KEY ASIC BERHAD - MalaysiaStock.Biz...2014/05/30 · HSBC Bank Malaysia Berhad No. 2, Leboh Ampang 50100 Kuala Lumpur Tel : 1300-88-0181 CorporaTE WEBSITE ANNUAL REPORT 2013 Board

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Annual Report

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KEY ASIC BERHAD(707082-M)

Corporate Information 2

Board Of Directors 3

Chairman’s Statement 5

Audit Committee Reports 7

Statement On Corporate Governance 10

Statement On Risk Management and Internal Control 15

Additional Compliance Statement 16

Directors’ Report 18

Statement By Directors 22

Statutory Declaration 22

Contents

Financial Statements

Independent Auditors’ Report 23 Statement Of Profit Or Loss And

Other Comprehensive Income 25

Consolidated Statement Of Financial Position 27

Statement Of Financial Position 28

Consolidated Statements Of Changes In Equity 29

Statement Of Changes In Equity 30

Statements Of Cash Flows 31

Notes To The Financial Statements 33

Shareholdings Statistics 66

Notice Of Ninth Annual General Meeting 69

Form Of Proxy Enclosed

2

K E Y A S I C B E R H A D

Corporate Information

Board of dIrECTorS

Eg Kah YeeNon-Independent Non-Executive Chairman

Tengku Dato’ Sri Azmil Zahruddin bin Raja Abdul Aziz Non-Independent Non-Executive Director

Benny T. Hu @ Ting Wu HuIndependent Non-Executive Director

N.Chanthiran a/l NagappanIndependent Non-Executive Director

Lu I-Yen Independent Non-Executive Director

audIT CommITTEE

Benny T. Hu @ Ting Wu HuChairman / Independent Non-Executive Director

N.Chanthiran a/l NagappanIndependent Non-Executive Director

Lu I-Yen Independent Non-Executive Director

Company SECrETarIES

Wong Wai foong (MAICSA 7001358)Joanne Toh Joo ann (LS 0008574)

rEgISTErEd offICE

Level 18 The Gardens North TowerMid Valley City, Lingkaran Syed Putra59200 Kuala LumpurTel : 03-2264 8888Fax: 03-2282 2733

SharE rEgISTrar

Tricor Investor Services Sdn. Bhd.Level 17, The Gardens North TowerMid Valley City, Lingkaran Syed Putra59200 Kuala LumpurTel : 03-2264 3883Fax: 03-2282 1886

SToCk ExChangE LISTIng

Bursa Malaysia Securities Berhad (Main Market)Stock Name : KEYASICStock Code : 0143

CorporaTE SoLICITor

Rajah, Lau & AssociatesB-13-13, Megan Avenue II12 Jalan Yap Kwan Seng50450 Kuala Lumpur

audITor

STYL Associates107B, Jalan Aminuddin Baki,Taman Tun Dr Ismail,60000 Kuala Lumpur.Tel : 03-7727 5573

prInCIpaL BankEr

HSBC Bank Malaysia BerhadNo. 2, Leboh Ampang50100 Kuala LumpurTel : 1300-88-0181

CorporaTE WEBSITEwww.keyasic.com

A N N U A L R E P O R T 2 0 1 3

3Board of Directors

Eg Kah Yee, a Malaysian, aged 53, was appointed to the Board of Directors of Key ASIC Berhad (“Key ASIC” or “Company”) as a Non-Independent Non-Executive Chairman on 15 June 2006. He graduated with Bachelor of Computer Science degree from West Virginia University, USA in 1983. He started his career as a research and development (“R&D”) Engineer with Phoenix Data Systems Inc., Santa Clara, California, USA, before joining Daisy Systems Corporation (“Daisy”), a company listed on the NASDAQ Market and a pioneer in computer aided engineering in electronic designs, as R&D Project Manager.

While he was in Daisy, he assumed various positions such as Regional Technical Director, Country Manager (Taiwan) and Director of North Asia Region. In 1990, he joined Synopsys Inc., a company listed on the NASDAQ Market, which pioneered the high level design for Application Specific Integrated Circuit and Very-large-scale Integration, as Regional Manager for South Asia Pacific Operations and was subsequently promoted as General Manager for Asia Pacific Operations in 1992. He left Synopsys Inc. in 1996 and founded Palette Multimedia Berhad in 1997 and has been the Chairman/Managing Director since then. Currently, he is the Chairman of Malaysia Integrated Circuit Design Association and he also sits on the board of directors of various private limited companies. He is the Chairman of the Remuneration Committee of Key ASIC.

Lu I-Yen, Taiwanese, aged 44, was appointed to the Board of Directors of Key ASIC as an Independent Non-Executive Director on 24 November 2011. He graduated with a Master degree in Mechanical Engineering from National Chiao Tung University, Taiwan in 1995. He started his career as a team leader major for Taiwan IT Players in the Market and Industrial research and risk balance department with China Development Industrial Bank in year 1995. During his tenure with China Development Industrial Bank he was in charge of the setup of the US branch of the China Development Industrial Bank and also a team leader for the Domestic Direct Investment. He joined Whitesun Equity Partners as a General Partner in 2004. As a General Partner in Whitesun, he was in charge of the management buy-out of Data Systems Consulting Co. Ltd (“DSC”), the 1st ERP vendor in Taiwan and also the de-listing of DSC from the Taiwan Stock Exchange. He was also a Joint Sponsor of LongChen Paper mill investment in China. He is a member of the Audit Committee, Remuneration Committee and Nominating Committee of Key ASIC.

Benny T. Hu @ Ting Wu Hu, Taiwanese, aged 65, was appointed to the Board of Key ASIC as Independent Non-Executive Director on 14 October 2009. He graduated in Master in Business Administration degree from Wharton School, University of Pennsylvania and started his career as a Manager in Bankers Trust Company. He has more than 35 years of experience in finance and investment industry. He was the President and later Chairman of China Development Industrial Bank, the largest venture capital and investment firm in Taiwan with an investment portfolio over USD3 billion, from 1993 to 2004. The investment portfolio consists of over 500 investee companies, in which 80% of them are IT related companies. He has been actively involved in the semiconductor industry and was a former Vice Chairman and founder of World Semiconductor Manufacturing Corporation from 1996 to 2001. He has been a member of Rand Corporation Asia Pacific board and a board member of Stanford Institute of Economic Policy Research since 2000. Currently, he is the Chairman of National Taiwan University Incubation and Innovation Company, which the main objective is to provide financial and operational assistance to Taiwan’s ever-growing IT-related young companies. In addition, he also chairs multiple integrated circuit or semiconductor related companies or focused venture funds. He is the Chairman of the Audit Committee and the Nominating Committee.

Tengku Dato’ Sri Azmil Zahruddin bin Raja Abdul Aziz, a Malaysian, aged 43, was appointed to the Board of Directors of Key ASIC as a Non-Independent Non-Executive Director on 19 April 2012. He holds a first class degree in Economics from the University of Cambridge. He is a Chartered Accountant and an associate member of the Malaysian Institute of Accountants and the Institute of Chartered Accountants in England and Wales. He is also an Associate of the Association of Corporate Treasurers, United Kingdom. He is an Executive Director of Khazanah Nasional Berhad (“Khazanah”). He joined Khazanah in the Investments Division in October 2011. His main role is overseeing new investments and divestments in sectors within his portfolio. Prior to joining Khazanah, he was the Managing Director/Chief Executive Officer of Malaysia Airlines. He joined Malaysia Airlines as Executive Director/Chief Financial Officer in August 2005 after having served as a Non-Executive Board Director since August 2004. Before that, he was the Chief Financial Officer and then Managing Director/Chief Executive Officer of Penerbangan Malaysia Berhad. He was also with PricewaterhouseCoopers in their London and Hong Kong offices where he was in the Audit and Business Advisory Services division, specializing in financial services. He also sits on the Board of IHH Healthcare Berhad as the Non-Independent Non-Executive Director.

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N. Chanthiran a/l Nagappan, a Malaysian, aged 49, was appointed to the Board of Directors of Key ASIC as an Independent Non-Executive Director on 14 December 2007. He graduated with a Bachelor of Accounting (Honours) degree from University of Malaya in 1988. He is also a Chartered Accountant, Certified Public Accountants, Certified Risk Professional and Certified Financial Planner. He started his career as tax executive in Coopers & Lybrand in 1988. In 1994, he joined Arab Merchant Bank Berhad as Assistant Manager. In 1995, he worked as Corporate Finance Manager with Sadec Group. He started his Audit practice in 2001. He has more than 17 years of corporate finance experience in the areas of listing, financial and corporate restructuring, mergers and acquisition. Currently, he is a partner of Chanthiran & Co. and CH & Associates. He also sits on the Board of AWC Berhad as the Independent Non-Executive Director. He is the Chairman of the Option Committee and a member of the Audit Committee of Key ASIC.

Peng Jieh-Ping, an American nationality, aged 59, was appointed as the Chief Executive Officer (“CEO”) of Key ASIC on 25 August 2010. He graduated and received his Bachelor degree in Communication Engineering from Chiao-Tung University, Taiwan and Master degree in Electrical and Electronic from University of Iowa, USA . He started his career as a R&D engineer with AMD Sunnyvale, USA before joining Chips & Technology Inc., a company pioneered in developing graphic and chipset based on IBM personal computer. In 1989, he joined Macronix International Co, Ltd, Taiwan as a founding member where he held various positions as Director of specialty memory, Associate V.P. then V.P. of System Logic. On January 2007, he was appointed as the President of Gateway Silicon Inc., a design service company which subsequently became a wholly-owned subsidiary of Key ASIC Berhad. He does not hold directorship in any public company. As at 7 May 2014, he holds 278,000 ordinary shares of RM0.10 each in Key ASIC, representing less than 1 % of the issued and paid-up share capital of Key ASIC.

None of the Directors and CEO have any family relationship with any other Directors and/or major shareholders except the following:-

• Mr.EgKahYeeisalsoamajorshareholdersofKeyASICLimited,whichinturnisthemajorshareholderofKeyASIC;and

• TengkuDato’SriAzmilZahruddinbinRajaAbdulAzizisappointeddirectorrepresentingtheinterestofAQSB,amajorshareholder of Key ASIC.

None of the Directors and CEO has any conflict of interest with the Company and none of the Directors and CEO have any convictions for offences other than traffic offences, if any, in the past 12 years.

Board of Directors(continued)

A N N U A L R E P O R T 2 0 1 3

5Chairman’s Statement

FINANCIAL PERFoRmANCE

TheGrouphaspostedanetlossaftertaxation(“LAT”)ofRM7.55millionforthefinancialyearended(“FYE”)31December2013, a reduction of 60.43% as compared to the previous financial year loss. The loss is largely attributed to lower revenue than expected and high fixed cost associated with the semiconductor company. Despite our success in the commercialization of Wi-Fi Secure Digital (“SD”) system-on-chip (“SoC”), the product has yet to reach its mass adoption as the promotional activities done by our existing customers are limited. Nevertheless, we are proactively acquiring new markets through discussion with system manufacturers in other countries to expand the usage of our product in other application targeting mainly high volume segment. With a couple more products in the pipeline for development, we are working towards to profitability in the near future.

INDuSTRY TRENDS AND DEvELoPmENT

What is the outlook for year 2014 semiconductor market trend? Forecasts in the last few months have been very positive ranging from about 4% to 20%. Half of the forecasts are in the 7% to 9% range. The most recent forecast at Semiconductor Intelligence is 10%.

The 10% growth forecast is largely driven by an expectation of accelerating World GDP growth. The International Monetary Fund (IMF) calls for World GDP growth of 3.7% in 2014, up from 3.0% in 2013. Acceleration is driven by developed economies, with the U.S. expected to accelerate to 2.8% in 2014 versus 1.9% in 2013. The Euro Area should recover from a 0.4% decline in 2013 to 1.0% growth in 2014. The strongest growth continues to be in emerging and developing economies, growing 5.1% in 2014, up from 4.7% in 2013. Although China is forecast to decelerate slightly from 7.7% to 7.5%, most other developing economies are projected to show accelerating GDP growth in 2014.

For 2014, analyst projects tablet growth of 43% while PCs should be flat. IDC’s compound annual growth rate (CAGR) from 2013 to 2017 for tablets is 16% and for smartphones is 14%. IDC expects smartphones will account for over 50% of total mobile phone units in 2013 and 75% in 2017. Tablet units should pass PC units by 2015 or 2016.

How important are tablets and smartphones to semiconductor and more specific to the Company growth? Tablets and smartphones are not the only devices driving semiconductor growth, but they are certainly the most significant and it is the key driver for other consumer devices to grow. Key ASIC would likely be benefited through its own developed WiFi SD and WiFi USB disk that can supports real time wireless file sharing user experience with the massive tablet and smartphone increase in demand.

PRoSPECTS

The Board is of the opinion that the Group will improve its performances in the coming years and remain confident on the growth prospects of Key ASIC as a professional fabless ASIC/SoC design company in the world market. Our unique cross cultural research and development teams both in Malaysia and Taiwan are working cohesively to offer more innovative engineering capabilities and solution to our existing and potential new customers.

Moving into 2014, the Group is focusing especially in two areas of growth which will improve our profitability. Our main priority would be developing new markets in countries like Japan, USA, Russia and China through our new marketing and sales strategies. Secondly, we will continue our effort to capture more system manufacturers with our removable Wi-Fi SD card and WiFi USB disk solutions. The market for removable flash storage card and USB disk are expected to growth approximately 10% to reach 2 billion units by 2014. Currently there are more than thousand millions of SD Flash cards and USB disk being shipped yearly, and the trend is have SD card and USB disk with Wi-Fi capability that will enable any device to connect to Internet or other devices through Wi-Fi network for files sharing in anytime and anywhere. Ultimately, most of the SD Flash cards and USB disk shipped will have Wi-Fi and we are well positioned to capitalize on this growth.

The Wi-Fi SD card and WiFi USB disk is going to be used largely with digital cameras and standalone storage applications allowing users of digital camera and smartphone/tablet to transfer their video, images and other documents to another digital camera, laptops, smart phones, digital photo frames, remote server or send to the printer directly without having to connect with physical wire. Currently, our chip is being adopted by some major digital camera manufacturers in Japan, and world class SD card manufacturers in Taiwan and China.

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RESEARCH & DEvELoPmENT (R&D)

In aspect of R&D activities, the R&D team has been focusing on the activities that include ASIC design service capabilities, integrated circuit building blocks (also known as IP) development and products development. To continue expanding the R&D capabilities in supporting more variety of customers’ projects in different process nodes, the R&D team organization has been structured into 3 different divisions since year 2011 to focus on 3 major activities that are:

1. Foundry enablement and IP development activities,

2. ASIC/SoC design service activities, and

3. ASSP/CSSP design activities.

In year 2013, the company expanded the engineering operation and execution to cover more software, system, application design activities while continues leveraging both Taiwan and Malaysia engineering team strengths to be more competitive in design service, IP development and product development. In year 2013, Malaysia R&D engineering team has passed the 1st Surveillance Audit since both Taiwan and Malaysia R&D engineering team were ISO9001 certified in year 2012/2011. The company will continue exercising the Surveillance Audit for TWN R&D engineering team in coming year. This is to make sure that the company has continued to achieve greater discipline in engineering operation and execution.

In product development, the R&D team has successfully promoted the SD Wi-Fi SoC chip to different customer base. The SoC supports the latest iSDIO w-type features and it is the first SD Wi-Fi chip in the world that supports the iSDIO specification that supports video streaming application, scanner application, medical devices application, Wi-Fi SD card reader and near field communication application. The company has developed own SD Wi-Fi card solution. The product is currently in the product manufacturing phase. The team has developed the company 2nd generation SD-Wi-Fi prototype that supports security, iSDIO w-type/p-type, SDIO 3.0 and SDXC 3.0. The prototype is currently under product qualification phase. The company will continue expanding the software/system team to develop the software including the kernel, drivers and applications. As for the IP development, the team has passed the internal USB3.0 compliance tests, and the USB3.0 prototype is currently undertheproductqualificationphase.ThecompanywillcontinuepromotingtheUSB3.0PHYsolutionandofferingthecomplete USB3.0 solution to the customers while partnered with CAST, one of the prominent USB Controller IP vendors in the U.S. in coming year. The team has successfully passed the internal USB2.0 compliance tests, and the USB2.0 prototype with MSC application is currently under USB-IF USB2.0 Logo certification. The company will continue promoting the USB2.0 solution in Silterra 0.13G process in coming year. In addition, the company has developed other high speed analog IP such as PCIE2.0PHYandmanymoreIPsfordifferentcustomerapplicationssuchas,LVDSIO,LDO,SARADC,PCEIIO,0.18um/0.16umCUPIO, etc. As of today, the company has more than 110 IPs in company IP portfolio. As for the ASIC design service, the team has developed the DDR IP hardening methodology to handle the customers in DSP, and digital TV segment in year 2013. The company has continued expanding its foundry process development by collaborating with GlobalFoundries and Fujitsu in 65nm process. The team has completed more than 40 customer projects with the different foundry process such as, Silterra, TSMC, UMC and Tower in year 2013. The team will increase the capacity to handle more customer projects in coming year.

APPRECIATIoN

I wish to record my sincere appreciation to all the members of the Board of Directors, Shareholders, valuable employees, our indispensable business partners and associates, for their effort, contribution and their continuous support to the Company.

Thank you,

EG KAH YEEChairman

Chairman’s Statement(continued)

A N N U A L R E P O R T 2 0 1 3

7Audit Committee Reports

The Audit Committee was established on 4 October 2007 with the primary objective to provide assistance to the Board of Directors (“Board”) in fulfilling its fiduciary responsibilities relating to the corporate governance and practices for the Group, to improve the business efficiency and enhance the independent role of external and internal auditors.

1. ComPoSITIoN oF AuDIT CommITTEE

The present members of the Audit Committee comprise of:-

ChairmanBenny T. Hu @ Ting Wu Hu – Independent Non-Executive Director

membersN. Chanthiran a/l Nagappan - Independent Non-Executive DirectorLuI-Yen–Independent Non-Executive Director

2. TERmS oF REFERENCE

A. Composition

The Committee shall be appointed by the Board from amongst its members which fulfils the following requirements:-

(i) shallcomprisenotlessthan3members;(ii) themajorityshallbeindependentdirectors;(iii) allmembersshouldbenon-executivedirectors;and(iv) at least one member:

(a) mustbeamemberoftheMalaysianInstituteofAccountants;or

(b) if he is not a member of the Malaysian Institute of Accountants, he must have at least 3 years’ working experience and:-

• hemusthavepassedtheexaminationsspecifiedinPartIofthe1stScheduleoftheAccountantsAct1967;or

• hemustbeamemberofoneoftheassociationsofaccountantsspecifiedinPartIIofthe1stScheduleoftheAccountantsAct1967;or

(c) fulfils such other requirements as prescribed or approved by the Exchange.

In the event of any vacancy in the audit committee resulting in the non-compliance of the above, the Board shall within three (3) months appoint new members as required to make up the minimum numbers.

B. Authority

The Audit Committee is empowered by the Board to investigate, deliberate, discuss and review any activity within its terms of reference and access to any resources within the Company which are required to perform its duties without any restriction. The Committee is authorised to have direct communication channels with the external auditors and person(s) carrying out the internal audit function or convene meetings with them excluding the attendance of the executive members of the Company whenever is deemed necessary.

The Committee is also authorised to obtain independent/external professional or other advices and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.

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C. Functions and Duties

The duties and responsibilities of the Audit Committee shall be:-

1) To review the following and report the same to the Board:-

(i) The audit plan before the audit commences, the evaluation of the system of internal controls and the audit report with the external auditors.

(ii) The appointment of the external auditor, the audit fee and any question of resignation or dismissal.

(iii) The quarterly results and year end financial statements, prior to the approval by the Board, focusing particularly on:-

• changesinorimplementationofmajoraccountingpolicychanges;• significantandunusualevents;and• compliancewithaccountingstandardsandotherlegalrequirements.

(iv) Problems and reservations arising from the interim and final audits, and any matter the auditor may wish to discuss (in the absence of management where necessary).

(v) The external auditors’ management letter and management’s response.

2) To do the following, in relation to the internal audit function:-

(i) review the adequacy of the scope, functions, competency and resources of the internal audit function,andthatithasthenecessaryauthoritytocarryoutitswork;

(ii) review the internal audit programme and results of the internal audit process and, where necessary, ensure that appropriate actions are taken on the recommendations of the internal audit function.

3) To review any related party transaction and conflict of interest situation that may arise within the Company and Group including any transaction, procedure or course of conduct that raises questions of management integrity.

4) To monitor the Group’s compliance with relevant laws, regulations and code of conducts.

D. Retirement and Resignation

In the event of any vacancy in the Audit Committee, the Company shall fill the vacancy within two (2) months, but in any case not later than three (3) months.

E. meetings

The members of the Committee shall select a Chairman from among their members who is an Independent Non-Executive Director and majority of members present must be Independent Directors in order to form a quorum in the audit committee meeting.

Any member may at any time, and the head of group finance and the Company Secretary shall on the requisition of any of the members or the external auditors summon a meeting. The Committee shall meet on at least four (4) occasions each year. The external auditors may request a meeting if they consider this necessary.

Except in the case of any emergency, reasonable notice of every meeting shall be given in writing and the notice of each meeting shall be served to any member entitled personally or by sending it via fax or through post or by courier or by email to such member to his registered address as appearing in the Register of Directors, as the case may be.

Audit Committee Report(continued)

A N N U A L R E P O R T 2 0 1 3

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E. meetings (continued)

In addition to the Committee members, meetings would normally be attended by a representative of the external auditors, the financial controller and head of internal audit at the invitation of the Committee. Other Board members may also attend the Audit Committee meetings only at the Committee’s invitation.

The Committee should meet with the internal/external auditors without executive board members present at least twice a year. A resolution put to the vote of the meeting shall be decided on a show of hands. In the case of an equality of votes, the Chairman shall be entitled to a second or casting vote. The minutes of meetings shall be signed by the Chairman of the meeting at which the proceedings were held or by the Chairman of the next succeeding meeting and shall be circulated to the Committee and the Board.

The minutes of meetings shall be taken by the Company Secretary and be kept at the Company’s Registered Office.

3. SummARY oF mEETING AND ACTIvITIES uNDERTAKEN

A total of five (5) meetings were held during the year. The attendance record for each of the members is as follows:-

Name Attendance

Benny T.Hu 5/5N. Chanthiran a/l Nagappan 5/5LuI-Yen 5/5

The main activities undertaken by the Committee during the year were as follows:-

(i) reviewed the annual financial statements of the Group prior to submission to the Board for their consideration andapproval;

(ii) reviewed the quarterly unaudited financial results of the Group prior to recommending them for approval by theBoard;

(iii) reviewedrelatedpartytransactionsenteredintobytheGroup;

(iv) reviewedthefeesoftheexternalauditor;

(v) reviewedwiththeexternalauditortheauditplan,scopeofworkandauditreport;

(vi) consideredthere-appointmentoftheexternalauditor;and

(vii) reviewed the management letter issues and Management response.

4. INTERNAL AuDIT FuNCTIoN

Internal auditor is reporting directly to the Audit Committee. The functions of the internal auditor are to ensure a regular review of the adequacy and integrity of its internal control system. The internal auditor will also be required to assist the Group in enhancing its existing risk management framework and adopting a risk-based approach.

The internal auditor is required to conduct regular and systematic reviews on all operating units and submitting an independent report to the Audit Committee for review and approval to ensure adequate coverage. The Group has incurred approximately RM142,600 in financial year ended 31 December 2013 in maintaining the internal audit function.

5. STATEmENT oF vERIFICATIoN oN ALLoCATIoN oF oPTIoNS PuRSuANT To EmPLoYEE SHARE oPTIoN SCHEmE

The Audit Committee reported that they have verified that no options were allocated during the financial year ended 31 December 2013.

Audit Committee Report(continued)

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The Board recognises the importance of good corporate governance in discharging its responsibilities, protecting and enhancing shareholders’ value through promoting and practising high standards of corporate governance throughout the Group. The Board adopts and applies the principles and best practices as governed by the Listing Requirements of Bursa Securities and Malaysian Code on Corporate Governance 2012 (“Code”).

The following statements set out the Company’s compliance with the principles of the Code.

A. DIRECToRS

(i) The Board

The Board is primarily responsible for the strategic directions of the Group and is scheduled to meet at least four (4) times a year. However, additional meetings may be convened as and when deemed necessary as determined by the members of the Board.

During the financial year ended 31 December 2013, five (5) board meetings were held and the details of each Director’s attendance are set out as follows:-

Directors meeting Attendance

EgKahYee(Chairman) 5/5TengkuDato’SriAzmilZaharuddinbinRajaAbdulAziz 4/5Benny T. Hu 5/5N.Chanthiran a/l Nagappan 5/5LuI-Yen 5/5

(ii) Board Balance & Composition

The current Board has five (5) members comprising two (2) Non-Independent Non-Executive Directors and three (3) Independent Non-Executive Directors. The Board is satisfied that the current composition fairly reflects the investment of shareholders and balanced in view of the Group’s business. Together, the Directors bring a wide range of experience relevant to the direction and objectives of the Group as most of them are veteran in the semiconductor industry. A brief description of the background of each Director is presented on pages 3 to 4 of this Annual Report.

A Board Charter had been established with the objectives to ensure that all Board Members are aware of their duties and responsibilities, the various legislations and regulations affecting their conduct, principles and practices of good corporate governance are applied accordingly. The Board Charter is reviewed periodically to update with changes in regulating and best practices to ensure the Board’s effectiveness.

There is a division of responsibilities between the Board and the Chief Executive Officer (CEO) to ensure that there is a balance of power and authority ever since the first CEO of the Group has been appointed. The Chairman is responsible for the Board’s effectiveness and conduct, whilst the CEO has overall responsibilities over the business and operation of the Group. The CEO is responsible to formulate business and operations strategies and are empowered to structure the management team in discharging his duties to achieve the goals that has been assigned to him by the Board. The Board is in the opinion that the current practice is adequate in maintaining the sustainability and the creativity of the Group moving forward.

The independent directors play a crucial supervisory function. Their presence is essential in providing unbiased views and impartiality to the Board’s deliberation and decision-making process. In addition, the non-executive directors ensure that matters and issues brought to the Board are fully discussed and examined, taking into account the interest of all stakeholders in the Group. In order to ensure the effectiveness of the Independent Directors, the Board undertakes an assessment of its Independent Directors on annual basis.

The Board has assessed the independence of the Independent Directors and is satisfied with the level of independence demonstrated by all the Independent Directors and their ability to act in the best interest of the Company.

Currently there is no formal gender preference policy being established on the boardroom at the moment. However the Nomination Committee will review the suitability of women candidates based on vacancy arising therein and recommendation from fellow board member from time to time in order to promote a better gender diversity.

Statement On Corporate Governance

A N N U A L R E P O R T 2 0 1 3

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(iii) Board Responsibilities

The Board assumes the following responsibilities:-

• reviewingandadoptingastrategicplanfortheGroup;• overseeingtheconductoftheCompany’sbusiness;• identifyingrisksandassumeactiveroleinensuringtheimplementationofappropriatesystemstomanage

ormitigatetheserisks;• successionplanning,includingappointing,training,fixingthecompensationofthekeymanagements;• developingandimplementinganinvestorrelationsprogrammeorshareholdercommunicationspolicy

fortheGroup;and• reviewing the adequacy and integrityof theGroup’s internal control systemsandmanagement

information systems, including system for compliance with applicable laws, regulations, rules, directives and guidelines.

(iv) Supply of Information

All Directors, including Independent Non-Executive Directors, have full and timely access to information concerning the Company or other external information as they may feel necessary. Board papers and reports which include the Group’s performance and major operational, financial and corporate information are distributed to the Directors with sufficient time prior to Board meetings to enable Directors to obtain further explanation, where necessary, in order to be properly briefed before the meeting.

The Directors may obtain independent professional advice in furtherance of their duties, at the Company’s expense, if necessary.

Directors also have direct access to the advice and services of the Group’s Company Secretary. The Board is advised and updated on statutory and regulatory requirements pertaining to their duties and responsibilities as well as appropriate procedures for management of meetings.

(v) Appointment to the Board and Re-election

In accordance to the Company’s Articles of Association, Directors appointed during the year is required to retire and seek election by shareholders at the following Annual General Meeting (“AGM”) immediately after their appointment. The Articles also require one-third (1/3) of the Directors to retire by rotation and seek re-election at each AGM and that each Director shall submit himself for re-election every three (3) years.

TheBoardhasconsideredtheassessmentofTengkuDato’SriAzmilZahruddinbinRajaAbdulAzizandLuI-Yen,the Directors standing for re-election and collectively agree that they meet the criteria of character, experience, integrity, competence and time to effectively discharge their respective roles as Directors.

(vi) Directors’ Training

The Board will identify the training needs amongst the Directors and enroll the Directors for the relevant training programme. All Directors are provided with the opportunity, and are encouraged to attend any relevant training programme, seminar and conferences to keep them updated on relevant new legislations, best practices, financial reporting requirements and/or other relevant courses to further enhance their skills and knowledge to enable them to discharge their responsibilities more effectively.

The Directors during the year, have attended the following training:-

EgKahYee

• 9thTricorTaxandCorporateSeminarbyTricorTaxServicesSdnBhd.

Statement on Corporate Governance(continued)

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(vi) Directors’ Training (continued)

TengkuDato’SriAzmilZahruddinbinRajaAbdulAziz

• CultivatingonInnovationEcosystembyGEOperationsandGenovasi.• GEGlobalCustomerSummit(GCS)byGEGlobalGrowth&Operations• KhazanahMegatrendsbyKhazanah• TEDConferenceandBCGLeadershipForum–TheShapeofChangebyTEDandBostonConsultingGroup• RDGLegalForum–ThePersonalDataProtectionAct2010byRaja,Darryl&Loh• Topic1(MFRS10ConsolidatedfinancialstatementsandMFRS11JointArrangements)/Topic2(Corporate

Governance – assessment of board effectiveness in conjunction with the launch of the guidelines by Bursa) by KPMG

• MIAConference–ManagingValueAccelerationGrowthbyMIA

N. Chanthiran a/l Nagappan

• IRB–CTIMRoadshow2013byCharteredTaxInstituteofMalaysia(“CTIM”)andInlandRevenueBoardofMalaysia

• NationalTaxConference2013byLembagaHasilDalamNegeriMalaysiaandCharteredTaxInstituteofMalaysia

• NationalTaxSeminar–2014budgetproposalbyInlandRevenueBoardofMalaysia• MIAAccountantConference2013byMIA

(vii) Code of Conduct and Ethics for Directors

The Code is based on the following principles:-

• Conflictsofinterest;• Corporateopportunities;• Protectionofconfidentialinformation;• Compliancewithlaws,rulesandregulations;• Tradingoninsideinformation• CompliancewiththisCodeandreportingofanyillegalorunethicalbehaviour;and• Waiversandamendments.

(viii) option Committee

The Employees’ Share Option Scheme (“ESOS”) Committee was established on 18 August 2011 and is responsible to administer the ESOS in accordance with the By-Laws. The members of the ESOS Committee are as follows :-

ChairmanN. Chanthiran A/L Nagappan

membersPeng Jieh-PingThong Kooi Pin

(ix) Nominating Committee

The Board has adopted the best practice and the Nominating Committee, which was established on 4 October 2007, has been tasked with the responsibilities to recommend new appointment to the Board. The present members of the Nominating Committee are as follows:-

ChairmanBenny T. Hu

memberLuI-Yen


A N N U A L R E P O R T 2 0 1 3

13

(ix) Nominating Committee (continued)

The primary function of the Nominating Committee is to recommend to the Board, candidates for all directorships to be filled by the shareholders or the board after taking into consideration the following criteria:

• skills,knowledge,expertiseandexperience;• professionalism;• integrity;and• in thecaseofcandidates for thepositionof independentnon-executivedirectors, theNominating

Committee should also evaluate the candidates’ ability to discharge such responsibilities/functions as expectedfromindependentnon-executivedirectors;

In addition, the Nominating Committee assesses the effectiveness of the Board as a whole, Board Committees and contributions of each individual Director on annual basis. The Nominating Committee reviews annually the required mix of skills and experience including core competencies which Non-Executive Directors should bring to the Board and other qualities for the Board to function effectively and efficiently.

The Nominating Committee met twice during the financial year.

B. DIRECToR REmuNERATIoN

Following the Code, the Remuneration Committee was established on 4 October 2007 and is responsible to recommend the remuneration packages for Executive Directors taking into consideration the individual performance, seniority, experience and scope of responsibility that is sufficient to attract and retain the Directors needed to run the Company successfully.ThepresentmembersoftheRemunerationCommitteeareEgKahYeeandLuI-Yen.

The determination of remuneration packages of Non-Executive Directors, including Non-Executive Chairman, should be a matter for the Board as a whole with the individuals concerned abstaining from discussion of their own remuneration.

The aggregate Directors’ remuneration paid or payable to all Directors of the Company categorised into appropriate components for the financial year ended 31 December 2013 are as follows:-

Non Executive Directors

(Rm)

Salaries and other emoluments – Fees 120,000 Benefit in kind –

Total 120,000

None of the Directors of Key ASIC are Executive Directors.

Non-ExecutiveBand of remuneration Directors

RM 50,000 and below 5


14


C. RELATIoNSHIP WITH SHAREHoLDERS

The Company maintains various methods of dissemination of information important to shareholders, stakeholders and the public at large through timely announcement of events, quarterly announcement of financial results and product information on the Company’s website.

The Company’s AGM also provides an effective means of face-to-face communication with the shareholders where they are encouraged to participate in the open question and answer session during the AGM. Shareholders are notified of the meeting and provided with a copy of the Company’s Annual Report at least 21 days before the AGM in order for them to have sufficient time to read and understand the Company’s financial and non-financial performance before the actual event takes place.

D. ACCouNTABILITY AND AuDIT

(i) Financial Reporting

It is the Board’s responsibility to ensure that the financial statements are prepared in accordance with the Companies Act, 1965 and the applicable approved accounting standards set by Malaysian Accounting Standard Board so as to present a balanced and fair assessment of the Group’s financial position and prospects. The Directors are also responsible for keeping proper accounting records, safeguarding the assets of the Company and taking reasonable steps to prevent and enable detection of fraud and other irregularities.

In preparing the financial statements, the Directors have taken the necessary steps and actions as follows:-

(a) selectingsuitableaccountingpoliciesandthenapplyingthemconsistently;(b) statingwhetherapplicableaccountingstandardshavebeenfollowed;(c) makingjudgmentsandestimatesthatarereasonableandprudent;and(d) preparing the financial statements on a going concern basis, having made reasonable enquiries and

assessment on the resources of the Company on its ability to continue further business in foreseeable future.

(ii) Internal Control

The Board acknowledges its overall responsibility for maintaining a sound system of internal controls to safeguard shareholders’ investment and the Group’s assets. However, the Board recognises that such system is structured to manage rather than eliminate the possibility of encountering risk of failure to achieve corporate objectives.

The Statement of Risk Management and Internal Controls is set out on pages 15 of the Annual Report providing an overview of the state of internal controls within the Group.

(iii) Relationships with Auditors

The Board has established a transparent relationship with the external auditors through the Audit Committee, which has been accorded the authority to communicate directly with the external auditors. The auditors in turn are able to highlight matters which require the attention of the Board effectively to the Audit Committee in term of compliance with the accounting standards and other related regulatory requirements.

E. CoRPoRATE SoCIAL RESPoNSIBILITIES

The Company currently is a committee member of Malaysian Integrated Circuit Design Association or MICDA founded by Silterra Malaysia Sdn Bhd that focuses in consolidating the fabless design houses within the integrated circuit industry in Malaysia with the aim to identify and grow the integrated circuit companies in Malaysia to become world class companies.


A N N U A L R E P O R T 2 0 1 3

15Statement on Risk Management and Internal Control

1. INTRoDuCTIoN

The Board is committed to maintaining a sound system of internal control of the Company and is pleased to provide the following statement, which outlines the nature and scope of internal control of the Company during the year.

2. BoARD RESPoNSIBILITIES

The Board recognises the importance of sound internal controls and risk management in safeguarding the assets of the Group. However, such systems are designed to manage rather than eliminate the business risk totally. It should be noted that any system could provide only reasonable and not absolute assurance against material misstatement or fraud.

The Group has in place an on-going process to identify, evaluate, monitor and manage any significant risks through the internal controls set out in order to attain a reasonable assurance that business objectives have been met. These controls are regularly reviewed by the Board and subject to continuous improvement.

3. RISK mANAGEmENT FRAmEWoRK

The Board has established an organization with clearly defined lines of accountability and delegated authority.

A risk analysis of the Group is conducted on a regular basis including constantly reviewing the process in identifying, evaluating and putting up necessary action to assess and monitor the impacts of the risk on the operation and business. The process requires management to comprehensively identify and assess all types of risks in terms of likelihood and magnitude of impact as well as to address the adequacy and application of mechanisms in place to manage, mitigate, avoid or eliminate these risks. Significant risks identified are subsequently brought to the attention of the Board at thescheduledboardmeetings.Thisservesastheon-goingprocessofidentifying;assessingandmanagingrisksfacedby the Group and has been in place for the year under review and up to the date of approval of this statement for inclusion in the Annual report.

The process is regularly reviewed by the Board via the Audit Committee at the quarterly Board meeting with the assistance of the outsourced internal auditors to further review and improve the existing internal control processes within the Group. The Group will continue to focus on the key risks and corresponding controls to ensure that they are able to respond effectively to the business changes and competitive environment.

4. INTERNAL CoNTRoL FRAmEWoRK

The other key elements of the Group’s internal control systems are described below:

• MonthlymonitoringofoperationalresultsagainstthebudgetfortheBoard’sreviewanddiscussion;• RegularandcomprehensiveinformationprovidedtotheBoard,coveringfinancialperformanceandkeybusiness

indicators;• Regularupdatesofinternalpoliciesandprocedures,toreflectchangingrisksorresolveoperationalefficiencies;

and• Regularmanagementmeetingwithallkeypersonnelofrespectivedepartmenttoaddressweaknessesand

improve efficiency.

The Board is of the view that there is no significant breakdown or weaknesses in the system of internal control of the Group that may have material impact against the operations of the Group for the financial year ended 31 December 2013.

5. INTERNAL AuDIT

The Company has implemented ISO 9001:2000 Quality Management Systems, where documented internal procedures and standard have been put in place. Internal quality audits are carried out by the ISO Committee and annual surveillance audits are conducted by an independent certification body to provide a high assurance of compliance.

6. CoNCLuSIoN

The Board recognizes the necessity to monitor closely the adequacy and effectiveness of the Group’s system of internal controls and risk management, taking into consideration the fast-changing business environment.Although the Board is of the view that the present risk management and internal control is adequately in place to safeguard the Company’s assets and sufficient to detect any fraud or irregularities, the Board is on a constant watch for any improvement that may strengthen its current system from time to time.

16


Additional Compliance Information

1. NoN-STATuToRY AuDIT FEES

There was no non-statutory audit fees paid to the external auditor and its affiliates by the Group for the financial year ended 31 December 2013.

2. oPTIoN, WARRANT AND CoNvERTIBLE SECuRITIES

There were no option, warrants and convertible securities issued by the Company during the financial year ended 31 December 2013.

3. mATERIAL CoNTRACTS

Neither the Company nor its subsidiary have entered into any contract which are or may be material (not being contracts entered into in the ordinary course of business) involving Directors’ and major shareholders’ interests since the end of the previous financial year.

4. RECuRRENT RELATED PARTY TRANSACTIoNS (“RRPT”)

Details of related party transactions are disclosed in Note 21 on pages 63 to 64 of the financial statements.

5. SANCTIoNS oR PENALTIES

There were no sanctions or material penalties imposed by any regulatory body to the Company and its subsidiaries, Directors or management.

6. vARIANCE IN RESuLT

There was no material variation between the audited results for the financial year ended 31 December 2013 and the unaudited results previously announced for the similar period.

7. PRoFIT GuARANTEE

There was no profit guarantee committed by the Company to any party.

9. DEPoSIToRY RECEIPT PRoGRAmmE

During the financial year, the Company did not sponsor any Depository Receipt Programme.

A N N U A L R E P O R T 2 0 1 3

17

10. SHARE BuY-BACK

The Company at its Fifth Annual General Meeting held on 18 June 2010 obtained its shareholders’ mandate to implement share buy-back programme. The renewal of the mandate was obtained on 14 June 2013 and during the year, a total of 261,000 ordinary shares were bought and retained as treasury shares. The detail of all the purchases are listed below:-

month No. of Shares Lowest Highest Average Total Consideration (Rm)

February 241,000 0.115 0.150 0.1382 33,543.79September 20,000 0.11 0.11 0.1100 2,231.66

Additional Compliance Information(continued)

18


Directors Report

The directors hereby submit their report together with the audited financial statements of the Group and of the Company for the financial year ended 31st December 2013.

PRINCIPAL ACTIvITIES

The Company is principally engaged in the turnKey ASIC (application - specific integrated circuit) design services, providing data processing, data management, disk - based back - up solutions, telecommunications, office automation, network infrastructure and intelligent storage networking support. The principal activities of the subsidiaries are as disclosed in Note 11 to the Financial Statements.

There have been no significant changes in the nature of these principal activities during the financial year.

FINANCIAL RESuLTS The results of the operations of the Group and of the Company for the financial year are as follows:

GRouP ComPANY Rm Rm

Loss before tax (7,302,526) (7,335,637)Income tax expense (245,352) –

Loss for the financial year (7,547,878) (7,335,637)

Attributable to: Equity holders of the Company (7,547,878) (7,335,637) In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature.

DIvIDENDS No dividend has been paid or declared by the Company since the end of the previous financial year. The directors also do not recommend the payment of any dividend in respect of the current financial year RESERvES AND PRovISIoNS

There were no material transfers to or from reserves or provisions during the financial year other than those as disclosed in the Financial Statements.

ISSuE oF SHARES AND DEBENTuRES

There were no changes in the authorised, issued and paid-up capital of the Company during the financial year. There were no debentures issued during the financial year.

A N N U A L R E P O R T 2 0 1 3

19

SHARE oPTIoNS

A new Key ASIC Berhad’s Employees’ Share Option Scheme (“ESOS”) was approved by shareholders at an Extraordinary General Meeting held on 17th June 2011 and became effective on 30th November 2011 for a period of five (5) years. The salient features of the ESOS are as follows: a) the total number of new shares which may be made available under the scheme shall not exceed fifteen per cent

(15%) of the total issued and paid-up share capital of the Company at any point of time during the existence of the ESOS;

b) eligible persons are confirmed employees including executive directors of the Group and have been in the employment of the Group for a period of at least twelve (12) months of continuous service on or prior to the date of allocation. However, where the employee/executive director is serving under an employment contract, the contract should be foradurationofatleasttwo(2)years;

c) not more than fifty per cent (50%) of the shares under the ESOS will be granted to the directors and senior management. Inaddition,notmorethantenpercent(10%)ofthesharesundertheESOSwillbegrantedtoanyindividualstaff;

d) the option price may be at a discount of not more than ten per cent (10%) from the five (5) days weighted average market price of the underlying shares preceding the date of offer or at par value of the ordinary shares of the Company, whicheverishigher;

e) theESOSshallbeinforceforaperiodoffive(5)yearsandextendableforanotherfive(5)yearsfromtheeffectivedate;and

f) the options granted may be exercised in full immediately or in parts within the duration of the scheme.

The movement in the share options during the financial year are as follows:

Exercise Number of options over ordinary shares of Rm0.10 eachprice Date of As at As at Rm offer 1.1.2013 Granted Lapsed 31.12.2013

0.15 30.11.2011 7,813,000 – (1,538,000) 6,275,000 0.11 20.6.2012 500,000 – – 500,000

DIRECToRS

The following directors served on the Board of the Company since the date of the last report:

EgKahYee N. Chanthiran A/L Nagappan Benny Ting Wu Hu LuI-Yen TengkuDato’SriAzmilZahruddinBinRajaAbdulAziz

DIRECToRS’ BENEFITS

Since the end of the previous financial year, no director of the Company has received or become entitled to receive any benefit (other than the benefit included in the aggregate amount of emoluments received or due and receivable by directors as disclosed in the financial statements or the fixed salary of full-time employees of the Company or its related corporation) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest except for any benefit which may be deemed to have arisen by virtue of the transactions as disclosed in Note 21 to the Financial Statements. Neither during nor at the end of the financial year, was the Company a party to any arrangements whose object is to enable the directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Directors Report(continued)

20


DIRECToRS’ INTERESTS

The shareholdings in the Company of those who were directors at the end of the financial year, as recorded in the Register of Directors’ Shareholdings kept by the Company under Section 134 of the Companies Act, 1965, are as follows:

Number of ordinary shares of Rm0.10 each Balance as at Balance as at 1.1.2013 Bought Sold 31.12.2013

Shares in the Company Registered in name of directors EgKahYee 1,000,000 – – 1,000,000N. Chanthiran A/L Nagappan 10,000 – – 10,000

Deemed interest EgKahYee 325,869,500 – – 325,869,500

In addition to the above, the following directors are deemed to have an interest in the shares of the Company to the extent of options granted to them pursuant to the ESOS as follows: Number of ordinary shares of Rm0.10 each Balance as at Balance as at 1.1.2013 Bought Sold 31.12.2013

Share options in the Company Registered in name of directors EgKahYee 500,000 – – 500,000N. Chanthiran A/L Nagappan 250,000 – – 250,000 Benny Ting Wu Hu 250,000 – – 250,000

By virtue of the directors’ interests in the shares of the Company, the directors are deemed to have an interest in the shares of the subsidiaries as disclosed in Note 11 to the Financial Statements. None of the other directors in office at the end of the financial year held shares or have any beneficial interest in the shares of the Company during or at the beginning and end of the financial year.

oTHER STATuToRY INFoRmATIoN

a) Before the statements of profit or loss and other comprehensive income and the statements of financial position of

the Group and of the Company were made out, the directors took reasonable steps:

(i) 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 satisfied themselves that no known bad debts need to be written off and thatadequateallowancehadbeenmadefordoubtfuldebts;and

(ii) to ensure that any current assets which were unlikely to realise in the ordinary course of business their values as shown in the financial statements of the Group and of the Company have been written down to an amount which they might be expected to realise.


A N N U A L R E P O R T 2 0 1 3

21

oTHER STATuToRY INFoRmATIoN (continued)

b) At the date of this report, the directors are not aware of any circumstances:

(i) which would require the writing off of bad debts or render the amount of allowance for doubtful debts in the financialstatementsoftheGroupandoftheCompanyinadequatetoanysubstantialextent;or

(ii) which would render the values attributable to current assets in the financial statements of the Group and of theCompanymisleading;or

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

c) At the date of this report, there does not exist:

(i) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year whichsecurestheliabilityofanyotherperson;or

(ii) any contingent liability of the Group and of the Company which has arisen since the end of the financial year.

d) No contingent liability or other liability of the Group and of the Company has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which in the opinion of the directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

e) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading.

f ) In the opinion of the directors, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made.

AuDIToRS Theauditors,Messrs.STYLAssociates,haveindicatedtheirwillingnesstocontinueinoffice.

Signed on behalf of the Board in accordance with a resolution of the directors,

EG KAH YEE TENGKu DATo’ SRI AZmIL ZAHRuDDINDirector BIN RAJA ABDuL AZIZ Director

Petaling Jaya

Date: 7th April 2014


22


Statement By Directors

We,EgKahYeeandTengkuDato’SriAzmilZahruddinBinRajaAbdulAziz,beingtwoofthedirectorsofKeyASICBerhad,dohereby state that, in the opinion of the directors, the accompanying financial statements are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and of the Company as at 31st December 2013 and of the financial performance and cash flows of the Group and of the Company for the year ended on that date.

In the opinion of the Directors, the supplementary information set out in Note 23 to the Financial Statements has been compiled in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

Signed on behalf of the Board in accordance with a resolution of the directors,

EG KAH YEE TENGKu DATo’ SRI AZmIL ZAHRuDDINDirector BIN RAJA ABDuL AZIZ Director

Petaling Jaya Date: 7th April 2014

I, Thong Kooi Pin, being the officer primarily responsible for the financial management of Key ASIC Berhad, do solemnly and sincerely declare that the accompanying financial statements are, in my opinion, 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.

THoNG KooI PINSubscribed and solemnly declared by the abovenamed Thong Kooi Pin, at Petaling Jaya, on 7th April 2014 Before me,

S.Arokiadass A.M.NNo. B 390

Statutory Declaration

A N N U A L R E P O R T 2 0 1 3

23Independent Auditors’ Reportto the members of Key Asic Berhad

REPoRT oN THE FINANCIAL STATEmENTS

We have audited the financial statements of Key ASIC Berhad, which comprise the statements of financial position as at 31st December 2013 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 33 to 65.

Directors’ Responsibility for the Financial Statements The directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material mistatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’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 financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. opinion In our opinion, the financial statements give a true and fair view of its financial position of the Group and of the Company as at 31st December 2013 and of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 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 have been properly kept in accordance with the provisions of the Act.

(b) We have considered the financial statements and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 11 to the Financial Statements.

(c) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for these purposes.

(d) The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any adverse comment made under Section 174(3) of the Act.

24


oTHER REPoRTING RESPoNSIBILITIES

The supplementary information set out in Note 23 to the Financial Statements is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

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.

STYLASSOCIATES Firm No. AF 1929 Chartered Accountants

TAN CHIN HuAT Approval No: 2037/06/14(J) Chartered Accountant

Date: 7th April 2014 Kuala Lumpur

Independent Auditors’ Report to the member of Key Asic(continued)

A N N U A L R E P O R T 2 0 1 3

25Statements of Profit or Loss and OtherComprehensive Income

for the year ended 31st December 2013

GRouP ComPANY 2013 2012 2013 2012 Note Rm Rm Rm Rm

Revenue 41,094,785 21,591,440 9,289,586 6,642,981

Other operating income 2,942,063 1,131,566 2,636,006 466,312 Changes in inventories of work-in-progress 2,561,599 81,950 2,705,432 –Purchases and other direct costs (32,948,332) (14,113,863) (8,156,153) (3,412,070)Depreciation of property, plant and equipment (741,318) (794,104) (571,525) (613,184)Amortisation of intangible assets (1,506,054) (1,507,611) (1,503,081) (1,503,081)Impairment loss on goodwill on consolidation – (6,325,362) – – Impairment loss on investment in subsidiary – – – (10,913,234)Directors’ fee 6 (120,000) (120,600) (120,000) (120,600)Staff costs (7,412,664) (6,889,885) (2,367,520) (2,435,688)Other operating expenses (11,172,605) (12,195,338) (9,248,382) (8,652,640)

Loss before tax (7,302,526) (19,141,807) (7,335,637) (20,541,204)

Loss before tax is stated after charging/(crediting): Audit fee - current year 51,121 50,119 20,000 20,000 - underprovision in prior year – 3,000 – 3,000 Amortisation of intangible assets 1,506,054 1,507,611 1,503,081 1,503,081 Depreciation of property, plant and equipment 741,318 794,104 571,525 613,184 Directors’ fee 120,000 120,600 120,000 120,600 Exceptional items: Impairment loss on goodwill on consolidation – 6,325,362 – – Impairment loss on investment in subsidiary – – – 10,913,234 Interest income (452,441) (522,626) (449,335) (156,291) Inventories written off 252,392 52,981 – – (Gain)/Loss on foreign exchange (800,959) 837,545 (631,955) 343,364 Reversal of impairment loss on trade receivables (1,556,606) (442,588) (1,550,000) (310,000) Rental of equipment 7,630 5,550 7,630 5,550 Rental of premises 758,879 721,906 169,644 163,512

Income tax credit/(expense) 7 (245,352) 69,173 – –

Loss for the financial year (7,547,878) (19,072,634) (7,335,637) (20,541,204)

Other comprehensive income/(loss), net of income tax:Item that will not be subsequently reclassified to profit and loss

Exchange difference on translation of foreign operations 84,330 (46,711) – –

Total comprehensive loss for the financial year (7,463,548) (19,119,345) (7,335,637) (20,541,204)

(Forward)

26


GRouP ComPANY 2013 2012 2013 2012 Note Rm Rm Rm Rm

Loss for the financial year attributable to: Owners of the Company (7,547,878) (19,072,634) (7,335,637) (20,541,204)

Total comprehensive loss for the financial year attributable to:

Owners of the Company (7,463,548) (19,119,345) (7,335,637) (20,541,204)

Loss per share attributable to equity holders of the Company: Basic (RM) 8 (0.01) (0.02)

Diluted 8 N/A N/A

The accompanying Notes form an integral part of the Financial Statements.

Statement of Profit or Loss and Other Comprehensive Income(continued)

A N N U A L R E P O R T 2 0 1 3

27Consolidated Statement of Financial PositionAs At 31st December 2013

2013 2012 Note Rm Rm

ASSETS Non-Current Assets Property, plant and equipment 9 1,274,935 1,406,766Intangible assets 10 39,473,493 40,959,895Deferred tax assets 12 – 183,899

Total Non-Current Assets 40,748,428 42,550,560

Current AssetsInventories 13 3,835,829 688,389Trade receivables 14 4,487,860 3,825,459Other receivables and prepaid expenses 14 2,404,583 903,161Tax recoverable 125,329 315,755Fixed deposits with licensed banks 11,924,458 25,972,948Cash and bank balances 10,944,834 5,581,468

Total Current Assets 33,722,893 37,287,180

ToTAL ASSETS 74,471,321 79,837,740

EQuITY AND LIABILITIES Share capital 15 80,500,000 80,500,000 Reserves 16 (12,531,639) (5,068,091) 67,968,361 75,431,909Less: Treasury shares 17 (353,187) (317,681)

Total Equity 67,615,174 75,114,228

Current Liabilities Trade payables 18 4,952,287 3,019,320Other payables and accrued expenses 18 1,903,860 1,704,192

Total Current Liabilities 6,856,147 4,723,512

Total Liabilities 6,856,147 4,723,512

ToTAL EQuITY AND LIABILITIES 74,471,321 79,837,740

(Forward)

28


Statement of Financial PositionAs At 31st December 2014

2013 2012 Note Rm Rm

ASSETS Non-Current Assets Property, plant and equipment 9 622,588 1,043,235 Intangible assets 10 39,455,657 40,958,738 Investment in subsidiaries 11 3,060,150 2

Total Non-Current Assets 43,138,395 42,001,975

Current Assets Inventories 13 2,705,432 – Trade receivables 14 1,969,817 1,565,237 Other receivables and prepaid expenses 14 2,066,136 576,111 Tax recoverable – 151,220 Amount owing by subsidiaries 11 2,948,121 4,132,286 Fixed deposits with licensed banks 11,531,739 25,457,140 Cash and bank balances 5,040,163 1,401,935

Total Current Assets 26,261,408 33,283,929

ToTAL ASSETS 69,399,803 75,285,904 EQuITY AND LIABILITIES Share capital 15 80,500,000 80,500,000 Reserves 16 (13,071,926) (5,736,289) 67,428,074 74,763,711 Less: Treasury shares 17 (353,187) (317,681)

Total Equity 67,074,887 74,446,030

Current Liabilities Trade payables 18 1,832,528 403,876 Other payables and accrued expenses 18 492,388 435,998 Total Current Liabilities 2,324,916 839,874

Total Liabilities 2,324,916 839,874

ToTAL EQuITY AND LIABILITIES 69,399,803 75,285,904


A N N U A L R E P O R T 2 0 1 3

29Consolidated Statement of Changes in Equityfor the year ended 31st December 2013

<------------------Attributable to Equity Holders of the Company-------------------> Share Exchange Share Accumulated Share option fluctuation Treasury capital loss premium reserve reserve shares Total Rm Rm Rm Rm Rm Rm Rm

Balance as at 1st January 2012 80,500,000 (41,747,368) 54,886,539 810,014 76,519 (299,596) 94,226,108

Loss for the financial year – (19,072,634) – – – – (19,072,634)Other comprehensive loss for the year – – – – (46,711) – (46,711)

Total comprehensive loss for the year – (19,072,634) – – (46,711) – (19,119,345) Buy-back of ordinary shares – – – – – (18,085) (18,085) Share option granted under ESOS – – – 25,550 – – 25,550

Share options lapsed – 78,718 – (78,718) – – –

Balance as at 31st December 2012 80,500,000 (60,741,284) 54,886,539 756,846 29,808 (317,681) 75,114,228

Loss for the financial year – (7,547,878) – – – – (7,547,878)Other comprehensive income for the year – – – – 84,330 – 84,330

Total comprehensive income /(loss) for the year – (7,547,878) – – 84,330 – (7,463,548)

Buy-back of ordinary shares – – – – – (35,506) (35,506)

Share options lapsed – 143,957 – (143,957) – – –

Balance as at 31st December 2013 80,500,000 (68,145,205) 54,886,539 612,889 114,138 (353,187) 67,615,174

(Forward)

30


Statement of Changes in Equityfor the year ended 31st December 2013

Accumulated Share Share option Treasury Share capital loss premium reserve shares Total Rm Rm Rm Rm Rm Rm

Balance as at 1st January 2012 80,500,000 (40,917,188) 54,886,539 810,014 (299,596) 94,979,769

Loss for the year representing total comprehensive loss for the year – (20,541,204) – – – (20,541,204) Buy-back of ordinary shares – – – – (18,085) (18,085)

Share option granted under ESOS – – – 25,550 – 25,550

Share options lapsed – 78,718 – (78,718) – –

Balance as at 31st December 2012 80,500,000 (61,379,674) 54,886,539 756,846 (317,681) 74,446,030

Loss for the year representing total comprehensive loss for the year – (7,335,637) – – – (7,335,637)

Buy-back of ordinary shares – – – – (35,506) (35,506)

Share options lapsed – 143,957 – (143,957) – –

Balance as at 31st December 2013 80,500,000 (68,571,354) 54,886,539 612,889 (353,187) 67,074,887


A N N U A L R E P O R T 2 0 1 3

31Statement of Cash Flowsfor the year ended 31st December 2013

GRouP ComPANY 2013 2012 2013 2012 Rm Rm Rm Rm

CASH FLoWS FRom oPERATING ACTIvITIES Loss before tax (7,302,526) (19,141,807) (7,335,637) (20,541,204)Adjustments for: Amortisation of intangible assets 1,506,054 1,507,611 1,503,081 1,503,081 Depreciation of property, plant and equipment 741,318 794,104 571,525 613,184 Exceptional items: Impairment loss on goodwill on consolidation – 6,325,362 – – Impairment loss on investment in subsidiary – – – 10,913,234 Inventories written off 252,392 52,981 – – Reversal of impairment loss on trade receivables (1,556,606) (442,588) (1,550,000) (310,000) Share option expenses – 25,550 – 25,550 Interest income (452,441) (522,626) (449,335) (156,291)

Operating loss before working capital changes (6,811,809) (11,401,413) (7,260,366) (7,952,446)

Changes in working capital: Increase in inventories (3,375,171) (555,830) (2,705,432) – (Increase)/Decrease in trade receivables 976,258 1,368,222 1,145,420 (308,293) Increase in other receivables and prepaid expenses (1,486,612) (52,987) (1,490,025) (19,071) Decrease in amount owing by subsidiaries – – 1,184,165 32,559,095 Increase/(Decrease) in trade payables 1,817,151 (200,735) 1,428,652 (251,033) Increase in other payables and accrued expenses 156,376 288,343 56,390 127,868

Cash Generated From/(Used In) Operations (8,723,807) (10,554,400) (7,641,196) 24,156,120 Interest received 452,441 522,626 449,335 156,291 Tax refund 128,974 577,082 151,220 596,295 Net Cash From/(used In) operating Activities (8,142,392) (9,454,692) (7,040,641) 24,908,706

CASH FLoWS FRom INvESTING ACTIvITIES Purchase of property, plant and equipment (593,040) (171,643) (150,878) (138,359) Purchase of intangible assets (19,598) – – – Purchase of investment in subsidiary – – (3,060,148) – Net Cash used In Investing Activities (612,638) (171,643) (3,211,026) (138,359)

CASH FLoWS FRom FINANCING ACTIvITIES Payment for shares buy-back (35,506) (18,085) (35,506) (18,085) (Increase)/Decrease in fixed deposit pledged for banking facilities granted 3,413 (527) – –

Net Cash Used In Financing Activities (32,093) (18,612) (35,506) (18,085)

(Forward)

32



NET INCREASE/(DECREASE) IN CASH AND CASH EQuIvALENTS (8,787,123) (9,644,947) (10,287,173) 24,752,262

Effects of changes in exchange rates 102,865 (51,506) – –

CASH AND CASH EQuIvALENTS BRouGHT FoRWARD 31,498,170 41,194,623 26,859,075 2,106,813

CASH AND CASH EQuIvALENTS CARRIED FoRWARD (Note 19) 22,813,912 31,498,170 16,571,902 26,859,075


Statement of Cash Flows(continued)

A N N U A L R E P O R T 2 0 1 3

33Notes to the Financial Statements

1) GENERAL INFoRmATIoN

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on Main Market of Bursa Malaysia Securities Berhad.

The Company is principally engaged in the turnKey ASIC (application - specific integrated circuit) design services, providing data processing, data management, disk - based back - up solutions, telecommunications, office automation, network infrastructure and intelligent storage networking support. The principal activities of the subsidiaries are as disclosed in Note 11 to the Financial Statements. There have been no significant changes in the nature of these principal activities during the financial year.

The registered office of the Company is located at Level 18, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur.

The principal place of business of the Company is located at 6th Floor, Unit 3, No: 8, First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan.

The financial statements are presented in Ringgit Malaysia (RM).

The financial statements have been authorised by the Board of Directors for issuance on 7th April 2014.

2) BASIS oF PREPARATIoN oF THE FINANCIAL STATEmENTS

The financial statements of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (MFRS), International Financial Reporting Standards (IFRS) and the requirements of the Companies Act, 1965 in Malaysia.

adoption of Standards, amendments and Issues Committee (“IC”) Interpretations

At the beginning of the current financial year, the Group and the Company adopted the new and revised MFRSs which are mandatory for the financial periods beginning on or after 1st January 2013.

The accounting policies adopted by the Group and the Company are consistent with those adopted in the previous year, except as follows:

MFRS 3 Business CombinationsMFRS 10 Consolidated Financial StatementsMFRS 11 Joint ArrangementsMFRS 12 Disclosure of Interest in Other EntitiesMFRS 13 Fair Value MeasurementMFRS 119 Employee Benefits (revised)MFRS 127 Consolidated and Separate Financial Statements (revised)MFRS 128 Investments in Associates and Joint Ventures (revised)Amendments to MFRS 1 First-time Adoption of MFRS - Government LoansAmendments to MFRS 7 Financial Instruments: Disclosures - Offsetting Financial Assets and Financial LiabilitiesAmendments to MFRS 10 Consolidated Financial Statements: Transition GuidanceAmendments to MFRS 11 Joint Arrangements: Transition GuidanceAmendments to MFRS 12 Disclosure of Interest in Other Entities: Transition GuidanceAnnual Improvements to IC Interpretations and MFRSs 2009 - 2011 Cycle

The adoption of the above standards and interpretations did not have any impact on the financial statements of the Group and of the Company.

34


Notes to the Financial Statements(continued)

2) BASIS oF PREPARATIoN oF THE FINANCIAL STATEmENTS (continued)

Standards and Interpretations in issue but not yet effective

As at the date of authorisation for issue of these financial statements, the following new and revised standards and amendments were in issue but not yet effective. The Group and the Company intends to adopt these standards, if applicable, when they become effective.

Effective for annual period beginning on or after

Amendments to MFRS 132 Offsetting Financial Assets and Financial Liabilities 1st January 2014Amendments to Investment Entities 1st January 2014 MFRS 10, MFRS 12 and MFRS 127Amendments to MFRS 136 Recoverable Amount Disclosures for Non-Financial Assets 1st January 2014Amendments to MFRS 139 Novation of Derivatives and Continuation of Hedge Accounting 1st January 2014IC Interpretation 21 Levies 1st January 2014Amendments to MFRS 201 Property Development Activities 1st January 2014Amendments to MFRS 2 Share-based Payment 1st July 2014Amendments to MFRS 3 Business Combinations 1st July 2014Amendments to MFRS 8 Operating Segments 1st July 2014Amendments to MFRS 13 Fair Value Measurement 1st July 2014Amendments to MFRS 116 Annual Improvements to MFRSs 2010-2012 Cycle 1st July 2014Amendments to MFRS 119 Defined Benefit Plans: Employee Contributions 1st July 2014Amendments to MFRS 124 elated Party Disclosures 1st July 2014Amendments to MFRS 138 Intangible Assets 1st July 2014Amendments to MFRS 140 Investment Property 1st July 2014MFRS 9 Financial Instruments 1st January 2015

The directors expect that the adoption of the above standards and interpretations will have no material impact on the financial statements in the period of initial application except as discussed below:

MFRS 9 Financial Instruments

MFRS 9 Financial Instruments, addressess the classification, measurement and recognition of financial assets and financial liabilities. MFRS 9 was issued in November 2009 and October 2010. It replaces the parts of MFRS 139 that relate to the classification and measurement of financial instruments. MFRS 9 requires financial assets to be classified into two measurement categories: those measured at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the MFRS 139 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than profit or loss, unless this creates an accounting mismatch.

A N N U A L R E P O R T 2 0 1 3

35Notes to the Financial Statements(continued)

3) FINANCIAL RISK mANAGEmENT oBJECTIvES AND PoLICIES

The operations of the Group are subject to a variety of financial risks: market risk (including foreign currency exchange risk and interest rate risk), credit risk and liquidity risk. The Group has formulated a financial risk management framework whose principal objective is to minimise the Group’s exposure to risks and/or costs associated with the financing, investing and operating activities of the Group. The Group also ensures that the above risks are managed in order to minimise the effects of the unpredictability of the financial markets on the performance of the Group.

market risk

Market risk is the risk that changes in market prices, such as foreign currency exchange risk, and other prices will affect the Group’s financial position and cash flows.

The Group has in place policies to manage its competitive risks from its competitors in providing better alternatives in terms of better services.

(i) Foreign currency exchange risk

Foreign currency risk is that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign currency exchange rates. The Group has exposure to foreign currency fluctuation arising from revenue or expense that are denominated in currency other than the functional currency of the Group.

Currency risk sensitivity analysis

A ten percent weakening of Ringgit Malaysia against the following currencies at the end of the reporting period would have decreased loss before tax by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

2013 2012 Rm Rm

US Dollar 3,546,118 3,368,490New Taiwan Dollar 4,679 –

A ten percent strenghtening of the Ringgit Malaysia against the above currencies at the end of the reporting period would have had equal but opposite effect on the above currencies to the amount shown above, on the basis that all other variables remain constant.

The Group has not entered into any forward foreign exchange contracts as at 31st December 2013.

(ii) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market interest rates.

Changes in interest rates are not expected to have a significant impact on the Group’s profit or loss.

Credit risk

Credit risk is the risk of a financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group’s exposure to credit risk arises principally from its receivables from customers. The Company’s exposure to credit risk arises principally from loans and advances to subsidiary.

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. As at the end of the reporting period, the maximum exposure to credit risk arising from receivables is represented by the carrying amounts in the statements of financial position.

36



3) FINANCIAL RISK mANAGEmENT oBJECTIvES AND PoLICIES (continued)

Credit risk (continued)

Management has taken reasonable steps to ensure that receivables that are neither past due nor impaired are measured at their realisable values. A significant portion of these receivables are regular customers that have been transacting with the Group. The Group uses ageing analysis to monitor the credit quality of the receivables. Any receivables having significant balances past due more than 120 days, which are deemed to have higher credit risk, are monitored individually.

The ageing of trade receivables as at the end of the reporting period was:


Not past due 1,985,191 2,741,828 1,246,970 451,625 Past due 0 - 30 days 894,232 798,638 – 798,638Past due 31 - 120 days 906,233 – – –Past due more than 120 days 9,284,644 10,422,761 9,279,964 10,422,091

13,070,300 13,963,227 10,526,934 11,672,354

The movements in the allowance for impairment losses of receivables during the financial year were:


As at beginning of year 10,137,768 9,678,053 10,107,117 9,515,653Impairment loss reversed (1,556,606) (442,588) (1,550,000) (310,000)Exchange fluctuation 1,278 839 – –Reclassification – 901,464 – 901,464

As at end of year 8,582,440 10,137,768 8,557,117 10,107,117

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due.

The Group practises prudent liquidity risk management to minimise the mismatch of financial assets and liabilities and to maintain sufficient funds for contingent funding requirement of working capital.

Fair values

The fair value of financial instruments refer to the amount at which the instrument could be exchanged for or settled between knowledgeable and willing parties in an arm’s length transactions.

The carrying amounts of the financial assets and financial liabilities as reported in the statements of financial position as at 31st December 2013 approximate their fair values of these assets and liabilities because they are either within the normal credit terms or they have short-term maturity period.

A N N U A L R E P O R T 2 0 1 3


3) FINANCIAL RISK mANAGEmENT oBJECTIvES AND PoLICIES (continued)

Capital Risk management Policies and Procedures

The primary objective of the Group’s capital management is to safeguard the Group’s ability to continue as a going concern, and to maintain an optimal capital structure so as to provide returns for shareholders.

The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. There were no changes made in the objectives, policies or processes compared to the previous financial year.

The Group is not subject to any externally imposed capital requirements.

4) SIGNIFICANT ACCouNTING PoLICIES

a) Basis of Accounting

The financial statements are prepared under the historical cost convention unless otherwise indicated in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristic into account when pricing the asset or liability at the measurement date.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

(i) Level 1 inputs are quoted prices (unadjusted) inactive markets for identical assets or liabilities that the entitycanaccessatthemeasurementdate;

(ii) Level 2 are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability,eitherdirectlyorindirectly;and

(iii) Level 3 inputs are unobservable inputs for the asset or liability.

b) Revenue Recognition

Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the enterprise and the amount of the revenue can be measured reliably. Revenue is measured at the fair value of consideration received or receivable, net of returns, allowances and trade discounts.

Revenue from goods sold is recognised upon delivery of goods and when the risks and rewards of ownership have passed. Interest income is recognised on accrual basis.

38



4) SIGNIFICANT ACCouNTING PoLICIES (continued)

c) Employee Benefits

(i) Short term benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which associated services are rendered by employees of the Group. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

(ii) Defined contributions plans

As required by law, companies in Malaysia make contributions to the state pension scheme, Employees Provident Fund. Such contributions are recognised as an expense in profit or loss as incurred.

(iii) Share-based compensation

The Group operates an equity-settled, share-based compensation plan. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense in profit or loss with a corresponding increase in the share option reserve over the vesting period. The total amount to be recognised over the vesting period is determined by reference to the fair value of the options granted on the date of the grant. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable on the vesting date. At each reporting date, the Group revises its estimates of the number of options that are expected to become exercisable on the vesting date and recognises the impact of the revision of the estimates in profit or loss, with a corresponding adjustment to the share option reserve over the remaining vesting period. The equity amount is recognised in the share option reserve until the option is exercised, upon which it will be transferred to share premium, or until the option expires, upon which it will be transferred directly to retained earnings.

d) Income Tax

(i) Current tax

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted by the financial year end.

Current taxes are recognised in profit or loss, except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity.

(ii) Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which those deductible temporary differences, unused tax losses and unused tax credits can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

A N N U A L R E P O R T 2 0 1 3



d) Income Tax (continued)

(ii) Deferred tax (continued)

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The tax effects of unutilised reinvestment allowances are only recognised upon actual realisation.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group and the Company expect, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group and the Company intend to settle its current tax assets and liabilities on a net basis.

e) Subsidiaries and Basis of Consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the reporting date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied for like transactions and events in similar circumstances.

The Company controls an investee if and only if the Company has all the following:

- Power over the investee (i.e existing rights that give it the current ability to direct the Power over the investee(i.eexistingrightsthatgiveitthecurrentabilitytodirecttherelevantactivitiesoftheinvestee);

- Exposure,orrights,tovariablereturnsfromitsinvestmentwiththeinvestee;and

- The ability to use its power over the investee to affect its returns.

40




e) Subsidiaries and Basis of Consolidation (continued)

When the Company has less than a majority of the voting rights of an investee, the Company considers the following in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power over the investee:

- Power over the investee (i.e existing rights that give it the current ability to direct the The size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

- PotentialvotingrightsheldbytheCompany,othervoteholdersorotherparties;

- Rightsarisingfromothercontractualarrangements;and

- Any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meeting.

Subsidiaries are consolidated when the Company obtains control over the subsidiary and ceases when the Company losses control of the subsidiary. All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

Losses of subsidiaries are attributable to the non-controlling interests even if that results in a deficit balance.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interest and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. The resulting difference is recognised directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, a gain or loss calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets and liabilities of the subsidiary and any non-controlling interest, is recognised in profit or loss. The subsidiary’s cumulative gain or loss which has been recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss or where applicable, transferred directly to retained earnings. The fair value of any investment retained in the former subsidiary at the date control is lost is regarded as the cost on initial recognition of the investment.

f) Property, Plant and Equipment

All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

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 benefits associated with the item will flow to the Group 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 profit or loss during the financial year in which they are incurred.

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

A N N U A L R E P O R T 2 0 1 3



f) Property, Plant and Equipment (continued)

Depreciation of property, plant and equipment is calculated to write off the cost of the property, plant and equipment on a straight-line basis over the expected useful lives of the property, plant and equipment concerned. The annual depreciation rates used are:

%

Computers 20Furniture and fittings 10Office equipment 10 - 50Renovation 10Tooling equipment 20Machinery 20 - 33.3Leasehold improvement 20

The carrying values of property, plant and equipment are reviewed for impairment when events or change in circumstances indicate that the carrying value may not be recoverable. The residual values, useful lives and depreciation methods are reviewed at each financial year end, and adjusted prospectively, if appropriate.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Gain or loss arising from the disposal of an asset is determined as the difference between the estimated net disposal proceed and the carrying amount of the asset, and is recognised in profit or loss.

g) Intangible Assets

i) Goodwill on Consolidation

Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

For the purpose of impairment testing, goodwill acquired is allocated, from the acquisition date, to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination.

The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the cash-generating unit may be impaired, by comparing the carrying amount of the cash-generating unit, including the allocated goodwill, with the recoverable amount of the cash-generating unit. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in profit or loss. Impairment losses recognised for goodwill are not reversed in subsequent periods.

Where goodwill forms part of a cash-generating units and part of the operation within that cash-generating units is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstances is measured based on the relative fair values of the operations disposed of and portion of the cash-generating units retained.

42




g) Intangible Assets (continued)

ii) Research and Development Costs

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

(i) the technical feasibility of completing the intangible asset so that it will be available for use or sale;

(ii) theintentiontocompletetheintangibleassetanduseorsellit;

(iii) theabilitytouseorselltheintangibleasset;

(iv) howtheintangibleassetwillgenerateprobablefutureeconomicbenefits;

(v) the availability of adequate technical, financial and other resources to complete the development andtouseorselltheintangibleasset;and

(vi) the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.

Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses. The average expected life of the development projects is five (5) years.

iii) Other Intangible Assets

Intangible assets, which comprise intellectual property and licence rights, are measured on initial recognition at cost. The useful lives of the intangible assets are assessed to be finite or indefinite. Intangible assets with indefinite useful lives are not amortised but are tested for impairment annually or more frequently if the events or changes in circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. The useful lives of intangible assets with indefinite lives are also reviewed annually to determine whether the useful life assessment continues to be supportable.

h) Subsidiaries

A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities.

In the Company’s separate financial statements, investments in subsidiary are accounted for at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss.

A N N U A L R E P O R T 2 0 1 3



i) Inventories

Inventories are valued at the lower of cost (determined principally on the first-in, first-out method) and net realisable value. Cost of work-in-progress consists of raw materials, direct labour and an appropriate share of production overheads based on normal operating capacity.

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

j) Financial Instruments

i) Initial recognition and measurement

A financial instrument is recognised in the financial statements when, and only when, the Group becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of the financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

ii) Financial instrument categories and subsequent measurement

The Group categories financial instruments as follows:

Financial assets

The Group classifies its financial assets in the following categories: at fair value through profit or loss, held-to-maturity, loans and receivables and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification at initial recognition.

a) Financial assets at fair value through profit or loss

Financial assets are classified as financial assets at fair value through profit or loss if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term.

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value are recognised in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on financial assets at fair value through profit or loss are recognised separately in profit or loss as part of other losses or other income.

Financial assets at fair value through profit or loss could be presented as current or non-current. Financial assets that are held primarily for trading purposes are presented as current whereas financial assets that are not held primarily for trading purposes are presented as current or non-current based on the settlement date.

Investment in quoted securities are designated as fair value through profit or loss on initial recognition.

44




j) Financial Instruments (continued)

ii) Financial instrument categories and subsequent measurement (continued)

b) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Group has the positive intent and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method less any impairment.

c) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

d) Available-for-sale (AFS) financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised.

Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on available-for-sale equity instrument are recognised in profit or loss when the Company’s right to receive payment is established.

Available-for-sale financial assets are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period.

Financial assets are de-recognised when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership.

Financial liabilities

Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.

a) Financial liabilities at fair value through profit or loss

Financial liabilities are classified as financial liabilities at fair value through profit or loss when the financial liability is either held for trading or it is designated as financial liabilities at fair value through profit or loss.

A N N U A L R E P O R T 2 0 1 3




ii) Financial instrument categories and subsequent measurement (continued)

Financial liabilities (continued)

a) Financial liabilities at fair value through profit or loss (continued)

A financial liability is classified as held for trading if:

a) ithasbeenacquiredprincipallyforthepurposeofrepurchasingitinthenearterm;or

b) on initial recognition it is part of a portfolio of identified financial instruments that the Company managestogetherandhasarecentactualpatternofshort-termprofit-taking;or

c) it is a derivative that is not designated and effective as a hedging instrument.

A financial liability other than a financial liability held for trading may be designated as financial liabilities at fair value through profit or loss upon initial recognition if:

a) such designation eliminates or significantly reduces a measurement or recognition inconsistency thatwouldotherwisearise;or

b) the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company’s documented risk management or investment strategy, and information about thegroupingisprovidedinternallyonthatbasis;or

c) it forms part of a contract containing one or more embedded derivatives, and MFRS 139 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as financial liabilities at fair value through profit or loss.

Financial liabilities at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in the ‘other gains and losses’ line item in the statement of comprehensive income.

b) Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid or payable is recognised in profit or loss.

46





iii) Impairment of Financial Assets

The Company assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is taken as evidence that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less impairment loss on that financial asset previously recognised in profit or loss - is removed from equity and recognised in profit or loss. Impairment losses recognised in profit or loss on equity instruments are not reversed through profit or loss.

k) Impairment of Non-Financial Assets

At the end of each reporting period, the Group reviews the carrying amounts of its non-current assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risk specific to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss unless the asset is carried at a revalued amount. Any impairment loss of a revalued asset is treated as a revaluation decrease to the extent of any unutilised previously recognised revaluation surplus for the same asset.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

l) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

A N N U A L R E P O R T 2 0 1 3



m) Foreign Currency Conversion

(i) Functional and Presentation Currency

The individual financial statements of each entity in the Group are measured using the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Company’s functional currency.

(ii) Foreign Currency Transactions

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

n) Cash and Cash Equivalents

Cash and cash equivalents comprise cash and bank balances, term deposits and other short term, highly liquid investments that are readily convertible into cash with insignificant risk of changes in value against which bank overdraft, if any, are deducted.

o) Equity Instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are equity instruments.

Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared.

p) Treasury Shares

Where the Company reacquires its own equity share capital, the consideration paid, including attributable transaction costs on repurchased ordinary shares of the Company that have not been cancelled, are classified as treasury shares and presented as a deduction from equity. No gain or loss is recognised in profit or loss on the sale, re-issuance or cancellation of treasury shares. When treasury shares are reissued by resale, the difference between the sales consideration and the carrying amount is recognised in equity.

q) Contingencies

A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group.

Contingent liabilities and assets are not recognised in the statements of financial position of the Group.

r) operating Segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the chief operating decision maker, which in this case is the Chief Executive Officer of the Group, to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.

48



5) CRITICAL ACCouNTING JuDGEmENTS AND KEY SouRCES oF ESTImATIoN uNCERTAINTY

The preparation of financial statements in conformity with MFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported results during the reported period. It also requires directors to exercise their judgement in the process of applying the Group’s and the Company’s accounting policies. Although these estimates and judgement are based on the director’s best knowledge of current events and actions, actual results may differ.

Critical judgements in applying the Group’s and the Company’s accounting policies

In the process of applying the Group’s and the Company’s accounting policies, which are described in Note 4 above, management is of the opinion that there are no instances of application of judgement which are expected to have significant effect on the amounts recognised in the financial statements.

Key sources of estimation uncertainty

Management believes that there are no key assumptions made concerning the future, and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year other than as follows:

i) Impairment of Intangible Assets

The Group determines whether the intangible assets are impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the intangible assets are allocated. Estimating the value in use amount requires management to make an estimate of the expected future cash flows from the cash-generating units and also to choose a suitable discount rate in order to calculate the present value of those cash flows.

ii) Capitalisation of Development Expenditure

During the year, the directors reconsidered the recoverability of the Group’s internally generated intangible assets arising from its software application solutions development, which is included in the consolidated statement of financial position.

The project continues to progress in a very satisfactory manner, and customer reaction has reconfirmed the directors’ previous estimates of anticipated revenues from the project. However, increased competitor activity has caused the directors to reconsider their assumptions regarding future market share and anticipated margins on these products. Detailed sensitivity analysis has been carried out and the directors are confident that the carrying amount of the asset will be recovered in full, even if returns are reduced. This situation will be closely monitored, and adjustments made in future periods if future market activity indicates that such adjustments are appropriate.

iii) Impairment on Receivables

The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s loans and receivables at the reporting date is disclosed in Note 14 to the Financial Statements.

A N N U A L R E P O R T 2 0 1 3


6) DIRECToRS’ FEE

GRouP AND ComPANY 2013 2012 Rm Rm

Non-executive directors: Fees 120,000 120,600

The number of directors of the Company whose total remuneration during the financial year fell within the following

band is analysed below:

Number of directors 2013 2012 Rm Rm

Non-executive directors:

RM1 - RM50,000 5 6

7) INComE TAX EXPENSE/(CREDIT)


Underprovision of income tax in prior years 61,453 – – –Deferred tax assets (Note 12) 183,899 (69,173) – –

245,352 (69,173) – –

Malaysia income tax is calculated at the statutoty tax rate of 25% (2012: 25%) of the estimated taxable profit for the year. Taxation for other jurisdictions are calculated at the rates prevailing in the relevant jurisdictions. The Malaysian statutory tax rate will be reduced to 24% from the current year’s statutory tax rate of 25%, effective year of assessment 2016.

A numerical reconciliation between the income tax expense/(credit) and the product of accounting loss multiplied by the applicable statutory income tax rate, is as follows:

GRouP ComPANY

2013 2012 2013 2012 Rm Rm Rm Rm

Accounting loss (7,302,526) (19,141,807) (7,335,637) (20,541,204)

Tax at the applicable statutory income tax rate of 25% (1,825,632) (4,785,452) (1,833,909) (5,135,301)Tax effects in respect of: Expenses that are not deductible for tax purposes 52,968 1,648,118 49,055 2,794,050 Differences in tax rate in other jurisdictions (89,754) 232,702 – – Deferred tax assets not recognised 1,862,418 2,835,459 1,784,854 2,341,251Underprovision of income tax in prior years 61,453 – – –Reversal of previously recognised deferred tax assets 183,899 – – –

Income tax expense/(credit) 245,352 (69,173) – –

50



7) INComE TAX EXPENSE/(CREDIT) (continued)

The Company has been awarded Multimedia Super Corridor (“MSC”) status by the Government of Malaysia and was granted pioneer status under the Promotion of Investments (Amendment) Act, 1997, which exempts 100% of the statutory business income from taxation for a period of 5 years commencing from its effective date and was further extended for another 5 year expiring on 13th April 2016.

As at 31st December 2013, the Group and the Company have unutilised business loss and unabsorbed capital allowances amounting to RM101,403,680 (2012: RM93,713,917) and RM65,769,085 (2012: RM59,457,853) respectively, which are subject to the agreement by the tax authorities.

8) LoSS PER SHARE

Basic

Basic loss per share is calculated by dividing the loss for the year attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the financial year.

GRouP 2013 2012

Rm Rm

Loss attributable to equity holders of the Company (RM) (7,547,878) (19,072,634)

2013 2012 units units

Number of ordinary shares at beginning of year 805,000,000 805,000,000Effect of shares bought back and held as treasury shares (2,378,555) (2,136,534)

Weighted average number of ordinary shares in issue 802,621,445 802,863,466

Basic loss per share (RM) (0.01) (0.02)

Diluted

The effect on the diluted loss per share arising from the assumed conversion of the Company’s ESOS is anti-dilutive.

A N N U A L R E P O R T 2 0 1 3


9)

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2

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8

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67

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52



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4,86

6).

A N N U A L R E P O R T 2 0 1 3


10) INTANGIBLE ASSETS

Intellectual Goodwill on property and Development consolidation licence rights costs Total Rm Rm Rm Rm

GRouP

2013CostAs at 1st January 2013 12,650,723 67,222,685 10,264,099 90,137,507 Additions – – 19,598 19,598Exchange fluctuation – 322,136 16,729 338,865

As at 31st December 2013 12,650,723 67,544,821 10,300,426 90,495,970

Accumulated amortisationAs at 1st January 2013 – 28,435,423 4,853,886 33,289,309 Amortisation for the year – – 1,506,054 1,506,054 Exchange fluctuation – 183,907 15,607 199,514 As at 31st December 2013 – 28,619,330 6,375,547 34,994,877

Accumulated impairmentAs at 1st January 2013 12,650,723 3,213,986 23,594 15,888,303Charge for the year – – – – Exchange fluctuation – 138,229 1,068 139,297

As at 31st December 2013 12,650,723 3,352,215 24,662 16,027,600

Net carrying amount as at 31st December 2013 – 35,573,276 3,900,217 39,473,493

2012CostAs at 1st January 2012 12,650,723 67,222,685 10,261,679 90,135,087Exchange fluctuation – – 2,420 2,420

As at 31st December 2012 12,650,723 67,222,685 10,264,099 90,137,507

Accumulated amortisationAs at 1st January 2012 – 28,435,423 3,344,047 31,779,470 Amortisation for the year – – 1,507,611 1,507,611Exchange fluctuation – – 2,228 2,228

As at 31st December 2012 – 28,435,423 4,853,886 33,289,309

Accumulated impairmentAs at 1st January 2012 6,325,361 3,213,986 23,439 9,562,786Charge for the year 6,325,362 – – 6,325,362Exchange fluctuation – – 155 155

As at 31st December 2012 12,650,723 3,213,986 23,594 15,888,303

Net carrying amount as at 31st December 2012 – 35,573,276 5,386,619 40,959,895

54



10) INTANGIBLE ASSETS (continued)

Intellectual property and Development licence rights costs Total Rm Rm Rm

ComPANY

2013CostAs at 1st January 2013 and 31st December 2013 59,732,675 9,894,707 69,627,382

Accumulated amortisationAs at 1st January 2013 24,159,399 4,509,245 28,668,644Amortisation for the year – 1,503,081 1,503,081

As at 31st December 2013 24,159,399 6,012,326 30,171,725

Net carrying amount as at 31st December 2013 35,573,276 3,882,381 39,455,657

2012CostAs at 1st January 2012 and 31st December 2012 59,732,675 9,894,707 69,627,382

Accumulated amortisationAs at 1st January 2012 24,159,399 3,006,164 27,165,563Amortisation for the year – 1,503,081 1,503,081

As at 31st December 2012 24,159,399 4,509,245 28,668,644

Net carrying amount as at 31st December 2012 35,573,276 5,385,462 40,958,738

Key assumptions used in value-in-use calculations

For the purpose of impairment testing, the recoverable amount in the cash-generating unit (“CGU”) is determined based on its value in use. The value in use is determined by discounting the future cash flows to be generated from the continuing use of the CGU based on financial budgets prepared by management covering a ten-year period.

Based on the assumptions, the directors are of the view that no impairment loss is required as the recoverable amount determined is higher than the carrying amount of the CGU.

Sensitivity to changes in assumptions

Management believes that no reasonable possible changes in any of the key assumptions above would cause the carrying values of the CGUs to materially exceed their recoverable amounts.

A N N U A L R E P O R T 2 0 1 3


11) INvESTmENT IN SuBSIDIARIES

ComPANY 2013 2012 Rm Rm

Unquoted shares - At cost 24,886,618 21,826,470Less: Accumulated impairment loss (21,826,468) (21,826,468)

3,060,150 2

The details of the subsidiaries are as follows:

Equity Interest

Name of Company Country ofIncorporation

2013%

2012%

Principal Activities

Key ASIC Semiconductor Sdn. Bhd.

Malaysia 100 100 Business of providing manufacturing services to fabless design company, provide design for manufacturing (“DFM”) and design for test (“DFT”) consultation and sale of chips.

Key ASIC Incorporation Republic ofChina

100 100 Providing designing services in relation to the electronic components of integrated circuit, semiconductor and related parts.

The above subsidiaries were audited by firms of auditors other than the auditors of the Company.

The amount owing by subsidiaries, which arose mainly from trade transactions and advances given, is unsecured and repayable on demand. The Company charged interest at 1.66% (2012: 1.66%) per annum on the advances granted to a subsidiary.

12) DEFERRED TAX ASSETS

GRouP 2013 2012

Rm Rm

As at beginning of year 183,899 114,726Recognised in profit or loss (Note 7) (183,899) 69,173

As at end of year – 183,899

The recognised deferred tax assets are made up of the following:

2013 2012 Rm Rm

Tax effects of:Temporary differences between tax capital allowance and book depreciation of property, plant and equipment – 55,043Unabsorbed capital allowances – 40,254 Unutilised tax losses – 87,724Unrealised loss on foreign exchange – 878

– 183,899

56



13) INvENToRIES

GRouP ComPANY 2013 2012 2013 2012

Rm Rm Rm Rm

At cost:Raw materials 476,293 70,150 – –Work in progress 3,200,882 554,199 2,705,432 –Finished goods 158,654 64,040 – –

3,835,829 688,389 2,705,432 –

14) TRADE RECEIvABLES, oTHER RECEIvABLES AND PREPAID EXPENSES

GRouP ComPANY 2013 2012 2013 2012

Rm Rm Rm Rm

Trade receivables 13,070,300 13,963,227 10,526,934 11,672,354 Less: Allowance for doubtful debts (8,582,440) (10,137,768) (8,557,117) (10,107,117)

Net 4,487,860 3,825,459 1,969,817 1,565,237

Trade receivables comprise amounts receivable for sales of goods and services rendered. The normal credit period granted on sales of goods and services rendered ranges from 60 to 90 days. Other credit terms are assessed and approved on a case by case basis.

Included in trade receivables of the Group and of the Company is an amount owing by a company in which a director is also a director of the Company as follows:

2013 2012 Rm Rm

Trade receivables 1,350,000 1,350,000 Less: Allowance for doubtful debts (1,350,000) (1,350,000)

Net – –

This balance which arose out of normal trade transactions, is unsecured, interest-free and repayable on demand.

Other receivables and prepaid expenses consist of:

GRouP ComPANY 2013 2012 2013 2012

Rm Rm Rm Rm

Other receivables 205,777 200,127 – –Refundable deposits 275,791 261,869 143,121 134,946Prepaid expenses 1,923,015 441,165 1,923,015 441,165

2,404,583 903,161 2,066,136 576,111

A N N U A L R E P O R T 2 0 1 3


14) TRADE RECEIvABLES, oTHER RECEIvABLES AND PREPAID EXPENSES (continued)

The currency profile of trade and other receivables is as follows: GRouP ComPANY 2013 2012 2013 2012

Rm Rm Rm Rm

Ringgit Malaysia 27,898 103,513 23,888 103,513US Dollar 4,292,720 3,401,637 1,945,929 1,461,724New Taiwan Dollar 373,019 520,436 – –

4,693,637 4,025,586 1,969,817 1,565,237

15) SHARE CAPITAL

2013 2012 Rm Rm

Authorised1,000,000,000 ordinary shares of RM0.10 each 100,000,000 100,000,000

Issued and fully paid805,000,000 ordinary shares of RM0.10 each 80,500,000 80,500,000

A new Key ASIC Berhad’s ESOS was approved by shareholders at an Extraordinary General Meeting held on 17th June

2011 and became effective on 30th November 2011 for a period of five (5) years.

The salient features of the ESOS are as follows:

a) the total number of new shares which may be made available under the scheme shall not exceed fifteen per cent (15%) of the total issued and paid-up share capital of the Company at any point of time during the existence oftheESOS;

b) eligible persons are confirmed employees including executive directors of the Group and have been in the employment of the Group for a period of at least twelve (12) months of continuous service on or prior to the date of allocation. However, where the employee/executive director is serving under an employment contract, thecontractshouldbeforadurationofatleasttwo(2)years;

c) not more than fifty per cent (50%) of the shares under the ESOS will be granted to the directors and senior management. In addition, not more than ten per cent (10%) of the shares under the ESOS will be granted to anyindividualstaff;

d) the option price may be at a discount of not more than ten per cent (10%) from the five (5) days weighted average market price of the underlying shares preceding the date of offer or at par value of the ordinary shares oftheCompany,whicheverishigher;

e) the ESOS shall be in force for a period of five (5) years and extendable for another five (5) years from the effective date;and

f ) the options granted may be exercised in full immediately or in parts within the duration of the scheme.

58



15) SHARE CAPITAL (continued)

The share options granted and exercised during the financial year are as follows: Number of options over ordinary shares of Rm0.10 each Exercise price Date of As at As at Rm offer 1.1.2013 Granted Lapsed 31.12.2013

0.15 30.11.2011 7,813,000 – (1,538,000) 6,275,000 0.11 20.6.2012 500,000 – – 500,000

fair value of the share option

The fair value of the options granted in 2012 was estimated by using Black-Scholes pricing model, taking into account the terms and conditions upon which the options were granted. The fair value of share options measured at grant date and the assumptions are as follows:

2012 Rm

Fair value of share options granted 0.05Weighted average share price (RM) 0.12Weighted average exercise price (RM) 0.11 Expected volatility (%) 65.50 Expected life (years) 4Risk free rate (%) 2.50 Expected dividend yield rate (%) –

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of the option grant were incorporated into the measurement of fair value.

16) RESERvES

GRouP ComPANY 2013 2012 2013 2012

Rm Rm Rm Rm

Distributable reserve: Accumulated loss (68,145,205) (60,741,284) (68,571,354) (61,379,674)Non-distributable reserves: Share premium 54,886,539 54,886,539 54,886,539 54,886,539 Share option 612,889 756,846 612,889 756,846 Exchange fluctuation 114,138 29,808 – –

55,613,566 55,673,193 55,499,428 55,643,385

(12,531,639) (5,068,091) (13,071,926) (5,736,289)

A N N U A L R E P O R T 2 0 1 3


16) RESERvES (continued)

Share premium reserve

Share premium arose from the issuance of 202,000,000 ordinary shares of RM0.10 each at a premium of RM0.30 per ordinary share, net of share issue expenses of RM5,713,461.

Share option reserve

The share option reserve represents the equity-settled share options granted to employees. This reserve is made up of the cumulative value of services received from employees recorded on grant of share options.

Exchange fluctuation reserve

The exchange fluctuation reserve is used to record exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group’s presentation currency. It is also used to record the exchange differences arising from monetary items which form part of the Group’s net investment in foreign operations, where the monetary item is denominated in either the functional currency of the reporting entity or the foreign operation.

17) TREASuRY SHARES

The Company bought back from the open market of 261,000 (2012: 133,000) of its issued ordinary shares listed on the Bursa Malaysia Securities Berhad at an average buy-back price of RM0.136 (2012: RM0.1308) per ordinary share. The repurchase transactions were financed by internally generated funds. Share buybacks have been accounted for under the treasury stock method. When shares are repurchased, they are held as treasury shares at the cost of repurchase and set off against equity in accordance with Section 67A of the Companies Act, 1965.

As at 31st December 2013, out of the total of 805,000,000 (2012: 805,000,000) of ordinary shares of RM0.10 each issued and paid-up, 2,428,900 (2012: 2,167,900) are held as treasury shares. Hence, the number of outstanding ordinary shares of RM0.10 each in issue and fully paid is 802,571,100 (2012: 802,832,100).

No. of ordinary shares of Rm0.10 Amount Rm0.10 each 2013 2012 2013 2012 Rm Rm

As at beginning of year 2,167,900 2,034,900 317,681 299,596Acquisition during the year 261,000 133,000 35,506 18,085 As at end of year 2,428,900 2,167,900 353,187 317,681

Subsequent to the year end, the Company further bought back from the open market of 74,500 of its issued ordinary

shares listed on the Bursa Malaysia Securities Berhad at an average buy back price of RM0.115 per ordinary share on 28th February 2014.

60



18) TRADE PAYABLES, oTHER PAYABLES AND ACCRuED EXPENSES

Trade and other payables comprise amounts outstanding for trade and ongoing costs. The average credit period granted to the Group and the Company for trade purchases is 60 days.

Other payables and accrued expenses consist of:

GRouP ComPANY 2013 2012 2013 2012

Rm Rm Rm Rm

Other payables 445,349 424,855 160,176 146,943Accrued expenses 1,458,511 1,279,337 332,212 289,055

1,903,860 1,704,192 492,388 435,998

The currency profile of trade and other payables is as follows:

GRouP ComPANY 2013 2012 2013 2012

Rm Rm Rm Rm

Ringgit Malaysia 195,355 126,456 90,526 43,481US Dollar 2,201,065 1,055,968 1,855,385 507,338 New Taiwan Dollar 3,001,216 2,261,751 46,793 –

5,397,636 3,444,175 1,992,704 550,819

19) CASH AND CASH EQuIvALENTS

GRouP ComPANY 2013 2012 2013 2012

Rm Rm Rm Rm

Cash and cash equivalents carried forward consist of:

Fixed deposits with licensed banks 11,924,458 25,972,948 11,531,739 25,457,140Cash and bank balances 10,944,834 5,581,468 5,040,163 1,401,935

22,869,292 31,554,416 16,571,902 26,859,075 Less: Deposit pledged as security (55,380) (56,246) – –

22,813,912 31,498,170 16,571,902 26,859,075

The currency profile of fixed deposits, cash and bank balances is as follows:

GRouP ComPANY 2013 2012 2013 2012

Rm Rm Rm Rm

Ringgit Malaysia 12,699,460 16,963,815 12,648,862 13,912,570US Dollar 6,356,849 14,419,334 3,923,040 12,946,505JapaneseYen – 632 – –New Taiwan Dollars 3,812,983 170,635 – –

22,869,292 31,554,416 16,571,902 26,859,07

A N N U A L R E P O R T 2 0 1 3


19) CASH AND CASH EQuIvALENTS (continued)

The average interest rates per annum of deposits, cash and bank balances that were effective as at the reporting date were as follows:

GRouP AND ComPANY 2013 2012 % %

Fixed deposits with licensed banks 0.01 - 3.3 0.01 - 3.15

Deposits of the Group and of the Company have an average maturity period of 30 days. Bank balances are deposits held at call with banks. Included in the Group’s fixed deposit with licensed bank is an amount of RM55,380 (2012: RM56,246) pledged as collateral for import duties.

20) SEGmENTAL INFoRmATIoN

BuSINESS SEGmENTS

Non-recurring Recurring engineering engineering services services Eliminations Consolidated Rm Rm Rm Rm

2013REvENuE

Sales 12,797,923 30,708,270 (2,411,408) 41,094,785

RESuLTSProfit/(Loss) before tax (13,236,006) 5,933,480 (7,302,526Income tax expense (245,352)

Loss after tax (7,547,878)

oTHER INFoRmATIoNSegment assets 75,780,319 4,699,273 (6,008,271) 74,471,321Segment liabilities 8,635,409 1,179,702 (2,958,964) 6,856,147Capital expenditure 612,638 – 612,638Depreciation 740,969 349 741,318

Non cash expenses other than depreciation 1,614,613 143,833 1,758,446

2012REvENuE

Sales 12,492,644 11,202,900 (2,104,104) 21,591,440

RESuLTSLoss before tax (14,139,449) (5,002,358) – (19,141,807)Income tax credit 69,173

Loss after tax (19,072,634)

62



20) SEGmENTAL INFoRmATIoN (continued)

Non-recurring Recurring engineering engineering services services Eliminations Consolidated Rm Rm Rm Rm

oTHER INFoRmATIoNSegment assets 75,285,904 8,500,223 (4,132,286) 79,653,841

Segment liabilities 839,874 8,027,124 (4,143,486) 4,723,512

Capital expenditure 138,359 33,284 – 171,643

Depreciation 613,184 180,920 – 794,104

Non cash expenses other than depreciation 7,853,993 57,511 – 7,911,504

GEOGRAPHICAL SEGMENTS

The following is an analysis of the Group’s revenue and non-current assets by geographical market:

Revenue Non-current assets 2013 2012 2013 2012 Rm Rm Rm Rm

Malaysia 9,680,723 8,747,671 40,078,249 42,002,328Taiwan 31,414,062 12,843,769 670,179 364,333

41,094,785 21,591,440 40,748,428 42,366,661

Revenue from transactions with major customers who individually accounted for 10 percent or more of Group’s

revenue are summarised below:

Revenue 2013 2012

Segment Rm Rm

Customer A Russia 6,603,000 5,642,000Customer B Taiwan 17,202 2,355,588Customer C United States – 2,167,723

A N N U A L R E P O R T 2 0 1 3


21) SIGNIFICANT RELATED PARTY TRANSACTIoNS

For the purposes of these financial statements, parties are considered to be related to the Group or the Company if the Group or the Company have the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, vice versa, or where the Group or the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel include all the directors of the Group.

In the normal course of business, the Group and the Company undertake on agreed terms and prices, transactions with its related companies and other related parties.

a) In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions. The related party transactions listed below were carried out on terms and conditions obtainable in transactions with unrelated parties unless otherwise stated.


i) Purchases from Key ASIC Incorporation, a wholly owned subsidiary of the Company – – 2,263,000 –

ii) Purchases of EDA tools from Key ASIC Limited, a substantial shareholder of the Company 7,388,317 1,410,000 7,388,317 1,410,000

iii) Interest income on advances given to Key ASIC Incorporation, a wholly owned subsidiary of the Company – – 67,756 68,344

iv) Sales to Key ASIC Semiconductor Sdn. Bhd., a wholly owned subsidiary of the Company – – 20,586 110,773

v) Purchases from Silterra Malaysia Sdn Bhd, a company in which Khazanah Nasional Berhad, a major shareholder of the Company via direct and indirect interest in Atlantic Quantum Sdn. Bhd., is also a major shareholder of the Company 3,628,838 – – –

64



21) SIGNIFICANT RELATED PARTY TRANSACTIoNS (continued)

b) Compensation of key management personnel

The remuneration of directors and other members of key management during the year is as follows:


Short-term employee benefits 1,839,630 899,350 628,255 641,950Defined contribution plan 175,634 81,398 56,012 50,506Share-based payment – 25,550 – –

2,015,264 1,006,298 684,267 692,456

Included in the total key management personnel is:

GRouP AND ComPANY 2013 2012 Rm Rm

Directors’ fee (Note 6) 120,000 120,600

22) CAPITAL CommITmENTS

As at 31st December 2013, the Group has the following commitments in respect of rental of office premises:

Future minimum lease payments GRouP 2013 2012 Rm Rm

2013 – 367,4962014 358,596 367,4962015 358,596 –2016 358,596 –

1,075,788 734,992

A N N U A L R E P O R T 2 0 1 3


23) SuPPLEmENTARY INFoRmATIoN

Supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad are as follow:


Accumulated loss carried forward are analysed as follows:- Realised (89,044,679) (81,215,198) (68,571,354) (61,379,674) - Unrealised 594,455 (102,747) – –

(88,450,224) (81,317,945) (68,571,354) (61,379,674)Add: Consolidation adjustments 20,305,019 20,576,661 – –

Total accumulated loss (68,145,205) (60,741,284) (68,571,354) (61,379,674)

66


Shareholding StatisticsAs At 7 May 2014

Authorised Share Capital : RM100,000,000Issued and fully paid-up Share Capital : RM80,500,000Class of Shares : Ordinary Shares of RM0.10 eachVoting Rights : 1 vote per ordinary share

Analysis of Shareholders by Range Group

Size Holding No. of Holders % No. of Shares %

1 - 99 7 0.49 270 0.00100 - 1,000 519 36.47 278,296 0.031,001 - 10,000 338 23.75 1,932,000 0.2410,001 - 100,000 444 31.20 16,663,852 2.08100,001 - 40,124,829 112 7.87 236,792,982 29.5140,124,830 and above 3 0.21 546,829,200 68.14

Total 1,423 100.00 802,496,600 100.00

Thirty Largest Shareholders

No. Name Shareholding %

1 Key ASIC Limited 270,541,666 33.7122 Atlantic Quantum Sdn Bhd 166,109,500 20.6993 Commerce Technology Ventures Sdn Bhd 54,850,200 6.8344 Key ASIC Limited 45,327,834 5.6485 Cimsec Nominees (Asing) Sdn Bhd Pledged Securities Account For One Objective Limited 29,661,600 3.6966 Cimsec Nominees (Asing) Sdn Bhd Pledged Securities Account For Powerful Properties Limited 28,669,000 3.5727 Macronix (BVI) Co., Ltd. 26,924,500 3.3558 Cimsec Nominees (Asing) Sdn Bhd Pledged Securities Account For Wu Chen, Tsai-Mei 24,000,000 2.9909 Cimsec Nominees (Asing) Sdn Bhd Pledged Securities Account For Hsieh, Hung-Ming 16,000,000 1.99310 RHB Nominees (Asing) Sdn Bhd Pledged Securities Account For Ng Geok Lui 15,754,100 1.96311 Cimsec Nominees (Asing) Sdn Bhd PledgedSecuritiesAccountForWang,Hsu-Ying 10,605,200 1.32112 Key ASIC Limited 10,000,000 1.24613 Lee Kin Hin 8,722,200 1.08614 Ng Geok Lui 8,716,900 1.08615 TA Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Lee Chee Ming 8,171,500 1.01816 See Lee Ming 5,537,200 0.68917 Ng Hock Seng 5,498,300 0.68518 Cimsec Nominees (Asing) Sdn Bhd Pledged Securities Account For Liu, Lien-Chun 4,675,000 0.58219 Cimsec Nominees (Asing) Sdn Bhd Pledged Securities Account For Hong, Chia-Lin 4,400,000 0.54820 Lee Chee Ming 3,266,900 0.40721 LimLaeYong 2,977,400 0.37122 Ng Geok Lui 2,463,200 0.30623 Ng Geok Lui 1,984,338 0.24724 Public Invest Nominees (Asing) Sdn Bhd Exempt An for Phillip Securities Pte Ltd (Clients) 1,546,500 0.192

Shareholding StatisticsAs At 7 May 2014

A N N U A L R E P O R T 2 0 1 3

67

Thirty Largest Shareholders (continued)

No. Investor / Beneficiary Name No. of Shares %

25 Public Nominees (Tempatan) Sdn Bhd PledgedSecuritiesAccountforTanBengHooi(E-SLY) 1,175,400 0.14626 Public Invest Nominees (Tempatan) Sdn Bhd Exempt An for Phillip Securities Pte Ltd (Clients) 1,110,000 0.13827 Lim Hong Liang 1,036,900 0.12928 EgKahYee 1,000,000 0.12429 Ng Meng Kong 980,400 0.12230 See Lee Ming 764,100 0.095

Substantial Shareholders based on Register of Substantial Shareholders as at 7 may 2014

<----------Direct----------> <----------Indirect---------->Name of Nationality/substantial Place of No. of % No. of %shareholder incorporation Shares held held Shares held held

Key ASIC Limited British Virgin Islands 325,869,500 40.61 – – Atlantic Quantum Sdn Bhd Malaysia 166,109,500 20.70 – – Commerce Technology Ventures Sdn Bhd Malaysia 54,850,200 6.83 – – Key Aim Group Limited British Virgin – – 325,869,500(a) 40.61 Islands Principles Securities Limited Taiwan – – 325,869,500(a) 40.61 Top China Production Limited British Virgin – – 325,869,500(a) 40.61 Islands EgKahYee Malaysian 1,000,000 0.12 325,869,500(b) 40.61 Chang Tao-Chun Taiwanese – – 325,869,500(c) 40.61 Chang Li-Ping Canadian/ Taiwanese – – 325,869,500(d) 40.61 Fang Chun-Jung Canadian/ Taiwanese – – 325,869,500(d) 40.61 Khazanah Nasional Berhad Malaysia – – 220,959,700(e) 27.53 Commerce Asset Ventures Malaysia – – 54,850,200(f) 6.83 Sdn Bhd CIMB Group Sdn Bhd Malaysia – – 54,850,200(g) 6.83 CIMB Group Holdings Berhad Malaysia – – 54,850,200(h) 6.83

Shareholdings Statistics As At 7 May 2014 (continued)

68


notes:-

(a) Deemed interest by virtue of its interest in Key ASIC Limited (“KAL”) pursuant to Section 6A of the Companies Act, 1965 (“the Act”).

(b) Deemed interest by virtue of his interest in Key Aim Group Limited (“KAGL”) pursuant to Section 6A of the Act and KAGL is deemed interested by virtue of its interest in KAL pursuant to Section 6A of the Act..

(c) Deemed interest by virtue of his interest in Principles Securities Limited (“PSL”) pursuant to Section 6A of the Act and PSL is deemed interested by virtue of its interest in KAL pursuant to Section 6A of the Act..

(d) Deemed interest by virtue of their interest in Top China Production Limited (“TCPL”) pursuant to Section 6A of the Act and TCPL is deemed interested by virtue of its interest in KAL pursuant to Section 6A of the Act.

(e) Khazanah is deemed to have interest pursuant to Section 6A of the Act through AQSB and through its direct substantial shareholding in CIMB Group Holdings Berhad.

(f) Deemed interested by virtue of Section 6A of the Act through its direct substantial shareholding in Commerce Technology Ventures Sdn. Bhd. (“CTVSB”).

(g) Deemed interested by virtue of Section 6A of the Act through its direct substantial shareholding in Commerce Asset Ventures Sdn. Bhd. (“CAVSB”). CTVSB is a subsidiary of CAVSB.

(h) Deemed interested by virtue of Section 6A of the Act through its direct substantial shareholding in CIMB Group Sdn Bhd

Directors’ Shareholding based on Register of Directors’ Shareholding as at 7 may 2014

Direct Interest Indirect Interest (excluding bare trustees)Name No. of Shares % No. of Shares %

EgKahYee 1,000,000 0.12 325,869,500 (a) 40.61TengkuDato’SriAzmilZahruddin bin Raja Abdul Aziz – – – –Benny T. Hu – – – –N. Chanthiran a/l Nagappan 10,000 0.00 – –LuI-Yen – – – –

note:-(a) Deemed interested by virtue of his interest in KAGL pursuant to Section 6A of the Act

Shareholdings Statistics As At 7 May 2014 (continued)

A N N U A L R E P O R T 2 0 1 3

69Notice of Ninth Annual General Meeting

NoTICE IS HEREBY GIvEN that the Ninth Annual General Meeting of Key ASIC Berhad will be held at Greens 3, Sport Wing, Tropicana Golf & Country Resort, Jalan Kelab Tropicana, 47410 Petaling Jaya, Selangor Darul Ehsan on Monday, 23 June 2014 at 11.30 a.m. to transact the following business:-

oRDINARY BuSINESS

1. To receive the Audited Financial Statements for the financial year ended 31 December 2013 together with the Directors’ and Auditors’ Reports thereon.

2. To approve the payment of Directors’ fees for the financial year ended 31 December 2013. 3. Tore-electTengkuDato’SriAzmilZahruddinbinRajaAbdulAzizwhoretiresunderArticle

84 of the Company’s Articles of Association.

4. Tore-appointMessrsSTYLAssociatesasAuditorsoftheCompanyandtoauthorizetheDirectors to fix their remuneration.

SPECIAL BuSINESS

To consider and if thought fit, to pass the following resolutions, with or without modifications, as Ordinary Resolutions of the Company:- 5. oRDINARY RESoLuTIoN I

AUTHORITYUNDERSECTION132DOFTHECOMPANIESACT,1965FORTHEDIRECTORSTOISSUE SHARES

“THAT subject always to the Companies Act 1965, the Articles of Association of the Company and the approvals of the relevant governmental/regulatory authorities, the Directors be and are hereby empowered, pursuant to Section 132D of the Companies Act 1965, to issue shares in the Company from time to time and upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit provided that the aggregate number of shares issued pursuant to this Resolution does not exceed 10% of the issued and paid-up share capital of the Company for the time being. THAT the Directors be and are also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on the Bursa Malaysia Securities Berhad AND THAT such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company.”

6. oRDINARY RESoLuTIoN II PRoPoSED RENEWAL oF THE EXISTING SHAREHoLDERS’ mANDATE FoR RECuRRENT

RELATED PARTY TRANSACTIoNS oF A REvENuE oR TRADING NATuRE

“THAT pursuant to Paragraph 10.09 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Listing Requirements”), the Company and its subsidiaries (“the Group”) be and are hereby authorised to enter into and give effect to the recurrent related party transactions of a revenue or trading nature with the related parties as set out in Section 1.4 of the Circular to Shareholders dated 30 May 2014 (“Related Parties”) provided that such transactions and/or arrangements are:-

(a) necessaryfortheday-to-dayoperations;(b) are undertaken in the ordinary course of business at arm’s length basis and are on

normal commercial terms which are not more favourable to the Related Parties than thosegenerallyavailabletothepublic;and

(c) are not detrimental to the minority shareholders of the Company,

(collectivelyknownas“Shareholders’Mandate”);

[Please refer toExplanatory Note 1]

[Resolution 1]

[Resolution 2][Please refer to

Explanatory Note 2]

[Resolution 3]

[Resolution 4]

[Resolution 5]

70


AND THAT such approval, shall continue to be in force until:-

(a) the conclusion of the next Annual General Meeting (“AGM”) of the Company, at which time it will lapse, unless by a resolution passed at such AGM, the authority is renewed;or

(b) the expiration of the period within the next AGM of the Company after that date is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (“the Act”) (but shall not extend to such extension as may be allowed pursuant to Section 143(2)oftheAct);or

(c) revoked or varied by ordinary resolution passed by the shareholders of the Company in general meeting,

whicheverisearlier;

AND THAT the estimated aggregrate value of the transactions conducted pursuant to the Shareholders’ Mandate during a financial year will be disclosed, in accordance with the ListingRequirements,intheAnnualReportoftheCompanyforthesaidfinancialyear;

AND THAT the Directors of the Company be and are hereby authorised to complete and do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the Shareholders’ Mandate.”

7. oRDINARY RESoLuTIoN III PRoPoSED RENEWAL oF SHARE BuY-BACK AuTHoRITY “THAT, subject always to the Companies Act, 1965, the provisions of the Memorandum and

Articles of Association of the Company, the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) and all other applicable laws, guidelines, rules and regulations, the Company be and is hereby authorized, to the fullest extent permitted by law, to purchase such amount of ordinary shares of RM0.10 each in the Company as may be determined by the Directors of the Company from time to time through Bursa Securities upon such terms and conditions as the Directors may deem fit and expedient in the interest of the Company provided that:-

(i) the aggregate number of shares purchased does not exceed ten per centum (10%) of the total issued and paid-up share capital of the Company as quoted on Bursa Securitiesasatthepointofpurchase;

(ii) an amount not exceeding the Company’s share premium account of RM54,886,539 for the financial year ended 31 December 2013 at the time of purchase(s) will be allocatedbytheCompanyforthepurchaseofownshares;and

(iii) the Directors of the Company may decide either to retain the shares purchases as treasury shares or cancel the shares or retain part of the shares so purchased as treasury shares and cancel the remainder or to resell the shares or distribute the shares as dividend.

AND THAT the authority conferred by this resolution will commence immediately and will, subject to renewal thereat, expiry at the conclusion of the next Annual General Meeting of the Company following the passing of this Ordinary Resolution (unless earlier revoked or varied by an Ordinary Resolution of the shareholders of the Company in a general meeting) but shall not prejudice the completion of purchase(s) by the Company or any person before that aforesaid expire date and in any event, in accordance with the provisions of theguidelinesissuedbyBursaSecuritiesoranyotherrelevantauthorities;

[Resolution 6]

Notice of Ninth Annual General Meeting (continued)

A N N U A L R E P O R T 2 0 1 3

71

AND THAT authority be and is hereby given unconditionally and generally to the Directors of the Company to take all such steps as are necessary or expedient (including without limitation, the opening and maintaining of central depository account(s) under Securities Industry (Central Depositories) Act, 1991, and the entering into all other agreements, arrangements and guarantee with any party or parties) to implement, finalise and give full effect to the aforesaid purchase with full powers to assent to any conditions, modifications, revaluations, variations and/or amendments (if any) as may be imposed by the relevant authorities and with the fullest power to do all such acts and things thereafter (including without limitation, the cancellation or retention as treasury shares of all or any party of the purchased shares or to resell the shares or distribute the shares as dividends) in accordance with the Companies Act, 1965, the provisions of the Memorandum and Articles of Association of the Company and the requirements and/or guidelines of Bursa Securities for the Main Market and all other relevant governmental and/or regulatory authorities.”

By Order of the BoardWoNG WAI FooNG (MAICSA 7001358)JoANNE ToH Joo ANN (LS 0008574)Company Secretaries

Kuala LumpurDated: 30 May 2014

i. noTES on appoInTmEnT of proxy:

A member of the Company entitled to attend and vote at the Meeting is entitled to appoint a proxy/proxies to attend and vote in his stead. A proxy need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

A member shall be entitled to appoint not more than two (2) proxies to attend and vote at the same meeting.

Where a member is an authorized nominee as defined under the Securities Industry (Central Depositories) Act, 1991 (“Central Depositories Act”) it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

Where a Member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. An exempt authorised nominee refers to an authorised nominee defined under Central Depositories Act which is exempted from compliance with the provisions of subsection 25A(1) of Central Depositories Act.

If more than one (1) proxy is appointed, the appointment shall be invalid unless he/she specifies the proportion of his/her holdings to be represented by each proxy.

Only members whose names appear in the Record of Depositors as at 16 June 2014 will be entitled to attend, vote and speak at the meeting or appoint proxy(ies) to attend speak and/or vote on their behalf.

The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorized in writing or, if the appointer is a corporation, either under Seal or under the hand of an officer or an attorney duly authorized. The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll.

The instrument appointing a proxy must be deposited at the Registered Office of the Company situated at Level 18, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur not less than forty-eight (48) hours before the time appointed for the meeting or any adjournment thereof, and in default, the instrument of proxy shall not be treated as valid.


72


ii. ExpLanaTory noTES on SpECIaL BuSInESS

1. audited financial Statements for the year ended 31 december 2013-Item 1 of agenda

This item is meant for discussion only as the provision of Section 169(1) of the Companies Act, does not require a formal approval of the shareholders for the Audited Financial Statements. Hence, this Agenda is not put forward for voting.

2. re-election of directors

The Board has considered the assessment of Tengku Dato’ Sri Azmil Zahruddin bin Raja Abdul Aziz, the Director standing for re-election and collectively agree that he meets the criteria of character, experience, integrity, competence and time to effectively discharge his role as a Director.

Lu I-Yen had indicated to the Company that he would not be seeking for re-election at the Ninth Annual General Meeting. Therefore, Lu I-Yen shall retire as Director of the Company at the conclusion of the Ninth Annual General Meeting.

3. ordInary rESoLuTIon I

resolution pursuant To Section 132d of The Companies act, 1965

The Ordinary Resolution proposed under Resolution 4 is the renewal of the mandate obtained from the members at the last Annual General Meeting (“the previous mandate”). The previous mandate was not utilised and accordingly no proceeds were raised.

The Ordinary Resolution proposed under Resolution 4, if passed, would provide flexibility to the Directors to undertake fund raising activities, including but not limited to placement of shares for the purpose of funding the Company’s future investment project(s), working capital and/or acquisition(s), by the issuance of shares in the Company to such persons at any time as the Directors may deem fit provided that the aggregate number of shares issued pursuant to the mandate does not exceed 10% of the issued and paid-up share capital of the Company for the time being, without having to convene a general meeting. This authority, unless revoked or varied by the Company in a general meeting will expire at the conclusion of the next Annual General Meeting of the Company.

4. ordInary rESoLuTIon II

proposed renewal of the Existing Shareholders’ mandate for recurrent related party Transactions of a revenue or Trading nature

The Ordinary Resolution proposed under Resolution 5, if passed, will allow the Group to enter into recurrent related party transactions made on an arm’s length basis and on normal commercial terms and which are not detrimental to the interests of the minority shareholders.

5. ordInary rESoLuTIon III

proposed renewal of Share Buy-Back authority

Please refer to the Statement to Shareholders dated 30 May 2014 for further information.


✄

(Resolution 1)

(Resolution 2)

(Resolution 3)

(Resolution 4)

(Resolution 5)

(Resolution 6)

KEY ASIC BERHAD (707082-M)

(Incorporated in Malaysia)Number of shares held:If more than 1 proxy, please specify number of shares represented by each proxyName of Proxy 1:Name of Proxy 2:

FoRm oF PRoXY(Before completing the form please refer to notes below)

I/We _____________________________________________NRIC/Company No. ________________________________________________ (PLEASE USE BLOCK CAPITAL)of ________________________________________________________________________________________________________________ (FULL ADDRESS)a member/members of KEY ASIC BERHAD hereby appoint ________________________________________________________________

NRIC No. _________________________________of _______________________________________________________________________

or failing whom, _____________________________________________________ NRIC No. _______________________________________

of __________________________________________________ or failing him, the Chairman of the Meeting as my/our proxy to vote for me/us and on my/our behalf, at the Ninth Annual General Meeting of the Company to be held at Greens 3, Sport Wing, Tropicana Golf & Country Resort, Jalan Kelab Tropicana, 47410 Petaling Jaya, Selangor Darul Ehsan on Monday, 23 June 2014 at 11.30 a.m. and at any adjournment thereof, on the following resolutions referred to in the Notice of the Ninth Annual General Meeting.

Item Agenda

1. To receive the Audited Financial Statements for the financial year ended 31 December 2013 together with the Directors’ and Auditors’ Report thereon.

*For *Against

2. ORDINARYBUSINESSTo approve the payment of Directors’ fees for the financial year ended 31 December 2013.

3. Tore-electTengkuDato’SriAzmilZahruddinbinRajaAbdulAzizwhoretiresunderArticle84ofthe Company’s Articles of Association.

4. To re-appoint Auditor of the Company and to authorise the Directors to fix their remuneration.

5. AS SPECIAL BUSINESSTo authorise Directors to allot and issue shares pursuant to Section 132D of the Companies Act, 1965.

6. Proposed Renewal of the Existing Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature

7. Proposed Renewal of Share Buy-Back Authority

(*Please indicate with an “X” in the space provided above how you wish your vote to be cast. If no instruction as to voting is given, the proxy will vote or abstain from voting at his/her discretion.)

Dated this ____________ day of ____________________ 2014.

_________________________________________Signature of Shareholder or Common Seal

notes:-A member of the Company entitled to attend and vote at the Meeting is entitled to appoint a proxy/proxies to attend and vote in his stead. A proxy need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

A member shall be entitled to appoint not more than two (2) proxies to attend and vote at the same meeting.

Where a member is an authorized nominee as defined under the Securities Industry (Central Depositories) Act, 1991 (“Central Depositories Act”) it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

Where a Member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. An exempt authorised nominee refers to an authorised nominee defined under Central Depositories Act which is exempted from compliance with the provisions of subsection 25A(1) of Central Depositories Act.

If more than one (1) proxy is appointed, the appointment shall be invalid unless he/she specifies the proportion of his/her holdings to be represented by each proxy.

Only members whose names appear in the Record of Depositors as at 16 June 2014 will be entitled to attend, vote and speak at the meeting or appoint proxy(ies) to attend speak and/or vote on their behalf.

The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorized in writing or, if the appointer is a corporation, either under Seal or under the hand of an officer or an attorney duly authorized. The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll.

The instrument appointing a proxy must be deposited at the Registered Office of the Company situated at Level 18, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur not less than forty-eight (48) hours before the time appointed for the meeting or any adjournment thereof, and in default, the instrument of proxy shall not be treated as valid.

AFFIXSTAMP

Fold this flap for sealing

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1st fold here

ComPANY SECRETARYKEY ASIC BERHAD (707082-M)Level 18 The Gardens North Tower

Mid Valley City, Lingkaran Syed Putra59200 Kuala Lumpur

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Annual Report

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Documents

KEY ASIC BERHAD - MalaysiaStock.Biz...2014/05/30 · HSBC Bank Malaysia Berhad No. 2, Leboh Ampang 50100 Kuala Lumpur Tel : 1300-88-0181 CorporaTE WEBSITE ANNUAL REPORT 2013 Board