company. (b) (c) There is no transaction with related party during the financial year. Compensation of key management personnel Key management personnel include personnel having authority and responsibility for planning, directing and controlling the activities of the entities, directly or indirectly, including any director of the Group and of the Company. The remuneration of the key management personnel is as follows: Group Company Short term employees benefits 299, ,500 25,000 5,500 Contribution to Employees Provident Fund 31,680 49, , ,940 25,000 5, SEGMENT INFOATION During the financial year, the Group s reportable segments have been changed from Advanced Plastic Injection Mould ( APIM ) and Conventional Plastic Injection Mould ( CPIM ) to Investment Holding and Investment Property and Manufacturing as a result of decisions made by chief operating decision maker of the Group about resources to be allocated to the segment and assessing its performance. Such changes have no significant impact to the financial statements of the Group for the current and previous financial year. The Group is organised into business units based on its products and services, and has two reportable operating segments as follows:- Investment holding and investment property Manufacturing Investment in shares, property investment and development Designing and fabrication of precision moulds and tooling for use in automobile, home appliance, audio visual, computer peripheral, electrical and telecommunication industry Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which, in certain respects as explained in the table below, is measured differently from operating profit or loss in the consolidated statement of profit or loss and other comprehensive income. Group financing (including finance costs) and income taxes are managed on a group basis and are not allocated to operating segments. 83

85 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 34. SEGMENT INFOATION (CONT D) 2014 Revenue Investment Holding & Investment Adjustments & Note Property Manufacturing Eliminations Consolidated External revenue 24,843,879 (2,430,775) 22,413,104 Results Depreciation 151 3,029,521 3,029,672 Interest income (3,805) (3,805) Other non-cash expenses a 770,988 6, ,699 Segment (loss)/profit b (1,568,712) 3,056, ,477 1,850,204 Segment Assets Additions to property, plant and equipment 2,181,133 2,181,133 Segment assets c 31,053,305 78,432,876 (41,580,538) 67,905,643 Segment liabilities d 2,180,890 76,043,070 (58,666,725) 19,557, Revenue External revenue 10,239,172 (935,000) 9,304,172 Results Depreciation 198 2,628,152 2,628,350 Interest income (14,370) (24,197) (38,567) Other non-cash expenses a 486, ,369 Segment (loss)/profit b (3,128,379) 3,182, , ,580 Segment Assets Additions to property, plant and equipment 8,255,471 8,255,471 Segment assets c 30,729,086 64,000,835 (33,500,719) 61,229,202 Segment liabilities d 3,666,954 65,312,076 (49,947,236) 19,031,794 84

86 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 34. SEGMENT INFOATION (CONT D) (a) Other material non-cash expenses consist of the following items as presented in the respective notes: Bad debts written off 9,232 49,344 Deposits written off 12,000 Fixed deposit written off 61,507 Goodwill written off 6,711 Impairment loss on trade receivables 671, ,402 Inventories written off 3,334 Loss on disposal of property, plant and equipment 13, , , ,369 (b) The following items are added to segment (loss)/profit to arrive at profit before tax presented in the consolidated statement of profit or loss and other comprehensive income: Other expenses 362, ,600 (c) The following items are deducted from segment assets to arrive at total assets reported in the consolidated statement of financial position: Inter-segment assets (41,580,538) (33,500,719) (d) The following items are deducted from segment liabilities to arrive at total liabilities reported in the consolidated statement of financial position: Inter-segment liabilities (58,666,725) (49,947,236) (e) Geographical Information Revenue information based on the geographical location of customers is as follows: Germany 3,223, ,922 Hong Kong 13,237, ,000 India 36, ,747 Japan 108,112 Malaysia 14,900 1,833,230 Thailand 2,103,335 1,629,769 United States of America 3,797,090 4,292,392 22,413,104 9,304,172 85

87 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 34. SEGMENT INFOATION (CONT D) (e) Geographical Information (Cont d) The following is the analysis of non-current assets other than deferred tax assets analysed by the Group s geographical location: 2014 Malaysia Thailand Consolidated Property, plant and equipment 33,329, ,851 34,250, Property, plant and equipment 34,224, ,313 35,136,320 Goodwill on consolidation 6,711 6,711 34,230, ,313 35,143,031 (f) Major customer Revenue from one (1) customer in the manufacturing segment represents approximately 17,333,106 (2013: 5,609,133) or 77% (2013: 60%) of the Group s revenue. 35. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (i) (ii) (iii) (iv) (v) (vi) On 10 July 2013, the Company increased its issued and fully paid-up ordinary share capital by way of the issuance of 410,130 ordinary shares of 0.10 each pursuant to conversion of ICULS. On 25 July 2013, the Company increased its issued and fully paid-up ordinary share capital by way of the issuance of 394,200 ordinary shares of 0.10 each pursuant to conversion of ICULS. On 20 August 2013, the Company increased its issued and fully paid-up ordinary share capital by way of the issuance of 292,040 ordinary shares of 0.10 each pursuant to conversion of ICULS. On 6 September 2013, the Company increased its issued and fully paid-up ordinary share capital by way of the issuance of 430,660 ordinary shares of 0.10 each pursuant to conversion of ICULS. On 13 September 2013, the Company increased its issued and fully paid-up share capital by way of the issuance of 30,000,000 ordinary shares of 0.10 each pursuant to a private placement, for additional working capital purpose. On 18 October 2013, the Company increased its issued and fully paid-up ordinary share capital by way of the issuance of 14,352,280 ordinary shares of 0.10 each pursuant to conversion of ICULS. (vii) On 30 October 2013, the Company had incorporated a wholly-owned subsidiary, Sanichi Property Sdn. Bhd., a company incorporated and domiciled in Malaysia with an authorised share capital of 400,000 comprising 400,000 ordinary share of 1.00 each of which 2 shares have been issued and fully paid-up. 86

88 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 35. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (CONT D) (viii) On 27 December 2013, the Company increased its issued and fully paid-up ordinary share capital by way of the issuance of 102,360 ordinary shares of 0.10 each pursuant to conversion of ICULS. (ix) (x) On 5 February 2014, the Company increased its issued and fully paid-up ordinary share capital by way of the issuance of 279,280 ordinary shares of 0.10 each pursuant to conversion of ICULS. On 20 February 2014, the Company announced that Dato Dr. Pang Chow Huat, a director of its subsidiary, Sanichi Property Sdn. Bhd. had transferred one (1) fully paid-up ordinary share of 1.00 each to the Company. Consequently, Sanichi Property Sdn. Bhd. became the whollyowned subsidiary of the Company. (xi) On 26 February 2014, the Company announced that its wholly-owned subsidiary, Sanichi Property Sdn. Bhd. has entered into a Sales and Purchase Agreement with Top Creation Property Sdn. Bhd. (the Vendor ) for the acquisition of a piece of freehold land under Geran 14939, Lot 129, Pekan Klebang Sek. 1, Daerah Melaka Tengah, Melaka for a purchase consideration of 7,700,000. (xii) On 26 February 2014, the Company proposed to undertake the following proposals:- (i) (ii) (iii) (iv) (v) (vi) Proposed rights issue with warrants; Proposed diversification; Proposed acquisition; Proposed employee share option scheme ( ESOS ); Proposed increase in authorised share capital; and Proposed Memorandum and Articles of Association (M&A) amendments. The proposals are subject to approval by the relevant authorities. (xiii) On 26 May 2014, the Company announced that the following proposals in relation to the announcement dated 26 February 2014 have been approved by Bursa Malaysia Securities Berhad:- (i) (iv) Proposed rights issue with warrants Proposed employee share option scheme ( ESOS ) 36. SIGNIFICANT EVENTS SUBSEQUENT TO THE END OF FINANCIAL YEAR (i) (ii) (iii) On 9 September 2014, the Company increased its issued and fully paid-up ordinary share capital by way of the issuance of 12,190 ordinary shares of 0.10 each pursuant to conversion of ICULS. On 29 September 2014, the Company announced rights issue of up to 644,891,820 new ordinary shares of 0.10 each together with up to 429,927, 880 free detachable warrants ( Warrants C ) at an issue price of 0.10 per Rights Share on the basis of three (3) Rights Shares together with two (2) Warrants C for every two (2) existing shares based on a minimum subscription level of 90,000,000 Rights Shares together with 60,000,000 Warrants C ( Rights Issue with Warrants ). The Rights Shares and the Warrants C are listed and quoted on the ACE Market of Bursa Malaysia Securities Berhad on 1 October On 10 October 2014, the Company increased its issued and fully paid-up ordinary share capital by way of the issuance of 13,912,340 ordinary shares of 0.10 each pursuant to conversion of ICULS. 87

89 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 37. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group and the Company are exposed to financial risks arising from their operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk and foreign currency risk. The Board of Directors reviews and agrees policies and procedures for the management of these risks. It is, and has been throughout the current and previous financial year, the Group s policy that no derivatives shall be undertaken. The Group and the Company do not apply hedge accounting. The Group s and the Company s exposure to the financial risks and the objectives, policies and processes put in place to manage these risks are discussed below. (a) Credit Risk Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group s and the Company s exposure to credit risk arises primarily from receivables. For other financial assets, the Group and the Company minimise credit risk by dealing with high credit rating counterparties. The Group and the Company does not have any major concentration of credit risk related to any individual customer or counter party nor does it have any major concentration of credit risk related to any financial instruments. The Group and the Company manage its exposure to credit risk by investing its cash assets safely and profitably, and by the application of credit approvals, credit limits and monitoring procedures on an ongoing basis. Exposure to credit risk At the reporting date, the Group s and the Company s maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the statements of financial position. Credit risk concentration profile The credit risk concentration profile of the Group s trade receivables at the financial year end by geographical region are as follow: Group Asia 10,497,205 1,011,825 Malaysia 21,400 1,918,395 Europe 7,384,265 7,000,230 Oceania 266,688 17,902,870 10,197,138 At the end of the reporting period, 98.1% (2013: 57.9%) of the Group s trade receivables were due from two major customers who are involved in automotive industry. 88

90 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 37. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT D) (a) Credit Risk (Cont d) Financial assets that are neither past due nor impaired Information regarding trade receivables that are neither past due or impaired is disclosed in Note 14. Financial assets that are past due but not impaired Information regarding financial assets that are past due but not impaired is disclosed in Note 14. Financial assets that are impaired Information regarding financial assets that are impaired is disclosed in Note 14. Financial guarantee The Company provides unsecured financial guarantees to banks in respect of banking facilities granted to subsidiaries. The Company monitors on an ongoing basis the repayments made by the subsidiaries and their financial performance. The maximum exposure to credit risk amounted to 33,960,000 (2013: 33,960,000) representing the outstanding credit facilities of the subsidiaries guaranteed by the Company at the reporting date. At the reporting date, there was no indication that the subsidiaries would default on their repayments. The financial guarantee has not been recognised as the fair value on initial recognition was immaterial since the financial guarantees provided by the Company did not contribute towards credit enhancement of the subsidiaries borrowings in view of the security pledged by the subsidiaries and it is unlikely that the subsidiaries will default within the guarantee provided. (b) Liquidity Risk Liquidity risk is the risk that the Group or the Company will encounter in meeting financial obligations due to shortage of funds. The Group actively manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all refinancing, repayment and funding needs are met. As part of its overall prudent liquidity management, the Group maintains sufficient levels of cash to meet its working capital requirements. In addition, the Group s objective is to maintain a balance of funding and flexibility through the use of credit facilities, short and long term borrowings and a flexible cost effective borrowing structure. Short-term flexibility is achieved through credit facilities and short-term borrowings. This is to ensure that at the minimum, all projected net borrowing needs are covered by committed facilities. Also, the objective for debt maturity is to ensure that the amount of debt maturing in any one year is not beyond the Group s means to repay and refinance. 89

91 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 37. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT D) (b) Liquidity Risk (Cont d) The table below summarises the maturity profile of the Group s and the Company s liabilities as at the financial year end based on contractual undiscounted repayment obligations. Group 2014 Financial liabilities: Total On demand Carrying contractual or less than Within amount cash flows 1 year 1-5 years Total Trade payables 659, , , ,910 Other payables and accruals 3,363,305 3,363,305 3,363,305 3,363,305 Term loans 11,630,788 13,651,052 3,522,356 10,128,696 13,651,052 Finance lease payable 96, ,241 17,052 95, ,241 Liabilities directly associated with non-current assets classified as held for sale 2,206,235 2,410,335 2,410,335 2,410,335 ICULS 736, , , ,688 18,693,535 21,022,531 10,798,646 10,223,885 21,022, Financial liabilities: Trade payables 346, , , ,243 Other payables and accruals 1,959,871 1,959,871 1,959,871 1,959,871 Term loans 13,024,699 15,840,765 2,490,753 13,350,012 15,840,765 Finance lease payable 108, ,293 17, , ,293 Liabilities directly associated with non-current assets classified as held for sale 2,150,048 2,233,782 2,233,782 2,233,782 ICULS 1,420,519 1,509,286 1,509,286 1,509,286 19,009,658 22,019,240 8,556,987 13,462,253 22,019,240 90

92 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 37. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT D) (b) Liquidity Risk (Cont d) The table below summarises the maturity profile of the Group s and the Company s financial liabilities at the reporting date based on contractual undiscounted repayment obligations. (cont d) Company Total On demand Carrying contractual or less than Within amount cash flows 1 year 1-5 years Total 2014 Financial liabilities: Other payables and accruals 657, , , ,269 ICULS 736, , , ,688 1,394,190 1,482,957 1,482,957 1,482, Financial liabilities: Other payables and accruals 395, , , ,135 ICULS 1,420,519 1,509,286 1,509,286 1,509,286 1,815,654 1,904,421 1,904,421 1,904,421 (c) Interest Rate Risk Interest rate risk is the risk that the fair value or future cash flows of the Group s and the Company s financial instruments will fluctuate because of changes in market interest rates. The Group s exposure to interest rate risk arises primarily from interest bearing financial assets and financial liabilities. The Group manages its interest rate exposure by maintaining a prudent mix of fixed and floating rate borrowings. The Group actively reviews its debt portfolio, taking into account the investment holding period and the nature of its assets. This strategy allows it to capitalise on cheaper funding in a low interest rate environment and achieve a certain level of protection against rate hikes. Sensitivity analysis for interest rate risk At the end of the financial year, if average interest rates increased/decreased by 1% with all other variable held constant, the Group s profit net of tax for the financial year ended 30 June 2014 will be lower/higher by 109,305 (2013: 124,464) as a result of exposure to floating rate borrowings. 91

93 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 37. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT D) (d) Foreign Currency Risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group has transactional currency exposures arising from sales or purchases that are denominated in currencies other than the functional currency of the Group entities, primarily. The foreign currencies in which these transactions are denominated are mainly in EURO ( EURO ), Singapore Dollar ( SGD ), Thai Baht ( THB ) and United States Dollar ( USD ). The Group also hold cash and cash equivalents denominated in foreign currencies for working capital purposes. At the reporting date, such foreign currency balances (mainly in THB) amounted to 17,675 (2013: 73,719). The Group is also exposed to currency translation risk arising from its net investment in foreign operation. The Group s net investment in Thailand is not hedged as currency position in the functional currency of that country is considered to be long-term in nature. Sensitivity analysis for foreign currency risk The following table demonstrates the sensitivity of the Group s profit net of tax to a reasonably possible change in the foreign currencies exchange rates against, with all other variables held constant: Group Profit net of tax EUR/ - strengthen by 5% (2013: 5%) 163, ,954 - weaken by 5% (2013: 5%) (163,204) (107,954) SGD/ - strengthen by 5% (2013: 5%) (33,664) 2,416 - weaken by 5% (2013: 5%) 33,664 (2,416) THB/ - strengthen by 5% (2013: 5%) 8,602 3,602 - weaken by 5% (2013: 5%) (8,602) (3,602) USD/ - strengthen by 5% (2013: 5%) 145, ,922 - weaken by 5% (2013: 5%) (145,266) (177,922) 38. FAIR VALUE OF FINANCIAL INSTRUMENTS The methods and assumptions used to estimate the fair values of the following classes of financial assets and financial liabilities are as follows: (i) Cash and Cash Equivalents, Trade and Other Receivables and Payables The carrying amounts are reasonable approximation of fair values due to the relatively short term maturity of these financial assets and liabilities. (ii) Borrowings The carrying amounts of the short term borrowings are reasonable approximation of fair values due to the insignificant impact of discounting. The carrying amount of long term floating rate loans approximates their fair value as the loans will be re-priced to market interest rate or near reporting date. The fair value of finance lease payables is estimated using discounted cash flow analysis, based on current lending rate for similar type of borrowing arrangement. 92

94 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 38. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONT D) The carrying amounts of financial instruments recognised in the statements of financial position as at reporting date approximate their fair values except for the following: Carrying Amount Group Fair Value 2014 Financial liabilities Finance lease payable 96,376 93, Financial liabilities Finance lease payable 108, , FAIR VALUE HIERARCHY (a) Policy on transfer between levels The fair value of the asset and liability to be transferred between levels is determined as at the date of the event or change in circumstances that caused the transfer. (b) The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable. (i) (ii) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Non-derivative financial liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the end of the reporting period. For borrowings, the market rate of interest is determined by reference to similar borrowing arrangements. Transfer between Level 1 and Level 2 fair values There is no transfer between Level 1 and Level 2 fair values during the financial year. (iii) Level 3 fair value measurements are those derived from inputs for the asset or liability that are not based on observable market data (unobservable inputs). 93

95 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 39. FAIR VALUE HIERARCHY (CONT D) (c) The valuation techniques and significant unobservable inputs used in determining the fair value measurement of Level 3 financial instruments as well as the relationship between key unobservable inputs and fair value, is detailed in the table below. Inter-relationship Valuation Significant between key technique unobservable unobservable Financial instrument used inputs inputs and fair value Financial liabilities 4% 5 years nominal value Discounted Weighted The higher the Irredeemable Convertible cash flows average cost discount rate, the Unsecured Loan Stocks method of capital lower the fair ( ICULS ) value of the ICULS would be. As at 30 June 2014, the fair value of financial instruments not carried at fair values of the Group on the statements of financial position: Fair value of financial instruments not carried at fair value Total Carrying L level 1 Level 2 Level 3 Total fair value amount Group At Financial liabilities Other financial liabilities - finance lease payable 93,724 93,724 93,724 96,376 - ICULS 736, , , ,921 93, , , , ,297 * Comparative figures have not been analysed by levels, by virtue of transitional provision given in Appendix C3 of MFRS CAPITAL MANAGEMENT The primary objective of the Group s capital management is to ensure that it maintains a strong credit rating and healthy capital ratio in order to support its business and maximise shareholders value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies and processes during the financial years ended 30 June 2014 and 30 June Pursuant to the requirements of Practice Note No. 17/2005 of the Bursa Malaysia Securities, the Group is required to maintain a consolidated shareholders equity equal to or not less than the twenty-five percent (25%) of the issued and paid-up capital (excluding treasury shares) and such shareholders equity is not less than 40.0 million. The Company has complied with this requirements for the financial year ended 30 June

96 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 40. CAPITAL MANAGEMENT (CONT D) The Group monitors capital using a gearing ratio, which is net debt divided by total equity plus net debt. Net debt include borrowings and payables, less cash and bank balances whilst total equity is the shareholders funds of the Group. The Group s gearing ratio is shown as follow: Group Company Borrowings 12,464,085 14,553, ,921 1,420,519 Trade payables 659, ,243 Other payables 3,363,305 1,959, , ,135 Liabilities directly associated with non-current assets classified as held for sale 2,206,235 2,150,048 Less: Cash and cash equivalents (1,528,479) (4,944,100) (207,657) (4,667,267) Net debt 17,165,056 14,065,558 1,186,533 (2,851,613) Total equity 48,348,408 42,197,408 28,965,426 27,062,132 Total equity and net debt 65,513,464 56,262,966 30,151,959 24,210,519 Gearing ratio 26% 25% 4% -12% 41. COMPARATIVE FIGURES The following comparative figures have been reclassified to conform with the current year presentation: Statements of comprehensive income Group Company As As Previously As As Previously Reclassified Classified Reclassified Classified Cost of sales (11,306,191) (11,373,337) Other income 9,300,001 9,181,039 Selling and distribution costs (47,340) (27,826) Administrative expenses (5,145,365) (5,386,485) (2,242,972) (3,100,572) Other expenses (863,817) (457,433) (857,600) Finance costs (329,880) (328,550) Statements of financial position Amount owing by subsidiaries 23,343,543 25,172,707 Amount owing to a subsidiary (1,829,164) Cash and cash equivalent 4,944,100 4,976,599 Trade payables (346,243) (378,742) Bank overdrafts (641,683) Borrowings (2,816,787) (4,325,152) Liabilities directly associated with non-current assets classified as held for sale (2,150,048) 95

97 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) NOTES TO THE FINANCIAL STATEMENTS 30 June 2014 (Cont d) 41. COMPARATIVE FIGURES (CONT D) The following comparative figures have been reclassified to conform with the current year presentation: (Cont d) Statements of cash flows Group Company As As Previously As As Previously Reclassified Classified Reclassified Classified Cash Flows from Operating Activities (9,524,478) (9,441,874) Cash Flows from Financing Activities 23,237,402 23,187,297 Cash and cash equivalents at end of financial year 4,240,910 4,273,409 96

98 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 SUPPLEMENTARY INFOATION ON THE DISCLOSURE OF REALISED AND UNREALISED PROFITS OR LOSSES SUPPLEMENTARY INFOATION ON THE DISCLOSURE OF REALISED AND UNREALISED PROFITS OR LOSSES The following analysis of realised and unrealised retained earnings of the Group and of the Company at 30 June 2014 and 30 June 2013 is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad ( Bursa Malaysia ) dated 25 March 2010 and prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants. The retained earnings of the Group and of the Company as at reporting date is analysed as follows: Group Company Total accumulated losses of the Company and its subsidiaries - realised (14,089,551) (15,855,451) (12,641,234) (10,997,650) - unrealised (165,573) (314,865) (14,255,124) (16,170,316) (12,641,234) (10,997,650) Less: Consolidation adjustments 20,794,420 20,431,943 Total retained earnings/ (accumulated losses) 6,539,296 4,261,627 (12,641,234) (10,997,650) The disclosure of realised and unrealised profits above is solely for complying with the disclosure requirements stipulated in the directive of Bursa Malaysia and should not be applied for any other purpose. 97

99 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) LIST OF PROPERTIES as at 30 June 2014 Registered Owner Title/Location Address Description/ Existing Use Tenure Age of Building (Years) Total Land Area (Square feet) Total Built Up Area (Square feet) NBV () Year of Acquisition Sanichi Precision Mould Sdn Bhd HS(D) PTD Mukim of Senai-Kulai PLO 135 Kawasan Perindustrian Fasa Senai Johor Warehouse & Factory Leasehold ,340 43,924 4,478, Sanichi Precision Mould Sdn Bhd HS(D) PTD Mukim of Senai-Kulai PLO 136 Kawasan Perindustrian Fasa Senai Johor Building in Progress Leasehold ,340 4,615,

100 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 ANALYSIS OF SHAREHOLDINGS as at 31 October 2014 SHARE CAPITAL Authorized Share Capital : 500,000, Paid-up Share Capital : 88,385, Class of Share : Ordinary Shares of 0.10 each Voting Rights : 1 Vote per Ordinary Share A. Distribution of shareholdings No. of Total Size of shareholdings Holders Holdings % Less than 100 shares 52 1, ,000 shares , ,001 to 10,000 shares 911 5,769, ,001 to 100,000 share 2, ,152, ,001 to less than 5% of issued shares ,759, % and above of issued shares 2 98,000, TOTAL 4, ,853, B. List of Thirty (30) Largest Shareholders Name of shareholders No. of Shares % 1 PELABURAN MARA BERHAD 53,000, PELABURAN MARA BERHAD 45,000, MAH WEE MAH SIEW KUNG 35,878, SJ SEC NOMINEES (ASING) SDN BHD 30,000, (PLEDGED SECURITIES A/C FOR HERBERT TUCAKOVIC) 5 MAH WEE MAH SIEW KUNG 28,200, RAMESH SINGH A/L KULDIP SINGH 16,000, MAYBANK NOMINEES (TEMPATAN) SDN BHD 15,500, (PLEDGED SECURITIES A/C FOR TAN CHIN HOE) 8 SJ SEC NOMINEES (TEMPATAN) SDN BHD 14,848, (PLEDGED SECURITIES A/C FOR DATO DR. PANG CHOW HUAT) 9 KONG CHEE SENG 14,400, HLB NOMINEES (TEMPATAN) SDN BHD 13,912, (HONG LEONG BANK BERHAD) 11 SJ SEC NOMINEES (TEMPATAN) SDN BHD 11,702, (PLEDGED SECURITIES A/C FOR CHENG KIM LIANG) 12 SJ SEC NOMINEES (TEMPATAN) SDN BHD 11,200, (PLEDGED SECURITIES A/C FOR KUA KHAI LOON) 13 LEONG CHEE KEE 11,000, CHEN CHOON LEE 9,610, AHMAD KOMAROLAILI BIN ABU 9,189, HSBC NOMINEES (ASING) SDN BHD (EXEMPT AN FOR CREDIT SUISSE) 8,869, ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 7,500, (PLEDGED SECURITIES A/C FOR MAH WEE MAH SIEW KUNG) 18 MAH SIEW SEONG 7,497, CIMSEC NOMINEES (TEMPATAN) SDN BHD 6,000, (CIMB BANK FOR NAZRI BIN NAZRI BHUPALAN) 20 NG KOK SING 5,500,

101 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) ANALYSIS OF SHAREHOLDINGS as at 31 October 2014 (Cont d) B. List of Thirty (30) Largest Shareholders (CONT D) Name of shareholders No. of Shares % 21 MAH WEE MAH SIEW KUNG 5,009, SHIN KONG CHIN KONG KEW 5,000, MONICA MAIRON BAHANJA 5,000, TOH AH LOU 4,600, MOHAMED FAROZ BIN MOHAMED JAKEL 4,500, DATO DR. PANG CHOW HUAT 4,334, MOHD SHAFEI BIN ABDULLAH 4,000, LIM HAI YOUNG 4,000, KENANGA NOMINEES (TEMPATAN) SDN BHD 4,000, (PLEDGED SECURITIES A/C FOR MOHAMAD BOLHAIR BIN REDUAN) 30 YIN YIT FUN 3,900, TOTAL 399,150, C. Substantial shareholders No of Shares Held Name of substantial shareholders Direct % Indirect % Pelaburan MARA Berhad 98,000, Mah Wee Mah Siew Kung 79,089, D. Directors shareholdings No of Shares Held Name of Directors Direct % Indirect % Tan Sri Dato Sri Abdul Halil bin Abd Mutalif Dato Dr. Pang Chow Huat 19,182, ,610,000 (1) 1.09 Dato Abd Halim bin Abd Hamid Mr. Ong Tee Kein Datuk Seri Ahmad Said bin Hamdan Note: (1) Deemed interest by virtue of his spouse s shareholdings in the Company. 100

102 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 ANALYSIS OF WARRANT B HOLDINGS as at 31 October 2014 No of Warrant B 2013/2018 : 60,485,000 Exercise Price : 0.10 for one (1) ordinary share of 0.10 each Exercise Rights : Each Warrant entitles the holder to subscribe for one new ordinary share of 0.10 each Exercise Period : 14 March 2013 to 23 March 2018 No of Warrants exercised during the year ended 30/6/2014 : NIL No of % of Total Warrant B Warrant B No of % of Size of Warrant holdings Holders Holders Warrant B Warrant B Less than , , , ,001-10, , , , ,086, ,001 <5% of issued Warrant B ,416, % & above of issued Warrant B TOTAL ,485, List of Thirty (30) Largest Warrant B Holders (As per Record of Depositors) No of Warrant B % of No Name Held Warrant B 1 CHAU SAM CHOW SAM TAI 1,738, TAN CHONG KHEAN 1,593, WONG MOI FONG 1,399, SHOBA A/P SATHIASEELAN 1,390, MAYBANK NOMINEES (TEMPATAN) SDN BHD (WAI KWONG SENG) 1,304, TAN PAIK LAN 1,000, AL-ASHRAF BIN MUSHID 1,000, YONG EE LIN 1,000, SURESH RETNAM A/L SATHIASEELAN 960, MOHD AMIN BIN ABDULLAH 926, SOH TONG HWA 900, MAYBANK NOMINEES (TEMPATAN) SDN BHD 800, (PLEDGED SECURITIES A/C FOR MOHD RIDZA BIN ABDUL LATIFF) 13 MAYBANK NOMINEES (TEMPATAN) SDN BHD 799, (MOHD FAZLY BIN MOHD ELIAS) 14 BIMSEC NOMINEES (TEMPATAN) SDN BHD 700, (PLEDGED SECURITIES A/C FOR NOALA BINTI AHMAD SUPAN) 15 BIMSEC NOMINEES (TEMPATAN) SDN BHD 654, (PLEDGED SECURITIES A/C FOR MOHAMAD SUPAR BIN AHMAD) 16 HLIB NOMINEES (TEMPATAN) SDN BHD 612, (PLEDGED SECURITIES A/C FOR MOHD NIZAMRI BIN JAAPAR) 17 YIN YIT FUN 600, MAYBANK NOMINEES (TEMPATAN) SDN BHD (ARIF BIN AB HADI) 600, KANG CHIN NAI 550, SHIN KONG CHIN KONG KEW 500,

103 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) ANALYSIS OF WARRANT B HOLDINGS as at 31 October 2014 (Cont d) List of Thirty (30) Largest Warrant B Holders (Cont d) (As per Record of Depositors) No of Warrant B % of No Name Held Warrant B 21 LEE SOON LEE ENG SOON 500, YONG KHI HEE 500, MAYBANK NOMINEES (TEMPATAN) SDN BHD (WONG POON KING) 500, TAN WEE FONG 500, MONICA MAIRON BAHANJA 500, PUBLIC NOMINEES (TEMPATAN) SDN BHD 500, (PLEDGED SECURITIES A/C FOR LEE SOON LEE ENG SOON) 27 LEE THIEN CHIEN 500, JF APEX NOMINEES (TEMPATAN) SDN BHD 470, (PLEDGED SECURITIES A/C FOR CHONG KUOK LONG) 29 KENANGA NOMINEES (TEMPATAN) SDN BHD 465, PLEDGED SECURITIES A/C FOR MOHD HAFIZ FAIZAL BIN IBRAHIM) 30 LEE KOK HOONG 450, TOTAL 23,913,

104 SANICHI TECHNOLOGY BERHAD ( K) ANNUAL REPORT 2014 ANALYSIS OF WARRANT C HOLDINGS as at 31 October 2014 No of Warrants C 2014/2019 : 347,971,517 Exercise Price : 0.10 for one (1) ordinary share of 0.10 each Exercise Rights : Each Warrant entitles the holder to subscribe for one new ordinary share of 0.10 each Exercise Period : 25 September 2014 to 24 September 2019 No of Warrants exercised during the year ended 30/6/2014 : NIL No of % of Total Warrant C Warrant C No of % of Size of Warrant holdings Holders Holders Warrant C Warrant C Less than , , , ,001-10, ,434, , , ,482, ,001 <5% of issued Warrant C ,273, % & above of issued Warrant C ,750, TOTAL 1, ,971, List of Thirty (30) Largest Warrant C Holders (As per Record of Depositors) No of Warrant C % of No Name Held Warrant C 1 MAH WEE MAH SIEW KUNG 23,250, MAH WEE MAH SIEW KUNG 19,500, SHIN KONG CHIN KONG KEW 15,000, ANG CHAN MOY 9,000, KENANGA NOMINEES (TEMPATAN) SDN BHD 8,546, (PLEDGED SECURITIES A/C FOR GAN BOON GUAT) 6 KONG CHEE SENG 8,000, NALACHAKRAVARTHY ODHAYAKUMAR 6,045, LEONG CHEE KEE 6,000, MAH WEE MAH SIEW KUNG 5,005, MAH WEE MAH SIEW KUNG 4,511, DHASHA (M) SDN BHD 4,500, TAM MAY CHOW 3,833, GERARD CHEN WOON MING 3,500, NG KOK SING 3,366, ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 3,333, (PLEDGED SECURITIES A/C FOR MAH WEE MAH SIEW KUNG) 16 TENG POK TENG FOOK SANG 3,000, MERRY NOEL ROBERT 3,000, CHIN AKAU 3,000, CHONG KAH AN 3,000, LIM SZE HOCK 3,000,

105 ANNUAL REPORT 2014 SANICHI TECHNOLOGY BERHAD ( K) ANALYSIS OF WARRANT C HOLDINGS as at 31 October 2014 (Cont d) List of Thirty (30) Largest Warrant C Holders (cont d) (As per Record of Depositors) No of Warrant C % of No Name Held Warrant C 21 MAH SIEW SEONG 2,938, WONG AH NGAN 2,650, TAN TOH THAI 2,500, AFFIN HWANG INVESTMENT BANK BERHAD 2,500, TOH AH LOU 2,500, KUAR KEONG CHEE 2,400, ACE-TEAM RESOURCES SDN BHD 2,210, TA NOMINEES (TEMPATAN) SDN BHD 2,054, (PLEDGED SECURITIES A/C FOR CHONG SENG FOH) 29 LIME SECURITIES SDN BHD 2,000, LIM LIM HOON NAM 2,000, TOTAL 162,144,

106 SANICHI TECHNOLOGY BERHAD (Company No: K) (Incorporated in Malaysia) PROXY FO Number of Ordinary Shares Held I/We,... (FULL NAME AND NRIC/PASSPORT NO/COMPANY NO) of... (FULL ADDRESS) being a member of SANICHI TECHNOLOGY BERHAD hereby appoint (FULL NAME AND NRIC/PASSPORT NO) of... (FULL ADDRESS) or failing him/her, the Chairman of the meeting as *my/our proxy to attend and vote for *me/us and on *my/ our behalf at the Tenth Annual General Meeting of the Company to be held at PLO 135 Jalan Cyber 5, Kawasan Perindustrian Senai Fasa 3, Senai, Johor on Friday, 19 December 2014 at a.m. or any adjournment thereof. My/our proxy/proxies is/are to vote as indicated below:- Resolution 1 Resolution 2 Resolution 3 Resolution 4 Resolution 5 RESOLUTIONS FOR AGAINST To approve the payment of Directors fees To re-elect Tan Sri Dato Sri Abdul Halil bin Abd Mutalif To re-elect Datuk Seri Ahmad Said bin Hamdan To re-appoint Auditors Authority to issue shares pursuant to Section 132D of the Act Please indicate with an X in the appropriate boxes on how you wish your vote to be cast. If no specific directions as to voting is given, the proxy will vote or abstain at his/her discretion. Signed this day of 2014 For appointment of two proxies, the shareholdings to be represented by the proxies Proxies % of Shares Proxy 1 Signature of Member/Common Seal Proxy 2 Strike out whichever is not applicable Total 100% Note: 1. The Agenda item 1 is meant for discussion only as the provision of Section 169(1) of the Act does not require a formal approval of the shareholders and hence, is not put forward for voting. 2. A member entitled to attend and vote at this meeting is entitled to appoint up to two (2) proxies to attend and vote in his stead. Where a member appoints two (2) proxies, the appointment shall be invalid unless he specifies the proportion of his holdings to be represented by each proxy. 3. A proxy may but need not be a member of the Company. There shall be no restriction as to the qualification of the proxy and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. A proxy appointed to attend and vote at the meeting of the Company shall have the same rights as the member to speak at the meeting. 4. A member of the Company who, is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account ( omnibus account ), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. 5. Where the Form of Proxy is executed by a corporation, it must be executed under its seal or under the hand of its attorney. 6. The instruments appointing a proxy must be deposited at the Registered Office of the Company located at Level 33A, Menara 1MK, Kompleks 1 Mont Kiara, No.1 Jalan Kiara, Mont Kiara, Kuala Lumpur, not less than fortyeight (48) hours before the time for holding the meeting or at any adjournment thereof. 7. Only depositors whose names appear in the Record of Depositors as at 12 December 2014 shall be regarded as members and entitled to attend, speak and vote at the meeting or appoint a proxy or proxies to attend and vote in his/her stead.

107 Fold this flap for sealing Then fold here AFFIX STAMP SANICHI TECHNOLOGY BERHAD (Company No: K) (Incorporated in Malaysia) THE COMPANY SECRETARY sanichi technology berhad ( k) Level 33A, Menara 1MK, Kompleks 1 Mont Kiara No.1, Jalan Kiara, Mont Kiara Kuala Lumpur, Malaysia 1 st fold here

108 RECOGNITION A W A R D SERIES Winner - SMI ICT Adoption Award BS EN ISO 9001 : 企業高峰獎 Sanichi Technology Berhad (Company No K) PLO 135, Jalan Cyber 5, Kawasan Perindustrian Senai Fasa 3, Senai, Johor Darul Takzim Tel: Fax : sanichi@streamyx.com