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SANICHI TECHNOLOGY BERHAD (661826-K)

PLO 135, Jalan Cyber 5, Kawasan Perindustrian Senai Fasa 3, 81400 Senai, Johor.Tel: 607-598 8866 Fax: 607-598 2886 Email: [email protected]

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(661826-K)

Annual Report 2010 Annual Report 2010

Generating GROWTH

Automotive Components

Air-craft components

Electronic Components

Oil & Gas Engineering Components

• NOTICE OF ANNUAL GENERAL MEETING 2-3

• CORPORATE STRUCTURE 4

• CORPORATE INFORMATION 5

• DIRECTORS’ PROFILE 6-8

• CHAIRMAN’S STATEMENT 9

• AUDIT COMMITTEE REPORT 10-12

• CORPORATE GOVERNANCE STATEMENT 13-19

• STATEMENT OF INTERNAL CONTROL 20

• FINANCIAL STATEMENTS 21-59

• LIST OF PROPERTIES 60

• ANALYSIS OF SHAREHOLDINGS 61-62

• PROXY FORM ENCLOSED

Contents


ANNUAL REPORT 20102

Notice of Sixth Annual General Meeting

NOTICE IS HEREBY GIVEN that the Sixth Annual General Meeting of the Company will be held at PLO 135 Jalan Cyber 5, Kawasan Perindustrian Senai Fasa 3, 81400 Senai, Johor on Thursday, 23 December 2010 at 11.00 a.m. to transact the following business:-

AGENDA

ORDINARY BUSINESS

1. To receive the Audited Financial Statements for the fi nancial year ended 30 June 2010 together with the Reports of the Directors and Auditors thereon.

2. To approve the payment of Directors’ Fees for the fi nancial year ended 30 June 2010. 3. To re-elect Tan Sri Dato’ Seri Arshad bin Ayub who retires pursuant to Section 129(2) of the Companies Act,

1965. 4. To re-elect the following Directors, who retire pursuant to Article 127 of the Company’s Articles of Association

and being eligible, offer themselves for re-election: (i) Datin Chen Choon Lee (ii) Dato’ Abd Halim bin Abd Hamid

5. To re-elect the following Directors, who retire pursuant to Article 132 of the Company’s Articles of Association and being eligible, offer themselves for re-election:

(i) Datuk Nik Ibrahim bin Nik Abdullah (ii) Puan Azrina binti Arshad (iii) Mr Leong Choon Meng

6. To re-appoint Messrs THL Wong & Co as Auditors of the Company and to authorise the Directors to fi x their remuneration.

AS SPECIAL BUSINESS:

To consider and if thought fi t, to pass the following resolution:

ORDINARY RESOLUTION

7. Ordinary Resolution – Authority to Issue Shares THAT, subject always to the Companies Act, 1965, (“the Act”) (as may be amended, modifi ed 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 ordinary shares from the unissued capital of the Company at any time at such price, upon such terms and conditions, for such purposes and to such persons whomsoever the Directors may in their discretion deem fi t and that the Directors be empowered to obtain the approval for the listing and quotation of the additional shares so issued on the Bursa Malaysia Securities Berhad (“Bursa Securities”) 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 such authority shall continue to be in force until the conclusion of the next Annual General Meeting (“AGM”) of the Company.

8. To transact any other business of which due notice shall have been given.

By Order of the Board

SANICHI TECHNOLOGY BERHAD

Siew Suet Wei (MAICSA No.: 7011254)Company SecretaryKuala Lumpur1 December 2010

Resolution 1

Resolution 2

Resolution 3

Resolution 4Resolution 5

Resolution 6Resolution 7Resolution 8

Resolution 9

Resolution 10


ANNUAL REPORT 20102


ANNUAL REPORT 2010 3

Note:

1. 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 specifi es the proportion of his holdings to be represented by each proxy.

2. A proxy may but need not be a member of the Company and a member may appoint any person to be his proxy without limitation and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply.

3. Where the Form of Proxy is executed by a corporation, it must be executed under its seal or under the hand of its attorney.

4. The instruments appointing a proxy must be deposited at the Registered Offi ce of the Company, located at A-15-4 Northpoint Offi ces, Medan Syed Putra Utara, 1 Jalan Syed Putra, Mid Valley City, 59200 Kuala Lumpur, Malaysia, not less than forty-eight (48) hours before the time for holding the meeting or at any adjournment thereof.

Explanatory notes to Special Business

Resolution 10The proposed Ordinary Resolution 10 is a renewal of the general authority for the Directors to issue shares pursuant to Section 132D of the Companies Act, 1965. If passed, it will empower the Directors of the Company, from the conclusion of this Annual General Meeting to allot and issue shares in the Company up to and not exceeding in total 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 interests of the Company. This authority will expire at the next Annual General Meeting of the Company, unless revoked or varied at a general meeting.

The general authority to issue shares will allow the Company to take advantage of any strategic opportunities, including but not limited to, issuance of new shares for purpose of funding investment project(s), working capital and/or acquisitions which require new shares to be allotted and issued speedily and would also save the cost involved in convening a general meeting to approve such issuance of shares.

Statement Accompanying Notice of Annual General Meeting(pursuant to Paragraph 8.29(2) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad)

There are no individuals who are standing for election as directors (other than directors standing for re-election).

Notice of Sixth Annual General Meeting (Cont’d)




ANNUAL REPORT 20104

Corporate Structure

)K-628166 .oN ynapmoC()5691 ,tcA seinapmoC eht rednu aisyalaM ni detaroprocnI(

Sanichi Precision Mould Sdn Bhd

Design and fabrication of Advanced Plastic Injection Mould andConventional Plastic Injection Mould.

100%

Asia Pinnacle Sdn Bhd

Design and fabrication ofAdvanced Plastic Injection Mould.

100%

Sanichi Mould(Thailand) Co. Ltd

Design and fabrication of Advanced Plastic Injection Mould andConventional Plastic Injection Mould.

100%



Corporate Information

AUDIT COMMITTEETan Sri Dato’ Sri Abdul Halil bin Abdul Mutalif Chairman/Independent Non-Executive Director

Datuk Nik Ibrahim bin Nik AbdullahMember/Non-Independent Non-Executive Director

Mr Leong Choon MengMember/Independent Non-Executive Director

REMUNERATION AND NOMINATION COMMITTEETan Sri Dato’ Seri Arshad AyubChairman/Non-Independent Non-Executive Director

Dato’ Dr Pang Chow HuatMember/Executive Director

Dato’ Abd Halim bin Abd HamidMember/Independent Non-Executive Director

COMPANY SECRETARYMs Siew Suet Wei (MAICSA No. 7011254)

AUDITORSTHL WONG & CO. (AF 0942)10, Lorong Universiti B,Section 16, 46350 Petaling JayaTel : 03 7956 5333Fax : 03 7958 6833

BOARD OF DIRECTORS

Tan Sri Dato’ Seri Arshad Ayub Chairman/Non-Independent Non-Executive Director

Dato’ Dr Pang Chow Huat Managing Director

Datin Chen Choon Lee Executive Director

Tan Sri Dato’ Sri Abdul Halil bin Abdul Mutalif Independent Non-Executive Director

Dato’ Abd Halim bin Abd Hamid Independent Non-Executive Director

Datuk Nik Ibrahim bin Nik Abdullah Non-Independent Non-Executive Director

Puan Azrina binti Arshad Non-Independent Non-Executive Director

Mr Leong Choon Meng Independent Non-Executive Director

En Mansor bin Ali Alternate Director to Tan Sri Dato’ Seri Arshad Ayub

Mr Teo Kong Wan Alternate Director to Datuk Nik Ibrahim bin Nik Abdullah

STOCK EXCHANGE LISTING ACE Market of Bursa Malaysia Securities Berhad

SHARE REGISTRARShareworks Sdn Bhd10-1, Jalan Sri Hartamas 8Sri Hartamas50480 Kuala LumpurTel : 03 6201 1120Fax : 03 6201 3121

PRINCIPAL BANKERSUnited Overseas Bank (Malaysia) Berhad2 Jalan Wong Ah Fook80000 Johor BahruTel : 07 219 6300

WEBSITE www.sanichimould.com

REGISTERED OFFICE A-15-4, Northpoint Offi ces,Medan Syed Putra Utara,1 Jalan Syed Putra, Mid Valley City59200 Kuala LumpurTel No. 03 2287 0080Fax No. 03 2287 0090


ANNUAL REPORT 20106

Director’s Profi le

Tan Sri Dato’ Seri Arshad Bin Ayub Non-Independent Non-Executive ChairmanMalaysian, aged 82

Tan Sri Dato’ Seri Arshad Bin Ayub was appointed as Non-Independent Non-Executive Director and Chairman of the Company on 2 April 2010. He is also the Chairman of the Remuneration and Nomination Committee of Sanichi.

He graduated with a Diploma in Agriculture from College of Agriculture, Serdang, Selangor in 1954 and later obtained a Bachelor of Science (Hons.) Economics and Statistics from University of Wales, Aberystwyth, United Kingdom in 1958. In 1964, he obtained a postgraduate Diploma in Business Administration from Management Development Institute (IMEDE), Lausanne, Switzerland.

He has vast experience having served as a member of numerous bodies in the fi elds of industry and trade, education, economic planning, fi nance, regional development, agriculture and science. He was the fi rst Director of Mara Institute of Teknologi from 1965 to 1975. He held senior positions with various Ministries in the Malaysian Government, from 1951 to 1983, including his appointment as Deputy Governor of Bank Negara Malaysia from 1975 to 1977, and Deputy Director General of Economic Planning Unit, Prime Minister’s Department. He was the immediate past Chairman of Malaysia Rubber Export Promotion Council. He currently serves as President of Malaysian Rubber Products Manufacturers Association, Chairman of University of Malaya Board and a member of Harun’s Salary Commission for Statutory Bodies and Local Government and Cooperative College Malaysia.

On listed companies, he is currently Chairman of Malayan Flour Mills Bhd, Tomypak Holdings Bhd and LBI Capital Bhd. He is a Director of Kulim Malaysia Bhd, Sindora Bhd, KPJ Healthcare Bhd and Top Glove Corporation Bhd. On unlisted companies, he is a Chairman of PFM Capital Holdings Sdn Bhd, Amanahraya Investment Bank Ltd, Zalaraz Sdn Bhd, a family company and Ladang MOCCIS Sdn Bhd. He is a Director of Pelaburan Johor Bhd, Bata (M) Sdn Bhd, AmanahRaya Investment Management Sdn Bhd and Land Rover (M) Sdn Bhd.

Tan Sri recorded 100% attendance at the Board Meetings since his date of appointment for the fi nancial year ended 30 June 2010.

Dato’ Dr. Pang Chow HuatManaging DirectorMalaysian, aged 37

Dato’ Dr. Pang Chow Huat is the founder and Managing Director of Sanichi and was appointed to the Board on 20 June 2006. He is also a member of the Remuneration Committee and Nomination Committee of the Company. Equipped with more than sixteen (16) 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 2005. He began his career in 1991 as an apprentice with a local company specializing in the fabrication of plastic moulds and dies as well as plastic injection moulding, and later joined a Singapore-based mould anufacturer 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, specializing in the servicing and repair of moulds and tools. He has experience exposure to advanced design and technology of high-quality precision moulds and parts.

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 lso 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 fi nancial year ended 30 June 2010.

Datin Chen Choon LeeExecutive DirectorMalaysian, aged 37

Datin Chen Choon Lee is the Executive Director of Sanichi and was appointed to the Board on 20 June 2006. Equipped with more than fi fteen (15) years of experience in accounts administration and management within a manufacturing environment, she is currently responsible for the overall supporting functions of the Group, including fi nance, accounting, cash fl ow management, tax planning, human resources and administrative matters. She completed an Accounting Diploma from the London Chamber of Commerce and Industry from Maju Commercial Institute in 1993.

In 1998, she joined Sanichi Precision Mould Industries as an Accounts Director, and was subsequently promoted to Finance Director in 2000.

Datin Chen attended all Board Meetings held during the fi nancial year ended 30 June 2010.


ANNUAL REPORT 20106



Tan Sri Dato’ Sri Abdul Halil bin Abdul MutalifIndependent Non-Eexcutive DirectorMalaysian, aged 64

Tan Sri Dato’ Sri Abdul Halil bin Abdul Mutalif is the Audit Committee Chairman of Sanichi and was appointed to the Board on 20 June 2006.

He is also a member of the Remuneration Committee and Nomination Committee of the Company. He was formerly the Director-General of the Royal Malaysian Customs for fi ve (5) years before he retired in October 2005. After graduating from University Malaya with B.A (Hons) in History in 1970, he began his career as an Administrative and Diplomatic Services Offi cer 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 RM16 billion prior to his appointment to RM25 billion upon his retirement. He also sits on the board of directors of several private limited companies.

Tan Sri Dato’ Sri Halil attended 4 out of 5 Board Meetings held during the fi nancial year ended 30 June 2010.

Datuk Nik Ibrahim bin Nik AbdullahNon-Independent Non-Executive DirectorMalaysian, aged 66

Datuk Nik Ibrahim is a member of the Audit Committee of Sanichi and was appointed to the Board on 8 January 2010.

Dato’ Nik Ibrahim holds a B.A (Hons) Economics Degree from University of Malaya. He joined Malaysian Industrial Development Authority (MIDA) in 1968 as an Economist and subsequently served as Assistant Secretary in the Ministry of Finance from 1970 to 1972. Dato’ Nik Ibrahim returned to MIDA in 1974 and served as Senior Economist for two years. Thereafter he joined Bank Pembangunan & Infrastruktur Malaysia Berhad as Manager and was promoted to General Manager, Chief Executive Offi cer and lastly as Chief Operating Offi cer until his retirement in March 2004. Dato’ Nik Ibrahim is a Director and a member of the Audit Committee of Muda Holdings Berhad and sits on the board of a few other local companies. He is a committee member of Malaysian Pulp & Paper Manufacturers Association.

Datuk Nik recorded 100% attendance of the Board Meetings since his appointment as Director of Sanichi for the fi nancial year ended 30 June 2010.

Director’s Profi le (Cont’d)




ANNUAL REPORT 20108

Director’s Profi le (Cont’d)

Dato’ Abd Halim bin Abd HamidIndependent Non-Executive DirectorMalaysian, aged 61

Dato’ Abd Halim bin Abd Hamid is an Independent Non-Executive Director of Sanichi and was appointed to the Board on 28 May 2008. He is also a member of Remuneration and Nomination Committee of Sanichi.

He was formerly a senior police offi cer who had served over a span of 36 years in various parts of Malaysia since 1969. 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 qualifi cations, 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 Offi cer of UNIKOP College, a private institution of higher learning fully owned by the PDRM Cooperative with effect from October 2005 until today.

Dato’ Abd Halim attended 4 out of 5 Board Meetings held during the fi nancial year ended 30 June 2010.

Mr Leong Choon MengIndependent Non-Executive DirectorMalaysian, aged 46

Mr Leong Choon Meng was appointed to the Board of Sanichi Technology Berhad on 31 December 2009. He graduated from the professional body of the Chartered Institute of Management Accountants (CIMA), United Kingdom and is currently an Associate member of the professional body. He was the Senior Vice President (Capital Market) of Alliance Investment Bank Berhad from October 2003 to January 2008. Prior to that, he was the General Manager Corporate Finance of a public listed Construction & Property Development Group where he started as a Senior Executive in 1991. The initial year of his career was in tax consulting for 4 years from 1987, of which 2 years were with KPMG Tax Division. He has more than 20 years of experience in investment banking, accounting & taxation, general management, privatisation, construction, property development and manufacturing businesses.

Mr Leong is a member of the Audit Committee of Sanichi. He is also the Chairman of the Audit Committee of LCL Corporation Berhad and Limahsoon Berhad.

Mr Leong recorded 100% attendance of the Board Meetings since his appointment as a Director of Sanichi for the fi nancial year ended 30 June 2010.

Puan Azrina binti ArshadNon-Independent Non-Executive DirectorMalaysian, aged 41

Puan Azrina binti Arshad was appointed as a Director of Sanichi on 8 January 2010. She graduated from Institut Teknologi MARA, Shah Alam (now known as UITM). She also has a Post Graduate Diploma in Architecture from Oxford Polytechnic, England (now Oxford Brookes University). She started her career in 1993 as an Assistant Architect in Arca-3 Arkitek in Bukit Damansara and thereafter worked in various capacities in several architectural fi rms such as Focus Architects in Selangor. She is a Director of I-Partnership Sdn Bhd (formerly known as Woods Bagot (M) Sdn Bhd) since 1996. She is also the proprietor Azalea Enterprise and a director of The Teapot Café Sdn Bhd, Babymanis Sdn Bhd and Arah Muara Sdn Bhd.

Puan Azrina recorded 100% attendance of the Board Meetings since her appointment as a Director of Sanichi for the fi nancial year ended 30 June 2010.

En Mansor bin AliAlternate Director to Tan Sri Dato’ Seri Arshad bin AyubMalaysian, aged 57

En Mansor bin Ali was appointed as the Alternate Director to Tan Sri Dato’ Seri Arshad bin Ayub on 2 April 2010.

He has Bachelor of Economic from University of Malaya and Diploma in Securities Institute of Australia., He sits on the Board of several private limited companies including Land Rover (M) Sdn Bhd, Melewar Leisure Sdn Bhd and Equiti Teroka (M) Sdn Bhd. Currently, he is the Executive Director of PFM Capital Holdings Sdn Bhd.

Mr Teo Kong WanAlternate Director to Datuk Nik Ibrahim bin Nik AbdullahMalaysian, aged 51

Mr Teo Kong Wan was appointed as the Alternate Director to Datuk Nik Ibrahim bin Nik Abdullah on 8 January 2010.

He graduated from the University of Malaya in 1983 with a degree in Bachelor of Engineering (Mechanical). He passed his Malaysian Futures and Options Registered Representative (MFORR) examination in 1997 and secured his Capital Markets and Services Representative’s License in 2004. His extensive 24 years of working experience is focused in the fi nance, banking and investment industry. He was a Project/Loan Supervision Offi cer with Malaysian Industrial Development Finance Berhad (MIDF) from 1984 to 1991. He left MIDF and joined PFM Capital Sdn. Bhd. (a member of PNB Group of Companies) in 1991 as a Corporate Planning Offi cer. In PFM Capital Sdn Bhd, he was involved in the economic and stock market research; company analysis and evaluation; and portfolio and private equities management. He was the Quality Management Representative responsible for the company’s ISO9001:2000 certifi cation. Currently, he is the Senior Manager of Market Investment Division in PFM Capital Sdn Bhd.

Notes:

1. None of the Directors has any family relationship with any Director and/or Major Shareholder of the Company save for :

- Tan Sri Dato’ Seri Arshad bin Ayub and Puan Azrina binti Arshad who are father and daughter respectively; and

- Dato’ Dr Pang Chow Huat and Datin Chen Choon Lee who are husband and wife respectively.

2. None of the Directors has any confl ict of interest with the Company.3. None of the Directors has been convicted for any offences (other than traffi c

offences) within the past 10 years


ANNUAL REPORT 2010

FINANCIAL HIGHLIGHTS

The Group registered a marginal net profi t of RM0.203 million in FY2009/2010 against a net loss of RM10.835 million in FY2008/2009. The net profi t was on the back of a 13.8 percent increase in revenue of RM19.262 million in FY2009/2010 against RM16.921 million in FY2008/2009. The improved fi nancial performance were merely due to the lower total cumulative depreciation charge of RM2.575 million in FY2009/2010 against RM5.175 million in FY2008/2009, total bad debt recovery of RM1.205 million in FY2009/2010 and lower total allowance for doubtful debts of RM1.324 million in FY2009/2010 against RM3.690 million in FY2008/2009. Despite the enlarged share capital in FY2009/2010, the Group continues to operate on a tight cashfl ow due to the long production cycle and slow collectibles.

CORPORATE DEVELOPMENT

During the year under review, the Group has successfully undertaken a Private Placement of 50,000,000 new ordinary shares of RM0.10 each on 15 September 2009 and was completed following the listing and quotation of these new shares on 12 January 2010. The gross proceeds of RM5.000 million raised were utilized for general working capital (RM2.850 million), repayment of bank borrowings (RM2.0 million) and estimated expenses relating to Private Placement (RM0.150 million).

MIMB Investment Bank Berhad completed as sponsor of the Group with effect on 30 June 2010. The Group has fulfi lled the requirement under Rule 3.21 of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad which provides for a company listed on ACE Market of Bursa Securities to secure and maintain the services of sponsor for at least 3 full fi nancial years after its listing on the MESDAQ Market of Bursa Securities on 7 September 2006.

BOARD AND COMMITTEE CHANGES

Following the successful conclusion of the Private Placement, the Board composition was strengthened in April 2010 with the appointment of Tan Sri Datuk Arshad Ayub as Chairman / Non Independent Executive Director (En. Mansor Ali as Alternate);

Chairman’s Statement

Datuk Nik Ibrahim bin Nik Abdullah as Non Independent Non Executive Director (Mr Teo Kong Wan as Alternate); Pn. Azrina binti Arshad as Non Independent Non Executive Director and Mr Leong Choon Meng as Independent Non Executive Director. The Audit Committee and Remuneration and Nomination Committee were also reorganised to include the new members for enhancement of their duties and responsibilities.

CORPORATE GOVERNANCE

The Group is driven by the commitment of the enlarged Board and Management and we continuously strive to build a culture of responsibility, accountability, transparency, excellence and trust in our people.

The internal controls systems and policies are being strengthened to ensure the Group’s viability. Further information can be obtained in the statement on Corporate Governance found in the Annual Report.

OUTLOOK AND PROSPECTS

Economic prospects in emerging economies continue to be favourable while the developed economies remain weak. Nonetheless, we have experienced increase in demand from both local and overseas markets, both from consumer electronic industry and automotive industry. We expect the sales of moulds and tooling to these industries to remain favourable. Notwithstanding this, we have to realign ourselves to face challenges arising from the current fi nancial constraints.

ACKNOWLEDGEMENTS

On behalf of the Board, we would like to thank the Management, staff, customers, business associates and partners, fi nancial institutions, regulatory authorities and last but not least, the shareholders for their support and contributions.

TAN SRI DATO’ SERI ARSHAD AYUBNOVEMBER 2010

On behalf of the Board of Directors of Sanichi Technology Berhad

(Sanichi), I would like to present the Annual Report, incorporating

the Financial Statements of the Group and the company, for the

fi nancial year ended 30 June 2010 (FY2009/2010).

Dear Shareholders,




ANNUAL REPORT 201010

The Board of Sanichi Technology Berhad is pleased to present the report on the Audit Committee (“AC “) for the fi nancial year ended 30 June 2010.

COMPOSITION OF MEMBERS AND MEETINGS

The Audit Committee of Sanichi Technology Berhad (“the Committee”) comprise of three (3) Directors, two (2) of whom are Independent Non-Executive Directors. During the fi nancial year ended 30 June 2010, changes were made to the composition of the members of the Audit Committee as follows:-

Name Position Tan Sri Dato’ Sri Abdul Halil Bin Abdul Mutalif Chairman / Independent No Change Non-Executive Director Dato’ Abd Halim Bin Abd Hamid Member / Independent & Resigned as member of Non-Executive Director Audit Committee on 11 January 2010

Mr Er Soon Lock Member / Independent & Resigned as Director Non-Executive Director on 31 December 2009

Mr Leong Choon Meng Member / Independent Appointed as Director Non-Executive Director on 31 December 2009

Datuk Nik Ibrahim Bin Nik Abdullah Member / Non-Independent Non-Executive Director Appointed as Director on 8 January 2010

During the fi nancial year, 6 AC meetings were held and details of the attendance of the AC members are as follows:

(i) Tan Sri Dato’ Sri Abdul Halil Bin Abd Mutalif [5/6](ii) Dato’ Abd Halim Bin Abd Hamid (*) [3/3](iii) Er Soon Lock (resigned on 31 December 2009) [3/3](iv) Leong Choon Meng (appointed on 31 December 2009) [3/3] (v) Datuk Nik Ibrahim Bin Nik Abdullah (appointed on 11 January 2010) [3/3]

(*) Resigned as member of Audit Committee on 11 January 2010

TERMS 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 fi nancial 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.

MembershipThe committee shall be appointed by the Board and fulfi ls 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 qualifi cations recognized by the MIA;

and(4) All members should be non-executive directors.

Audit Committee Report



Retirement and ResignationIn the event of any vacancy resulting in the number of members being reduced to below 3, the vacancy must be fi lled within 3 months. The Chairman, who shall be elected by the AC, must be an Independent Director.

Attendance At Meeting1. 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 the 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 offi cer of the Company or Group to attend any of its meetings as it deems fi t.

3. The external auditors shall have the right to appear 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 Audit Committee (“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 the 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. Discuss with the external auditors before the audit commences, the nature and scope of the audit.3. To review the quarterly interim results and annual fi nancial statements of the Company and 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. Discuss issues arising from the interim and fi nal audits and any matter the external auditors may wish to discuss in the absence of the Management where necessary.

5. Review the external auditor’s management letter and management’s response.6. Evaluate the standards of internal controls and fi nancial reporting of the Sanichi Group of Companies.7. Consider the major fi ndings of internal audits and/or investigations and Management’s response.8. Review any related party transactions and confl ict of interest situation that may arise within Sanichi Group, including any

transaction, procedure or source of conduct that raises questions of management integrity.9. Consider other issues as defi ned by the Board.

Power of Audit Committee 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’s 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.

Audit Committee Report (Cont’d)



Frequency of MeetingsThe AC shall hold a minimum of at least 4 meetings in a fi nancial year. The number of AC meetings held during a fi nancial 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 ProceduresThe Company Secretary shall circulate the minutes of meetings of the AC to all members of the Board.

SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE

During the fi nancial year, the AC carried out the following activities to discharge their duties and responsibilities:1. Reviewed the unaudited quarterly fi nancial results and the annual audited fi nancial 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 fi ndings of the external auditor’s.4. Reviewed and recommended the reappointment of the external auditors for the Board’s consideration.5. Reviewed the AC Report and Statement on 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 for the fi nancial year ended 30 June 2010 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 and 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 fi ndings relating to the weaknesses in the internal control systems were issue to the AC.

This statement is made in accordance with a Board’s resolution adopted by the Board at its meeting held on 25 November 2010.

Audit Committee Report (Cont’d)



The Board of Director (“the Board”) of Sanichi Technology Berhad (“Group” or “Company”) recognizes the importance of good corporate governance and is committed to adopting the principles and practices in corporate governance as a fundamental in discharging its duties and responsibilities, to safeguard the interest of its shareholders as well and enhance shareholders’ value and the fi nancial performance of the Company. Pursuant to paragraph 15.25 of the Ace Market Listing Requirement (“AMLR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”), the Board is pleased to outline below the manner in which the Group has applied and complied with the principles of the Best Practices in Corporate Governance set out in Part 1 and Part 2 of the Malaysian Code on Corporate Governance.

A. BOARD OF DIRECTORS

1. Principal Responsibilities of the Board

The Board affi rms its overall responsibility for the direction, risk management, fi nancial performance, internal control and investment decision of the Group.

The Board had delegated certain responsibilities to its Board committees. The Board Committee operates within clearly defi ned terms of reference and has full authority to examine and clarify issues delegated to them. The Board Committees comprises of a wide spectrum of skills, knowledge and experiences from various business and educational backgrounds vital to the continued success of the Group’s business.

2. Board Composition and Balance

The Board is structured where at least one third of the Board is independent which is in compliance with the AMLR.

During the fi nancial year, the following changes were made to the Board’s composition and structure:

(a) Appointment of Tan Sri Dato’ Seri Arshad bin Ayub as Non Executive Non Independent Chairman on 2 April 2010;

(b) Re-designation of Dato’ Dr Pang Chow Huat from Chairman and remaining as Managing Director on 2 April 2010;

(c) Resignation and appointment of Mr Er Soon Lock and Mr Leong Choon Meng respectively as Independent Non-Executive Director on 31 December 2009:

(d) Appointment of Datuk Nik Ibrahim bin Nik Abdullah and Puan Azrina Arshad as Non-Independent Non-Executive Directors on 8 January 2010;

(e) Appointment of Mr Teo Kong Wan as Alternate Director of Datuk Nik Ibrahim bin Nik Abdullah on 8 January 2010; and

(f) Appointment of En Mansor bin Ali as Alternate Director to Tan Sri Dato’ Seri Arshad bin Ayub on 2 April 2010.

Currently, the Board comprises eight (8) members of whom two (2) are Executive Directors (ED), four (4) are Non-Independent Non Executive Directors and two (2) are Independent Non-Executive Directors.

The Board comprises various backgrounds and industries which are provide broader and independent views, advice

and judgment and ultimately the enhancement of shareholders’ value.

A brief profi le of each Director is set out on pages 6 to 8 of this Annual Report.

Corporate Governance Statement



Corporate Governance Statement (Cont’d)

3. Board Meetings

The Board meetings are scheduled on a quarterly basis with additional meetings convened as and when necessary. Agenda and Board papers are circulated to the Board members prior to the meetings so as to give Directors suffi cient time to consider and deliberate on the issues to be raised at Board meeting.

During the fi nancial year under review, the Board met fi ve (5) times and details of each Director’s attendance are tabled below:

Attendance at Board meetings

Dato’ Dr. Pang Chow Huat 5/5

Datin Chen Choon Lee 5/5

Tan Sri Dato’ Sri Abdul Halil Bin Abd Mutalif 4/5

Dato’ Abd Halim Bin Abd Hamid 4/5

Er Soon Lock 2/2

Tan Sri Dato’ Seri Arshad Ayub 1/1

Datuk Nik Ibrahim Bin Nik Abdullah 3/3

Puan Azrina Binti Arshad 3/3

Leong Choon Meng 3/3

Note : Number of meetings attended by each Director vary according to their dates of resignation and appointment.

4. Supply and Access to Information

The Board has fully, unrestricted and timely access to all information necessary for the discharge of its responsibilities. The Board is supplied with all relevant information and reports on Group’s fi nancial result, strategic and business plan by way of board papers effective discharge of their duties.

All Board members have direct access to the advice and services of the Company Secretaries, senior management and where necessary, to seek independent professional advice if require.

5. Appointment and Re-election to the Board

The appointment of new Directors is carried out in a formal and transparent manner under the purview of the Nomination Committee, which is responsible for making the necessary recommendations to the Board on suitable candidates for appointment.

The Company Secretary is responsible for ensuring that all appointments are properly made, and that all legal and regulatory obligations are met.

In accordance with the Company’s Articles of Association, an election of the Directors shall take place every year and all Directors shall retire from offi ce once at least in every three (3) years at its Annual General Meetings but shall be eligible for re-election. Directors who are appointed by the Board during the fi nancial year are subject to retirement and offer themselves for re-election by the shareholders at the Annual General Meeting following their appointment.




6. Director’s Training

Continuous learning and training are part of the Directors’ development programme. The Board recognized the needs to attend trainings to enable them to discharge their duties more effective. All Directors have attended the Mandatory Accreditation Programme (MAP) and are mindful that they shall receive appropriate training which may be required from time to time to keep abreast with current developments of the industry as well as new statutory and regulatory requirements.

During the fi nancial year ended 30 June 2010, some of the Directors have undergone the following training/seminars programmes to enhance their ability in discharging their duties and responsibilities more effectively:

Directors Training / Seminar

Dato’ Dr. Pang Chow Huat Corporate strategy and planning.

Datin Chen Choon Lee Corporate strategy and planning.

Tan Sri Dato’ Seri Arshad Ayub Seminar Pengurusan Perubahan “Tambahan Lanskap Politik : Cabaran kepada Perkhidmatan Awam”

The 6th Asia Pacifi c Audit & Governance Summit 2010 2nd Annual Corporate Governance Summit 2010 World Congress of Accountants 2010

Datuk Nik Ibrahim Bin Nik Abdullah Shaping the Future Corporate Professional Overview of Selected New and Revised FRSs

Puan Azrina Binti Arshad Mandatory Accreditation Programme for Directors of Public Listed Companies

Mr. Leong Choon Meng Reviewing and Timely Submission of Financial Statements

7. Board Committees

In order for the Board to function effectively, the Board has delegated certain of its responsibilities to its committees which operate within clearly defi ned terms of reference as follow:

a) Audit Committee The Board is also assisted by the Audit Committee whose members, terms of reference and summary of activities

for fi nancial year under review are set out under the Audit Committee Report in this Annual Report. b) Nomination and Remuneration Committee The Nomination and Remuneration Committee which comprises a majority of whom are Non-Executive Directors,

are as follows: Remuneration and Nomination Committee:

(1) Tan Sri Dato’ Seri Arshad Ayub - Chairman/Non-Independent Non-Executive Director

(2) Dato’ Dr Pang Chow Huat - Member/Executive Director

(3) Dato’ Abd Halim bin Abd Hamid - Member/Independent Non-Executive Director The Nomination Committee is empowered by the Board through its terms of reference to assist the Board in fulfi lling its

responsibilities to make recommendations in regards to appointment of new candidates to the Board.

The Remuneration Committee was formed to assist the Board in review and recommending remuneration packages for the Board and shareholders’ approval at the Annual General Meeting. No Directors will participate in the deliberation and decision in respect of their own remuneration.


ANNUAL REPORT 201016 SANICHI TECHNOLOGY BERHAD (661826-K)

ANNUAL REPORT 2010


B. DIRECTORS’ REMUNERATION

The Board established and with the assistance from the Remuneration Committee to review and recommend the appropriate level of remuneration for all the Directors. The proposed fees for the Company are presented to shareholders at its Annual General Meeting for their approval.

A summary of the Directors’ remuneration for the fi nancial year ended 30 June 2010, distinguishing between the Executive and Non-Executive Directors in aggregate with categorization into appropriate components and the number of Directors whose remuneration falling into each successive band of RM50,000, is shown below:

Executive Director Non-Executive Director Total RM’000 RM’000 RM’000

Fees 0 132 132

Salary and other remuneration 550 20 570

Total 550 152 702 Remuneration Band Executive Director Non-Executive Director Total

Below RM50,000 0 6 6

RM250,001 – RM300,000 2 0 2

Total 2 6 8

The Board is of the opinion that the non disclosure of the individual remuneration of each Director will not signifi cantly affect the understanding and evaluation of the Group’s corporate governance structure.

C. SHAREHOLDERS AND INVESTORS

1. Investors Relation and Shareholders Communication

The Board ensured timely dissemination of information on the Group’s performance and other related matters affecting shareholders’ and investors’ interest through appropriate announcement, quarterly announcements, relevant circulars and distribution of annual report.

Shareholders and investors can also obtain information from the Group’s offi cial website at www.sanichimould.com as

accessible by all its stakeholders and the public in general, which containing essential corporate information about the Group and its products.

2. Annual General Meeting (“AGM”)

The principal forum for dialogue with shareholders remains at AGM. 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. Shareholders who are unable to attend the AGM are allowed to appoint proxies to attend and vote on their behalf.


ANNUAL REPORT 2010SANICHI TECHNOLOGY BERHAD (661826-K)



D. ACCOUNTABILITY AND AUDIT

1. Financial Reporting

The Board acknowledges its responsibilities to ensure that there is a clear, balanced, understandable and meaningful assessment of the Group’s fi nancial position and prospects primarily through the quarterly report to Bursa Securities, annual audited fi nancial statements as well as the Chairman’s statement and review of operations in the Annual Report.

In presenting fi nancial statements, the Group had used the appropriate accounting policies, made reasonable and prudent judgments and estimates, and applied them consistently, to enable that the fi nancial statements comply with the Companies Act, 1965 (“The Act”) and approved Financial Reporting Standards (“FRS”).

The Group’s quarterly and annual Audited Financial Statements are reviewed by Audit Committee and approved by the Board prior to their release to the Bursa Securities within the stipulated time frame.

2. Internal Control

The Board is responsible for the Group’s system of internal controls encompassing fi nancial, operational and compliance controls as well as risk management to maintain a sound system of internal control to safeguard the shareholders’ investment and the Group’s assets.

The Group’s Statement on Internal Control is set out under the relevant section in this Annual Report.

3. Relationship with Auditors

The Board through the establishment of AC to maintains a formal and transparent relationship with both internal and external auditors in seeking their professional advice and ensuring compliance with applicable approved accounting standards.

The Audit Committee meets the external auditors at least once a year to discuss on their audit plan, audit fi ndings and the fi nancial statements.

4. Directors’ Responsibility Statement

The Directors are required to prepare the fi nancial 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 the Bursa Securities’ Listing Requirement.

The Board is responsible for ensuring that the fi nancial statements give a true and fair view of the state of affairs of the Group and Company at the end of the fi nancial year, and of the results and cash fl ows for the fi nancial year then ended.

In preparing the fi nancial statements, the Board have 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 also responsible for taking reasonable steps to safeguard the assets of the Group, to prevent and detect fraud and other irregularities.

5. Corporate Social Responsibilities (“CSR”)

The Board acknowledges the signifi cance 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.




ADDITIONAL COMPLIANCE INFORMATION

Utilisation Of Proceeds From Private PlacementThe Private Placement which was announced on 15 September 2009 has been completed on 12 January 2010. The gross proceeds of RM5,000,000 raised from the Private Placement of 50,000,000 new ordinary shares of RM0.10 each in Sanichi (“Placement Shares”) at an issue price of RM0.10 per share has been fully utilized in the fi nancial year ended 30 June 2010.

Recurrent Related Party TransactionThere were no recurrent related party transactions involved in the fi nancial year ended 30 June 2010.

Share Buy-backsThere were no share buy-backs transactions involved in the fi nancial year ended 30 June 2010.

Options, Warrants of Convertible Securities ExercisedThe Company has not issued any options, warrants or convertible securities in respect of the fi nancial year ended 30 June 2010.

American Depository Receipt (“ADR”) of Global Depository Receipt (“GDR”)The Company has not sponsored any ADR or GDR programme for the fi nancial year ended 30 June 2010.

Sanctions and/or PenaltiesThe Company and its subsidiaries, Directors and management have not been imposed with any sanctions and/or penalties by regulatory bodies.

Material Contracts Involving Directors’ and Major Shareholders’ InterestThere were no material contracts entered into by the Company and its subsidiaries involving Directors’ and major shareholders’ interests.

Revaluation of Landed PropertiesThe Group does not revalue its landed properties as these are stated at cost less amortization, if applicable.

Non-Audit FeesDuring the fi nancial year under review, there is no non-audit fee being paid to the external auditors of the Group.

Variation in resultsThere were no signifi cance variance between the reported results for the fi nancial year and the unaudited results previously announced by the Company for the fi nancial year ended 30 June 2010.

Profi t GuaranteeThere was no profi t guarantee given by the Group in respect of the fi nancial year.




COMPLIANCE STATEMENT

As at end of the fi nancial year, the Board is of the opinion that the following Principles and Best Practices of the Code (“Code”) have not been complied with:

Reference to the Code

Summary of the Principle / Best Practice Board Comments

Part Bill Disclosure of each Director’s remuneration 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 RM50,000 and the number of Executive / Non-Executive Directors receiving Annual remuneration in that particular band.

Part 2 AA1Part 2 CCI

Board to develop, implement and maintain an investor relations programme and communications policy to communicate effectively with shareholders, stakeholders and the public.

The Board does not have a formal investor relations programme and shareholder communications policy at present, Any important announcement is made through Bursa Securities which in the opinion of the Board is adequate.

Part 2 AAVIII Part 2 AAIXPart AAX

Nomination Committee to comprise exclusively of non-executive Directors and to evaluate the effectiveness of members of the Board

The Board is of the view that it is suffi cient 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.

Part 2 AAXIII Company to provide orientation and education programme for new Board members

The Group does not have a formal process for the orientation of newly appointed Board members as orientation is conducted on an informal basis by the Executive Directors. The Board is of the opinion that the activities of the Group are not complex as to require a formal training.

Part 2 AAXVII Provision for non-quantitative information At present, the Group’s information system generates information which are predominantly fi nancial based.

Part 2 BBVII Establishment of the internal audit function The Board had outsourced its internal audit function to a professional service provider fi rm.




INTRODUCTION

Pursuant to paragraph 15.26(b) of Bursa Malaysia Securities Berhad (“Bursa Securities”) ACE Market Listing Requirements, the Board of Sanichi Technology Berhad (“Sanichi” and “Board”) is committed to maintaining a sound system of internal controls to safeguard shareholders’ investment and the Group’s assets.

During the fi nancial year under review, Sanichi’s Group continued to enhance the system of internal controls in order to better quantify its compliance with the Malaysian Code on Corporate Governance (“Code”). The Board of Sanichi is pleased to provide the following Statement on Internal Controls (“Statement”) which outlines the nature and scope of internal controls of Sanichi and its subsidiary companies (“Group”).

BOARD RESPONSIBILITY

The Board acknowledges that it has overall responsibility for the adequacy and integrity of the Group’s system of internal controls including the review of its effectiveness.

However, the Board recognizes that reviewing the Group’s system of internal controls is a continuing process, designed to minimize the likelihood of fraud and error, and to manage rather than eliminate the risk of failure. The system of internal controls can only provide reasonable but not absolute assurance against material misstatement, fraud and fi nancial loss.

RISK MANAGEMENT FRAMEWORK

The Board is committed in strengthening the Group’s risk management and process. The Board is committed to the ongoing processes for identifying, evaluating, monitoring and managing any signifi cant risks faced by the Group in respect of its business objectives.

The Board is ultimately responsible for identifying the Group’s risks, the implementation of risk management system and the establishment of the Group’s internal controls framework is delegated to the executive management and each Head of Department is responsible for managing its individual department risks.

INTERNAL AUDIT FUNCTION

The review of the adequacy and effectiveness of the Group’s internal controls system is delegated to the Audit Committee(“AC”) on behalf of the Board. The internal audit function is outsourced to an independent professional consulting fi rm which reviews the Group’s system of internal controls. Internal audits are carried out in accordance with the approved internal audit plan and the results of the internal audit reviews are tabled at the AC meeting.

The cost incurred for the internal audit function in respect of the fi nancial year was approximately RM18,000.

REVIEW MECHANISM

Independent review of system of internal controls is essential in order to provide an objective assurance to the Board. The existing review mechanism is overseen by the AC which supports by the presence of the internal audit functions. The AC also reviews the fi nancial information and reports produced by the management including quarterly fi nancial results, annual report and audited fi nancial statements. Upon consultation with the management, deliberates on the integrity of the information and data before recommending to the Board for presenting to the shareholders and public investors.

OTHER KEY ELEMENTS OF INTERNAL CONTROLS

The other key features of the Group’s internal controls system are as follows:

• The Group maintains a set of clearly defi ned and structured lines of reporting to ensure clarity in the division of responsibilities which promotes appropriate levels of accountability.

• Clearly defi ned and structured responsibilities within the organization, including segregation of duties and authorization levels for all divisions within the Group.

• Assets are safeguarded from unauthorized and improper use. Adequate insurance and physical security of major assets are in place to ensure that the assets of the Group are suffi ciently covered against any mishap that will result in material losses to the Group.

REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS

The external auditors have reviewed this Statement for the inclusion in the Annual Report for the fi nancial year ended 30 June 2010, and reported to the Board that nothing has come to their attention that cause them to believe that this Statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and integrity of the system of internal controls within the Group in compliance with Paragraph 15.23 of Bursa Securities ACE Market Listing Requirements.

CONCLUSION

The Board remains committed towards continuous improvement and effectiveness of the Group’s internal controls system and risk management framework in order to meet its corporate objective and maximize the returns to the shareholders. Issues highlighted by Management and internal audit functions as well as the External Auditors in relation to the Group’s system of internal controls have been adequately addressed for the fi nancial year under review. The Board is satisfi ed that the Group’s internal controls system is adequate, effective and suffi cient to safeguard the shareholders’ investment and its assets.


Statement on Internal Control

22 - 24 DIRECTORS’ REPORT

25 STATEMENT BY DIRECTORS

25 STATUTORY DECLARATION

26 - 27 INDEPENDENT AUDITORS’ REPORT

28 BALANCE SHEETS

29 INCOME STATEMENTS

30 STATEMENTS OF CHANGES IN EQUITY

31 - 32 CASH FLOW STATEMENTS

33 - 60 NOTES TO THE FINANCIAL STATEMENTS

F i n a n c i a l S t a t e m e n t s



The Directors hereby submit their report together with the audited fi nancial statements of the Group and Company for the fi nancial year ended 30th June 2010. PRINCIPAL ACTIVITIES The Company is principally an investment holding company and a provider of management services. The principal activities of the subsidiaries are set out in Note 9 to the fi nancial statement. There have been no signifi cant changes in the nature of these activities during the fi nancial year. FINANCIAL RESULTS Group Company RM RM

Profi t/(loss) before taxation 229,129 (121,768) Taxation (25,883) (1,883) Net profi t/(loss) for the year 203,246 (123,651) DIVIDENDS No dividend has been paid or declared by the Company since the end of the previous fi nancial year and the Directors do not recommend the payment of any dividend for the current fi nancial year. RESERVES AND PROVISIONS There were no material transfers to or from reserves and provisions during the fi nancial year other than those disclosed in the statements of changes in equity.

ISSUE OF SHARES AND/OR DEBENTURES During the fi nancial year, the Company increased its issued and paid up capital from RM 11,350,000 to RM 16,350,000 by way of the issuance of 50,000,000 ordinary shares of RM 0.10 each for cash consideration. The new ordinary shares issued during the fi nancial year ranked pari passu in all respects with the existing ordinary shares of the Company. No debentures were issued during the fi nancial year.

OPTIONS GRANTED OVER UNISSUED SHARES During the fi nancial year, no options were granted by the Company to any person to take up any unissued shares in the Company.

INFORMATION ON THE FINANCIAL STATEMENTS Before the Income Statements and Balance Sheets of the Group and Company were made out, the Directors took reasonable steps :- (a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful

debts and satisfi ed themselves that there were no known bad debts and that adequate allowance had been made for doubtful debts; and

(b) to ensure that any current assets which were unlikely to realise in the ordinary course of business including their value as shown

in the accounting records of the Group and Company have been written down to an amount which they might be expected so to realise.

DIRECTORS’ REPORT



INFORMATION ON THE FINANCIAL STATEMENTS

At the date of this report, the Directors are not aware of any circumstances:-

(a) which would render it necessary to write off any bad debts or the amount of the allowance for doubtful debts in the fi nancial statements of the Group and Company inadequate to any substantial extent; or

(b) which would render the values attributed to the current assets in the fi nancial statements of the Group and Company misleading; or

(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and Company misleading or inappropriate.

No contingent or other liability of the Group and Company has become enforceable or is likely to become enforceable within the period of twelve months after the end of the fi nancial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and Company to meet its obligations as and when they fall due. At the date of this report, there does not exist:- (a) any charge on the assets of the Group and Company which has arisen since the end of the fi nancial year which secures the

liability of any other person; or

(b) any contingent liability of the Group and Company which has arisen since the end of the fi nancial year other than as disclosed in Note 35 of the Notes to the Financial Statements.

OTHER STATUTORY INFORMATION

The Directors state that :- At the date of this report, they are not aware of any circumstances not otherwise dealt with in this report or the fi nancial statements of the Group and Company which would render any amount stated in the fi nancial statements misleading. In their opinion:- (a) the results of the operations of the Group and Company during the fi nancial year were not substantially affected by any item,

transaction or event of a material and unusual nature ; and

(b) there has not arisen in the interval between the end of the fi nancial 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 Company for the fi nancial year in which this report is made.

DIRECTORS The Directors who have held offi ce during the year since the date of the last report are as follows:- Dato’ Dr. Pang Chow Huat Datin Chen Choon Lee Tan Sri Dato’ Sri Abdul Halil Bin Abd Mutalif Dato’ Abd Halim Bin Abd Hamid Tan Sri Datuk Arshad Bin Ayub (Appointed on 02.04.10) Datuk Nik Ibrahim Bin Nik Abdullah (Appointed on 08.01.10) Azrina Binti Arshad (Appointed on 08.01.10) Leong Choon Meng (Appointed on 31.12.09) Mansor Bin Ali (Alternate Director to Tan Sri Datuk Arshad Bin Ayub) (Appointed on 08.01.10) Teo Kong Wan (Alternate Director to Datuk Nik Ibrahim Bin Nik Abdullah) (Appointed on 08.01.10) Er Soon Lock (Resigned on 31.12.09)

DIRECTORS’ REPORT (Cont’d)



DIRECTORS (Cont’d) Pursuant to Article 127 of the Articles of Association of the Company, Datin Chen Choon Lee and Dato’ Abd Halim Bin Abd Hamid retire by rotation at the forthcoming annual general meeting and, being eligible, offer themselves for re-election. The shareholdings in the Company and its related corporations during the fi nancial year of those who were Directors at the end of the fi nancial year are as follows:- No. of Ordinary Shares of RM 0.10 each At At Direct interest 01.07.09 Bought Sold 30.06.10

Dato’ Dr. Pang Chow Huat 20,305,020 10,000,000 (10,220,000) 20,085,020 Datin Chen Choon Lee 4,180,000 - (2,000,000) 2,180,000 Tan Sri Datuk Arshad Bin Ayub 2,080,000 15,920,000 (17,500,000) 500,000 Other than as disclosed above, no other Directors in offi ce at the end of the fi nancial year held any interest in shares in, or debentures of its related corporations during the year.

DIRECTORS’ BENEFITS During and at the end of the fi nancial year, no arrangement subsisted to which the Group and Company was a party, with the object or objects of enabling Directors of the Company to acquire benefi ts by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the previous fi nancial year, no Director has received or become entitled to receive any benefi t (other than as disclosed in the Notes to the Financial Statements) by reason of a contract made by the Company or a related corporation with the Director or with a fi rm of which he is a member, or with a company in which he has substantial fi nancial interest. GOING CONCERN The fi nancial statements of the Group and Company are prepared on a going concern basis as the Directors are of the opinion that the Group and Company will be able to operate profi tably in the foreseeable future and obtain continuing fi nancial support from its fi nancial institution lenders as well as trade payables and accordingly, realise their assets and discharge their liabilities in the normal course of business. In view of the foregoing, the Directors consider it is appropriate to prepare the fi nancial statements of the Group and Company on a going concern basis, and accordingly, the fi nancial statements do not include any adjustments relating to the recoverability and classifi cation of recorded asset amounts, or to amounts and classifi cation of liabilities that may be necessary should the going concern basis for the preparation of the fi nancial statements of the Group and Company be not appropriate.

AUDITORS Messrs THL Wong & Co., the retiring Auditors, have expressed their willingness to continue in offi ce. Signed on behalf of the Board in accordance with a resolution of the Directors dated 15th October 2010

) DATO’ DR. PANG CHOW HUAT ) ) ) ) DIRECTORS ) ) ) DATIN CHEN CHOON LEE ) Senai

DIRECTORS’ REPORT (Cont’d)



STATEMENT BY DIRECTORS We, DATO’ DR. PANG CHOW HUAT and DATIN CHEN CHOON LEE, being two of the Directors of SANICHI TECHNOLOGY BERHAD, do hereby state, in the opinion of the Directors, the fi nancial statements set out on pages 28 to 59 are drawn up so as to give a true and fair view of the state of affairs of the Group and Company as at 30th June 2010 and of the results of the operations, changes in equity and cash fl ows of the Group and Company for the fi nancial year ended on that date in accordance with the applicable approved Financial Reporting Standards issued by the Malaysian Accounting Standards Board and the provisions of the Companies Act, 1965 in Malaysia. Signed on behalf of the Board in accordance with a resolution of the Directors DATO’ DR. PANG CHOW HUAT DATIN CHEN CHOON LEE Senai 15th October 2010

STATUTORY DECLARATION I, DATO’ DR. PANG CHOW HUAT, I/C No. 731218-01-5205, the Director primarily responsible for the fi nancial management of SANICHI TECHNOLOGY BERHAD, do solemnly and sincerely declare that the fi nancial statements set out on pages 28 to 59 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, 1960. Subscribed and solemnly declared by the ) abovenamed DATO’ DR. PANG CHOW HUAT, ) I/C No. 731218-01-5205, ) at Kuala Lumpur ) ) on 15th October 2010 ) DATO’ DR. PANG CHOW HUAT

Before me: Arshad Bin Abdullah (No. W550) Commissioner for Oath

STATEMENT BY DIRECTORS’/ STATUTORY DECLARATION



Report on the Financial Statements We have audited the fi nancial statements of Sanichi Technology Berhad, which comprise the balance sheets of the Group and Company as at 30th June 2009, and the income statements, statements of changes in equity and cash fl ow statements of the Group and Company for the fi nancial year then ended, and a summary of signifi cant accounting policies and other explanatory notes, as set out on pages 28 to 59. The fi nancial statements of the Company as at 30th June 2009 were audited by another auditor whose report dated 27th October 2009 expressed an unqualifi ed opinion with emphasis of matter on going concern on those statements. Directors’ Responsibility for the Financial Statements The Directors of the Group and Company are responsible for the preparation and fair presentation of these fi nancial statements in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of fi nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors’ Responsibility Our responsibility is to express an opinion on these fi nancial 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 whether the fi nancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the fi nancial statements 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 control. 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 fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the fi nancial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the fi nancial position of the Group and Company as of 30th June 2010 and of its fi nancial performance and cash fl ows for the fi nancial year then ended. Emphasis of Matter Without qualifying our opinion, we draw attention to Note 2 (a) (i) to the Financial Statements on the basis of preparation of the fi nancial statements. The Directors are of the opinion that the Group and Company will be able to operate profi tably in the foreseeable future and obtain continuing fi nancial support from its fi nancial institution lenders as well as trade payables and therefore continue as a going concern and accordingly, realise their assets and discharge their liabilities in the normal course of business. In view of the foregoing, the Directors consider it is appropriate to prepare the fi nancial statements of the Group and Company on a going concern basis, and accordingly, the fi nancial statements do not include any adjustments relating to the recoverability and classifi cation of recorded asset amounts, or to amounts and classifi cation of liabilities that may be necessary should the going concern basis for the preparation of the fi nancial statements of the Group and Company be not appropriate.

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SANICHI TECHNOLOGY BERHAD (Incorporated in Malaysia)



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 Act to be kept by the Company and its

subsidiary companies of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

b) We have considered the fi nancial statements of the subsidiary company of which we have not acted as auditors, which are

indicated in Note 9 of the Notes to the Financial Statements.

c) We are satisfi ed that the fi nancial statements of the subsidiary companies that have been consolidated with the Company’s fi nancial statements are in form and content appropriate and proper for the purposes of the preparation of the fi nancial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

d) The audit reports on the fi nancial statements of the subsidiary companies did not contain any qualifi cation or any adverse comment made under Section 174(3) of the Act.

Other Matters 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 content of this report.

THL WONG & CO. WONG KOK SEONG (NO. AF 0942) CHARTERED ACCOUNTANT CHARTERED ACCOUNTANTS (NO: 2791/08/12 (J))

Petaling Jaya 15th October 2010

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SANICHI TECHNOLOGY BERHAD (Incorporated in Malaysia) (Cont’d)



Group Company Note 2010 2009 2010 2009 RM RM RM RM ASSETSNON-CURRENT ASSETS

Property, plant and equipment 6 24,948,561 26,664,728 146 195 Prepaid land leases 7 1,659,444 1,689,631 - - Development expenditure 8 33,177 148,139 - - Investment in subsidiary companies 9 - - 11,657,600 9,357,600 Goodwill on consolidation 10 6,711 6,711 - - Deferred tax asset 11 - - - -

26,647,893 28,509,209 11,657,746 9,357,795

CURRENT ASSETSInventories 12 6,373,958 4,959,379 - - Trade receivables 13 19,092,991 14,441,542 - - Other receivables 14 417,089 1,313,895 14,800 14,300Amount due from subsidiary companies 15 - - 16,653,630 12,738,070 Tax in credit 760,891 781,719 55,000 - Fixed deposits 16 501,034 741,200 - - Cash and bank balances 17 63,483 92,055 1,796 1,351

27,209,446 22,329,790 16,725,226 12,753,721 TOTAL ASSETS 53,857,339 50,838,999 28,382,972 22,111,516 EQUITY AND LIABILITIES

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY Share capital 18 16,350,000 11,350,000 16,350,000 11,350,000 Reserves 19 8,254,446 8,128,967 10,539,244 10,662,895 24,604,446 19,478,967 26,889,244 22,012,895 NON-CURRENT LIABILITIES Borrowings 20 9,217,458 7,192,326 - - Deferred tax liability 11 - - - - 9,217,458 7,192,326 - - CURRENT LIABILITIES

Trade payables 21 2,616,396 3,868,278 - - Other payables 22 2,020,803 3,926,515 178,102 88,331 Amount due to Directors 23 794,044 1,481,117 - - Amount due to subsidiary companies 15 - - 1,315,626 - Bank overdraft 17 1,121,206 1,766,004 - - Borrowings 20 13,482,986 13,115,502 - - Tax payable - 10,290 - 10,290

20,035,435 24,167,706 1,493,728 98,621 TOTAL LIABILITIES 29,252,893 31,360,032 1,493,728 98,621 TOTAL EQUITY AND LIABILITIES 53,857,339 50,838,999 28,382,972 22,111,516

The above balance sheets are to be read in conjunction with the notes to the fi nancial statements set out on pages 25 to 64.

BALANCE SHEETS AS AT 30TH JUNE 2010



Group Company Note 2010 2009 2010 2009 RM RM RM RM Revenue 24 19,262,435 16,627,454 480,000 480,000 Less: Cost of sales (10,761,645) (16,694,604) - - Gross profi t/(loss) 8,500,790 (67,150) 480,000 480,000 Add: Other income 7,326 181,251 - - 8,508,116 114,101 480,000 480,000 Less: Sales and distribution costs (35,336) (214,235) - - Administrative expenses (5,412,812) (8,383,595) (601,768) (335,832) Other operating expenses (469,192) (725,742) - - Finance costs 25 (2,361,647) (1,454,189) - - Profi t/(loss) before taxation 26 229,129 (10,663,660) (121,768) 144,168 Taxation 27 (25,883) (171,998) (1,883) (61,184) Net profi t/(loss) for the year 203,246 (10,835,658) (123,651) 82,984

Earnings/(loss) per share attributable to ordinary equity holders of the Company:- - basic (sen) 28 0.12 (9.55) - diluted (sen) 28 NA NA


INCOME STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2010

Attributable to Equity Holders of the Company Non-distributable Distributable UNAPPROPRIATED FOREIGN PROFITS/ SHARE SHARE EXCHANGE (ACCUMULATED TOTALGroup Note CAPITAL PREMIUM RESERVE LOSSES) EQUITY RM RM RM RM RM

Balance at 01.07.08 11,350,000 10,586,318 2,566 8,319,609 30,258,493 Currency exchange translation reserve - - 56,132 - 56,132 Net loss for the year - - - (10,835,658) (10,835,658) Balance at 30.06.09 11,350,000 10,586,318 58,698 (2,516,049) 19,478,967 Issuance of shares 5,000,000 - - - 5,000,000 Currency exchange translation reserve - - (77,767) - (77,767)Net profi t for the year - - - 203,246 203,246 Balance at 30.06.10 16,350,000 10,586,318 (19,069) (2,312,803) 24,604,446

(Accumulated losses absorbed by)/unappropriated profi ts retained by:- 2010 2009 RM RM The Company (47,074) 76,577 Subsidiary companies (2,265,729) (2,592,626)

(2,312,803) (2,516,049)

Distributable SHARE Non-distributable UNAPPROPRIATED TOTAL Company Note CAPITAL SHARE PREMIUM PROFITS EQUITY RM RM RM RM Balance at 01.07.08 11,350,000 10,586,318 (6,407) 21,929,911 Net profi t for the year - - 82,984 82,984 Balance at 30.06.09 11,350,000 10,586,318 76,577 22,012,895 Issuance of shares 5,000,000 - - 5,000,000 Net loss for the year - - (123,651) (123,651) Balance at 30.06.10 16,350,000 10,586,318 (47,074) 26,889,244


STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30TH JUNE 2010



Group Company 2010 2009 2010 2009 Note RM RM RM RM OPERATING ACTIVITIES Profi t/(loss) before taxation 229,129 (10,663,660) (121,768) 144,168 Adjustments for:-

Allowance for specifi c doubtful debts 1,323,766 3,689,319 - - Allowance for specifi c doubtful debts no longer required (1,205,457) - Amortisation of development expenditure 114,962 86,201 - - Amortisation of prepaid land leases 30,187 30,188 - - Depreciation of property, plant and equipment 2,567,931 5,201,138 49 49 Interest expenses 2,361,647 1,454,189 Loss/(gain) on foreign currency exchange - unrealised 1,013,595 (91,435) - - Loss/(gain) on disposal of plant and equipment 370,597 87,780 - - Interest income - (52,240) - -

Operating profi t/(loss) before working capital changes 6,806,357 (258,520) (121,719) 144,217 Increase in inventories (1,414,579) (3,827,889) - (Increase)/decrease in receivables (5,031,529) 4,123,689 (500) - Decrease in amount due from subsidiary company - - (3,915,560) (76,005)(Decrease)/increase in payables (3,012,611) 3,084,097 89,771 57,722 Decrease in amount due to a Director (687,073) - - - Increase in amount due to subsidiary companies - - 1,315,626 -

Cash (absorbed by)/generated from operations (3,339,435) 3,121,377 (2,632,382) 125,934 Interest paid (2,361,647) (1,454,189) - - Income tax paid (15,345) (475,178) (67,173) (68,731) Net cash (used in)/from operating activities (5,716,427) 1,192,010 (2,699,555) 57,203

CASH FLOWS FROM INVESTING ACTIVITIES Additional investment in subsidiary - - (2,300,000) (100,000)Interest received - 52,240 - - Proceeds from disposal of plant and equipment 460,000 1,020,450 - - Purchase of property, plant and equipment 29 (1,715,149) (3,065,515) - -

Net cash used in investing activities (1,255,149) (1,992,825) (2,300,000) (100,000) CASH FLOWS FROM FINANCING ACTIVITIES Advances from Directors - 1,481,117 - - Proceeds from issuance of shares 30 5,000,000 - 5,000,000 - Pledged of fi xed deposit (500,000) - - - Net (repayment)/drawdown of term loan 3,975,253 (1,910,220) - - Net (repayment)/drawdown of bankers’ acceptances (414,000) 1,961,000 - - Repayment of hire purchase creditors (1,168,637) (2,701,169) - -

Net cash from/(used in) fi nancing activities 6,892,616 (1,169,272) 5,000,000 -

CASH FLOW STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2010



Group Company 2010 2009 2010 2009 Note RM RM RM RM

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (78,960) (1,970,087) 445 (42,797) Effect of foreign exchange rate changes (44,980) (46,512) - - CASH AND CASH EQUIVALENTS BROUGHT FORWARD (932,749) 1,083,850 1,351 44,148 CASH AND CASH EQUIVALENTS CARRIED FORWARD 17 (1,056,689) (932,749) 1,796 1,351


CASH FLOW STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2010 (Cont’d)



1. PRINCIPAL ACTIVITIES AND GENERAL INFORMATION

The Company is principally an investment holding company and a provider of management services. There have been no signifi cant changes in the nature of these activities during the fi nancial year. The Company is a public limited company by shares and is incorporated under the Companies Act, 1965 in Malaysia. The domiciled of the Company is Malaysia. The registered offi ce of the Company is located at A-15-4 Northpoint Offi ces, Medan Syed Putra Utara, No 1 Jalan Syed Putra, Mid Valley City, 59200 Kuala Lumpur. The principal place of business of the Company is located at PLO 135, Jalan Cyber 5, Kawasan Perindustrian Senai Fasa 3, 81400 Senai, Johor Darul Takzim. The fi nancial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors dated 15th October 2010.

2. SIGNIFICANT ACCOUNTING POLICIES

Unless otherwise stated, the following accounting policies have been applied consistently in dealing with items that are considered material in relation to the fi nancial statements.

a) Basis of preparation i) on the basis of accounting principles applicable to a going concern, the validity of which is dependent upon future

profi table operations of the Company and/or the availability of funds for the Company to meet its obligations as and when they fall due;

ii) in accordance with the applicable approved Financial Reporting Standards (FRS) issued by the Malaysian Accounting Standards Board (MASB) and the provisions of the Companies Act, 1965 in Malaysia; and

iii) under the historical cost convention, unless otherwise indicated.

The fi nancial statements are presented in Ringgit Malaysia (RM), unless otherwise indicated. b) Subsidiary companies and basis of consolidation i) Subsidiary companies

Subsidiary companies are entities over which the Group or the Company has the ability to control the fi nancial and operating policies so as to obtain benefi ts from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity. In the Company’s separate fi nancial statements, investments in subsidiary companies are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profi t or loss.

ii) Basis of consolidation

The consolidated fi nancial statements comprise the fi nancial statements of the Company and its subsidiary companies as at the balance sheet date. The fi nancial statements of the subsidiary companies are prepared for the same reporting date as the Company. Subsidiary companies are consolidated from the date of acquisition, being the date on which the Group or the Company obtains control, and continue to be consolidated until the date that such control ceases. In preparing the consolidated fi nancial statements, intragroup balances, transactions and unrealised gains or losses are eliminated in full. Uniform accounting policies are adopted in the consolidated fi nancial statements for like transactions and events in similar circumstances.

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2010



2. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) b) Subsidiary companies and basis of consolidation (Cont’d) ii) Basis of consolidation (Cont’d)

Acquisitions of subsidiary companies are accounted for using the purchase method. The purchase method of accounting involves allocating the cost of the acquisition to the fair value of the assets acquired and liabilities and contingent liabilities assumed at the date of acquisition. The cost of an acquisition is measured as the aggregate of the fair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the acquisition. Any excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities represents goodwill. Any excess of the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in profi t or loss. interests represent the portion of profi t or loss and net assets in subsidiaries not held by the Group. It is measured at the minorities’ share of the fair value of the subsidiary companies’ identifi able assets and liabilities at the acquisition date and the minorities’ share of changes in the subsidiary companies’ equity since then.

c) Intangible assets - Goodwill

Goodwill acquired in a business combination is initially measured at cost being the excess for the cost of business combination over the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities. Following the initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but instead, it is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

d) Property, plant and equipment

Property, plant and equipment are initially recorded at cost. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefi ts associated with the item will fl ow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the fi nancial period in which they are incurred.

Subsequent to recognition, property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

The principal annual rates of depreciation used are as follows:-

Buildings 2% Plant and machinery 10% to 15% Furniture and fi ttings, offi ce equipment and motor vehicles 15% to 20%

The residual values, useful life and depreciation method are reviewed at each fi nancial 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 benefi ts embodied in the items of property, plant and equipment.

Building under construction represents assets which are not ready for commercial use at the balance sheet date. It is stated at cost and are depreciated accordingly when the building is completed and ready for commercial use. Building under construction includes direct costs, related expenditures and interest cost on borrowing taken to fi nance the construction of the assets to the date that the assets are completed and put into use. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefi ts are expected from its use or disposal. The difference between the net disposal proceeds, if any, and the net carrying amount is recognised in profi t or loss and the unutilised portion of the revaluation surplus on that item is taken directly to retained earnings.

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2010 (Cont’d)



2. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) e) Prepaid land lease payments

Leases of land under which the lessor has not transferred all the risks and benefi ts of ownership are classifi ed as operating leases. Leases prepayment for land use rights is stated at cost less accumulated amortisation and impairment losses, if any. Amortisation is charged to the income statement on a straight-line basis over the term of the leases of 60 years.

f) Development expenditure

Development expenditure is recognised as an expense except that expenditure incurred on development projects are capitalised as long-term assets to the extent that such expenditure is expected to generate future economic benefi ts. Development expenditure is capitalised if, and only if an entity can demonstrate all of the following:- i) its ability to measure reliably the expenditure attributable to the asset under development; ii) the product or process is technically and commercially feasible; iii) its future economic benefi ts are probable; iv) its ability to use or sell the developed asset; v) the availability of adequate technical, fi nancial and other resources to complete the asset under development; and vi) its intention to complete the intangible asset and use or sell.

Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses, if any. Development expenditure initially recognised as an expense are not recognised as assets in the subsequent period. The development expenditure is amortised on a straight-line method over a period of 3 years when the products are ready for sale or use. In the event that the expected future economic benefi ts are no longer probable of being recovered, the development expenditure is written down to its recoverable amount.

g) Inventories

Inventories are valued at the lower of cost and net realisable value on the fi rst-in, fi rst-out method. The cost of inventories comprises costs of purchase and other direct cost and appropriate proportions of manufacturing overheads.

Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and applicable variable selling expenses.

h) Receivables

Receivables are carried at anticipated realisable value. Bad debts are written off in the fi nancial year in which they are identifi ed. An estimate is made for doubtful debts based on a review of all outstanding amounts as at balance sheet date.

i) Cash and cash equivalents

Cash comprises of cash at bank and cash in hand including bank overdraft and deposits. Cash equivalents comprises of investments maturing within three months from the date of acquisition and which are readily convertible to known amount of cash which are subject to an insignifi cant risk of change in value.

j) Impairment of assets

At each balance sheet date, the carrying values of assets (other than inventories, deferred tax assets and fi nancial assets) are reviewed for impairment whether there is an indication that the assets might be impaired. If such indication exists, the asset’s recoverable amount is estimated to determine the amount of impairment loss. Impairment is measured by comparing the carrying values of the assets with their recoverable amounts. The recoverable amount is the higher of an asset’s net selling price and its value in use, which is measured by reference to discounted future cash fl ows. Recoverable amounts are estimated for individual assets, or if it is not possible, for the cash-generating unit.




2. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) j) Impairment of assets (Cont’d)

An impairment loss is charged to the income statement immediately, unless the asset is carried at revalued amount. Any impairment loss of a revalued asset is treated as a revaluation decrease to the extent of previously recognised revaluation surplus for the same asset.

Subsequent increase in the recoverable amount of an asset is treated as reversal of the previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in the income statement immediately, unless the asset is carried at revalued amount. A reversal of an impairment loss on a revalued asset is credited directly to revaluation surplus. However, to the extent that an impairment loss on the same revalued asset was previously recognised as an expense in the income statement, a reversal of that impairment loss is recognised as income in the income statement.

k) Payables

Payables are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received.

l) Finance lease and hire purchase arrangements

Assets held under fi nance lease and hire purchase contracts are assets where substantially all the risks and rewards of ownership of the assets have been passed to the Company. They are capitalised and depreciated over their estimated useful lives according to the rates as set out in Note 2(d). Finance charges of the lease rental obligations and hire purchase instalments are charged to the income statement over the periods of the respective agreements using the “Sum-of-Digits” method to give a constant periodical rate of interest on the remaining fi nance lease and hire purchase liabilities.

m) Equity instrument

Ordinary shares are classifi ed as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared.

The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equity transaction costs comprise only those incremental external costs directly attributable to the equity transaction which would otherwise have been avoided.

n) Revenue recognition

Revenue from sales of goods are recognised upon delivery of products and customer acceptance, if any, or performance of services, net of returns and discounts.

Interest income and management fees are recognised on an accruals basis.

Rental income is recognised on an accrual basis in accordance with the substance of the relevant agreement.

o) Borrowing cost

All interest and other costs incurred in connection with borrowings are expensed as incurred.

p) Taxation

Income tax on the profi t or loss for the fi nancial year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profi t for the fi nancial year and is measured using the tax rates that have been enacted at the balance sheet date.




2. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

p) Taxation (Cont’d)

Deferred tax is provided in the fi nancial statements, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the fi nancial statements. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax credits and losses. Deferred tax assets are recognised to the extent that it is probable that taxable profi t will be available against the temporary differences and unused tax credits and losses.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted at the balance sheet date.

q) Foreign currencies

Transactions in foreign currencies are recorded in Ringgit Malaysia at rates of exchange ruling at the time of the transactions. Foreign currency monetary assets and liabilities are translated at exchange rates ruling at balance sheet date.

The assets and liabilities of the foreign entities, if any, are translated at fi nancial year end rates and operating results are translated at the rates ruling at the end of each month. Gains and losses arising on translation are taken directly to the foreign exchange translation reserve.

All other foreign exchange differences are taken to the income statement in the fi nancial year in which they arise.

The principal closings rates used are as follows:- 2010 2009

RM RM 1 SGD 2.328 2.430 100 Baht 10.085 9.690 1 US Dollar 3.272 3.825 1 EURO 3.984 4.970 r) Employee benefi ts i) Short term benefi ts

Wages, salaries, bonuses and social security contributions are recognised as an expense in the fi nancial year in which the associated services are rendered by employees 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) Defi ned contribution plan

Defi ned contribution plans are post-employment benefi t plans under which the Company pays fi xed contributions into separate entities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold suffi cient assets to pay all employee benefi ts relating to employee services in the current and preceding fi nancial years. Such contributions are recognised as an expense in the profi t or loss as incurred. As required by law, companies in Malaysia make such contributions to the Employees Provident Fund (“EPF”).

s) Segmental information

Segment revenues and expenses are those directly attributable to the segments and include any joint revenue and expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of property, plant and equipment (net of accumulated depreciation, where applicable), other investments, inventories, receivables and cash and bank balances.




2. SIGNIFICANT ACCOUNTING POLICIES(Cont’d) s) Segmental information (Cont’d)

Most segment assets can be directly attributed to the segments on a reasonable basis. Segment assets do not include income tax assets, whilst segment liabilities do not include income tax liabilities and borrowings from fi nancial institutions.

Segment revenue, expenses and results include transfers between segments. The prices charged on intersegment transactions are based on normal commercial terms. There transfers are eliminated on consolidation.

t) Related parties

Related parties are entities with common directors/shareholders wherein one party has the ability to control or exercise signifi cant infl uence over the other parties in fi nancial or operating policy decision.

u) Financial instruments

Financial instruments carried on the balance sheet include cash and bank balances, receivables, payables, borrowings and equity instrument. The particular recognition methods adopted are disclosed in the individual accounting policy statements associated with each item.

Financial instruments are classifi ed as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a fi nancial instrument classifi ed as liability are reported as expense or income. Distributions to holders of fi nancial instruments classifi ed as equity are charged directly to equity. Financial instruments are offset when the Company has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

3. CHANGES IN ACCOUNTING POLICIES AND EFFECTS ARISING FROM ADOPTION OF NEW AND REVISED FRSs

The accounting policies adopted by the Group and the Company are consistent with those adopted in the previous fi nancial year except that the Group and the Company had adopted FRS 8 Operating Segments which is mandatory for annual fi nancial period beginning on or after 1 July 2009. FRS 8 replaces FRS 1142004: Segment Reporting and requires a ‘management approach’ under which segment information is presented on a similar basis to that used for internal reporting purposes. As a result, the Group’s external segmental reporting will be based on the internal reporting to the “chief operating decision maker”, who makes decisions on the allocation of resources and assesses the performance of the reportable segments. As this is a disclosure standard, there will be no impact on the fi nancial position or results of the Group.

The MASB has issued the following new FRSs and IC Interpretations that are yet to be effective and have not been adopted by the Group and Company in preparing these fi nancial statements. For fi nancial periods FRSs / Interpretations beginning on or after FRS 1, First-time Adoption of Financial Reporting Standards 1 July 2010 Amendments to FRS 1, First-time Adoption of Financial Reporting 1 January 2010 Amendments to FRS 1, First-time Adoption of Financial Reporting Standards and FRS 127, Consolidated and Separate Financial Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or AssociateAmendments to FRS 1, First-time Adoption of Financial Reporting - 1 January 2011 Additional Exemptions for First-time adopters Limited Exemption from Comparative FRS 7 Disclosures for First-time 1 January 2011 Adopters (Amendment to FRS 1) Amendments to FRS 2, Share-based Payment - Vesting Conditions and Cancellations 1 January 2010




3. CHANGES IN ACCOUNTING POLICIES AND EFFECTS ARISING FROM ADOPTION OF NEW AND REVISED FRSs (Cont’d)

For fi nancial periods FRSs / Interpretations beginning on or after

Amendments to FRS 2, Share-based Payment 1 July 2010 Amendments to FRS 2, Share-based Payment - Group Cash-settled Share-based Payment Transactions 1 January 2011 FRS 3, Business Combinations 1 July 2010 FRS 4, Insurance Contracts 1 January 2010 Amendment to FRS 5, Non-current Assets Held For Sale and Discontinued Operations 1 January 2010 Amendments to FRS 5, Non-current Assets Held For Sale and Discontinued Operations 1 July 2010 FRS 7, Financial Instruments: Disclosures 1 January 2010 Amendments to FRS 7, Financial Instruments : Disclosures 1 January 2010 Improving Disclosures about Financial Instruments (Amendments to FRS 7) 1 January 2011 Amendment to FRS 8, Operating Segments 1 January 2010

FRS 101, Presentation of Financial Statements 1 January 2010 Amendment to FRS 108, Accounting Policies - Changes in Accounting Estimates and Errors 1 January 2010 Amendment to FRS 117, Leases 1 January 2010 Amendment to FRS 119, Employee Benefi ts 1 January 2010 Amendment to FRS 120, Accounting for Government Grants and 1 January 2010 Disclosure of Government Assistance FRS 123, Borrowing Costs 1 January 2010 Amendment to FRS 123, Borrowing Costs 1 January 2010 Amendment to FRS 127, Consolidated and Separate Financial Statements 1 January 2010 FRS 127, Consolidated and Separate Financial Statements 1 July 2010 Amendment to FRS 128, Investments in Associates 1 January 2010 Amendment to FRS 129, Financial Reporting in Hyperinfl ationary Economies 1 January 2010 Amendment to FRS 131, Interests in Joint Ventures 1 January 2010 Amendment to FRS 132, Financial Instruments : Presentation 1 January 2010 Amendment to FRS 132, Financial Instruments : Presentation 1 January 2010/ 1 March 2010 Amendment to FRS 134, Interim Financial Reporting 1 January 2010 Amendment to FRS 138, Intangible Assets 1 January 2010 Amendments to FRS 138, Intangible Assets 1 July 2010 FRS 139, Financial Instruments: Recognition and Measurement 1 January 2010 Amendments to FRSs ‘Improvements to FRSs (2009)’ 1 January 2010 Amendment to FRS 140, Investment Property 1 January 2010 IC Interpretation 4, Determining Whether an Agreement contains a Lease 1 January 2011 IC Interpretation 9, Reassessment of Embedded Derivatives 1 January 2010 Amendment to IC Interpretation 9, Reassessment of Embedded Derivatives 1 July 2010 IC Interpretation 10, Interim Financial Reporting and Impairment 1 January 2010 IC Interpretation 11, FRS 2 - Group and Treasury Share Transactions 1 January 2010 IC Interpretation 12, Service Concession Arrangements 1 July 2010 IC Interpretation 13, Customer Loyalty Programmes 1 January 2010 IC Interpretation 14, FRS 119 - The Limit on a Defi ned Benefi t Asset, Minimum Funding Requirements and their Interaction 1 January 2010 IC Interpretation 15, Agreements for the Construction of Real Estate 1 July 2010 IC Interpretation 16, Hedges of a Net Investment in a Foreign Operation 1 July 2010 IC Interpretation 17, Distributions of Non-cash Assets to Owners 1 July 2010 IC Interpretation 18, Transfers of Assets from Customers 1 January 2011 TR 3, Guidance on Disclosure of Transitions of IFRSs 1 January 2011 TR i - 3, Presentation of Financial Statements of Islamic Financial Institutions 1 January 2010 TR i - 4, Shariah Compliant Sale Contracts 1 January 2011

The Group and Company is exempted from disclosing the possible impact, if any, to the fi nancial statements upon the initial application of FRS 7 and FRS 139.





The new FRSs and Interpretations above are expected to have no signifi cant impact on the fi nancial statements of the Group and Company upon their initial application except for the following:-

FRS 3: Business Combinations and FRS 127: Consolidated and Separate Financial Statements (amended)

FRS 3 introduces a number of changes to the accounting for business combinations occurring on or after 1st July 2010. These include changes that affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs and future reported results.

FRS 127 (amended) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners and to be recorded in equity. Therefore, such transaction will no longer give rise to goodwill, nor will it give rise to a gain or loss. Furthermore, the amended Standard changes the accounting for losses incurred by the subsidiary as well as loss of control of a subsidiary.

The changes by FRS 3 and FRS 127 (amended) will be applied prospectively and only affect future acquisition or loss of control of subsidiaries and transactions with non-controlling interests.

FRS 101: Presentation of Financial Statements

This standard separates owner and non-owner changes in equity. Therefore, the consolidated statement of changes in equity will now include only details of transactions with owners. All non-owner changes in equity are presented as a single line labelled as total comprehensive income. The Standard also introduces the statement of comprehensive income: presenting all items of income and expense recognised in the income statement, together with all other items of recognised income and expense, either in one single statement, or in two linked statements. The Group and Company is currently evaluating the format to adopt. In addition, a statement of fi nancial position is required at the beginning of the earliest comparative period following a change in accounting policy, the correction of an error or the reclassifi cation of items in the fi nancial statements. This revised FRS does not have any impact on the fi nancial position and results of the Group and the Company.

Amendment to FRS 108: Accounting Policies - Changes in Accounting Estimates and Errors

This standard clarifi es that only implementation guidance that is an integral part of an FRS is mandatory when selecting accounting policies.

FRS 123: Borrowing Costs

This Standard supersedes FRS 1232004: Borrowing Costs that removes the option of expensing borrowing costs and requires capitalisation of such costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Other borrowing costs are recognised as an expense.

Amendment to FRS 123: Borrowing Costs

Amendment to FRS 123 Borrowing Costs: The defi nition of borrowing costs is aligned with FRS 139 by referring to the use of effective interest rate as a component of borrowing cost.

Amendment to FRS 134: Interim Financial Reporting

This amendment clarifi es that earnings per share is to be disclosed in interim fi nancial reports if an entity is within the scope of FRS 133: Earnings per share.





FRS 139: Financial Instruments: Recognition and Measurement, FRS 7: Financial Instruments: Disclosures and Amendments to FRS 139 and FRS 7: Financial Instruments: Recognition and Measurement and Disclosures

The new Standard on FRS 139: Financial Instruments: Recognition and Measurement establishes principles for recognising and measuring fi nancial assets, fi nancial liabilities and some contracts to buy and sell non-fi nancial items. Requirements for presenting information about fi nancial instruments are in FRS 132: Financial Instruments: Presentation and the requirements for disclosing information about fi nancial instruments are in FRS 7: Financial Instruments: Disclosures.

FRS 7: Financial Instruments: Disclosures is a new Standard that requires new disclosures in relation to fi nancial instruments. The Standard is considered to result in increased disclosures, both quantitative and qualitative of the Group’s and Company’s exposure to risks, enhance disclosure regarding components of the Group’s and Company’s fi nancial position and performance, and possible changes to the way of presenting certain items in the fi nancial statement.

In accordance with the respective transitional provisions, the Group and the Company are exempted from disclosing the possible impact to the fi nancial statements upon the initial application.

Amendments to FRSs ‘Improvements to FRSs (2009)’

The ‘Improvements to FRSs (2009)’ contains amendments to several FRSs as described below:

i) FRS 7, Financial Instruments: Disclosure: Clarifi es on the presentation of fi nance costs whereby interest income is not a component of fi nance costs.

ii) FRS 8, Operating Segments: Segment assets and liabilities need only be reported when those assets and liabilities are included in measures of segment profi t or loss that are reviewed or otherwise regularly used by the ‘chief operating decision maker’.

iii) FRS 101, Presentation of Financial Statements: Assets and Liabilities classifi ed as held for trading in accordance with FRS 139, Financial Instruments: Recognition and Measurement are not automatically classifi ed as current in the balance sheet. The amendment further clarifi es that the classifi cation of the liability component of a convertible instrument as current or non-current is not affected by the terms that could, at the option of the holder, result in settlement of the liability by the issue of equity instruments.

iv) FRS 108, Accounting Policies, Changes in Accounting Estimates and Errors: Clarifi es that only implementation guidance that is an integral part of an FRS is mandatory when selecting accounting policies.

v) FRS 116, Property, Plant and Equipment: Replacement of the term “net selling price” with “fair value less costs to sell”. Items of property, plant and equipment held for rental that are routinely sold in the ordinary course of business after rental are transferred to inventory when rental ceases and they are held for sale. This will not result in any reclassifi cation.

vi) FRS 117, Leases: The amendment clarifi es that the default classifi cation of the land element in a land and building lease is no longer an operating lease. As a result, leases of land should be classifi ed as either fi nance or operating, using the general principles of FRS 117.

vii) FRS 118, Revenue: The amendment provides additional guidance on whether an entity is acting as a principal or an agent. It also aligns the defi nition of costs incurred in originating a fi nancial asset that should be deferred and recognised as an adjustment to the effective interest by replacing the term ‘direct costs’ with ‘transaction costs’ as defi ned in FRS 139.

viii) FRS 123, Borrowing Costs: The defi nition of borrowing costs is aligned with FRS 139 by referring to the use of effective interest rate as a component of borrowing cost.

ix) FRS 127, Consolidated and Separate Financial Statements: The amendment clarifi es that when a parent entity accounts for a subsidiary at fair value in accordance with FRS 139 in its separate fi nancial statements, this treatment continues when the subsidiary is subsequently classifi ed as held for sale.

x) FRS 134: This amendment clarifi es that earnings per share is to be disclosed in interim fi nancial reports if an entity is within the scope of FRS 133: Earnings per share.




3. CHANGES IN ACCOUNTING POLICIES AND EFFECTS ARISING FROM ADOPTION OF NEW AND REVISED FRSs(Cont’d)

Amendments to FRSs ‘Improvements to FRSs (2009)’ (Cont’d)

xi) FRS 136, Impairment of Assets: Clarifi es that when discounted cash fl ows are used to be estimated ‘fair value less cost to sell’ additional disclosure is required about the discount rate, consistent with disclosure is required about the discount rate, consistent with disclosures required when the discounted cash fl ows are used to estimate ‘value in use’. The amendment further clarifi es that the largest cash generating unit or group of units to which goodwill should be allocated for purposes of impairment testing is an operating segment as defi ned in FRS 8.

xii) FRS 139, Financial Instruments: Recognition and Measurement: Changes in circumstances relating to derivatives are not reclassifi cations and therefore may be either removed from, or included in, the ‘fair value through profi t and loss’ classifi cation after initial recognition. Removed the reference in FRS 139 to a ‘segment’ when determining whether an instrument qualifi es as a hedge. Require the use of the revised effective interest rate when remeasuring a debt instrument on the cessation of fair value hedge accounting. The Group and the Company are exempted from disclosing the possible impact to the fi nancial statements upon the initial application of this Standard.

Amendments to FRS 1, First-time Adoption of Financial Reporting Standards and FRS 127, Consolidated and Separate Financial Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate The amendments to FRS 1 allow fi rst-time adopters to use costs, determined in accordance with FRS 127, or deemed cost of either fair value (in accordance with FRS 139) or the carrying amount under previous accounting practice to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate opening FRS balance sheet. In the amendment to FRS 127, there is no longer a distinction between the pre-acquisition and post-acquisition dividends. The amendments also require the cost of the investment of a new parent in a group (in a reorganisation meeting certain criteria) to be measured at the carrying amount of its share equity as shown in the separate fi nancial statements of the previous parent. The amendments also remove the defi nition of the cost method from FRS 127 and will be applied prospectively that affect only the fi nancial statements of the Company and do not have an impact on the fi nancial statements of the Group.

IC Interpretation 17: Distribution of Non-cash Assets to Owners

The interpretation clarifi es that an entity should be measure the non-cash assets distributed to owners at the fair value of the assets. It also clarifi es that the difference between the fair value of the assets and the carrying amount of the assets distributed to be taken to the income statement. This interpretation will be applied prospectively and therefore there will be no impact on prior periods in the fi nancial statements of the Group and of the Company.

Improving Disclosure about Financial Instruments (Amendments to FRS 7)

The Improving Disclosure about Financial Instruments amendments reinforce existing principles for disclosure about liquidity risk. Also, the Amendments required enhanced disclosure about fair value measurements in which a three-level fair value hierarchy is introduced. An entity is required to classify fair value measurements using this hierarchy which aims to refl ect the inputs used in making the measurement. These Amendments do not have any impact on the fi nancial position and results of the Group and of the Company.

4. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated by the Directors and Management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and judgements that effect the application of the Company’s accounting policies and disclosures, and have a signifi cant risk of causing a material adjustment to the carrying amounts of assets, liabilities, income and expenses are discussed below:-

i) Depreciation of Property, Plant and Equipment

The estimates for the residual values, useful lives and related depreciation charges for the property, plant and equipment are based on commercial and production factors which could change signifi cantly as a result of technical innovations and competitors’ actions in response to the market conditions.




4. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (Cont’d)

The Company anticipates that the residual values of its property, plant and equipment will be insignifi cant. As a result, residual values are not being taken into consideration for the computation of the depreciable amount.

Changes in the expected level of usage and technological development could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.

ii) Income Taxes

There are certain transactions and computations for which the ultimate tax determination may be different from the initial estimate. The Company recognises tax liabilities based on its understanding of the prevailing tax laws and estimates of whether such taxes will be due in the ordinary course of business. Where the fi nal outcome of these matters is different from the amounts that were initially recognised, such difference will impact the income tax and deferred tax provisions in the period in which such determination is made.

iii) Impairment of Assets

When the recoverable amount of an asset is determined based on the estimate of the value-in-use of the cash-generating unit to which the asset is allocated, the management is required to make an estimate of the expected future cash fl ows from the cash-generating unit and also to apply a suitable discount rate in order to determine the present value of those cash fl ows.

iv) Amortisation of Development Costs

Changes in the expected level of usage and technological development could impact the economic useful lives therefore future amortisation charges could be revised.

v) Allowance for Doubtful Debts of Receivables

The Company makes allowance for doubtful debts based on an assessment of the recoverability of receivables. Allowances are applied to receivables where events or changes in circumstances indicate that the carrying amounts may not be recoverable. Management analyses historical bad debt, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgement to evaluate the adequacy of the allowance for doubtful debts of receivables. Where the expectation is different from the original estimate, such difference will impact the carrying value of receivables.

vi) Written down of Inventories

Reviews are made periodically by management on damaged, obsolete and slow-moving inventories. These reviews require judgement and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories.

5. FINANCIAL RISK MANAGEMENT POLICIES

The Group’s fi nancial risk management policies seek to ensure that adequate fi nancial resources are available for the development of the Group’s business whilst managing its market, credit, liquidity and cash fl ow risks. The policies in respect of the major areas of treasury activity are as follows:-

a) Market Risk

i) Foreign Currency Risk

The Group is exposed to foreign exchange risk on sales and purchases that are denominated in currencies other than Ringgit Malaysia.

Foreign currency risk is closely monitored and kept at an acceptable level.

ii) Interest Rate Risk

The Group obtains fi nancing through bank borrowings and hire purchase facilities. Its policy is to obtain the most favourable interest rates available. Information relating to the Group’s borrowings is disclosed in their respective notes.




5. FINANCIAL RISK MANAGEMENT POLICIES (Cont’d)

a) Market Risk (Cont’d)

iii) Price Risk

The Group does not have any quoted investments and hence is not exposed to price risks.

b) Credit Risk

Credit risks, or the risk of counterparties defaulting, are controlled by the application of credit approvals, limits and monitoring procedures. Credit risks are minimised by monitoring receivables regularly and by mostly trading with creditworthy customers.

The carrying amounts of cash and cash equivalents, trade receivables and other receivables represent the Group’s maximum exposure to credit risk in relation to fi nancial assets. No other fi nancial assets carry a signifi cant exposure to credit risk.

c) Liquidity and Cash Flow Risks

The Group manages its liquidity risk by maintaining suffi cient cash and the availability of funding through certain committed credit facilities to meet estimated commitments arising from operational expenditure and fi nancial liabilities.

6. PROPERTY, PLANT AND EQUIPMENT COST

At Foreign At Group 01.07.09/ exchange Written 30.06.10/ 2010 01.07.08 translation Additions Disposals * off 30.06.09

RM RM RM RM RM RM Buildings 2,816,303 - - - - 2,816,303 Plant and machinery 30,789,678 (27,151) 1,799,250 (1,791,435) - 30,770,342 Furniture, fi ttings, offi ce equipment and motor vehicles 4,040,847 (19,537) 87,699 - - 4,109,009 Building under construction 1,681,528 - 487,000 - - 2,168,528 39,328,356 (46,688) 2,373,949 (1,791,435) - 39,864,182 2009 Buildings 2,706,526 - 109,777 - - 2,816,303 Plant and machinery 29,787,782 73,621 2,498,579 (1,570,304) - 30,789,678 Furniture, fi ttings, offi ce equipment and motor vehicles 3,562,906 29,023 457,159 (8,241) - 4,040,847 Building under construction - - 1,681,528 - - 1,681,528 36,057,214 102,644 4,747,043 (1,578,545) - 39,328,356 * Included in the disposal of plant and machinery of the Group is the deemed disposal of a unit of machinery with net

carrying amount of RM1,006,250 by a subsidiary arising from return of the machinery to the supplier due to unsatisfactory performance. Refer to Note 14 to the fi nancial statements for further information.




6. PROPERTY, PLANT AND EQUIPMENT (Cont’d)

ACCUMULATED DEPRECIATION At Foreign Depreciation At Group 01.07.09/ exchange charge for Written 30.06.10/ 2010 01.07.08 translation the year Disposals off 30.06.09 RM RM RM RM RM RM Buildings 248,018 - 56,326 - - 304,344 Plant and machinery 10,704,717 (7,061) 1,919,797 (302,038) - 12,315,415 Furniture, fi ttings, offi ce equipment and motor vehicles 1,710,893 (6,839) 591,808 - - 2,295,862 Building under construction - - - - - - 12,663,628 (13,900) 2,567,931 (302,038) - 14,915,621

2009 Buildings 192,210 - 55,808 - - 248,018 Plant and machinery 6,615,985 - 4,552,286 (463,554) - 10,704,717 Furniture, fi ttings, offi ce equipment and motor vehicles 1,124,610 - 593,044 (6,761) - 1,710,893 Building under construction - - - - - - 7,932,805 - 5,201,138 (470,315) - 12,663,628 NET CARRYING AMOUNT At At Group 2010 2009 RM RM Buildings 2,511,959 2,568,285 Plant and machinery 18,454,927 20,084,961 Furniture, fi ttings, offi ce equipment and motor vehicles 1,813,147 2,329,954 Construction in progress 2,168,528 1,681,528 24,948,561 26,664,728

COST At At Company 01.07.09/ 30.06.10/ 2010 01.07.08 Additions Disposals 30.06.09 RM RM RM RM

Offi ce equipment 325 - - 325 2009

Offi ce equipment 325 - - 325




6. PROPERTY, PLANT AND EQUIPMENT (Cont’d) ACCUMULATED DEPRECIATION At Depreciation At Company 01.07.09/ charge for 30.06.10/ 2010 01.07.08 the year Disposals 30.06.09 RM RM RM RM Offi ce equipment 130 49 - 179 2009 Offi ce equipment 81 49 - 130

NET CARRYING AMOUNT At At Company 2010 2009 RM RM Offi ce equipment 146 195 146 195 Included in the net carrying amount of the property, plant and equipment of the Group are the following assets acquired under hire purchase terms:- The net carrying amount of assets under hire purchase fi nancing are as follows:- Group 2010 2009 RM RM Motor vehicles 312,568 560,020 Plant and machinery 5,785,815 4,894,895 6,098,383 5,454,915

The net carrying amount of assets pledged as security for bank borrowings are as follows:- Group 2010 2009 RM RM Buildings 2,511,959 2,568,285 Plant and machinery 3,943,286 5,884,136 Building under construction 2,168,528 1,681,528 8,623,773 10,133,949 Included in plant and machinery of the Group are machines with net carrying amount of RM 491,111 (2009:RM 1,238,925) which are not in the relevant subsidiaries’ premises as they are held for safe keeping by the machinery supplier on the Group’s behalf.




7. PREPAID LAND LEASES Group 2010 2009

RM RM At cost At beginning/end of the year 1,811,273 1,811,273 Accumulated amortisation At beginning of the year 121,642 91,454 Charge for the fi nancial year 30,187 30,188 At end of the year 151,829 121,642 Net carrying amount 1,659,444 1,689,631 The prepaid land leases has been charged to licensed commercial banks for various credit facilities granted to the Group.

8. DEVELOPMENT EXPENDITURE Group 2010 2009

RM RM At beginning of the year 148,139 234,340 Amortisation during the year (114,962) (86,201) At end of the year 33,177 148,139 The development expenditure relates to costs incurred for the development of the injection mould project. 9. INVESTMENT IN SUBSIDIARY COMPANIES Company 2010 2009

RM RM In Malaysia Unquoted shares, at cost 10,800,000 8,500,000 Outside Malaysia Unquoted shares, at cost 857,600 857,600 11,657,600 9,357,600 Details of subsidiary companies are as follows:-

Country ofName of Company Effective interest (%) Incorporation Principal Activities

2009 2008

Sanichi Precision 100 100 Malaysia Design and fabrication of precision moulds Mould Sdn. Bhd. and tooling Asia Pinnacle Sdn. Bhd. 100 100 Malaysia Design and fabrication of precision moulds and tooling *Sanichi Mould 100 100 Thailand Design and fabrication of precision moulds (Thailand) Co., Ltd. and tooling * Subsidiaries not audited by THL Wong & Co.




10. GOODWILL ON CONSOLIDATION Group 2010 2009

RM RM At beginning/end of the year 6,711 6,711 11. DEFERRED TAX ASSET/(LIABILITY) Group 2010 2009

RM RM At beginning of the year - (122,000) Recognised in income statement (Note 27) - current year relating to temporary difference - 87,000 - over provision in prior year relating to temporary difference - 35,000 - 122,000

At end of the year - -

The tax effects of temporary differences which would give rise to future net tax benefi ts are generally recognised only where there is a reasonable expectation of realisation. As at balance sheet date, the estimated amount of deferred taxation benefi ts calculated at the current tax rate, that had not been recognised in the fi nancial statements are as follows:-

Group Company 2010 2009 2010 2009 RM RM RM RM Tax effect of the excess of property, plant and equipment’s net carrying amount over its tax written down value (1,207,900) (888,800) - - Tax effect of unutilised capital allowance 1,761,400 1,564,500 - - Tax effect of unabsorbed tax losses 74,400 56,800 22,100 -

Deferred tax asset 627,900 732,500 22,100 -

Deferred tax asset has not been recognised in the fi nancial statements as it is not probable that suffi cient taxable profi t will be available against which the deductible temporary differences, unutilised capital allowance and unabsorbed tax losses can be utilised.

12. INVENTORIES Group 2010 2009

RM RM

Raw materials 1,015,915 1,017,736 Work-in-progress 5,142,721 3,941,643 Finish goods 215,322 -

6,373,958 4,959,379 All inventories are carried at cost.




13. TRADE RECEIVABLES Group 2010 2009

RM RM Third parties 22,970,119 18,200,361 Less: Allowance for specifi c doubtful debts (3,877,128) (3,758,819) 19,092,991 14,441,542

Group 2010 2009

RM RM Allowance for specifi c doubtful debts At beginning of the year 3,758,819 69,500 Additions during the year 1,323,766 3,689,319 Reversal during the year (1,205,457) -

At end of the year 3,877,128 3,758,819

The Group’s normal trade credit terms range from 30 to 60 days. Other credit terms are assessed and approved on a case-by-case basis.

The foreign currency exposure profi le of trade receivables is as follows:- Group 2010 2009

RM RM Euro 7,355,425 3,498,415 Singapore Dollar 390,037 463,160 Thai Bath 448,544 - United States Dollar 3,980,908 2,474,234 14. OTHER RECEIVABLES Group Company 2010 2009 2010 2009 RM RM RM RM Analysed to:- Other receivables 96,985 1,151,226 3,000 2,500 Deposits 213,070 35,220 1,000 1,000 Prepayments 107,034 127,449 10,800 10,800 417,089 1,313,895 14,800 14,300

In the previous fi nancial year, the other receivables included a unit of machinery with net carrying amount of RM 1,006,250 arising from return of the machinery to the supplier due to unsatisfactory performance. During the fi nancial year, the machinery was returned back from the supplier in current fi nancial year and was transferred to property, plant and equipment as addition of the year.




15. AMOUNT DUE FROM/(TO) SUBSIDIARY COMPANIES Company

Amount due from/(to) related companies arose mainly from inter-company advances which bear no interest, unsecured and no scheme of repayment has been arranged.

16. FIXED DEPOSITS Group 2010 2009

RM RM Fixed deposit with licenced banks 501,034 741,200 The fi xed deposits with licensed banks have been pledged as securities for banking facilities granted to the Group.

The effective interest rate per annum of the fi xed deposits at the balance sheet date is 3.12% (2009: range from 3.00% to 3.50%). The fi xed deposits have a maturity of 365 days (2009: range from 90 to 365 days).

17. CASH AND CASH EQUIVALENTS Cash and cash equivalents included in the cash fl ow statement comprise the following balance sheet amounts:- Group Company 2010 2009 2010 2009 RM RM RM RM Fixed deposits 1,034 741,200 - - Cash and bank balances 63,483 92,055 1,796 1,351 Bank overdraft - secured (1,121,206) (1,766,004) - -

(1,056,689) (932,749) 1,796 1,351

The bank overdraft is secured by way of:- a) facilities Agreements; b) open all monies fi rst party legal charge over a land and building of the Group; c) corporate guarantee by the Company; d) lien on fi xed deposit of the Group; e) letter of authorisation; f) joint and several guarantee by the certain Directors of the Company; g) third party forth and sixth legal charge over a leasehold industrial land with a factory building of a third party; h) loan and advances given to subsidiary companies by the Company; i) specifi c debenture over two units of machineries; and j) guarantee from Syarikat Jaminan Pembiayaan Perniagaan Berhad. The bank overdraft to a limit of RM 1,921,000 (2009: RM 1,780,000) is payable on demand and interest is charged at rates ranging from 7.35% to 8.30% (2008: 6.55% to 7.55%) per annum.




18. SHARE CAPITAL Number of ordinary shares of RM0.10 each Group and Company Group and Company 2010 2009 2010 2009 RM RM Authorised:- At beginning of the year 113,500,000 113,500,000 11,350,000 11,350,000 Created during the year 50,000,000 - 5,000,000 - At end of the year 163,500,000 113,500,000 16,350,000 11,350,000 Issued and fully paid:- At beginning of the year 113,500,000 113,500,000 11,350,000 11,350,000 Issued during the year 50,000,000 - 5,000,000 - At end of the year 163,500,000 113,500,000 16,350,000 11,350,000 The new ordinary shares rank pari passu in all respects with existing ordinary shares. 19. RESERVES Group Company 2010 2009 2010 2009 RM RM RM RM Non-distributable Share premium At beginning/end of the year 10,586,318 10,586,318 10,586,318 10,586,318 Foreign exchange reserve Exchange difference of translation of overseas subsidiary companies (19,069) 58,698 - - Distributable:- (Accumulated losses)/ Unappropriated profi ts (2,312,803) (2,516,049) (47,074) 76,577 8,254,446 8,128,967 10,539,244 10,662,895

The share premium reserve arose from the issue of shares by way of private placement and public offer less amount incurred for listing expenses. The share premium is not distributable by way of cash dividends and may be utilised in the manner set out in Section 60(3) of the Companies Act, 1965.

20. BORROWINGS Group 2010 2009

RM RM Non-current Secured Hire purchase creditors 2,542,762 3,563,142 Term loan 6,674,696 3,629,184 9,217,458 7,192,326 Current Secured Banker acceptance 9,120,000 9,534,000 Hire purchase creditors 1,203,582 1,351,839 Term loan 3,159,404 2,229,663 13,482,986 13,115,502 22,700,444 20,307,828




20. BORROWINGS (Cont’d) Banker acceptance amounting to RM 9,120,000 (2009: RM 9,534,000) are drawn for a period of up to 150 days (2009:150 days) which are renewable on maturity. Interest is charged at rates ranging from 2.24% to 4.75% (2009: 2.13% to 4.40%) per annum. Term loan amounting to RM 9,834,100 (2009: RM 5,858,847) bear interest at balance sheet date at rates ranging from 5.82% to 7.76% (2009: 6.40% to 7.25%) per annum.

The banker acceptance and term loan are secured by way of:- a) facilities Agreements; b) open all monies fi rst party legal charge over a leasehold land and building of the Group; c) corporate guarantee by the Company; d) joint and several guarantee by the certain Directors of the Company; e) fi rst party fi rst legal and second legal charge over the building of the Group; f) third party forth and sixth legal charge over a leasehold industrial land with a factory building of a third party; g) loan and advances given to subsidiary companies by the Company; h) specifi c debenture creating fi xed charge over the assets fi nanced; and i) guarantee from Syarikat Jaminan Pembiayaan Perniagaan Berhad. Group Repayment terms 2010 2009Bank borrowings and loans RM RM(excluding hire purchase creditors) - not later than 1 year 12,279,404 11,763,663 - later than 1 year and not later than 2 years 2,924,209 1,190,825 - later than 2 years and not later than 5 years 3,580,451 1,884,517 - later than 5 years 170,036 553,842

18,954,100 15,392,847

Hire purchase creditors Minimum instalment payments :- - not later than 1 year 1,469,653 1,642,023 - later than 1 year and not later than 5 years 1,069,341 4,007,345 - later than 5 years 1,715,955 - 4,254,949 5,649,368 Future fi nance charges on hire purchase creditors (508,605) (734,387) Present value of hire purchase creditors 3,746,344 4,914,981 Present value of hire purchase creditors - not later than 1 year 1,203,582 1,351,839 - later than 1 year and not later than 5 years 931,266 3,563,142 - later than 5 years 1,611,496 - 3,746,344 4,914,981 The effective interest rates per annum of the hire purchase creditors at the balance sheet date range from 4.24% to 6.69% (2009: 4.32% to 6.90%).




21. TRADE PAYABLES Group 2010 2009

RM RM Third parties 2,616,396 3,868,278 The normal trade credit terms granted to the Group in respect of trade payables range from 60 to 90 days. The foreign currency exposure profi le of trade payables is as follows:- Group 2010 2009

RM RM

Euro 181,060 27,893 Singapore Dollar 83,624 405,546 Thai Bath 10,893 - United States Dollar 5,467 57,312 22. OTHER PAYABLES Group Company 2010 2009 2010 2009 RM RM RM RM Analysed to: Other payables 1,260,944 3,000,877 42,150 35,292 Accrued expenses 383,733 479,314 118,988 52,000 Payroll liabilities 376,126 446,324 16,964 1,039

2,020,803 3,926,515 178,102 88,331 23. AMOUNT DUE TO DIRECTORS Group Amount due to Directors bears no interest, unsecured and no scheme of repayment has been arranged. 24. REVENUE Group Company 2010 2009 2010 2009 RM RM RM RM

Management fees - - 480,000 480,000 Sale of goods 19,262,435 16,627,454 - -

19,262,435 16,627,454 480,000 480,000 25. FINANCE COSTS Group 2010 2009

RM RM

Banker acceptance interest 416,492 493,546 Bank overdraft interest 106,382 120,916 Hire purchase interest 292,233 397,983 Other interest 943,206 - Term loan interest 603,334 441,744 2,361,647 1,454,189




26. PROFIT/(LOSS) BEFORE TAXATION

Profi t/(loss) before taxation has been determined after charging/(crediting) amongst other items the following:- Group Company 2010 2009 2010 2009 RM RM RM RM Allowance for specifi c doubtful debts 1,323,766 3,689,319 - - Allowance for specifi c doubtful debts no longer required (1,205,457) - - - Amortisation of development expenditure 114,962 86,201 - - Amortisation of prepaid land leases 30,187 30,188 - - Audit fees 50,174 52,265 15,000 12,000 Depreciation of property, plant and equipment 2,567,931 5,201,138 49 49 Directors’ remuneration - fees 132,000 132,392 132,000 101,000 - EPF contributions 61,660 72,720 - - - other emoluments 507,500 521,800 19,500 13,800 Past Director’s emolument - fees 15,000 - 15,000 - - other emoluments 1,750 - 1,750 - Loss on disposal of plant and equipment 370,597 87,780 - - Loss on foreign currency exchange - realised 343,398 93,309 - - - unrealised 1,013,595 - - - Rental charges 225,488 360,875 - - Gain on foreign exchange - realised - (24,914) - - - unrealised - (91,435) - - Interest income - (52,240) - - 27. TAXATION Group Company 2010 2009 2010 2009 RM RM RM RM Malaysian taxation: Current year tax expenses 24,000 99,000 - 66,000 Deferred tax (Note 11) - (87,000) - -

24,000 12,000 - 66,000 Under/(over) provision in prior years: Tax expenses 1,883 194,998 1,883 (4,816) Deferred tax (Note 11) - (35,000) - -

1,883 159,998 1,883 (4,816) 25,883 171,998 1,883 61,184

Group There is no current year tax expense for Thailand operations as those operations have no chargeable income. Pursuant to Paragraph 2B, Schedule 1 of the Income Tax Act, 1967, the Company, which is a subsidiary company of Sanichi Technology Berhad (a company with paid up capital of more than RM 2.5 million) does not qualify for preferential tax rates under Paragraph 2A, Schedule 1 of the Income Tax Act, 1967. This is pursuant to Paragraph 2B, Schedule 1 of the Income Tax Act, 1967. This is effective from the tax year of assessment 2009 onwards.

Income tax of the Malaysian subsidiary companies is calculated at the rate of 25% on the estimated taxable profi t. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.




27. TAXATION

Company There is no tax expense for the fi nancial year as the Company has no chargeable income. As at 30th June 2010, the Company has unabsorbed tax losses of approximately RM 88,200 (2009: RM Nil) available to set off against future taxable income. However, these amounts are subject to the agreement of the relevant tax authorities. Income tax is calculated at the rate of 25% on the estimated taxable profi t. A reconciliation of average effective tax rate applicable to (loss)/profi t before taxation to effective statutory tax rate is as follows:-

Group Company 2010 2009 2010 2009 RM RM RM RM

Profi t/(loss) before taxation 229,129 (10,663,660) (121,768) 144,168

% % % %

Average effective tax rate for the year 11.3 (1.6) (1.5) 42.4 Deferred tax asset/liability not recognised during the year (9.6) 22.3 18.1 - Utilisation of previously unrecognised deferred tax asset 36.0 - - - Under provision in prior year (0.8) 1.5 1.5 3.3 Tax effect on income exempted from income tax 199.3 - - - Tax effect of expenses not deductible for tax purpose (211.2) 2.8 6.9 (20.7)

Effective statutory tax rate for the year 25.0 25.0 25.0 25.0 28. EARNINGS PER SHARE Basic earning per share

The basic earnings per share for the fi nancial year is based on profi t attributable to equity holders of the Company divided by the weighted average number of ordinary shares in issue during the fi nancial year.

Group 2010 2009 RM RM Profi t/(loss) attributable to equity holders of the Company 203,246 (10,835,658) Weighted average number of ordinary shares of RM 0.10 each 163,500,000 113,500,000

Basic earnings/(loss) per share (sen) 0.12 (9.55) Diluted earning per share No ESOS option has been granted as at the balance sheet, therefore the disclosure of diluted loss per share is not applicable.




29. PURCHASE OF PROPERTY, PLANT AND EQUIPMENT During the fi nancial year, the Group and Company acquired property, plant and equipment as follows:- Group Company 2010 2009 2010 2009 RM RM RM RM Cash payment 1,715,149 3,065,515 - - Trade in 658,800 - - - Building under construction - 1,681,528 - -

2,373,949 4,747,043 - - 30. PROCEEDS FROM ISSUANCE OF SHARES

During the fi nancial year, the Company increased its issued and paid-up share capital from RM 11,350,000 to RM 16,350,000 by allotment of RM 5,000,000 ordinary shares of RM 0.10 each at par for cash consideration.

31. DIRECTORS’ REMUNERATION

The aggregate amount of emoluments received and receivable by the Directors of the Group and of the Company during the fi nancial year were as follows:- Group Company 2010 2009 2010 2009

RM RM RM RM Executive Directors:- - fees - 31,392 - - - Salaries, bonus and EPF contribution 549,660 580,720 - - Non-Executive Directors:- - fees 132,000 101,000 132,000 101,000 - other emoluments 19,500 13,800 19,500 13,800 Past Non-Executive Director:- - fees 15,000 - 15,000 - - other emoluments 1,750 - 1,750 - Total 717,910 726,912 168,250 114,800

The number of Directors of the Group where total remuneration during the fi nancial year fall within the following bands are as follows:- Number of Directors 2010 2009Executive Directors :- RM 200,001 - RM 250,000 - 1

RM 250,001 - RM 300,000 2 1 2 2

Non-Executive Directors Below RM 50,000 6 3 8 5




32. SIGNIFICANT RELATED PARTY TRANSACTIONS Company 2010 2009 RM RM Management fees charged to subsidiary companies 480,000 480,000

33. SEGMENTAL INFORMATION

The Group has a single business segment which is design and fabrication of precision moulds and tooling. Business contribution by geography is as follows:- Group 2010 2009 RM RM

SALES REVENUE BY GEOGRAPHICAL MARKET:- Malaysia 8,289,014 10,600,082 Other Asia Pacifi c countries 3,466,067 2,707,821 European countries 7,507,354 3,319,551 19,262,435 16,627,454 SEGMENT ASSETS:- Malaysia 51,864,496 49,251,817 Others 1,992,843 1,587,182 53,857,339 50,838,999 CAPITAL EXPENDITURE:- Malaysia 2,373,949 4,611,691 Others - 135,352 2,373,949 4,747,043

34. CAPITAL COMMITMENTS Authorised capital expenditure not provided for in the fi nancial statements:- Group 2010 2009

RM RM Contracted for:- Construction of building 4,318,000 4,318,000

35. CONTINGENT LIABILITIES Company 2010 2009

RM RM Corporate guarantees given to licensed banks for banking facilities granted to subsidiary companies 33,960,000 29,665,000




36. EMPLOYEES INFORMATION

Group Company 2010 2009 2010 2009 RM RM RM RM

Directors’ other emoluments 701,160 695,520 151,500 114,800

Past Directors’ other emoluments 16,750 - 16,750 -

EPF 247,057 371,815 10,254 3,520

Salaries, bonus and allowances 3,878,312 5,325,476 85,120 28,643

SOCSO 25,007 42,356 978 512

Other personnel cost 150,957 164,167 3,287 571

5,019,243 6,599,334 267,889 148,046

The total number of employees of the Company, including the Directors, as at the end of the fi nancial year was 12 (2009: 3).

The total number of employees of the Group, including the Directors, as at the end of the fi nancial year was 118 (2009: 145).

37. FAIR VALUES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

Fair value is defi ned as the amount at which the fi nancial instrument could be exchanged in a current transaction between

knowledgeable willing parties in an arm’s length transaction, other than in a forced sale or liquidation.

The following methods and assumptions are used to estimate the fair value of each class of fi nancial assets and liabilities:-

a) Cash and bank balances and othr liquid funds and short term receivables

The carrying amount approximated their fair values due to the relatively short-term maturity of these instruments.

b) Short term bank borrowings and other current liabilities

The carrying amount approximated their fair values because of the short period to maturity of these instruments.

c) Long term bank borrowings

The carrying amount of fl oating rate term loans approximates its fair values as its effective interest changes accordingly to

movements in the market. The carrying amount of fi xed rates term loans approximates its fair value as the changes in the

interst charged on similar kind of borrowings in the market have no material impact on the fair value of these loans.




36. FAIR VALUES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (Cont’d) d) Amount owing by subsidiaries

The carrying amount approximated their fair values at the balance sheet date.

e) Contingent liabilities

The nominal amount and net fair value of contingent liabilities not recognised in the balance sheets of the Company are

as follows:-

Company Nominal Net Fair Amount Value

Note RM RM

At 30.06.2010

Corporate guarantees 35 33,960,000 *

At 30.06.2009

Corporate guarantees 35 29,665,000 *

* The net fair value of the contingent liabilities is estimated to be minimal as the subsidiaries are expected to fulfi ll their

obligations to repay the banking facilities.

37. COMPARATIVE FIGURES

The comparative fi gures of the fi nancial statements have been audited by other fi rm of auditors and have been reclassifi ed to

conform with current year’s presentation.

As previously stated Reclassifi cation As restated

RM RM RM For the fi nancial year ended 30th June 2009

Income Statement Administrative expenses 9,070,947 (687,352) 8,383,595

Finance costs 1,492,579 (38,390) 1,454,189

Other operating expenses - 725,742 725,742




LIST OF PROPERTIES AS AT 30 JUNE 2010

Registered

Owner

Sanichi

Precision

Mould

Sdn. Bhd

Sanichi

Precision

Mould

Sdn. Bhd

Title/ Location

Address

HS(D)370623

PTD 88552

Mukim of

Senai-Kulai

PLO 135, Kawasan

Perindustrian

Fasa 3 , 81400 Senai

Johor.

HS(D)290337

PTD 65201

Mukim of

Senai-Kulai

PLO 136, Kawasan

Perindustrian Fasa 3,

81400 Senai Johor.

Description /

Existing Use

Offi ce

Warehouse

& Factory

Building In

Progress

Tenure

Leasehold

15.06.2064

Leasehold

23.11.2059

Age of Building

(Years)

5

-

Total Land Area (Square

feet)

65,340

65,340

Total Built Up Area (Square feet)

43,924

-

NBV 30.06.2010 (RM)

3,306,958

3,032,970

Year of Acquisition

2004

2007



SHARE CAPITAL

Authorized Share Capital : RM25,000,000Paid-up Share Capital : RM16,350,000Class of Share : Ordinary Shares of RM0.10 eachVoting Rights : 1 Vote per Ordinary Share

A. Distribution of shareholdings

No. of No. of Range of shareholdings Shareholders Shares %

Less than 100 shares 6 296 0.00100 - 1,000 shares 118 92,104 0.061,001 to 10,000 shares 490 3,133,600 1.9210,001 to 100,000 shares 441 19,166,000 11.72100,001 to less than 5% of issued shares 135 75,708,000 46.305% and above of issued shares 2 65,400,000 40.00 Total 1,192 163,500,000 100.00

B. List of Thirty (30) Largest Shareholders

Name of shareholders No. of Shares %

1 MIDF Amanah Investment Nominees (Tempatan) Sdn Bhd 40,000,000 24.46 Pledged Securities Account for PFM Capital Sdn Bhd 2 Abdul Aziz Bin Mohamed Hussain 25,400,000 15.543 Cimsec Nominees (Tempatan) Sdn Bhd 5,210,600 3.19 Pledged Securities Account for Yap Choon Tiong (Ampang-CL) 4 Zalaraz Sdn Bhd 5,076,700 3.115 Ng Kit Heng 3,427,500 2.106 Cimsec Nominees (Tempatan) Sdn Bhd 2,779,900 1.70 Pledged Securities Account for Chua Tiong Pan 7 Syed Sobri Bin Syed Ismail 2,410,000 1.488 Cimsec Nominees (Tempatan) Sdn Bhd 2,369,000 1.45 CIMB Bank for Yong Shu Kong 9 Cimsec Nominees (Asing) Sdn Bhd 2,300,000 1.41 CIMB Bank for Abdul Aziz Bin Mohamed Hussain 10 PFM Capital Sdn Bhd 2,189,500 1.3411 Ng Kee Leen 2,000,000 1.2212 Lee Kuan Chen 1,752,600 1.0713 Ng Keong Wee 1,738,900 1.0614 Cimsec Nominee (Tempatan) Sdn Bhd 1,706,500 1.04 CIMB Bank for Nandha Kumar A/L M. Krishnasamy 15 PFM Capital Sdn Bhd 1,610,000 0.9816 Tan Kok Min 1,483,000 0.9117 PFM Capital Sdn Bhd 1,470,000 0.9018 Ooi Bon Yu 1,456,000 0.8919 Jagjit Singh A/L G S Sambhi 1,050,000 0.6420 Koay Phaik Sim 1,030,000 0.63

ANALYSIS OF SHAREHOLDINGS As At 29 October 2010



B. List of Thirty (30) Largest Shareholders (Cont’d)

Name of shareholders No. of Shares %

21 Multi-Purpose Insurans Bhd 1,000,000 0.6122 Wong Yen Lin @ Wong Yoon Lin 1,000,000 0.6123 Mayban Nominees (Tempatan) Sdn Bhd 883,900 0.54 Pledged Securities Account For Abdul Latiff Bin Mohamed Ali 24 HLG Nominees (Tempatan) Sdn Bhd 824,000 0.50 Pledged Securities Account For Teh Tian Soon 25 Lim Siew Wah 810,000 0.4926 Yew Mi Chow 807,100 0.4927 Public Nominees (Tempatan) Sdn Bhd 800,000 0.49 Pledged Securities Account For Md Sabridan @ Md Shabrizan Bin Ahmad 28 Lim Siew Wah 760,000 0.4629 HDM Nominees (Tempatan) Sdn Bhd 700,000 0.43 Lim & Tan Securities Pte Ltd For Seet Chee Seong 30 CIMSEC Nominees (Tempatan) Sdn Bhd 680,000 0.42 Pledged Securities Account For Lim Siew Wah TOTAL 114,725,200 70.16

C. Substantial shareholders (as shown in the Register of Substantial Shareholders)

No of. Shares HeldName of substantial shareholders Direct % Indirect %

PFM Capital Sdn Bhd 45,269,500 27.68 - - Abdul Aziz Bin Mohamed Hussain 27,700,000 16.95 - -

D. Directors’ shareholdings (as shown in the Register of Directors’ Shareholding)

No of. Shares HeldName of Directors Direct % Indirect %

Tan Sri Dato’ Seri Arshad Bin Ayub 500,000 0.30 - - Dato’ Dr Pang Chow Huat 20 0.00 145,000* 0.09 Datin Chen Choon Lee 145,000 0.09 20* 0.00 Tan Sri Dato’ Sri Abdul Halil bin Abd Mutalif - - - - Datuk Nik Ibrahim bin Nik Abdullah - - - - Dato’ Abd Halim bin Abd Hamid - - - - Azrina binti Arshad - - 500,000@ 0.30 Leong Choon Meng - - - -

Note:* Deemed interested by virtue of the direct interest of his/her spouse’s shareholdings.@ Deemed interested by virtue of her indirect interest in her father’s, Tan Sri Dato’ Seri Arshad bin Ayub’s shareholdings.

ANALYSIS OF SHAREHOLDINGS As At 29 October 2010 (Cont’d)


ANNUAL REPORT 2010

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 Sixth Annual General Meeting of the Company to be held at the PLO 135 Jalan Cyber 5, Kawasan Perindustrian Senai Fasa 3, 81400 Senai, Johor on 23 December 2010 at 11.00 a.m. or any adjournment thereof.

Mark either box if you wish to direct the proxy how to vote. If no mark is made the proxy may vote on the resolution or abstain from voting as the proxy thinks fi t. If you appoint two proxies and wish them to vote differently this should be specifi ed.

My/our proxy/proxies is/are to vote as indicated below

PROXY FORM Number of Ordinary Shares Held

(Company No: 661826-K)(Incorporated In Malaysia)

Notes:

1. 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 specifi es the proportion of his holdings to be represented by each proxy.

2. A proxy may but need not be a member of the Company and a member may appoint any person to be his proxy without limitation and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply.

3. Where the Form of Proxy is executed by a corporation, it must be executed under its seal or under the hand of its attorney.

4. The instruments appointing a proxy must be deposited at the Registered Offi ce of the Company, located at A-15-4 Northpoint Offi ces, Medan Syed Putra Utara, 1 Jalan Syed Putra, Mid Valley City, 59200 Kuala Lumpur, Malaysia, not less than forty-eight (48) hours before the time for holding the meeting or at any adjournment thereof.

I/We, _______________________________________________________________________________________________________________(FULL NAME AND NRIC/PASSPORT NO)

of _________________________________________________________________________________________________________________(FULL ADDRESS)

being a member of SANICHI TECHNOLOGY BERHAD hereby appoint_____________________________________________________

____________________________________________________________________________________________________________________(FULL NAME AND NRIC/PASSPORT NO)

of _________________________________________________________________________________________________________________ (FULL ADDRESS)

Signed this ………… day of ….…………………………… 2010

FOR AGAINST

Resolution 1 To receive the Audited Financial Statements

Resolution 2 To approve the payment of Directors’ Fees

Resolution 3 To re-elect Tan Sri Dato’ Seri Arshad bin Ayub

Resolution 4 To re-elect Datin Chen Choon Lee

Resolution 5 To re-elect Dato’ Abd Halim bin Abd Hamid

Resolution 6 To re-elect Datuk Nik Ibrahim bin Nik Abdullah

Resolution 7 To re-elect Mr Leong Choon Meng

Resolution 8 To re-elect Puan Azrina binti Arshad

Resolution 9 To re-appoint Messrs THL Wong & Co as Auditors

Resolution 10 Authority to Directors to issue and allot shares

…………………………………………….Signature of Member/Common Seal

* Strike out whichever not applicable

Then fold here

1st fold here

AFFIX

STAMP

THE COMPANY SECRETARY


A-15-4 Northpoint Offi ces, Medan Syed Putra Utara, 1 Jalan Syed Putra, Mid Valley City, 59200 Kuala Lumpur, Malaysia.

(Company No: 661826-K)

(Incorporated In Malaysia)

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