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STRIVING FOR EXCELLENCE ANNUAL REPORT 2015

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AN

NU

AL R

EP

OR

T 2015

M3 T

EC

HN

OLO

GIE

S (A

SIA

) BE

RH

AD

(482772-D)

www.m3tech.com.my

M3 Technologies (Asia) Berhad (482772-D)

Unit 708, Block APusat Dagangan Phileo Damansara 2Jalan 16/1146350 Petaling JayaSelangor Darul EhsanMalaysiaTel: +603 7955 0018Fax: +603 7955 8017 STRIVING FOR EXCELLENCE

ANNUAL REPORT 2015

ContentsContents02

04

05

06

08

10

18

21

25

26

28

97

98

99

101

Corporate Information

Corporate Structure

5 Years Financial Highlights

Directors’ Profi le

Chairman’s Statement

Statement on Corporate Governance

Statement on Risk Management and Internal Control

Audit Committee Report

Statement of Directors’ Responsibilty

Additional Compliance Information

Financial Statements

Supplementary Information

List of Properties

Analysis of Shareholdings

Notice of Annual General Meeting

Proxy Form

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)2

CorporateCorporateInformationInformation

BOARD OF DIRECTORS

CHEW SHIN YONG, MARKExecutive Chairman

LIM SENG BOONManaging Director

LIM KOOI SIANG

Independent Non-Executive Director

CHIN CHEE WINGIndependent Non-Executive Director

YEOH BOON HOCK

Independent Non-Executive Director

CHOONG ENG CHOONIndependent Non-Executive Director

DATO’ WOO HON KONGIndependent Non-Executive Director

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)2

ANNUAL REPORT 2015 3

CORPORATE AND HEAD OFFICE

Unit 708, Block A, Pusat Dagangan Phileo Damansara 2, Jalan SS 16/11, 46350 Petaling Jaya, Selangor Darul Ehsan, Malaysia. Tel : 603-7955 0018 Fax : 603-7955 8017

REGISTERED OFFICE

Third Floor, No. 79 (Room A) Jalan SS 21/60, Damansara Utama, 47400 Petaling Jaya, Selangor Darul Ehsan, Malaysia. Tel : 603-7725 1777 Fax : 603-7722 3668

AUDIT COMMITTEE

LIM KOOI SIANGChairperson

CHIN CHEE WING

YEOH BOON HOCK

NOMINATION COMMITTEE

CHOONG ENG CHOONChairman

CHIN CHEE WING

LIM KOOI SIANG

REMUNERATION COMMITTEE

CHIN CHEE WINGChairman

LIM SENG BOON

LIM KOOI SIANG

COMPANY SECRETARIES

TEA SOR HUA (MACS 01324)

YONG YEN LING (MAICSA 7044771)

SHARE REGISTRAR

Securities Services (Holdings)Sdn. Bhd.Suite 18.05 MWE Plaza, No. 8 Lebuh Farquhar, 10200 Penang, Malaysia. Tel : 604-263 1966 Fax : 604-262 8544

STOCK EXCHANGE

Bursa Malaysia Securities Berhad(ACE Market)

PRINCIPAL BANKER

Alliance Bank (Malaysia) Berhad

AUDITORS

ECOVIS AHL PLTChartered Accountants

LISTING

Stock Name: M3TECHStock Code: 0017

WEBSITE

www.m3tech.com.my

Corporate Information (Cont’d)

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)4

100%M3 Mobile Technologies (S) Pte.Ltd.(Singapore)

Messaging Technologies (Hong Kong) Ltd.(Hong Kong)

M3 Technologies (Xiamen) Co., Ltd.(The People’s Republic of China)

M3 Technologies(Shen Zhen) Co., Ltd.(The People’s Republic of China)

Way Way Innovations Company Limited(Hong Kong)

M3 Technologies Middle East FZE(United Arab Emirates)

M3 Technologies Pakistan (Private) Limited(f.k.n. AKN Messaging Technologies (Pvt.) Ltd.)(Pakistan)

PT Surya Genta Perkasa (Indonesia)

M3 ASIA Sdn. Bhd.(Malaysia)

M3 ONLINE Sdn. Bhd.(Malaysia)

M3 Asia Distribution (S) Pte. Ltd.(Singapore)

M3 Interactive (S) Pte. Ltd.(Singapore)

100%

60%

80%

100%

M3Shoppe (Asia) Sdn. Bhd.(Malaysia)

100%

100%

60%

Virtue Partners International Limited(British Virgin Island)

100%

20%

95%

100%

M3 Interactive(Shen Zhen) Co., Ltd.(The People’s Republic of China)

100%

100%

100%

M3 Technologies (Thailand) Co., Ltd.(Thailand)

95%

CorporateCorporateStructureStructureAs at 30 June 2015

ANNUAL REPORT 2015 5

Revenue (RM’000)

2011 2012 2013

FINANCIAL YEAR

2014 2015 2011 2012 2013

FINANCIAL YEAR

2014 2015

2011 2012 2013 2014 2015

FINANCIAL YEAR

2011 2012 2013 2014 2015

FINANCIAL YEAR

Profit / (Loss) Before Tax (RM’000)

Paid-Up Share Capital (RM’000) Net Tangible Asset (NTA) (RM’000)

(20,000)

(15,000)

(10,000)

(5,000)

0

5,000

10,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

0

5,000

10,000

15,000

20,000

0

10,000

20,000

30,000

40,000

50,000

60,000

17,961

18,561

16,352

16,352 17,961

27,980

35,239

37,436

39,641

28,868

38,885

35,288

(2,848

)

(14,81

4)

7,44

1

7,56

6

(6,250

)

50,902 56,285

49,869

30/6/2011 30/6/2012 30/6/2013 30/6/2014 30/6/2015 RM’000 RM’000 RM’000 RM’000 RM’000

Revenue 50,902 56,285 49,869 38,885 35,288Profi t / (Loss) Before Tax 7,441 7,566 (6,250) (14,814) (2,848)Paid-up Share Capital 16,352 16,352 17,961 17,961 18,561 Net Tangible Asset (NTA) 35,239 37,436 39,641 28,868 27,980

5 Years Financial 5 Years Financial HighlightsHighlights

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)6

Directors’ Profi le

CHEW SHIN YONG, MARK Executive Chairman

Mr. Chew Shin Yong, Mark, a Singaporean aged 47, was appointed to the Board on 27 February 2008 as an Executive Director and is now the Executive Chairman of the Company. Mr. Chew was also responsible for setting up the Hong Kong offi ce of Messaging Technologies and is involved in its daily operations. In 1996, Mark graduated from Kingston University in the United Kingdom (“UK”) with a Bachelor of Science Degree in Computer Information Systems Design. He then obtained a Master’s Degree in Business Administration from the University of Surrey, also in the UK.

In 1997, Mark joined the Malahon Group of Companies in their stockbroking division, Malahon Securities Limited, and was appointed as a Director in 2002, having been a registered dealer with the Hong Kong Exchanges and the Securities and Futures Commission of Hong Kong. He currently sits on the Board of Malahon Credit Company Limited, which invests primarily in property.

Mr. Chew co-founded Mejority Capital Limited in 2012 and as a Principal, is actively involved in the fi rm’s public equity business via Mejority Securities Limited, a participant of the Stock Exchange of Hong Kong.

LIM SENG BOONManaging Director

Mr. Lim Seng Boon, a Malaysian aged 58, is the Managing Director and founder of the Company. He was appointed to the Board on 11 June 1999. He is a member of the Remuneration Committee of the Company. He is also a major shareholder of the Company.

He possesses over 20 years of the experience in the computer/information technology industry, both locally and abroad. His experience ranges from computers to system integration, network implementation and the development of the business applications. In 1984, he established World Value Sdn. Bhd., a company dealing with computer hardware and systems integration.

He was also the key person responsible for the establishment of Multisoft Business Systems Sdn. Bhd., a company which has developed numerous business applications software focusing on the concept of messaging through the internet. He has established numerous ties with local and foreign corporations, namely Advox of Sweden, Infi nite Technology of the USA, Microsoft Malaysia, EasyCall Malaysia and Celcom Berhad. He was solely responsible for the successful alliance between Advox’s technology in messaging and EasyCall pagers in January 1999.

LIM KOOI SIANG Independent Non-Executive Director

Ms. Lim Kooi Siang, a Malaysian aged 64 was appointed to the Board on 8 December 2014 as an Independent Non-Executive Director of the Company. She is the Chairperson of the Audit Committee and a member of both the Nomination Committee and Remuneration Committee of the Company.

She is a Fellow of the Association of Chartered Certifi ed Accountants, UK, as well as a member of the Malaysian Institute of Accountants and the Institute of Chartered Secretaries & Administrators, UK.

Ms. Lim has more than 40 years of experience in taxation and is a tax agent and GST tax agent approved by the Ministry of Finance, Malaysia.

CHIN CHEE WING Independent Non-Executive Director

Mr. Chin Chee Wing, a Malaysian aged 59, was appointed to the Board on 2 February 2012 as an Independent Non-Executive Director of the Company. He is the Chairman of the Remuneration Committee and a member of both the Audit Committee and Nomination Committee of the Company.

He has more than 25 years in the ICT Industry, as Senior Manager of Acer Sales & Services, CEO/Managing Director of Wearnes Thakral Group and Chief Executive Offi cer/Managing Director of Epson Trading Malaysia. He has gained vast experience in the overall management and fi nancial aspect of the companies involved in the design, manufacturing, sales and distribution of Information Technology related products.

During his working career, Mr. Chin has contributed signifi cantly to the progress and achievement of the companies he have managed and in the process won many management awards. Notably, the most prestigious President Award from the President of Seiko Epson Inc., Japan.

He has also served a short stint as Chief Executive Offi cer in M-Mode Bhd. Prior to his retirement in 2011, he was the Group Chief Operating Offi cer in Pradonet Technology Sdn. Bhd., a company involved in the design and development of security, identifi cation, payment and authentication devices.

ANNUAL REPORT 2015 7

Directors’ Profi le (Cont’d)

YEOH BOON HOCK Independent Non-Executive Director

Mr. Yeoh Boon Hock, a Malaysian aged 60, was appointed to the Board on 8 December 2014 as an Independent Non- Executive Director of the Company. He is also a member of the Audit Committee of the Company.

Mr. Yeoh has been in the construction business for over 30 years. Since 1982, Mr Yeoh is the Managing Director of Astara ITS Sdn. Bhd., a civil works, contractor for data center and property management company. He is also currently a Director of MTRT Industries Sdn. Bhd., a company dealing in the energy sector of recycling and scrap tyres for fuel.

CHOONG ENG CHOONIndependent Non-Executive Director

Mr. Choong Eng Choon, a Malaysian aged 58, was appointed to the Board on 8 December 2014 as an Independent Non- Executive Director of the Company. He is the Chairman of the Nomination Committee of the Company.

Upon graduation, Mr. Choong started his career as an architect in the Penang Development Corporation which was involved in various projects, namely the original Bukit Jambul Country Club, amongst others.

From 1987 to 1990, he joined Forum Architects in Cambridge, England as a design and project architect.

Subsequently, in 1990, he became a corporate member of Persatuan Akitek Malaysia, thus being a fully qualifi ed professional architect.

In 1992, his own fi rm, Akitek CEC, was set up and became the principle architect of his fi rm. Projects undertaken by his fi rm included amongst others, residential and commercial projects focusing mainly in the Northern states of Malaysia, namely Penang and Kedah.

Since the mid of 1990s, he has undertaken both Design and Project Management works for clients, namely Natsteel Electronics of Singapore and AMD in the overseas such as China and Hungary.

DATO’ WOO HON KONGIndependent Non-Executive Director

Dato’ Woo Hon Kong, a Malaysian aged 51, was appointed to the Board on 13 November 2015

He started his career in 1988 as a legal assistant and joined a mid size legal fi rm as a partner in 1989 until 1994.

He subsequently oversees the management and fi nancial matters of companies involved in real estate and equities market locally and overseas prior to joining Atlan Holdings Bhd‘s Group.

Currently, he is an Independent Non-Executive Director of Atlan Holdings Bhd.

Note :

1. None of the Directors have family relationship with any other Directors and/or major shareholders of our Company except for Mr. Lim Seng Boon who is a spouse of Madam Goh Lee Lang, a major shareholder of the Company.

2. None of the above Directors have any personal interest in any business arrangement involving the Company except as disclosed in Note 30 of the Financial Statements of this Annual Report.

3. None of our Directors have been convicted for any offenses other than traffi c offences in the past ten (10) years.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)8

Chairman’s Statement

REVIEW OF OPERATIONS AND FINANCIAL HIGHLIGHTS

For the fi nancial year ended 30 June, 2015, the Group recorded revenue of RM35 million and a net loss after tax of RM3.4 million as compared to a revenue of RM39 million and a net loss after tax of RM15 million recorded in the previous fi nancial year.

Following yet another fi nancial year amidst a lukewarm retail environment and generally unfavorable operating environment, the Group is pleased to be poised on the edge of profi tability in spite of reduced revenue. We have continued to streamline the operational and business processes to achieve this. Signifi cant changes in human resources such as the combination of duties and removal of dormant or low-performing positions have made a pronounced impact on the Group as a whole.

CORPORATE DEVELOPMENTS

For FYE 2015, the Group has moved its focus on expensive and resource draining development of new products and services. Even though research and development continues in order to keep up with market trends, the Group has decided to align its focus on existing lines, resulting in improved profi tability from each, some of which are gaining signifi cant ground and recognition. Acceptance of our i3Display interactive marketing display is steadily maturing, and we are deploying to a growing number of customers, the Perodua Group being one of our fl agship clients.

A defi nite highlight for the Group was to receive the Merit Award at the MSC Malaysia APICTA (Asia Pacifi c Information & Communication Technology Alliance) Awards 2014 for our “SpeakEZ” e-learning software. This award serves as validation of our continued ability to be at the forefront of software development, and is a signifi cant encouragement, not only to the team directly responsible for its production, but also to all members of the Group.

Our GetSnapps platform for creating Google Android and Apple iOS applications (“apps”) is also gaining ground. With feedback from users, the platform is constantly being adjusted to provide an increasingly simple and pleasant app-creation experience, yet embodying a technically superior library of functions that the user may incorporate into the app. What remains now is to increase the marketing of this platform, which has been conservative in light of previous fi nancial restriants.

The relationships with hardware suppliers are evolving into mutually benefi cial co-operative ventures, with the Group providing assistance on software and systems implementation, an area in which the Group has many signifi cant years of experience. Some examples include manufacturers of GPS devices and display systems that require software systems to manage information received from them, as well the basis for a user interface.

The past year has neither shown excessive growth or decline, just an overall slowdown.

FUTURE OUTLOOK

The Group remains positive with regard to our position within the numerous market spaces in terms of mobile solution and distribution business within which we maintain a presence. Now that we are operating at an improved pace, it is our priority to fully utilize the new effi ciencies to boost revenues back up, thereby would bring in more positive growth of the Group as a whole.

The benefi ts of the mechanisms put in place in the past few years within the Group are now beginning to materialize. All the efforts that were placed in training management and staff, as well as fi ne-tuning even the minutest aspects of the Group will continue. New initiatives are being introduced in a timely manner throughout the organization, and staff morale is at a high.

On behalf of the Board, I hereby present to you the Annual Report of the Company and its

subsidiaries (“Group”) for the fi nancial year ended 30 June, 2015(“FYE 2015”).

“ “Dear Valued Stakeholders,

ANNUAL REPORT 2015 9

Chairman’s Statement (Cont’d)

In light of the above, I am confi dent that we are likely to see further improvement in our performance in the following fi nancial year.

CORPORATE SOCIAL RESPONSIBILITY

The Group views Corporate Social Responsibility as a continuing commitment by business to behave ethically and contribute to economic and social development while improving the quality of workforce, stakeholder’s value and the local community at large.

The Group will participate in various corporate events in support of various charities for the coming years.

DIVIDEND

There were no dividend payments during FYE 2015.

BOARD CHANGES

There were several changes to the Board of Directors during FYE 2015.

I would like to warmly welcome our newly appointed Directors namely Mr. Yeoh Boon Hock, Mr. Choong Eng Choon and Dato’ Woo Hon Kong as our Independent & Non-Executive Directors.

Also, I am grateful to Ms. Lim Kooi Siang who rejoins the Board of Directors as an Independent & Non-Executive Director. She also serves as our new Chairperson of the Audit Committee.

I look forward to a long and fruitful working relationship with our new Directors, and am confi dent that their experience will be of great value to the Company.

I also wish to extend my sincere gratitude to our past Directors, En. Mohamad Nagib Gopal Bin Abdullah, Mr. Mark Wing Kong, and Mr. Lester Ratnakumar Neil Francis. They have all moved on to focus on their individual pursuits, and I wish them all the very best in their every endeavor and thank them for their dedication and past contribution during their tenure as Directors of the Company.

APPRECIATION

On behalf of the Board of Directors, I wish to take this opportunity to extend my sincere gratitude and appreciation to members of our management team, as well as the staff for their hard work, commitment, and loyalty.

I also wish to record our gratitude and thanks to our customers, suppliers, business associates, bankers, government authorities, and most importantly, our shareholders for their continued support and confi dence in the Company.

Chew Shin Yong, MarkExecutive Chairman

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)10

Statement on Corporate Governance

The Board of Directors (“Board”) of M3 Technologies (Asia) Berhad (“the Company”) is committed towards ensuring good corporate governance practices are implemented and maintained throughout the Company and its subsidiaries (“Group”) as a fundamental part of discharging its duties to enhance shareholders’ values consistent with the principles and best practices set out in the Malaysian Code on Corporate Governance 2012 (“the Code”). The Board supports the highest standards of corporate governance and the development of best practices for the Group.

The Board recognises that the practice of good corporate governance is fundamental in this era of globalisation where corporate climate calls for enhancement of shareholders’ value, alongside safeguarding the interest of shareholders and stakeholders of the Company.

The Board is pleased to state and affi rm the means and manner which the Group has applied the principles, and state the extent to which the Group has complied with the Best Practices of the Code during the fi nancial year ended 30 June 2015.

A. THE BOARD

The Board is entrusted with the proper stewardship of the Company’s resources for the best interest of its shareholders and also to steer the Group towards achieving the maximum economic value possible. The members of the Board have extensive experience and expertise in a wide range of related and unrelated industries and have been selected based on their skills, knowledge and their ability to add strength to the leadership.

The Executive Directors are equally accountable for the Company’s activities, strategies and fi nancial performance. Particular attention is given to ensure that the strategies proposed by the Management of the Company are fully discussed and critically examined by the Board.

The Board has delegated certain responsibilities to other Board level committees to assist the Board in carrying out its duties and responsibilities. The Board delegates certain functions to the following Committees to assist in the execution of its responsibilities:

a. Audit Committee b. Nomination Committee c. Remuneration Committee

The role of the Board Committees is to advise and make recommendations to the Board. The Chairman of various Committees provide a verbal report on the outcome of their Committee meetings to the Board, and any further deliberation is made at the Board level, if required.

Each Committee operates in accordance with its written terms of reference approved by the Board. The Board appoints the members and Chairman of each Committee.

i. Board Charter

A Board Charter was formalised on 27 May 2013 to set out the composition and balance, roles and responsibilities, operation and processes of the Board and is to ensure that all Board members acting on behalf of the Company are aware of their duties and responsibilities as Board members. The Board has also adopted a Code of Ethics and Conduct which is incorporated in the Board Charter of the Company.

A copy of the Board Charter is published in the corporate website of the Company at www.m3tech.com.my.

ii. Whistle Blowing Policy A Whistle Blowing Policy was formalised on 27 May 2013 with the intention to promote the highest standard of

corporate governance and business integrity that provides avenue for all employees of the Group and members of the public to raise concerns or disclose any improper conduct within the Group and to take appropriate action to resolve them effectively.

ANNUAL REPORT 2015 11

Statement on Corporate Governance (Cont’d)

A. THE BOARD (CONT’D)

iii. Composition and Balance of the Board

The strength of the Board lies in the composition of its members, who has a wide range of expertise, extensive experience and diverse background in business, fi nance and technical knowledge.

The current Board has seven (7) members comprising two (2) Executive Directors (including Mr. Chew Shin Yong, Mark who is the Executive Chairman) and fi ve (5) Independent Non-Executive Directors. This composition complies with Rule 15.02 of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) wherein it states that at least two (2) or one third (1/3) of the Board of Directors of a listed company, whichever is higher, are Independent Directors.

The profi les of the members of the Board are presented on Directors’ Profi le section as set out in this Annual Report.

With the Company having an Executive Chairman on the Board, the Board is aware that it is not in compliance

with the best practice of the Code which recommends that the Chairman of the Board must be a Non-Executive member of the Board. However, the presence of fi ve (5) Independent Directors, who forms more than half (½) of the Board, provides the necessary check and balance in the Board.

iv. Board Responsibilities

There is a clear separation of functions between the Board and Management. The Managing Director (“MD”) and the Executive Directors including the Executive Chairman have the responsibility to manage the day-to-day operations of the business, implementation of Board policies and making strategic decisions for the expansion of the business. The Non-Executive Directors contribute their expertise and experiences to give independent judgment to the Board on issues of strategy, performance and resources, including major policies, key directions and standards of conduct.

Mr. Chew Shin Yong, Mark is the Executive Chairman while Mr. Lim Seng Boon is the MD. There is a proper balance of power and authority on the Board, with clear division of responsibilities between the Chairman and the MD. This delineation provides a good check and balance, with the Chairman being responsible for leadership of the Board, while the MD leads the management of the Group and has overall responsibility for the operating units and the implementation of the Board’s policies and decisions.

No individual or group of individuals dominates the Board’s decision-making. Together, the Directors possess the wide range of business, commercial and fi nancial knowledge, expertise and skills essential in the management and direction of a corporation with regional presence.

The Board provides overall strategic direction and effective control of the Company. The Board has reserved appropriate strategic, fi nancial and operational matters for its collective decision. Key matters, such as approval of annual fi nancial budgets, business plan, acquisitions and disposals of material investment, material agreements, major capital expenditures, budgets, long term plans and succession planning for top management, reviewing the adequacy and integrity of the Group’s internal control systems and management information systems are reserved for the Board.

The presence of Non-Executive Directors ensures that views, consideration, judgment and discretion exercised by the Board in decision making remains objective and independent whilst assuring the interest of other parties such as minority shareholders are fully addressed and adequately protected as well as being accorded with due consideration.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)12

Statement on Corporate Governance (Cont’d)

A. THE BOARD (CONT’D)

v. The Board Meetings

The Board meets at least four (4) times a year, with additional meetings to be convened whenever necessary.

The proceedings and resolutions passed at each Board Meeting are minuted and kept in the statutory minutes book at the registered offi ce of the Company.

The Board met fi ve (5) times during the fi nancial year ended 30 June 2015.

Details of the Directors’ attendance at Board meetings are set out as follows:

Directors Meeting Attendance

Chew Shin Yong, Mark 5/5 Lim Seng Boon 5/5 Chin Chee Wing 5/5 Lim Kooi Siang (Appointed on 8 December 2014) 2/2 Yeoh Boon Hock (Appointed on 8 December 2014) 2/2 Choong Eng Choon (Appointed on 8 December 2014) 2/2 Lester Ratnakumar Neil Francis (Resigned on 23 October 2015) 5/5 Mark Wing Kong (Retired on 4 December 2014) 3/3 Muhammad Nagib Gopal bin Abdullah (Retired on 4 December 2014) 2/3 Dato’ Woo Hon Kong (Appointed on 13 November 2015) -

The Board is satisfi ed with the level of time commitment given by the Directors of the Company towards fulfi lling their duties and responsibilities. This is evidenced by the attendance record of the Directors as set out herein above.

vi. Supply of Information to the Board

Prior to each Board meeting, notice of meetings, setting out the agenda and accompanied by the relevant Board reports and documents are provided to the Directors on a timely manner to allow the Directors to peruse, obtain additional information and where applicable, seek further clarifi cation on the matters to be tabled at the meeting.

Where applicable, there will be a schedule of matters reserved specifi cally for the Board’s decision, including the approval of corporate plans and budgets, acquisitions and disposals of major investments, change of management and control structure of the Group, including key policies, procedures and authority limits.

Directors have access to all information within the Company whether as full board or in their individual capacity, in furtherance of their duties. In addition, whenever independent professional advice is required by the Directors, outside experts may be engaged at the Company’s expense. Before incurring such professional fees, the Director concerned must consult with the Chairman, or with two (2) other Directors (one (1) who is a Non-Executive Director). Such advice was not sought by any of the Directors for the fi nancial year under review.

The Directors have unrestricted access to information from the Management, the Company Secretary, the outsourced Internal Auditors as well as the External Auditors of the Group in furtherance of their duties.

The Board appoints the Company Secretary, who plays an important advisory role, and ensures that the Company Secretary fulfi lls the functions for which he/she has been appointed. The Company Secretary is a central source of information and advice to the Board and its Committees on issues relating to compliance with procedures, laws, rules and regulations affecting the Company.

The Board recognises the fact that the Company Secretaries are suitably qualifi ed and capable of carrying out the duties required. The Board is satisfi ed with the service and support rendered by the Company Secretaries to the Board in the discharge of their functions.

ANNUAL REPORT 2015 13

Statement on Corporate Governance (Cont’d)

A. THE BOARD (CONT’D)

vii. Board Committees

As appropriate or whenever required as provided by the Article of Association, the Board has delegated certain responsibilities to the Board Committees, which operate within clearly defi ned terms of reference. The Board Committees are:-

a. Audit Committee

The composition, summary of terms of reference and a summary of the activities of the Audit Committee are set out separately in the Audit Committee Report as laid out on in this Annual Report.

b. Nomination Committee

The Nomination Committee of the Company is responsible to oversee the selection and assessment of Directors. The committee’s responsibilities include assessing and making recommendations to the Board who will thereon assess the shortlisted candidates and arrive at a decision on the appointment of the Director.

In arriving at these recommendations, due consideration is given to the competencies, required mix of skills, expertise, experience and contribution that the proposed Director(s) shall bring to complement the Board.

The current Nomination Committee of the Company comprises the following members:-

• Mr. Choong Eng Choon Chairman, Independent Non-Executive Director

• Mr. Chin Chee Wing Member, Independent Non-Executive Director

• Ms. Lim Kooi Siang Member, Independent Non-Executive Director

The Nomination Committee meets as and when required. The Nomination Committee met once during the fi nancial period under review.

During the fi nancial year under review, the Nomination Committee undertook the following activities:

• Evaluate the balance of skills, knowledge and experience of the Board. In the light of this evaluation, reviewed the role of the Executive Chairman and the MD to ensure balance of power and authority, and a clear division of responsibilities as the head of the Company.

• Carried out the assessment and rating of each Director’s performance against the criteria as set out in the annual assessment form. The performance of Non-Executive Directors was also considered, including whether he/she could devote suffi cient time to the role.

• Reviewed, assessed and considered the appointment of new Directors to the Board.

The Nomination Committee also carried out an assessment on the effectiveness of the Board as a whole, the Committees of the Board and contribution of each individual Director. The assessment considered the contribution and performance of Directors on their competency, time commitment, integrity and experience in meeting the needs of the Group and suggestions to enhance Board effectiveness. The evaluation process involved a peer and self-review assessment, where Directors assessed their own and also their fellow Directors’ performance.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)14

Statement on Corporate Governance (Cont’d)

A. THE BOARD (CONT’D)

vii. Board Committees (cont’d)

c. Remuneration Committee

The Remuneration Committee is responsible for assessing and reviewing the remuneration packages of the MD and Executive Directors and subsequently furnishes their recommendations to the Board for adoption.

The current members of the Remuneration Committee is comprised of the followings:-

• Mr. Chin Chee Wing Chairman, Independent Non-Executive Director

• Mr. Lim Seng Boon Member, Managing Director

• Ms. Lim Kooi Siang Member, Independent Non-Executive Director

viii. Appointments of the Board and Re-election

The members of the Board are appointed in a formal and transparent practice as endorsed by the Code. The Nomination Committee is responsible for making recommendation for appointments to the Board. In discharging this duty, the Nomination Committee will assess the suitability of an individual to be appointed to the Board by taking into account the individual’s skill, knowledge, expertise, experience, professionalism, integrity and other commitments.

All Board members shall notify the Chairman of the Board before accepting any new Directorship in other companies. The notifi cation shall include an indication of time that will be spent on the new appointment. The Chairman shall also notify the Board if he has any new Directorship or signifi cant commitments outside the Company.

In accordance with the Company’s Articles of Association, at least one third (1/3) of the Directors shall retire at the Annual General Meeting (“AGM”), and be eligible for re-election provided that all Directors shall retire at least once in every three (3) years.

Directors who are appointed by the Board in the course of the year shall be subject to re-election at the next AGM to be held following their appointment.

Directors who are over seventy (70) years of age are required to submit themselves for annual re-appointment in accordance with Section 129(6) of the Companies Act, 1965.

ix. Tenure of Independent Director

The tenure of an Independent Director shall not exceed a cumulative term of nine (9) years. However, upon completion of the nine (9) years, the Independent Director may continue to serve the Board subject to the Director’s re-designation as a Non-Independent Director. In the event the Director is to remain designated as an Independent Director, the Board shall make a recommendation and provide justifi cation to shareholders in general meeting to obtain their approval on a year to year basis.

x. Evaluation of the Directors and the Board’s as a whole

The Board recognises the importance of assessing the effectiveness of individual Directors, the Board as a whole and its Board Committees. The Nomination Committee is given the task to review and evaluate the individual Director’s performance and the effectiveness of the Board and the Board Committees on an annual basis. In assessing suitability of candidates, considerations will be given to the competencies, commitment, contribution and performance.

The Nomination Committee is required to report annually to the Board an assessment of the Board’s and the Board Committees’ performance. This will be discussed with the full Board. Every year, the Nomination Committee will evaluate each individual Director’s contributions to the effectiveness of the Board and the relevant Board Committees.

ANNUAL REPORT 2015 15

Statement on Corporate Governance (Cont’d)

A. THE BOARD (CONT’D)

xi. Annual Assessment of Independence

The Board had conducted an evaluation of level of independence of the Independent Non-Executive Directors of the Company and the Board is satisfi ed with the level of independence demonstrated by them and their ability to act in the best interest of the Company and/or the Group.

The Nomination Committee will continue, on an annual basis, to access the independence of the Independent Directors.

xii. Board Diversity Policy

The Board acknowledges the need for gender diversity for good governance practices and to enhance the effi cient functioning of the Board. The Board believes the appointment of a new member is guided by the skills, experiences, competency and knowledge of the individual candidate and it shall review any potential candidate wherever reasonably possible.

The Board shall also accord due consideration to inculcate diversity policy in the boardroom and workplace which encapsulates not only gender, but also age and ethnicity for a well-functioned organisation.

xiii. Directors’ Training

The Directors are encouraged to attend relevant seminars and training programmes to equip themselves with the knowledge to effectively discharge their duties as Directors. The Board will assess the training needs of the Directors and ensure Directors have access to continuing education programme.

The Directors are also being updated on a continuing basis by the Company Secretary on new and /or amended ACE Market Listing Requirements of Bursa Securities as and when the same are advised by Bursa Securities.

Seminars and conference attended by the Directors during the fi nancial year ended 30 June 2015 are as follows:

Directors Programmes attended

Chin Chee Wing Advocacy Sessions on Corporate Disclosure for Directors of Listed Issuers, Nominating Committee Programme, Risk Management & Internal Control Workshop for Audit Committee Members. An Integrated Assurance on Risk Management and Internal Control- “Is our line of Defense Adequate and Effective”

Lim Kooi Siang Analysis of Recent Tax Cases 2014 & Understanding of Tax Appeal Process, Seminar Percukaian Kebangsaan 2014, National Tax Conference 2014

Yeoh Boon Hock Mandatory Accreditation Programme.

Choong Eng Choon Mandatory Accreditation Programme.

Save as disclosed above, other Directors were not able to attend any trainings during this fi nancial year due to busy schedule and overseas travelling. However, they have kept themselves abreast on fi nancial and business matters through readings to enable them to contribute to the Board.

The Directors will continue to attend other relevant appropriate training programmes to enhance their skills and knowledge.

xiv. Corporate Disclosure Policy The Board is committed to provide effective communication to its shareholders and general public regarding

the business, operations and fi nancial performance of the Group and where necessary, information fi led with regulators is in accordance with all applicable legal and regulatory requirements.

A Corporate Disclosure Policy was formalised on 23 May 2014 to promote comprehensive, accurate and timely disclosures pertaining to the Company and the Group to regulators, shareholders and stakeholders.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)16

Statement on Corporate Governance (Cont’d)

B. DIRECTORS’ REMUNERATION

i. Remuneration Policy and Procedures

The Remuneration Committee recommends to the Board the remuneration framework and remuneration packages of the MD and Executive Directors of the Company. The level of remuneration refl ects the experience, responsibilities, contribution and performance by each individual Director.

The Board recognises that levels of remuneration must be suffi cient to attract, retain and motivate the Directors of the quality required to manage the business of the Company and to align the interest of the Directors with those of the shareholders.

The determination of the fees of the Non-Executive Directors is decided by the Board as a whole. Non-Executive Directors will be paid a basic fee as ordinary remuneration and will be paid a sum based on their responsibilities in Committees and the Board, their attendance and/or special skills and expertise they bring to the Board. The fee shall be fi xed in sum and not by a commission on or percentage of profi ts or turnover.

Each individual Director shall abstain from the deliberation and voting on his/her own remuneration/fee.

ii. Directors’ Remuneration

The Board is of the view that the disclosure of remuneration by appropriate components and bands are suffi cient to meet the objectives set out in the ACE Market Listing Requirements of Bursa Securities.

The remuneration of the Directors for the fi nancial year under review is as follows:

Defi ned contribution plan and Salary and social other security emoluments Fee contributions Total RM’000 RM’000 RM’000 RM’000

Executive Directors 990 - 119 1109 Non-Executive Directors 8 168 - 176

Total 998 168 119 1285

The Directors, whose remuneration falls within the following bands are as follows:

Range Executive Non-Executive

Below RM 50,000 - 6 RM 50,001 - RM100,000 1 - RM 250,001 - RM300,000 1 - RM 450,001 - RM500,000 1 -

C. SHAREHOLDERS AND INVESTORS RELATIONS

The Group values the importance of dialogue between the Group and its investors in order to provide them with the clearest and most complete picture of the Group’s performance and fi nancial position. The Group communicates with its shareholders and investors primarily through its Annual General Meetings (“AGM”), Annual Report, Quarterly Financial Statements, Research Reports and the various announcements made to Bursa Securities. The Company’s corporate website at www.m3tech.com.my serves as one of the most convenient ways for shareholders and members of the public to gain access to corporate information, news and events relating to the Group.

ANNUAL REPORT 2015 17

Statement on Corporate Governance (Cont’d)

C. SHAREHOLDERS AND INVESTORS RELATIONS (CONT’D)

The Board will ensure that the General Meetings of the Company are conducted in an effi cient manner and serve as a mode in shareholders communications. These include the supply of comprehensive and timely information to shareholders and the encouragement of active participation at the General Meetings.

The AGM remains as a principal forum used by the Company for communication with its shareholders. At the AGM, the shareholders are encouraged to participate and to raise questions on the resolutions proposed and the Group’s operations in general.

In line with recommendation of the code, all resolutions set out in the Notice of the AGM will be put to vote by poll. The outcome of all resolutions proposed at the AGM is to be announced to Bursa Securities by the end of the meeting day.

D. ACCOUNTABILITY AND AUDIT

i. Financial Reporting

The Board has overall responsibility for the quality and completeness of the fi nancial statements of the Company and the Group, both quarterly and year-end, and has a duty to ensure that those fi nancial statements are prepared based on appropriate and consistently applied accounting policies, supported by reasonably prudent judgment and estimates and in accordance to the applicable Financial Reporting Standards.

In presenting the annual audited fi nancial statements and quarterly unaudited results, the Board aims to present a fair assessment of the Group’s position and prospects to the shareholders. The Audit Committee assists the Board in scrutinising information for disclosure to ensure accuracy, adequacy and completeness.

ii. Internal Control and Risk Management

The Board acknowledges their responsibilities in maintaining an internal control system that provides reasonable assurance of effective and effi cient operations, and compliance with laws and regulations as well as internal procedures and guidelines.

Management is responsible for implementing the processes for identifying, evaluating, monitoring and reporting of risks and internal control, taking appropriate and timely corrective actions as needed, and for providing assurance to the Board that the processes have been carried out.

The Audit Committee has been entrusted by the Board to ensure effectiveness of the Group’s internal control systems. The activities of the outsourced Internal Auditors are reported regularly to the Audit Committee which provides the Board with the required assurance in relation to the adequacy and integrity of the Group’s system of internal controls.

iii. Relationship with Auditors

The Group has established a transparent and appropriate relationship with the Internal Auditors and External Auditors. Such relationship allows the Group to seek professional advice on matters relating to compliance and corporate governance. The internal audit function of the Group is outsourced to a third party. Similar to the External Auditors, Internal Auditors too have direct reporting access to the Audit Committee to ensure that issues highlighted are addressed independently, objectively and impartially without any undue infl uence of the Management.

The Audit Committee of the Company undertakes an annual review of the suitability and independence of the External Auditors. The Audit Committee will thereafter make its recommendation to the Board, upon which the shareholders’ approval will be sought at the AGM of the Company.

E. STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF THE CODE

The Company is committed to achieving high standards of corporate governance throughout the Group and to the highest level of integrity and ethical standards in all its business dealings. Apart from the above disclosure, the Board considers that it has complied throughout the fi nancial year with the Best Practices as set out in the Code.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)18

Statement on Risk Management and Internal Control

Introduction

The Board of Directors (“the Board”) of M3 Technologies (Asia) Berhad (“Company”) is committed in maintaining a robust system of internal controls throughout the Company and its subsidiaries (“the Group”) and is pleased to provide the following statement which outlines the nature and scope of risk management and internal control of the Group during the year under review.

This Statement on Risk Management and Internal Control is made in accordance with the Malaysian Code on Corporate Governance and Rule 15.26 (b) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad, which requires Malaysian public listed companies to make a statement about their state of internal control, as a Group, in their annual report.

Board’s Responsibility

The Board recognises the importance of robust internal control for good corporate governance and further affi rms its overall responsibility for the Group’s system of internal control. This covers operational and fi nancial control, and review of the adequacy and integrity of those systems on an on-going basis.

The system of internal control is designed to manage rather than eliminate the risk of failure to achieve the Group’s business objectives. Accordingly, the internal control system can only provide reasonable and not absolute assurance against material misstatement or loss.

Material associated company has not been dealt with as part of the Group for purposes of applying the above guidance as it has its own system of internal controls in place. Nevertheless, the Board obtained operational and fi nancial updates from Group management to monitor the unquoted investment.

Risk Management Framework

The Board has yet to establish a formal risk management committee to formalise the risk management framework to further enhance the achievement of the Group’s objectives. However, the identifi cation, evaluation and management of signifi cant risks faced by the Group have always been discussed in the Board meetings during the fi nancial year.

The Board acknowledges that the Group’s business activities involve some degree of risk that may affect the achievement of its business objectives and an effective risk management framework should be an integral part of the Group’s daily operations.

It is the responsibility of the Management, head of subsidiary companies and heads of department to identify, evaluate and manage risks faced by the Group on an ongoing basis. The deliberation of risks and related mitigating responses are carried out at regular management meetings attended by the Managing Director, Executive Director and key management staff. Signifi cant risks are communicated to the Board at the quarterly scheduled meetings. The practices and initiatives by Management serve as an on-going process adopted by the Group to continuously review, identify, evaluate and manage risks faced by the Group.

The material associated company has its own management to monitor its daily operations and therefore is not included in the Group’s Risk Management review.

Internal Audit

During the fi nancial year ended 30 June 2015, we have appointed RSM Corporate Consulting Sdn. Bhd. (“RSM”) an independent professional fi rm as the new Internal Auditors to replace the outgoing Internal Auditors, CGRM Infocomm Sdn. Bhd.(“CGRM”). RSM supports the Audit Committee, and by extension, the Board, to execute the internal audit function of the Group by providing independent assurance on the effectiveness of the Group’s system of internal control.

ANNUAL REPORT 2015 19

Statement on Risk Management and Internal Control (Cont’d)

RSM has prepared an internal audit scope of coverage based on the understanding of our business operations, past fi nancial performance and internal audit reports, which refl ects the most current material risk profi le of the Group’s major business operations. The internal audit scope is presented to the Audit Committee for review and assessment in order to lay out the risk areas to be the main focus for internal audit during the fi nancial year. The scope of RSM’s function covers the audit and review of governance, risk assessment, compliance, operational and fi nancial control across all business units. RSM has conducted internal audit review in accordance with the approved internal audit scope of coverage for the purpose of assessing the adequacy and effectiveness of the internal control system. The internal control of the Group is adequate and effective except as disclosed in the periodical Internal Auditors’ Report. The recommendations by the Internal Auditors are currently being rectifi ed by Management or earmarked for improvement in the internal control system.

During the fi nancial year under review, CGRM appraised and contributed towards improving the Group’s risk assessment, governance and control systems and provided quarterly reporting on the same to the Audit Committee for the 1st quarter period ended 30 September 2014 and also proposed a 3-year internal audit plan during the 2nd quarter period ended 31 December 2014. In assessing the adequacy and effectiveness of the system of internal control and fi nancial control procedures of the Group, the Audit Committee reports to the Board on its activities, signifi cant audit results or fi ndings and the necessary recommendations or actions needed to be taken by Management to rectify those issues.

Our material associated company has not been dealt with by our Internal Audit scope as it has its own management team to oversee its operations.

RSM and CGRM both made reference to the Guidelines on the Internal Audit Function issued by The Institute of Internal Auditors Malaysia, the Standards for the Professional Practice of Internal Auditing (SPPIA) and the Code of Ethics issued by The Institute of Internal Auditors, Inc.

Internal Control System

The Group’s key internal control processes were identifi ed and grouped based on the principles of COSO (Committee of Sponsoring Organisations of the Treadway Commission) Guidance on Internal Controls – Integrated Framework as follows:

Control Environment

• The Group has established a clear vision, mission and strategic direction.

• Defi ned organisational and reporting structures are established at all levels within the Group which are aligned to business and operational requirements.

• The Group has adequate upper level managerial support and stewardship wherein, the senior management team is cohesive and complements each other in terms of skills and experience.

• The Group adopts a fl at working structure but with appropriate segregation of duties and empowerment.

Risk Assessment

Management of individual subsidiaries and business divisions continuously assess risks within their business environment and formulated required controls / mitigating strategies / corrective actions to minimise negative outcomes, i.e. reduce losses and prevent erosion of business profi t margin.

Control Activities

• The Group has successfully renewed its ISO 9001:2008 compliance certifi cation during the fi nancial year under review. The documented standard operating policies and procedures refl ected current practices of the business processes and key functions.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)20

Statement on Risk Management and Internal Control (Cont’d)

• The Group has cascaded down these documented procedures to its employees for implementation. Compliance in their day-to-day operations is monitored by the respective department managers to ensure quality of work and products.

• External audit, internal audit and ISO audit are carried out either quarterly or yearly basis to improve operational effi ciencies and consistency of quality of products and work standards.

• Financial Reporting Package (“FRP”) is in place for monthly management reporting and requires a declaration by the Head of subsidiaries or General Manager to confi rm that the reports in the FRP have been reviewed by them to achieve accuracy, completeness and timeliness in the Group Financial Reporting.

Information and Communication

• The Group utilises internally developed front-end, budget panel as well as job allocation and monitoring systems to provide timely information and generate relevant reports that enable and facilitate the decision making process.

• Submission of regular, timely and comprehensive fl ow of information and reports to the Board and Management on all aspect of the Group’s operations facilitates the monitoring of performance against strategic plans.

• Management meetings and strategic planning workshops were convened at subsidiaries and Group level to share information, discuss fi nancial and business development, progress and performance monitoring as well as to decide upon operational matters. The proceedings of these meetings were documented in minutes of meeting for further action and reference.

Monitoring

• Management constantly monitors and follow-up on performance gaps and highlights issues to improve on current processes and internal controls.

• Quarterly review on budgets were conducted to highlight any instances of signifi cant variances that arose during the year which may require immediate management action.

• External and internal audit reports were tabled to Management and the Board for their consideration and further action. Follow-up status reports were also dealt with in similar manner.

Conclusion

The Board has received assurance from the Managing Director that the Group’s risk management and internal control system are operating effectively, in all material aspects, based on the risk management and internal control system of the Group.

For the fi nancial year ended 30 June 2015, the Board is of the view that the system of internal control is adequate to safeguard shareholders’ interest and the Group’s assets and there were no material losses caused by the breakdown in internal controls. Management will continue to take measures and maintain an ongoing commitment to strengthen the Group’s control environment and processes.

As required by Rule 15.26 (b) of the Bursa Malaysia Securities Berhad ACE Market Listing Requirements, the External Auditors have reviewed this Statement on Risk Management and Internal Control. Their limited assurance review was performed in accordance with Recommended Practice Guide (RPG) 5 (Revised) issued by the Malaysian Institute of Accountants. RPG 5 (Revised) does not require the External Auditors to form an opinion on the adequacy and effectiveness of the risk management and internal control system of the Group.

This statement was made in accordance with a resolution of the Board dated 23 October 2015.

ANNUAL REPORT 2015 21

Audit Committee Report

The Audit Committee (“the Committee”) of the Company was established by the Board of Directors (“Board”) of M3 Techonologies (Asia) Berhad (“the Company”) with the primary objective to assist the Board in fulfi lling its fi duciary responsibilities relating to corporate governance, system of internal controls, risk management processes and management and fi nancial reporting practices of the Company and its subsidiaries (“the Group”).

COMPOSITION

The current members of the Committee, all being Independent Non-Executive Director are as follows:

Chairperson Designation

Lim Kooi Siang Independent Non-Executive Director

Members

Chin Chee Wing Independent Non-Executive DirectorYeoh Boon Hock Independent Non-Executive Director

SUMMARY OF TERMS OF REFERENCE

Size and Composition

1. The Committee shall be appointed by the Board from among its members and shall comprise not less than three (3) members, whereby all members must be Non-Executive Directors and fi nancially literate with a majority of them being Independent and Non-Executive Directors. At least one (1) member of the Committee:-

a. must be a member of the Malaysian Institute of Accountants; or

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

(i) he must have passed the examinations specifi ed in Part I of the 1st Schedule of the Accountants Act 1967; or

(ii) he must be a member of one (1) of the associations of accountants specifi ed in Part II of the 1st Schedule of the Accountants Act 1967; or

c. fulfi lls such other requirements as prescribed or approved by the Bursa Malaysia Securities Berhad (“Bursa Securities”).

2. Alternate Director shall not be appointed as a member of the Committee.

3. The members of the Committee shall elect a Chairman from among their members who shall be an Independent Director.

4. If a member of the Audit Committee resigns, retires, dies or for any other reason ceases to be a member which resulting in the non-compliance with point 1 above, the Board shall fi ll the vacancy within three (3) months.

Meetings

1. Frequency of meetings

a. Meetings shall be held not less than four (4) times a year. However, additional meetings may be called at anytime depending on the scope of activities of the Committee. In the event issues requiring the Committee’s decision arise between meetings, such issues may be resolved through circular resolutions of the Committee. Such circular resolution in writing shall be valid and effectual if it is signed or approved by letter, facsimile or any electronic means by all members of the Committee.

b. Other Board members, senior management, Internal and External Auditors may be invited to attend meetings.

c. Prior notice shall be given for all meetings.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)22

Audit Committee Report (Cont’d)

2. Quorum

The minimum quorum for the meeting is two (2) members of the Committee, a majority of members present must be Independent and Non-Executive Directors.

3. Secretary

The Company Secretary shall be the secretary of the Committee. The Secretary shall circulate the notice and minutes of the Committee to all members of the Committee.

Functions

The functions of the Committee are as follows:-

1. To consider any matters concerning the appointment and re-appointment, the audit fee and any questions of resignation or dismissal of External Auditors; and further ensure the suitability and independence of External Auditors.

2. To review with the External Auditors:-

a. Their audit plan, scope and nature of the audit of the Group;

b. Their evaluation and fi ndings of the system of internal controls; and the audit reports on the fi nancial statements;

c. The management letter and management’s response with regard to problems and reservations arising from their audits;

d. The assistance given by the Management and staff of the Group to the External Auditors; and

e. Any other matters that the External Auditors may wish to discuss (in the absence of Management where necessary).

3. To review and assess the adequacy of the scope, functions, competency and performance of the internal audit functions of which the Internal Auditors should report directly to the Committee. The Internal Auditors must be independent and must have the relevant qualifi cation and be responsible for providing objective assurance to the Committee that Internal Control is operating effectively.

In addition, the role of the Internal Auditors, amongst others, shall cover the following areas:

a. To evaluate the effectiveness of the governance, risk management and internal control framework and facilitate enhancement, where appropriate;

b. To conduct regular reviews and appraisals of the effectiveness of the governance, risk management and internal control processes within the Group;

c. To assess and report to the Committee as to whether risks, which may hinder the Group from achieving its objectives, are being adequately evaluated, managed and controlled; and

d. To carry out their functions according to the standards set by recognised professional bodies.

4. To review the adequacy and effectiveness of the Group’s internal control systems and risk management framework as evaluated, identifi ed and reported by the Management, Internal or External Auditors as well as to review the appropriate and timely corrective actions undertaken to rectify the same.

The responsibilities of Management in respect of risk management should include:

a. To identify the risks relevant to the businesses of the Group and the achievement of objectives and strategies;

b. To design, implement and monitor the risk management framework in accordance with the Group’s strategic vision and overall risk appetite; and

c. To identify changes to risk or emerging risks, take actions as appropriate, and promptly bring these to the attention of the Committee/Board.

ANNUAL REPORT 2015 23

Audit Committee Report (Cont’d)

5. To review the quarterly and year end fi nancial statements of the Group, focusing particularly on any changes in or implementation of major accounting policies and practices, signifi cant adjustments arising from the audit, the going concern assumption and compliance with applicable approved accounting standards and other legal and regulatory requirements.

6. To review any related party transactions and confl icts of interest situations that may arise within the Company or Group including any transactions, procedures or course of conduct that raises questions of management integrity.

7. To carry out such other functions or assignments as may be delegated by the Board from time to time.

Authority

The Committee is authorised by the Board to investigate any activity within its term of reference at the cost of the Company:-

1. To secure full and unrestricted access to any information pertaining to the Company and its subsidiaries;

2. To communicate directly with the External and Internal Auditors and all employees of the Group;

3. To seek and obtain independent professional advice and to secure the attendance of outsiders with relevant experience and expertise as it considers necessary; and

4. To convene meetings with the External and Internal Auditors or both excluding the attendance of other Directors and employees of the Company, whenever deemed necessary.

Communication to the Board

1. The minutes of each Committee meeting shall be tabled to the Board for notation.

2. The Committee may from time to time submit to the Board its recommendation on matters within its purview, for the Board’s decision.

3. Where the Committee is of the view that a matter reported by it to the Board has not been satisfactorily resolved, resulting in a breach of the ACE Market Listing Requirements of Bursa Securities, the Committee must promptly report such matter to Bursa Securities.

MEETINGS

During the fi nancial year under review, the Committee held a total of fi ve (5) meetings. Details of attendance of the Committee members are as follows:-

Committee Members Meeting Attendance

Chin Chee Wing 5/5Lim Kooi Siang (Appointed on 8 December 2014) 2/2Yeoh Boon Hock (Appointed on 8 December 2014) 2/2Mark Wing Kong (Retired on 4 December 2014) 3/3Muhammad Nagib Gopal bin Abdullah (Retired on 4 December 2014) 2/3

The Company’s other Board members, Internal Auditors, External Auditors, and certain senior management staff had attended the meetings at the invitation of the Chairman of the Committee.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)24

Audit Committee Report (Cont’d)

SUMMARY OF ACTIVITIES DURING THE FINANCIAL YEAR

The Committee had carried out the following activities during the meetings in discharging their duties and responsibilities:

1. Reviewed the quarterly fi nancial results and annual audited fi nancial statements of the Company including the announcements pertaining thereto, before recommending to the Board for their approval and release of the Group’s results to Bursa Securities.

2. Appointment of new outsourced Internal Auditors to replace the outgoing outsourced Internal Auditors. Discussed and reviewed with the External Auditors on their audit planning memorandum on the statutory audit of the Group for the fi nancial year ended 30 June 2015.

3. Reviewed with the newly appointed outsourced Internal Auditors, the internal audit plan to ensure principal risk areas are adequately covered in the audit plan.

4. Reviewed the results of the internal audit process to ensure that the recommendations made by the outsourced Internal Auditors and corrective actions taken by Management are adequately addressed on a timely basis.

5. Reviewed with the External Auditors on the results and issues arising from their audit and their resolutions of such issues highlighted in their report to the Committee.

6. Approved the Audit Fee for the fi nancial year ended 30 June 2015.

7. Reviewed related party transactions, if any, for compliance with the ACE Market Listing Requirements of Bursa Securities.

8. Meeting with External Auditors during the fi nancial year without the presence of the Management and Executive Directors.

INTERNAL AUDIT FUNCTION

The Group’s internal audit function is outsourced to an independent professional fi rm, which is independent of the activities and operations of the Group. The outsourced Internal Auditors are empowered by the Committee to provide objective evaluation of risk and controls in the auditable activities to ensure a sound system of internal controls.

The internal audits were undertaken to provide independent assessments on the adequacy, effi ciency and effectiveness of the Group’s internal control systems in anticipating potential risks exposures over key business processes within the Group. The Committee has full access to the Internal Auditors and received reports on all audits performed.

The resulting reports from the audits undertaken were forwarded to the Management for its attention and to take the necessary corrective actions as recommended. The Management is responsible for ensuring that corrective actions on reported weaknesses are taken within the required time frame.

During the fi nancial year under review, the internal audit activities have been carried out in accordance to the internal audit plan, which have been approved by the Committee.

The costs incurred for the internal audit function in respect of the fi nancial year ended 30 June 2015 was RM33,390

ANNUAL REPORT 2015 25

Statement of Directors’ Responsibility

This statement is prepared pursuant to the ACE Market Listing Requirements of Bursa Securities.

The Directors are required to prepare audited fi nancial statements that give a true and fair view of the state of affairs, including the cash fl ow and results, of the Company and its subsidiaries (“the Group”) as at the end of each fi nancial year.

In preparing these fi nancial statements for the fi nancial year ended 30 June 2015, the Directors have considered the following:-

• the Group have used appropriate accounting policies, and are consistently applied;

• that reasonable and prudent judgements and estimates were made;

• that the approved accounting standards in Malaysia have been applied; and

• ensure the fi nancial statements have been prepared on going concern basis.

The Directors are responsible for ensuring that the Company maintains proper accounting records which disclose with reasonable accuracy of the fi nancial position of the Group and which enable them to ensure that the fi nancial statements comply with the Companies Act, 1965.

The Directors have general responsibilities for taking such steps that are reasonably available to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)26

Additional Compliance Information

Share Buy Back

There was no share buy back during the fi nancial year. None of the treasury shares held was resold or cancelled during the fi nancial year under review.

Utilisation of Proceeds from Corporate Exercises

Private Placement of shares

The Company had on 17 February 2015 proposed to undertake a private placement of up to 17,961,474 new ordinary shares of RM 0.10 each in the Company representing up to ten percent (10%) of the issued and paid-up share capital of the Company (“Private Placement”).

6,000,000 new ordinary shares has been allotted on 10 June 2015 at an issue price of RM0.13 each representing the 1st tranche of Private Placement. 11,705,700 new ordinary shares has subsequently been alloted on 12 November 2015 at an issue price of RM0.105 each representing the 2nd and fi nal tranche of the private placement.

The proceeds from the 1st tranche of RM780,000 has been fully utilised for repayment to suppliers. While the proceeds of RM1,229,098.50 from the 2nd and fi nal tranche has yet to be utilised.

Bursa Malaysia Securities Berhad had on 7 September 2015, approved for an extension of time of six (6) months to 15 March 2016 to complete the implementation of the Private Placement.

Multiple Proposals

The Company had on 16 April 2015 proposed to undertake the following:

(a) Proposed Right Issue with Warrants

Proposed renounceable rights issue of up to 395,152,428 new ordinary shares of RM0.10 each in the Company (“M3Tech Shares”) (“Right Shares”) together with up to 296,364,321 free detachable warrants (“Warrants”) at an issue price of RM0.10 per Rights Share on the basis of four (4) Rights Shares together with three (3) Warrants for every two (2) existing M3Tech Shares held on an entitlement date to be determined and announced later based on a minimum subscription level of 80,000,000 Rights Shares together with 60,000,000 Warrants.

(b) Proposed Employees’ Share Option Scheme (“ESOS”)

Proposed establishment of ESOS of up to 30% of the prevailing issued and paid-up share capital of the Company (excluding treasury shares) for the eligible employees (including Directors) of M3Tech and its subsidiaries as set out in the by-laws.

(c) Proposed Increase in Authorised Share Capital

Proposed increase in the authorised share capital of the Company from RM25,000,000 comprising 250,000,000 M3Tech Shares to RM200,000,000 comprising 2,000,000,000 M3Tech Shares.

(d) Proposed Memorandum and Articles of Association (“M&A”) Amendments

Proposed amendments to the M&A of the Company to facilitate the Proposed Increase in Authorised Share Capital and the Proposed ESOS.

The approval of the Shareholders of the Company for the above proposals will be sought at an Extraordinary General Meeting to be held on 25 November 2015.

ANNUAL REPORT 2015 27

Additional Compliance Information (Cont’d)

Options, Warrants and Convertible Securities

There were no options, warrants or convertible securities issued by the Company during the fi nancial year under review.

Depository Receipt Programme

The Company did not sponsor any Depository Receipt Programme during the fi nancial year under review.

Imposition of Sanctions and Penalties

There were no sanctions or penalties imposed on the Company and its subsidiaries, directors or management by the relevant regulatory bodies during the fi nancial year under review.

Non-Audit Fees

The amount of non-audit fees paid to the external auditors by the Group for the fi nancial year ended 30 June 2015 was RM38,280.00.

Variation In Results, Profi t Estimate, Forecast or Projection

There were no material variance between the audited results for the fi nancial year ended 30 June 2015 and the unaudited results previously announced by the Company. The Company did not release any profi t estimate, forecast or projection for the fi nancial year under review.

Profi t Guarantee

The Company did not give any form of profi t guarantee to any parties during the fi nancial year under review.

Material Contracts Involving Directors’ and Major Shareholders’ Interest

There were no material contracts entered into by the Company or its subsidiaries, involving directors’ and major shareholders’ interest during the fi nancial year under review.

Recurrent Related Party Transactions of a Revenue or Trading Nature

The list of recurrent related party transactions of a revenue or trading nature entered into by the Group is disclosed in Note 30 to the fi nancial statements. For the fi nancial year ended 30 June 2015, no shareholders mandate was required for the recurrent related party transactions of a revenue or trading nature entered into by the Group pursuant to Rule 10.09 of the ACE Market Listing Requirements of Bursa Securities.

Financial Financial StatementsStatements29

33

33

34

36

37

38

40

42

97

Directors’ Report

Statement by Directors

Statutory Declaration

Independent Auditors’ Report

Statements of Comprehensive Income

Statements of Financial Position

Statements of Changes in Equity

Statements of Cash Flows

Notes to the Financial Statements

Supplementary Information- Breakdown of Retained Profi ts into Realised and Unrealised

ANNUAL REPORT 2015 29

Directors’ Report

The Directors hereby present their report together with the audited fi nancial statements of the Group and of the Company for the fi nancial year ended 30 June 2015.

PRINCIPAL ACTIVITIES

The Company is principally engaged in the provision of mobile solutions.

The principal activities of the subsidiaries are set out in Note 16 to the fi nancial statements.

There have been no signifi cant changes in the nature of these activities during the fi nancial year.

FINANCIAL RESULTS

Group Company RM RM Loss net of tax (3,474,219) (8,285,066) Attributable to: Owners of the Company (4,364,799) (8,285,066)Non-controlling interests 890,580 - (3,474,219) (8,285,066)

There were no material transfers to or from reserves or provisions during the fi nancial year other than as disclosed in the fi nancial statements.

In the opinion of the Directors, the results of the operations of the Group and of the Company during the fi nancial year were not substantially affected by any item, transaction or event of a material and unusual nature other than impairment of investment in subsidiaries of the Company amounting to RM759,153 and the impairment of amount due from subsidiaries amounting to RM6,477,203 at Company level as disclosed in Note 16 and 20 to the fi nancial statements.

DIVIDENDS

No dividend has been paid, proposed or declared by the Company since the end of the previous fi nancial year.

The Directors do not recommend the payment of any dividend for the fi nancial year ended 30 June 2015.

DIRECTORS

The Directors of the Company in offi ce since the date of the last report and at the date of this report are:

Chew Shin Yong, MarkLim Seng BoonChin Chee WingLim Kooi Siang (Appointed w.e.f. 8.12.2014)Choong Eng Choon (Appointed w.e.f. 8.12.2014)Yeoh Boon Hock (Appointed w.e.f. 8.12.2014)Lester Ratnakumar Neil Francis (Resigned w.e.f 23.10.2015)Mark Wing Kong (Retired w.e.f. 4.12.2014)Muhammad Nagib Gopal Bin Abdullah (Retired w.e.f. 4.12.2014)

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)30

Directors’ Report (Cont’d)

DIRECTORS’ BENEFITS

Neither at the end of the fi nancial year, nor at any time during that fi nancial year, did there subsist any arrangement to which the Company was a party, whereby the Directors might acquire benefi ts by means of acquisition of shares in or debentures of the Company or any other body corporate. Since the end of the previous fi nancial year, no Director has received or become entitled to receive a benefi t (other than benefi ts included in the aggregate amount of emoluments received or due and receivable by the Directors or fi xed salary of a full-time employee of the Company as shown in Note 11 to the fi nancial statements) by reason of a contract made by the Company or its related corporations with any Director or with a fi rm of which the Director is a member, or with a company in which the Director has a substantial fi nancial interest.

DIRECTORS’ INTERESTS

According to the register of directors’ shareholdings, the interests of Directors in offi ce at the end of the fi nancial year in shares of the Company during the fi nancial year were as follows:

Number of ordinary shares of RM0.10 each At 1 July At 30 June 2014 Acquired Sold 2015

Direct interest: Lim Seng Boon 13,605,000 - - 13,605,000Chew Shin Yong, Mark 2,130,600 - - 2,130,600Lester Ratnakumar Neil Francis 808,016 - - 808,016Chin Chee Wing 590,000 - (590,000) - Deemed interest: Lim Seng Boon* 24,186,840 - - 24,186,840Chin Chee Wing** 2,634,900 - (2,634,900) - Chew Shin Yong, Mark*** 1,333,400 - - 1,333,400

* Deemed interested by virtue of his spouse, Madam Goh Lee Lang’s shareholding in M3 Technologies (Asia) Berhad.** Deemed interested by virtue of his spouse, Madam Cha Lee Pin’s shareholding in M3 Technologies (Asia) Berhad.*** Deemed interested by virtue of his interest in Marmark (BVI) Limited, pursuant to section 6A of the Companies Act,

1965.

None of the other Directors in offi ce at the end of the fi nancial year had any interest in shares or options over shares of the Company or its related corporations during the fi nancial year.

The above Directors, by virtue of their interest in shares of the Company are also deemed interested in shares of all the Company’s subsidiaries to the extent that the Company has an interest.

SHARES AND DEBENTURES

On 16 March 2015, the Company’s application for private placement of 17,961,474 new ordinary shares has been approved by Bursa Malaysia Securities Berhad (“Bursa Securities”).

On 12 June 2015, the Company increased its issued and paid up share capital by RM600,000, from RM17,961,474 to RM18,561,474 via issuance of the fi rst tranche of the private placement of 6,000,000 new ordinary shares of RM0.10 each at issue price of RM0.13 per share. The new ordinary shares issued during the fi nancial year rank pari passu in all respects with the existing ordinary shares of the Company.

ANNUAL REPORT 2015 31

Directors’ Report (Cont’d)

SHARES AND DEBENTURES (CONT’D)

On 7 September 2015, Bursa Securities has approved the Company’s application to extend the completion of the private placement to 15 March 2016.

There were no new issues of debentures during the fi nancial year.

TREASURY SHARES

There was no repurchase or resale of shares held as treasury shares by the Company during the fi nancial year. Relevant details on the treasury shares are disclosed in Note 22 to the fi nancial statements.

OTHER STATUTORY INFORMATION

(a) Before the statements of fi nancial position and statements of comprehensive income 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 satisfi ed themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and

(ii) to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.

(b) At the date of this report, the Directors are not aware of any circumstances which would render:

(i) the amount written off for bad debts or the allowance for doubtful debts in the fi nancial statements of the Group and of the Company inadequate to any substantial extent; and

(ii) the values attributed to the current assets in the fi nancial statements of the Group and of the Company misleading.

(c) At the date of this report, the Directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

(d) At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or fi nancial statements of the Group and of the Company which would render any amount stated in the fi nancial statements misleading.

(e) As at the date of this report, there does not exist:

(i) any charge on the assets of the Group or of the Company which has arisen since the end of the fi nancial year which secures the liabilities of any other person; or

(ii) any contingent liability of the Group or of the Company which has arisen since the end of the fi nancial year.

(f) In the opinion of the Directors:

(i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the fi nancial year which will or may affect the ability of the Group or of the Company to meet their obligations as and when they fall due; and

(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the fi nancial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the fi nancial year in which this report is made.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)32

Directors’ Report (Cont’d)

SIGNIFICANT EVENTS

Signifi cant events are disclosed in Notes 34 and 35 to the fi nancial statements.

AUDITORS

The auditors, ECOVIS AHL PLT, have expressed their willingness to continue in offi ce.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 23 October 2015.

Lim Seng Boon Chew Shin Yong, Mark

Petaling Jaya

ANNUAL REPORT 2015 33

Statement by DirectorsPursuant to Section 169(15) of the Companies Act, 1965

Statutory DeclarationPursuant to Section 169(16) of the Companies Act, 1965

We, Lim Seng Boon and Chew Shin Yong, Mark, being two of the Directors of M3 Technologies (Asia) Berhad, do hereby state that, in the opinion of the Directors, the accompanying fi nancial statements set out on pages 36 to 96 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the fi nancial position of the Group and of the Company as at 30 June 2015 and of their fi nancial performance and cash fl ows for the year then ended.

The supplementary information set out in Note 38 to the fi nancial statements have been prepared in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profi ts or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 23 October 2015.

Lim Seng Boon Chew Shin Yong, Mark

I, Lim Seng Boon, being the Director primarily responsible for the fi nancial management of M3 Technologies (Asia) Berhad, do solemnly and sincerely declare that the accompanying fi nancial statements set out on pages 36 to 96, 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.

Subscribed and solemnly declared by the abovenamed Lim Seng Boon at Kuala Lumpur in the Federal Territory on 23 October 2015. Lim Seng Boon

Before me,

Commissioner for Oaths

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)34

Independent Auditors’ Reportto the members of M3 Technologies (Asia) Berhad (Incorporated in Malaysia) Company No: 482772 - D

Report on the fi nancial statements

We have audited the fi nancial statements of M3 Technologies (Asia) Berhad, which comprise the statements of fi nancial position as at 30 June 2015 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash fl ows of the Group and of the Company for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes, as set out on pages 36 to 96.

Directors’ responsibility for the fi nancial statements

The Directors of the Company are responsible for the preparation of fi nancial 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 fi nancial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation of fi nancial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

An audit also includes evaluating the appropriateness accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the fi nancial statements have been properly drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the fi nancial position of the Group and of the Company as at 30 June 2015 and of their fi nancial performance and cash fl ows for the year then ended.

Emphasis of Matter

We draw attention to Note 7 and 17 to the fi nancial statements on recognition of investment income from profi t guarantee agreement amounting to RM1,854,663. The Directors have recognised a provision for investment income as the Directors are certain that circumstances would not change materially so as to require reversal of the investment income. Our opinion is not modifi ed in respect of this matter.

ANNUAL REPORT 2015 35

Independent Auditors’ Report(Cont’d)to the members of M3 Technologies (Asia) Berhad (Incorporated in Malaysia) Company No: 482772 - D

Report on other legal and regulatory requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries for which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

(b) We have considered the fi nancial statements and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 16 to the fi nancial statements, being fi nancial statements that have been included in the consolidated fi nancial statements.

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

(d) The auditors’ reports on the fi nancial statements of the subsidiaries were not subject to any qualifi cation and did not include any comment required to be made under Section 174(3) of the Act. Other than those subsidiaries with emphasis of matter paragraph in the auditors’ reports disclosed in Note 16 to the fi nancial statements, the auditors’ reports on the fi nancial statements of the remaining subsidiaries did not contain any qualifi cation or any adverse comments made under Section 174(3) of the Companies Act, 1965 in Malaysia.

Other reporting responsibilities

The supplementary information set out in Note 38 on page 97 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the fi nancial 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 Profi ts 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.

ECOVIS AHL PLT Chua Kah ChunFirm No: AF 001825 Approval No: 2696/09/17 (J)Chartered Accountants Chartered Accountant

Kuala Lumpur23 October 2015

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)36

Statements of Comprehensive Income For the fi nancial year ended 30 June 2015

Group Company Note 2015 2014 2015 2014 RM RM RM RM Revenue 5 35,287,643 38,885,293 13,700,672 11,674,170Cost of sales 6 (22,153,472) (26,105,299) (10,816,915) (8,622,258)

Gross profi t 13,134,171 12,779,994 2,883,757 3,051,912 Other income 7 2,846,869 587,606 1,886,516 3,213,160 Administrative expenses (16,190,140) (17,727,720) (5,631,542) (7,006,812)Selling and marketing expenses (1,444,251) (3,164,845) (26,458) (149,860)Other expenses (924,710) (626,072) (84,425) -Finance costs 8 (39,196) (47,333) (33,658) (39,036) Impairment loss on goodwill 15 - (5,844,078) - -Impairment loss on investment in subsidiaries 16 - - (759,153) (3,410,661)Impairment loss on interest in a joint venture 18 - (728,775) - (951,649)Impairment loss of amount due from subsidiaries 20 - - (6,477,203) - Share of results of an associate 17 (230,879) (27,400) - - Share of results of a joint venture - (15,027) - -

Loss before tax 9 (2,848,136) (14,813,650) (8,242,166) (5,292,946) Income tax expense 12 (626,083) (557,658) (42,900) (130,823)

Loss net of tax (3,474,219) (15,371,308) (8,285,066) (5,423,769) Other comprehensive loss: Foreign currency translation 2,453,332 (240,127) - -

Total comprehensive loss for the year (1,020,887) (15,611,435) (8,285,066) (5,423,769) Loss attributable to: Owners of the Company (4,364,799) (15,543,374) (8,285,066) (5,423,769)Non-controlling interests 890,580 172,066 - -

(3,474,219) (15,371,308) (8,285,066) (5,423,769) Total comprehensive loss attributable to: Owners of the Company (2,526,925) (15,804,522) (8,285,066) (5,423,769)Non-controlling interests 1,506,038 193,087 - -

(1,020,887) (15,611,435) (8,285,066) (5,423,769)

Earnings per share attributable to owners of the Company (sen) Basic/Diluted 13 (2.46) (8.78)

The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements.

ANNUAL REPORT 2015 37

Statements of Financial PositionAs at 30 June 2015

The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements.

Group Company Note 2015 2014 2015 2014 RM RM RM RM Assets Non-current assets Property, plant and equipment 14 4,199,485 4,453,189 2,197,024 2,244,666Intangible assets 15 3,705,918 3,059,625 525,836 863,861Investment in subsidiaries 16 - - 23,343,695 24,102,848Investment in an associate 17 5,740,159 5,971,038 5,998,438 5,998,438Interest in a joint venture 18 - - - -

13,645,562 13,483,852 32,064,993 33,209,813

Current assets Inventories 19 3,161,104 6,896,466 291,406 76,992Trade and other receivables 20 23,572,854 16,037,009 6,640,827 9,458,208Tax refundable 782,589 582,952 1,075 18,963Deposits, cash and bank balances 21 3,512,060 5,657,141 248,185 992,749

31,028,607 29,173,568 7,181,493 10,546,912

Total assets 44,674,169 42,657,420 39,246,486 43,756,725 Equity and liabilities Equity attributable to owners of the Company Share capital 22 18,561,474 17,961,474 18,561,474 17,961,474Share premium 22 4,572,702 4,392,702 4,572,702 4,392,702Treasury shares 22 (565,639) (565,639) (565,639) (565,639)Other reserves 23 1,624,749 (213,125) 16,074,240 16,074,240Retained earnings/(accumulated loss) 24 2,588,255 6,953,054 (7,352,783) 932,283

26,781,541 28,528,466 31,289,994 38,795,060Non-controlling interests 4,904,852 3,398,814 - -

Total equity 31,686,393 31,927,280 31,289,994 38,795,060

Non-current liabilities Loans and borrowings 25 588,479 724,796 557,719 682,069Deferred tax liabilities 27 55,336 129,853 - -Provision for gratuity 10 9,889 34,602 - -

653,704 889,251 557,719 682,069

Current liabilities Loans and borrowings 25 159,997 482,971 122,471 455,985Trade and other payables 28 12,155,731 9,337,936 7,276,302 3,823,611Income tax payable 18,344 19,982 - -

12,334,072 9,840,889 7,398,773 4,279,596

Total liabilities 12,987,776 10,730,140 7,956,492 4,961,665

Total equity and liabilities 44,674,169 42,657,420 39,246,486 43,756,725

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)38

Statements of Changes in EquityFor the fi nancial year ended 30 June 2015

A

ttri

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to

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of

the

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any

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(N

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(N

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(N

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(N

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RM

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28,5

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3,39

8,81

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Loss

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- -

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(4,3

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890,

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- 1,

837,

874

- 1,

837,

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615,

458

2,45

3,33

2 To

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-

- -

1,83

7,87

4 (4

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506,

038

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,561

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4,

572,

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(565

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2,58

8,25

5 26

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(15,

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(1

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172,

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(15,

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- -

- (2

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(240

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) To

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(261

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ANNUAL REPORT 2015 39

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Statements of Changes in Equity (Cont’d) For the fi nancial year ended 30 June 2015

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2015

18

,561

,474

4,

572,

702

(565

,639

) 16

,074

,240

(7

,352

,783

) 31

,289

,994

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)40

Statements of Cash Flows For the fi nancial year ended 30 June 2015

Group Company Note 2015 2014 2015 2014 RM RM RM RM Cash fl ows from operating activities Loss before tax (2,848,136) (14,813,650) (8,242,166) (5,292,946)Adjustments for: Allowance for impairment losses on receivables 9 360,246 502,072 - 23,526 Allowance for amount due from subsidiaries 9 - - 6,477,203 133,336 Amortisation of intangible assets 9 1,036,496 2,064,825 857,985 1,212,049 Bad debts written off 9 91,715 2,222 - - Depreciation of property, plant and equipment 9 1,129,216 1,164,749 318,058 318,681 Dividend income 7 - - - (1,308,230) Impairment loss on goodwill 9 - 5,844,078 - - Impairment loss on investment in subsidiaries 9 - - 759,153 3,410,661 Impairment loss on interest in a joint venture - 728,775 - 951,649 Investment income from profi t guarantee 7 (1,854,663) - - - Interest expense 8 39,196 47,333 33,658 39,036 Interest income 7 (7,882) (76,608) (4,399) (50,945) Inventories write-down 9 522,489 374,621 - - Inventories write-off 9 515,504 898,386 - - Gain on disposal of property, plant and equipment 9 (3,954) (59,061) (3,954) - Property, plant and equipment written off 9 174,623 20,326 6,222 - Product development expenditure written off 9 - 345,572 - - Provision for gratuity 10 20,867 34,602 - - Share of results in an associate 230,879 27,400 - - Share of results in a joint venture - 15,027 - - Short-term accumulating compensated absences 10 - 9,200 - - Unrealised (gain)/loss on foreign exchange 9 (27,407) (13,076) 65,072 (7,211)

Operating (loss)/profi t before working capital changes (620,811) (2,883,207) 266,832 (570,394) Decrease/(increase) in inventories 2,697,369 2,555,221 (214,414) (76,992)Decrease/(increase) in trade and other receivables (6,146,834) 413,998 (4,803,186) 1,132,130Decrease in amount due from subsidiaries - - 1,078,292 3,415,036Increase in trade and other payables 2,795,015 1,134,007 3,452,691 1,214,982

Cash fl ows (used in)/ generated from operations (1,275,261) 1,220,019 (219,785) 5,114,762 Interest paid (39,196) (47,333) (33,658) (39,036)Interest received 7,882 72,803 4,399 50,945Income tax refund 17,888 653,932 17,888 54,048Income tax paid (920,472) (1,191,704) (42,900) (136,912)

Net cash (used in)/from operating activities (2,209,159) 707,717 (274,056) 5,043,807

ANNUAL REPORT 2015 41

Statements of Cash Flows (Cont’d)For the fi nancial year ended 30 June 2015

Group Company Note 2015 2014 2015 2014 RM RM RM RM Cash fl ows from investing activities Acquisition of an associate 17 - (5,998,438) - (5,998,438)Dividends received from a subsidiary - - - 1,308,230Proceeds from disposal of property, plant and equipment 73,387 234,572 - -Proceeds from transfer of property, plant and equipment - - 25,922 42,699Acquisition of intangible assets 15 (1,284,285) (2,458,519) (519,960) (821,578)Purchase of property, plant and equipment 14 (873,411) (1,051,532) (298,606) (311,143)

Net cash used in investing activities (2,084,309) (9,273,917) (792,644) (5,780,230)

Cash fl ows from fi nancing activities Dividends paid by a subsidiary to non-controlling interests - (924,395) - -Proceeds from issuance of share capital 22 780,000 - 780,000 -Repayment of letters of credit – net (338,696) (2,299,594) (338,696) (2,299,594)Repayment of term loan – net (57,493) (54,284) (57,493) (54,284)Repayment of fi nance lease obligations (63,102) (253,673) (61,675) (58,712)

Net cash from/(used in) fi nancing activities 320,709 (3,531,946) 322,136 (2,412,590)

Net decrease in cash and cash equivalents (3,972,759) (12,098,146) (744,564) (3,149,013)Effects of foreign exchange rate 1,827,678 (250,798) - -Cash and cash equivalents as at 1 July 5,657,141 18,006,085 992,749 4,141,762

Cash and cash equivalents as at 30 June 21 3,512,060 5,657,141 248,185 992,749

The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)42

Notes to the Financial StatementsFor the fi nancial year ended 30 June 2015

1. Corporate information

The Company is a public limited liability company incorporated and domiciled in Malaysia, and is listed on the ACE Market of Bursa Malaysia Securities Berhad. The registered offi ce of the Company is located at Third Floor, No. 79 (Room A), Jalan SS21/60, Damansara Utama, 47400 Petaling Jaya, Selangor Darul Ehsan. The principal place of business of the Company is located at Unit 608, 707 & 1007, Block A, Pusat Dagangan Phileo II, 15, Jalan 16/11, 46350 Petaling Jaya, Selangor Darul Ehsan.

The Company is principally engaged in the provision of mobile solutions.

The principal activities of the subsidiaries are set out in Note 16 to the fi nancial statements.

There were no signifi cant changes in the nature of these activities during the fi nancial year.

The fi nancial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors on 23 October 2015.

2. Basis of preparation

The fi nancial statements of the Group and 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.

The fi nancial statements of the Group and of the Company have been prepared on the historical cost basis unless otherwise indicated in the summary of signifi cant accounting policies as disclosed in Note 3 to the fi nancial statements.

The fi nancial statements are presented in Ringgit Malaysia (“RM”), which is the Company’s functional currency. All information is presented in RM, except when otherwise indicated.

(a) Basis of consolidation

The consolidated fi nancial statements comprise the fi nancial statements of the Company and its subsidiaries including the equity accounting of interest in an associate and a joint venture as at 30 June 2015. Further details on the accounting policies for interest in joint venture are disclosed in Note 3(c) to the fi nancial statements.

The fi nancial statements of the Company’s subsidiaries and joint venture are prepared for the same reporting date as the Company, using consistent accounting policies for transactions and events in similar circumstances.

Subsidiaries are consolidated from the date of acquisition or the date of incorporation, being the date on which

the Company obtains control and continue to be consolidated until the date that such control effectively ceases. Control is achieved when the Group is exposed to, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• The contractual arrangement with the other vote holders of the investee;

• Rights arising from other contractual arrangements; and

• The Group’s voting rights and potential voting rights.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.

ANNUAL REPORT 2015 43

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

2. Basis of preparation (cont’d)

(a) Basis of consolidation (cont’d)

All intra-group assets and liabilities, equity, income, expenses, cash fl ows and unrealised gains and losses relating to transactions between members of Group are eliminated in full on consolidation.

Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company, and is presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of fi nancial position, separately from equity attributable to owners of the parent.

Changes in the company owners’ ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to refl ect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the parent.

If the Group loses control over a subsidiary, it derecognises the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts, the carrying amount of any non-controlling interest in the former subsidiary, the cumulative foreign exchange translation differences recorded in equity, the fair value of the consideration received, the fair value of any investment retained in the former subsidiary, any surplus or defi cit in the profi t or loss and the parent’s share of components previously recognised in other comprehensive income to profi t or loss or retained earnings, if required in accordance with other MFRSs.

The accounting policies for business combination and goodwill are disclosed in Note 3(a) and 3(e) to the fi nancial statements.

(b) Standards, amendments to published standards and interpretations that are effective

The new accounting standards, amendments, and improvement to published standards and interpretations that are effective for the Group’s and the Company’s fi nancial year beginning on 1 July 2014 are as follows:

• Amendment to MFRS 132 ‘Offsetting Financial Assets and Financial Liabilities’ • Amendments to MFRS 10, MFRS 12 and MFRS 127 ‘Investment Entities’ • Amendments to MFRS 136 ‘Recoverable Amount Disclosures for Non-Financial Assets’ • Annual Improvements to MFRS 2010 - 2012 Cycle • Annual Improvements to MFRSs 2011 - 2013 Cycle

The adoption of the above new accounting standards, amendments and improvement to published standards and interpretations did not have a signifi cant fi nancial impact on the Group and the Company and did not result in substantial changes to the Group’s accounting policies.

(c) Standards, amendments to published standards and interpretations issued but not yet effective

The following are standards, amendments to published standards and interpretations issued by Malaysian Accounting Standard Board (MASB), but not yet effective, up to the date of issuance of the Company’s fi nancial statements. The Group and the Company intend to adopt these standards, amendments to published standards and interpretations, if applicable, when they become effective in the following fi nancial year:

(i) Financial year beginning on or after 1 July 2016• Amendments to MFRS 11 ‘Accounting for Acquisition of Interests in Joint Operations’• Amendments to MFRS 127 ‘Equity Method in Separate Financial Statements’• Amendments to MFRS 10 and MFRS 128 ‘Sale or Contribution of Assets between and Investor and its

Associate or Joint Venture’• Annual Improvements to MFRSs 2012-2014• Amendments to MFRS 10, 12 and 128 ‘Investment Entities – Applying the Consolidation Exception’• Amendments to MFRS 101 ‘Presentation of Financial Statements – Disclosure Initiative’

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)44

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

2. Basis of preparation (cont’d)

(c) Standards, amendments to published standards and interpretations issued but not yet effective (cont’d)

(ii) Financial year beginning on or after 1 July 2018• MFRS 15 ‘Revenue from Contracts with Customers’• MFRS 9 ‘Financial Instruments’

The Group is in the process of assessing the full impact of the above standards, amendments to published standards and interpretations on the fi nancial statements of the Group and the Company in the year of application.

3. Summary of signifi cant accounting policies

(a) Business combination

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interest in the acquiree at fair value or at the proportionate share of the acquiree’s identifi able net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses. When the Group acquires a business, it assesses the fi nancial assets and fi nancial liabilities assumed for appropriate classifi cation and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profi t or loss. It is then considered in the determination of goodwill. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classifi ed as an asset or liability that is a fi nancial instrument and within the scope of MFRS 139 ‘Financial Instruments: Recognition and Measurement’ (“MFRS 139”) is measured at fair value with changes in fair value recognised either in profi t or loss or as a change to other comprehensive income. If the contingent consideration is not within the scope of MFRS 139, it is measured in accordance with the appropriate MFRSs. Contingent consideration that is classifi ed as equity is not remeasured and subsequent settlement is accounted for within equity.

(b) Investment in subsidiaries

A subsidiary is an entity controlled by the Company. Control exists when the Company has the power over the entity, is exposed to or has rights to variable returns from its involvement with the entity and has the ability to use its power over the entity to affect the amount of the company’s return. In assessing control, potential voting rights that presently are exercisable are taken into account.

In the Company’s separate fi nancial statements, investment in a subsidiary is accounted for at cost less accumulated impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 3(g). On disposal of such investment, the difference between the net disposals proceed and its carrying amount is recognised as gain or loss on disposal in profi t or loss.

(c) Interest in associate and joint venture

An associate is an entity over which the Group or the Company has signifi cant infl uence. Signifi cant infl uence is the power to participate in the fi nancial and operating policy decisions of the investee, but is not control or joint control over those policies.

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

ANNUAL REPORT 2015 45

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

3. Summary of signifi cant accounting policies (cont’d)

(c) Interest in associate and joint venture (cont’d) The considerations made in determining signifi cant infl uence or joint control is similar to those necessary to

determine control over subsidiaries.

The Group’s interest in its associate and joint venture are accounted for using the equity method. The associate and joint venture are equity accounted for from the date the Group gains signifi cant infl uence or joint control until the date the Group ceases to have signifi cant infl uence over the associate or joint control over the joint venture.

Under the equity method, the interest in associate and joint venture are initially recognised at cost. The carrying amount of the investment is adjusted for changes in the Group’s share of net assets of the associate or joint venture since the acquisition date.

The consolidated statement of comprehensive income refl ects the Group’s share of the results of operation of the associate and joint venture. Any change in other comprehensive income of those investees is presented as part of the Group’s statement of comprehensive income. Where there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of such changes and discloses this, when applicable, in the consolidated statement of changes in equity. Unrealised gains and losses resulting from the transactions between Group and the associate and joint venture are eliminated to the extent of the interest in associate or joint venture. The aggregate of the Group’s share of profi t or loss in associate and joint venture is shown on the face of the consolidated statement of comprehensive income outside operating profi t. The Group’s share of profi t or loss in associate and joint venture represents profi t or loss after tax and non-controlling interests in the associate or joint venture.

When the Group’s share of losses in an associate or joint venture equals or exceeds its interest in the associate or joint venture, including any long term interests that, in substance, form part of the Group’s net interest in the associate or joint venture, the Group does not recognise further losses, unless it has incurred obligations or made payment on behalf of the associate or joint venture.

After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate and joint venture. The Group determines at each reporting date whether there is any objective evidence that the interest in the associate and joint venture are impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between recoverable amount of the associate or joint venture and its carrying amount, then recognises the amount in the ‘share of profi t of associate or share of profi t on joint venture’ on the face of the consolidated statement of comprehensive income.

Upon loss of signifi cant infl uence over the associate or joint control over the joint venture, the Group measures

and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of signifi cant infl uence or joint control and the fair value of the retained investment and proceeds from disposals is recognised in the consolidated statement of comprehensive income.

(d) Foreign currencies

(i) Functional and presentation currency

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

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)46

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

3. Summary of signifi cant accounting policies (cont’d)

(d) Foreign currencies (cont’d)

(ii) Foreign currency transactions and balances

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised in profi t or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassifi ed from equity to profi t or loss of the Group on disposal of the foreign operation.

Exchange differences arising on the translation of non-monetary items carried at fair value are included in profi t or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity.

(iii) Foreign operations

The assets and liabilities of foreign operations are translated into RM at the rate of exchange ruling at the reporting date and income and expenses are translated at exchange rates at the dates of the transactions. The exchange differences arising on the translation are taken directly to other comprehensive income through the foreign currency translation reserve. On disposal of a foreign operation, the cumulative amount recognised in other comprehensive income and accumulated in equity under foreign currency translation reserve relating to that particular foreign operation is recognised in the profi t or loss.

(e) Intangible assets

(i) Goodwill

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests over the net identifi able assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the gain is recognised in profi t or loss. After initial recognition, goodwill is measured at cost less accumulated impairment losses. Goodwill is reviewed for impairment annually, or more frequently, if events or changes in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired is allocated, from the acquisition date, to each of the Group’s cash-generating units (“CGU”) that are expected to benefi t from the synergies of the combination.

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

ANNUAL REPORT 2015 47

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

3. Summary of signifi cant accounting policies (cont’d)

(e) Intangible assets (cont’d)

(i) Goodwill (cont’d)

Where goodwill forms part of a CGU and part of the operation within that CGU 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 circumstance is measured based on the relative fair values of the operations disposed of and the portion of the CGU retained.

Goodwill and fair value adjustments arising on the acquisition of foreign operation on or after 1 January 2005 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the reporting date in line with the accounting policy set out in Note 3(d) to the fi nancial statements.

Goodwill and fair value adjustments which arose on acquisitions of foreign operation before 1 January 2005 are deemed to be assets and liabilities of the entity rather than assets and liabilities of the foreign operation translated at the exchange rate prevailing at the date of acquisition.

(ii) Product development expenditure All research costs are recognised in the profi t or loss as incurred.

Expenditure incurred on projects to develop new products is capitalised and deferred only when the Group or the Company can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefi ts, the availability of resources to complete the project and the ability to measure reliably the expenditure during the development. Product development expenditures which do not meet these criteria are expensed when incurred.

Development costs, considered to have fi nite useful lives, are stated at cost less any impairment losses and are amortised using the straight-line basis over the commercial lives of the underlying products not exceeding 2 years. Impairment is assessed whenever there is an indication of impairment and the amortisation period and method are also reviewed at least at each statement of fi nancial position date.

(iii) Intellectual properties Intellectual properties comprise digital content rights and licenses acquired and are considered to have

fi nite useful life due to the technological risks and advancement inherent in the industry. Intellectual properties of the Group or the Company are amortised on the straight-line basis over their estimated useful lives of 10 years.

(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 benefi ts associated with the item will fl ow to the Group or the Company and the cost of the item can be measured reliably.

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

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)48

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

3. Summary of signifi cant accounting policies (cont’d)

(f) Property, plant and equipment (cont’d)

When signifi cant parts of property, plant and equipment are required to be replaced in intervals, the Group or the Company recognises such parts as individual assets with specifi c useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the property, plant and equipment as a replacement if the recognition criteria are satisfi ed. All other repair and maintenance costs are recognised in profi t or loss as incurred.

Depreciation is computed on the straight-line basis over the estimated useful lives of the assets, at the following annual rates:

Buildings 2% Computers and software 10% - 50% Furniture, fi xtures, fi ttings and offi ce equipment 15% - 50% Motor vehicles 10% - 20% Renovation 10% - 33%

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

The residual value, useful life and depreciation method are reviewed at each fi nancial year end, and adjusted prospectively, if appropriate.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefi ts are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in profi t or loss in the year the asset is derecognised.

(g) Impairment of non-fi nancial assets

The Group and the Company assess at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group or the Company makes an estimate of the asset’s recoverable amount.

For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifi able cash fl ows (CGU). An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value-in-use. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount.

In assessing value-in-use, the estimated future cash fl ows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset. In determining fair value less costs to sell, recent market transactions are taken into account. If no such transactions can be identifi ed, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

Impairment losses are recognised in profi t or loss except for assets that have been previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.

An impairment loss in respect of goodwill is not reversed. For other fi nancial assets, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation or amortisation, had no impairment loss been recognised previously. Such reversal is recognised in profi t or loss.

ANNUAL REPORT 2015 49

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

3. Summary of signifi cant accounting policies (cont’d)

(h) Financial assets

(i) Initial recognition and subsequent measurement

Financial assets are recognised in the statements of fi nancial position when, and only when, the Group or the Company becomes a party to the contractual provisions of the fi nancial instrument, i.e. the trade date.

When fi nancial assets are recognised initially, they are measured at fair value plus directly attributable transaction costs, except in the case of fi nancial assets recorded at fair value through profi t or loss.

The Group and the Company determine the classifi cation of their fi nancial assets at initial recognition, and the categories include fi nancial assets at fair value through profi t or loss, loans and receivables, held-to-maturity investments and available-for-sale fi nancial assets.

(1) Financial assets at fair value through profi t or loss (“FVTPL”) Financial assets are classifi ed as FVTPL 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 fi nancial assets acquired principally for the purpose of selling in the near term.

For fi nancial assets designated at FVTPL, upon initial recognition the following criteria must be met:

• the designation eliminates or signifi cantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognising gains or losses on them on a different basis.

• the assets and liabilities are part of a group of fi nancial assets, fi nancial liabilities or both, which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.

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

Financial assets at FVTPL could be presented as current or non-current. Financial assets that are held primarily for trading purposes are presented as current whereas fi nancial assets that are not held primarily for trading purposes are presented as current or non-current based on the settlement date.

The Group and the Company have not designated any fi nancial assets as FVTPL.

(2) Loans and receivables

Non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market are classifi ed as loans and receivables. Loans and receivables are initially recognised at fair value including direct and incremental transaction costs.

Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any accumulated impairment losses. Gains and losses are recognised in profi t or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.

Loans and receivables are classifi ed as current assets, except for those having maturity dates later than 12 months after the reporting date which are classifi ed as non-current.

Financial assets classifi ed in this category include cash and bank balances, trade receivables, sundry receivables, tax refundable, refundable deposits and advances due from staff.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)50

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

3. Summary of signifi cant accounting policies (cont’d)

(h) Financial assets (cont’d)

(i) Initial recognition and subsequent measurement (cont’d)

(3) Held-to-maturity (“HTM”) investments

Non-derivative fi nancial assets with fi xed or determinable payments and fi xed maturity are classifi ed as HTM investments when the Group or the Company has the positive intention and ability to hold the investment to maturity.

Subsequent to initial recognition, HTM investments are measured at amortised cost using the effective interest method. Gains and losses are recognised in profi t or loss when the HTM investments are derecognised or impaired, and through the amortisation process.

HTM investments are classifi ed as non-current assets, except for those having maturity within 12 months after the reporting date which are classifi ed as current.

The Group and the Company have not designated any fi nancial assets as HTM investments.

(4) Available-for-sale (“AFS”) fi nancial assets

AFS fi nancial assets are fi nancial assets that are designated as AFS or are not classifi ed in any of the three preceding categories.

After initial recognition, AFS fi nancial assets are subsequently measured at fair value. Any gains or losses from changes in fair value of the fi nancial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest income calculated using the effective interest method are recognised in profi t or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassifi ed from equity to profi t or loss as a reclassifi cation adjustment when the fi nancial asset is derecognised. Dividends on AFS fi nancial assets are recognised in profi t or loss when the Group or the Company’s right to receive payment is established.

Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.

AFS fi nancial assets are classifi ed as non-current assets unless they are expected to be realised within 12 months after the reporting date.

The Group and the Company have not designated any fi nancial assets as AFS fi nancial assets.

(ii) Derecognition

A fi nancial asset is derecognised when the contractual right to receive cash fl ows from the asset has expired and the Group or the Company has transferred its rights to receive cash fl ows from the fi nancial asset or has assumed an obligation to pay the received cash fl ows in full without material delay to a third party under a “pass through” arrangement; and either:

(1) the Group or the Company has transferred substantially all the risks and rewards of the fi nancial asset, or

(2) the Group or the Company has neither transferred nor retained substantially all the risks and rewards of the fi nancial asset, but has transferred control of the fi nancial asset.

ANNUAL REPORT 2015 51

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

3. Summary of signifi cant accounting policies (cont’d)

(h) Financial assets (cont’d)

(ii) Derecognition (cont’d)

When the Group or the Company has transferred its rights to receive cash fl ows from a fi nancial asset or have entered into a “pass through” arrangement and has neither transferred nor retained substantially all the risks and rewards of the fi nancial asset nor transferred control of the fi nancial asset, the fi nancial asset is recognised to the extent of the Group or the Company’s continuing involvement in the fi nancial asset. In that case, the Group or the Company also recognises an associated fi nancial liability. The transferred fi nancial asset and associated fi nancial liability are measured on a basis that refl ect the rights and obligations that the Group or the Company has retained.

On derecognition of a fi nancial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profi t or loss.

Regular way purchases or sales are purchases or sales of fi nancial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of fi nancial assets are recognised or derecognised on the trade date i.e., the date that the Group or the Company commits to purchase or sell the asset.

(iii) Impairment of fi nancial assets

The Group and the Company assess at each reporting date whether there is any objective evidence that a fi nancial asset is impaired. A fi nancial asset or a group of fi nancial assets is deemed to be impaired if and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred loss event) and that loss event(s) has an impact on the estimated future cash fl ows of the fi nancial asset or the group of fi nancial assets that can be reliably estimated.

(1) Trade and other receivables and other fi nancial assets carried at amortised cost

To determine whether there is objective evidence that an impairment loss on fi nancial assets has been incurred, the Group and the Company consider factors such as the probability of insolvency or signifi cant fi nancial diffi culties of the debtor and default or signifi cant delay in payments. For certain categories of fi nancial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group’s or the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the fi nancial asset’s original effective interest rate. The impairment loss is recognised in profi t or loss.

The carrying amount of the fi nancial asset is reduced by the impairment loss directly for all fi nancial assets with the exception of receivables, where the carrying amount is reduced through the use of an allowance account. When a receivable becomes uncollectible, it is written off against the allowance account.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profi t or loss.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)52

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

3. Summary of signifi cant accounting policies (cont’d)

(h) Financial assets (cont’d)

(iv) Reclassifi cation of fi nancial assets

The Group and the Company may choose to reclassify non-derivative assets out of the fi nancial assets at FVTPL category, in rare circumstances, where the fi nancial assets are no longer held for the purpose of selling or repurchasing in the short term. In addition, the Group and the Company may also choose to reclassify fi nancial assets that would meet the defi nition of loans and receivables out of the fi nancial assets at FVTPL or AFS fi nancial assets if the Group and the Company have the intention and ability to hold the fi nancial assets for the foreseeable future or until maturity.

Reclassifi cations are made at fair value as at the reclassifi cation date, whereby the fair value becomes the new cost or amortised cost, as applicable.

For a fi nancial asset reclassifi ed out of the AFS fi nancial assets, any previous gain or loss on that asset that has been recognised in equity is amortised to the profi t or loss over the remaining life of the asset using the effective interest method. Any difference between the new amortised cost and the expected cash fl ows is also amortised over the remaining life of the asset using the effective interest method. If the asset is subsequently determined to be impaired, then the amount recorded in equity is recycled to the profi t or loss.

Reclassifi cation is at the election of management, and is determined on an instrument-by-instrument basis. The Group and the Company do not reclassify any fi nancial instrument into the FVTPL category after initial recognition.

(i) Cash and cash equivalents

For the purpose of the statements of cash fl ows, cash and cash equivalents comprise cash at bank and on hand and demand deposits. These also include bank overdrafts that form an integral part of the Group’s cash management.

(j) Inventories

Inventories comprise merchandise held for resale and are stated at the lower of cost and net realisable value.

Cost is determined using the fi rst in, fi rst out method. The cost includes cost of purchase and other incidental expenses in bringing the items into their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale.

(k) Provisions for liabilities

Provisions for liabilities are recognised when the Group or the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outfl ow 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 refl ect the current best estimate. If it is no longer probable that an outfl ow 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 refl ects, where appropriate, the risks specifi c to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a fi nance cost.

ANNUAL REPORT 2015 53

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

3. Summary of signifi cant accounting policies (cont’d)

(l) Financial liabilities

(i) Initial recognition and subsequent measurement

Financial liabilities are classifi ed according to the substance of the contractual arrangements entered into and the defi nitions of a fi nancial liability. All fi nancial liabilities are measured initially at fair value plus directly attributable costs, except in the case of fi nancial liabilities at FVTPL.

Financial liabilities, within the scope of MFRS 139, are recognised in the statement of fi nancial position when, and only when, the Group or the Company becomes a party to the contractual provisions of the fi nancial instrument. Financial liabilities are classifi ed as either fi nancial liabilities at fair value through profi t or loss or other fi nancial liabilities.

(1) Financial liabilities at FVTPL

Financial liabilities at FVTPL include fi nancial liabilities held for trading and fi nancial liabilities designated upon initial recognition as at FVTPL.

Financial liabilities held for trading include derivatives entered into by the Group or the Company that do not meet the hedge accounting criteria. Derivative liabilities are initially measured at fair value and subsequently stated at fair value, with any resultant gains or losses recognised in profi t or loss. Net gains or losses on derivatives include exchange differences.

The Group and the Company have not designated any fi nancial liabilities at FVTPL.

(2) Other fi nancial liabilities

The Group’s and the Company’s other fi nancial liabilities include payables and other liabilities.

Payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

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

Financial liabilities are classifi ed as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

(ii) Derecognition

A fi nancial liability is derecognised when the obligation under the liability is extinguished. When an existing fi nancial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modifi ed, such an exchange or modifi cation is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profi t or loss.

(m) Borrowing costs

Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale.

All other borrowing costs are recognised in profi t or loss in the period they are incurred. Borrowing costs consist of interest and other costs that the Group or the Company incurred in connection with the borrowing of funds.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)54

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

3. Summary of signifi cant accounting policies (cont’d)

(n) Employee benefi ts

(i) Short-term benefi ts

Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees. 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. Short-term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

(ii) Defi ned contribution plans

The Group participates in the national pension schemes as defi ned by the laws of the countries in which it has operations. The Malaysian companies in the Group make contributions to the Employee Provident Fund (EPF) in Malaysia, a defi ned contribution pension scheme. Contributions to defi ned contribution pension schemes are recognised as an expense in the period in which the related service is performed.

(iii) Provision for gratuity

The Group makes provision for payments to be made to employees upon the end of or termination of their employment contract, or retirement in its subsidiary in Dubai in accordance to the requirements of Federal Law No. 8 of 1980 Regulating Labour Relations of the United Arab Emirates.

Remeasurements of the provision for gratuity are recognised in profi t or loss as employee benefi ts expense in the period in which they are incurred.

(o) Finance lease – the Group or the Company as lessee

Assets acquired by way of hire purchase or fi nance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and accumulated impairment losses. The corresponding liability is included in the statement of fi nancial position as fi nance lease obligations. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practical to determine; otherwise, the entity’s incremental borrowing rate is used. Any initial direct costs are also added to the carrying amount of such assets.

Lease payments are apportioned between the fi nance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability for each accounting period. Finance charges are charged to profi t or loss.

Leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable certainty that the Group or the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life and the lease term.

(p) Operating lease - the Group or the Company as lessee

Operating lease payments are recognised as an expense in profi t or loss on the straight-line basis over the lease term. The aggregate benefi t of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on the straight-line basis.

Assets leased out under operating leases are presented on the statement of fi nancial position according to the nature of the assets. Rental income from operating leases is recognised on the straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on the straight-line basis over the lease term.

ANNUAL REPORT 2015 55

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

3. Summary of signifi cant accounting policies (cont’d)

(q) Revenue

Revenue is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Group or the Company and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable.

(i) Sale of goods

Revenue from sale of goods is recognised net of value-added taxes, rebates, returns and trade discounts upon the transfer of signifi cant risk and rewards of ownership of the goods to the customer. Revenue is not recognised to the extent where there are signifi cant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

(ii) Revenue from services

Revenue from services rendered is recognised net of service taxes, rebates and discounts as and when the services are performed and delivered to customers.

(iii) Interest income

Interest income is recognised using the effective interest method.

(iv) Dividend income

Dividend income is recognised when the Group’s or the Company’s right to receive payment is established.

(r) Income taxes

(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 substantively enacted by the reporting date.

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

(ii) Deferred tax

Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for fi nancial reporting purposes.

Deferred tax liabilities are recognised for all temporary differences, except where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profi t nor taxable profi t or loss.

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profi t will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profi t nor taxable profi t or loss.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)56

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

3. Summary of signifi cant accounting policies (cont’d)

(r) Income taxes (cont’d)

(ii) Deferred tax (cont’d)

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profi t will allow the deferred tax assets to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profi t or loss is recognised outside profi t or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

(iii) Sales tax

Revenues, expenses and assets are recognised net of the amount of sales tax except:

• Where the sales tax incurred in a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• Receivables and payables that are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of fi nancial position.

(s) Segment reporting

For management purposes, the Group is organised into operating segments based on business segments which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess segment performance. Additional disclosures on each of these segments are shown in the fi nancial statements, including the factors used to identify the reportable segments and the measurement basis of segment information.

(t) Share capital and share issuance expenses

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

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

ANNUAL REPORT 2015 57

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

3. Summary of signifi cant accounting policies (cont’d)

(u) Treasury shares

When shares of the Company, that have not been cancelled, recognised as equity are reacquired, the amount of consideration paid is recognised directly in equity. Reacquired shares are classifi ed as treasury shares and presented as a deduction from total equity. No gain or loss is recognised in profi t or loss on the purchase, sale, issue 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.

(v) Contingencies

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

Contingent liabilities and assets are not recognised but disclosed in the notes to the fi nancial statements, unless the possibility of an outfl ow and infl ow of resources embodying economic benefi ts is remote. When a change in the probability of an outfl ow occurs so that the outfl ow is probable, it will then be recognised as provision.

(w) Related parties

A party is related to an entity if:

(i) directly, or indirectly through one or more intermediaries, the party:• control, is controlled by, or is under common control with, the entity (this includes parents, subsidiaries

and fellow subsidiaries);• has an interest in the entity that gives it signifi cant infl uence over the entity; or • has joint control over the entity;

(ii) the party is an associate of the entity;

(iii) the party is a joint venture in which the entity is a venturer;

(iv) the party is a member of the key management personnel of the entity or its parent;

(v) the party is a close member of the family of any individual referred to in (i) or (iv);

(vi) the party is an entity that is controlled, joint controlled or signifi cantly infl uenced by, or for which signifi cant voting power in such entity resides with, directly or indirectly, any individual referred to in (iv) or (v); or

(vii) the party is a post-employment benefi t plan for the benefi t of employees of the entity, or of any entity that is a related party of the entity.

(viii) the party, or any member of a group of which the party is a part of, provides key management personnel services to the Company.

Close members of the family of an individual are those family members who may be expected to infl uence, or be infl uenced by, that individual in their dealings with the entity.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)58

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

4. Signifi cant accounting judgements, estimates and assumptions

The preparation of the Group’s and the Company’s fi nancial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. Although these estimates and judgements are based on management’s best knowledge of current events and actions, actual results may differ. Uncertainty about these judgements, estimates and assumptions could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability in the future.

The most signifi cant uses of judgements, estimates and assumptions are as follows:

(a) Going concern

The Group’s and the Company’s management have made an assessment of its ability to continue as a going concern and is satisfi ed that they have the resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast signifi cant doubt upon the Group’s and the Company’s ability to continue as a going concern. Therefore, the fi nancial statements continue to be prepared on the going concern basis.

(b) Impairment of investments in subsidiaries and interest in an associate and a joint venture

Investments in subsidiaries and interest in an associate and a joint venture are tested for impairment at each reporting date.

If indicators are present, these investments are subjected to impairment review. The impairment review comprises a comparison of the carrying amounts of the investment and the investment’s estimated recoverable amounts.

Judgements made by management in the process of applying the Group’s accounting policies in respect of investment in subsidiaries and interest in associates and joint ventures are as follows:

(i) The Group determines whether its investments are impaired following certain indications of impairment such as, amongst others, prolonged shortfall between market value and carrying amount, signifi cant changes with adverse effects on the investment and deteriorating fi nancial performance of the investment due to observed changes in the economic environment; and

(ii) Depending on their nature and the location in which the investments relate to, judgments are made by management to select suitable methods of valuation such as, amongst others, discounted future cash fl ows or estimated fair value based on quoted market price of the most recent transactions.

Once a suitable method of valuation is selected, management makes certain assumptions concerning the future to estimate the recoverable amount of the specifi c individual investment. These assumptions and other key sources of estimation uncertainty at the reporting date, may have a signifi cant risk of causing a material adjustment to the carrying amounts of the investments within the next fi nancial year. Depending on the specifi c individual investment, assumptions made by management may include, amongst others, assumptions on expected future cash fl ows, revenue growth, terminal value, discount rate used for purposes of discounting future cash fl ows which incorporates the relevant risks and expected future outcome based on certain past trends. Management believes that no reasonably expected possible change in the key assumptions described above would cause the carrying amounts of the investments to materially exceed their recoverable amounts.

(c) Impairment and depreciation of property, plant and equipment

Property, plant and equipment are tested for impairment at each reporting date. This requires an estimation of the recoverable amounts of the CGU which the property, plant and equipment are allocated.

When value-in-use calculations are undertaken, management must estimate the expected future cash fl ows from the asset or CGU and choose a suitable discount rate in order to calculate the present value of those cash fl ows. Changes to the assumptions used by management such as utilisation rate, revenue growth, expected future cash fl ows and discount rate used may impact recoverable amounts of property, plant and equipment.

ANNUAL REPORT 2015 59

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

4. Signifi cant accounting judgements, estimates and assumptions (cont’d)

(c) Impairment and depreciation of property, plant and equipment (cont’d)

The cost of property, plant and machinery is depreciated on the straight-line basis over the assets’ useful lives. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.

(d) Amortisation of intangible assets

The determination of estimated economic useful life of intangible assets requires management’s judgements which includes analysing the circumstances, industry and market practice. Changes in the expected level of usage and technological development could impact the economic useful lives and therefore, future amortisation charges.

(e) Impairment of loans and receivables

The Group assesses at each reporting date whether there is any objective evidence that a fi nancial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or signifi cant fi nancial diffi culties of the debtor and default or signifi cant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash fl ows are estimated based on historical loss experience for assets with similar credit risk characteristics.

(f) Deferred tax and income tax

The Group is subject to income taxes in many jurisdictions and signifi cant judgment is required in estimating the provision for income taxes. There are many transactions and interpretations of tax law for which the fi nal outcome will not be established until sometime later. Liabilities for taxation are recognised based on estimates of whether additional taxes will be payable. The estimation process includes seeking advice on the tax treatments where appropriate. Where the fi nal liability for taxation is different from the amounts that were initially recorded, the differences will affect the income tax and deferred tax provisions in the period in which the estimate is revised or the fi nal liability is established.

Deferred tax assets are recognised in respect of tax losses to the extent that it is probable that future taxable profi t will be available against which the losses can be utilised. Judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profi ts, together with future tax planning strategies.

At the reporting date, no deferred tax liability has been recognised for taxes that would be payable on the undistributed earnings of certain foreign subsidiaries. The Group has determined that these undistributed earnings of the subsidiaries will not be distributed in the foreseeable future.

(g) Inventories write-down

Inventories of the Group are written down to net realisable value based on analysis of the ageing profi le and taking into account the expected sales patterns and expected selling prices of individual items held in inventory. Changes in future sales patterns and expected selling prices of those inventories may have an impact on the amount of write down recorded.

(h) Investment income from profi t guarantee agreement

The profi t guarantee agreement provides for an income guarantee to the Company if the associate of the Company, Fotokem Sdn Bhd (“Fotokem”) has not achieved a minimum audited net profi t for fi nancial years 2014 and 2015. The Directors have recognised an investment income receivable from the profi t guarantee agreement using the management accounts of the Fotokem for fi nancial year 2015, as the Directors are certain that circumstances would not change materially so as to require reversal of the investment income.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)60

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

5. Revenue

Revenue of the Group represents the invoiced value of goods sold and services rendered, net of sales tax or service tax, trade discounts and returns. Revenue of the Company represents the invoiced value of services, net of service tax and trade discounts.

6. Cost of sales

Cost of sales of the Company consists mainly of Short Message Service (SMS) and leased-line charges, royalty expenses, amortisation of product development expenditure, other incidental costs incurred for the provision of mobile solutions and the cost of inventories.

Cost of sales of the Group includes costs of products, carriage inwards, import duty, goods and service tax and other incidental cost incurred in connection to sale of goods.

7. Other income

Group Company 2015 2014 2015 2014 RM RM RM RM Dividend income - - - 1,308,230 Gain on disposal of property, plant and equipment 3,954 59,061 3,954 - Realised gain on foreign exchange 820,858 417,446 - 40,259 Interest income 7,882 76,608 4,399 50,945 Service fee charged to subsidiaries - - - 1,791,000 Investment income from profi t guarantee (Note 17) 1,854,663 - 1,854,663 - Other income 159,512 34,491 23,500 22,726 2,846,869 587,606 1,886,516 3,213,160

8. Finance costs

Group Company 2015 2014 2015 2014 RM RM RM RM

Interest expense: - Finance lease obligations 13,811 19,534 8,273 11,237 - Term loan 25,385 27,799 25,385 27,799 39,196 47,333 33,658 39,036

ANNUAL REPORT 2015 61

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

9. Loss before tax

The following items have been included in arriving at loss before tax:

Group Company 2015 2014 2015 2014 RM RM RM RM Allowance for impairment losses on receivables (Note 20) 360,246 502,072 - 23,526 Allowance for impairment of amount due from subsidiaries (Note 20) - - 6,477,203 133,336 Amortisation of intangible assets (Note 15) 1,036,496 2,064,825 857,985 1,212,049 Auditors’ remuneration: Statutory audits - auditors of the Company 98,000 98,000 77,000 79,000 - other auditors 77,401 77,803 - - - (over)/under provision in previous fi nancial year (771) 288 - - Other services - auditors of the Company - 3,500 - 3,500 - other auditors 7,505 1,314 - - Bad debts written off 91,715 2,222 - - Depreciation of property, plant and equipment (Note 14) 1,129,216 1,164,749 318,058 318,681 Employee benefi ts expense (Note 10) 10,205,474 12,997,230 2,322,662 4,491,470 Impairment loss on goodwill (Note 15) - 5,844,078 - - Impairment loss on interest in a joint venture (Note 18) - 728,775 - 951,649 Impairment loss on investment in subsidiaries (Note 16) - - 759,153 3,410,661 Inventories write-down 522,489 374,621 - - Inventories write-off 515,504 898,386 - - Lease payments for premises 443,338 979,772 - 83,725 Net loss/(gain) on foreign exchange - realised 125,853 212,209 19,352 (33,048) Net (gain)/loss on foreign exchange - unrealised (27,407) (13,076) 65,072 (7,211) Directors’ remuneration (Note 11) 1,284,749 1,348,422 976,547 1,062,280 Property, plant and equipment written off 174,623 20,326 6,222 - Product development expenditure written off - 345,572 - -

10. Employee benefi ts expense

Group Company 2015 2014 2015 2014 RM RM RM RM Wages and salaries 10,321,083 12,884,930 2,450,523 4,617,713 Social security contributions 270,189 237,869 23,199 31,352 Contribution to defi ned contribution plan 820,863 1,125,111 286,656 518,571 Short-term accumulating compensated absences - 9,200 - - Provision for gratuity 20,867 34,602 - - Other staff related expenses 133,560 149,518 82,245 145,411 11,566,562 14,441,230 2,842,623 5,313,047 Less: Capitalised in product development expenditure (1,361,088) (1,444,000) (519,961) (821,577) 10,205,474 12,997,230 2,322,662 4,491,470

Included in employee benefi ts expense of the Group and the Company are executive directors’ remuneration amounting to RM1,108,749 (2014: RM1,204,422) and RM800,547 (2014: RM918,280) respectively.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)62

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

11. Directors’ remuneration

Group Company 2015 2014 2015 2014 RM RM RM RM

Directors of the Group and Company Executive: Salaries and other emoluments 989,934 1,095,402 713,651 818,784 Defi ned contribution plan and social security contributions 118,815 109,020 86,896 99,496 1,108,749 1,204,422 800,547 918,280 Non-executive: Fees 168,000 144,000 168,000 144,000 Other emoluments 8,000 - 8,000 - 1,284,749 1,348,422 976,547 1,062,280

The number of Directors of the Company whose total remuneration during the fi nancial year fall within the following bands is analysed below:

Number of directors 2015 2014

Executive: RM50,001 - RM100,000 - 1 RM250,001 - RM300,000 1 - RM400,001 - RM450,000 - 1 RM450,001 - RM500,000 1 - Above RM500,000 - 1 Non-executive: Below RM50,000 6* 3

*Including two (2) Directors who have retired during the fi nancial year.

12. Income tax expense

The major components of income tax expense are:

Group Company 2015 2014 2015 2014 RM RM RM RM Current tax: Foreign income tax 707,223 434,688 - - Foreign withholding tax 43,584 145,169 42,900 130,823 750,807 579,857 42,900 130,823 Overprovision in prior year: Foreign income tax (47,860) (6,757) - - 702,947 573,100 42,900 130,823 Deferred tax (Note 27): Relating to origination and reversal of temporary differences (76,864) (15,442) - - Income tax expense recognised in profi t or loss 626,083 557,658 42,900 130,823

ANNUAL REPORT 2015 63

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

12. Income tax expense (cont’d)

The reconciliation between tax expense and the product of accounting loss multiplied by the applicable corporate tax rate for the years ended 30 June 2015 and 2014 are as follows:

Group Company 2015 2014 2015 2014 RM RM RM RM Loss before tax (2,848,136) (14,813,650) (8,242,166) (5,292,946)

Taxation at Malaysian statutory tax rate of 25% (2014: 25%) (712,034) (3,703,413) (2,060,542) (1,323,237) Adjustments: Different tax rates in other countries (517,532) 266,254 - - Income not subject to tax (499,169) (343,677) (465,080) (339,794) Expenses not deductible fo tax purposes 569,534 2,687,029 2,296,058 1,663,031 Deferred tax assets not recognised during the year 1,815,968 1,528,495 229,564 - Under/(over) provision of income tax in prior year 2,595 (6,757) - - Withholding tax on dividend and other income received 43,585 145,169 42,900 130,823 Origination and reversal of temporary differences (76,864) (15,442) - - Income tax expense recognised in profi t or loss 626,083 557,658 42,900 130,823

Domestic current income tax is calculated at the Malaysian statutory tax rate of 25% (2014: 25%) of the estimated assessable loss for the year. For year assessment 2016, corporate tax rate will be 24%. Consequently, deferred tax assets and liabilities are measured using this rate.

Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. The above reconciliation is prepared by aggregating separate reconciliation for each national jurisdiction.

13. Earnings per share

Basic earnings per share is calculated by dividing loss for the year attributable to owners of the Company by the weighted average number of ordinary shares in issue during the fi nancial year, excluding treasury shares held by the Company.

The following table refl ects the loss and share data used in the computation of basic earnings per share for the years ended 30 June:

Group 2015 2014 Loss attributable to owners of the Company (RM) (4,364,799) (15,543,374) Weighted average number of ordinary shares in issue* 177,557,240 177,057,240 Basic earnings per share (sen) (2.46) (8.78)

* The weighted average number of ordinary shares takes into account the weighted average effect of changes in

treasury shares transactions during the year.

The Company does not have any outstanding convertible instruments. Accordingly, the diluted earnings per share is presented as equal to the basic earnings per share.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)64

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

14. Property, plant and equipment

Furniture fi xture Computers fi ttings and and offi ce Motor Group Buildings software equipment vehicles Renovation Total RM RM RM RM RM RM

Cost At 1 July 2013 1,240,000 14,778,060 2,578,070 1,015,798 714,523 20,326,451 Additions - 731,833 164,708 2,117 152,874 1,051,532 Disposals - (23,208) (62,159) (203,528) (50,897) (339,792) Write-offs - (45,478) (28,936) (3,670) (2,370) (80,454) Exchange differences - (152,922) (15,345) 2,953 (12,439) (177,753) At 30 June 2014/ 1 July 2014 1,240,000 15,288,285 2,636,338 813,670 801,691 20,779,984 Additions - 812,554 42,831 43,541 2,219 901,145 Disposals - (65,987) (36,802) - - (102,789) Write-offs - (17,379) (175,883) - (185,696) (378,958) Exchange differences - 634,944 121,871 58,096 37,844 852,755 At 30 June 2015 1,240,000 16,652,417 2,588,355 915,307 656,058 22,052,137 Accumulated depreciation At 1 July 2013 92,006 13,095,970 1,766,983 173,268 380,311 15,508,538 Depreciation charge for the year (Note 9) 24,800 688,634 259,442 115,605 76,268 1,164,749 Disposals - (939) (54,166) (89,573) (19,602) (164,280) Write-offs - (34,841) (20,955) (3,395) (937) (60,128) Exchange differences - (118,783) (925) 313 (2,689) (122,084) At 30 June 2014/ 1 July 2014 116,806 13,630,041 1,950,379 196,218 433,351 16,326,795 Depreciation charge for the year (Note 9) 24,800 682,843 265,898 93,544 62,131 1,129,216 Disposals - (15,741) (17,615) - - (33,356) Write-offs - (6,702) (120,141) - (77,492) (204,335) Exchange differences - 539,019 54,262 16,253 24,798 634,332 At 30 June 2015 141,606 14,829,460 2,132,783 306,015 442,788 17,852,652 Net carrying amount At 30 June 2014 1,123,194 1,658,244 685,959 617,452 368,340 4,453,189 At 30 June 2015 1,098,394 1,822,957 455,572 609,292 213,270 4,199,485

ANNUAL REPORT 2015 65

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

14. Property, plant and equipment (cont’d)

Furniture fi xture Computers fi ttings and and offi ce Motor Company Buildings software equipment vehicles Renovation Total RM RM RM RM RM RM

Cost At 1 July 2013 1,240,000 10,959,898 523,859 368,449 341,497 13,433,703 Additions - 276,018 21,426 - 13,699 311,143 Disposals - (74,827) (1,450) - - (76,277) Write-offs - (20,453) (390) - - (20,843) At 30 June 2014 / 1 July 2014 1,240,000 11,140,636 543,445 368,449 355,196 13,647,726 Additions - 297,246 1,360 - - 298,606 Disposal - (26,645) - - - (26,645) Write-offs - (8,000) - - - (8,000) At 30 June 2015 1,240,000 11,403,237 544,805 368,449 355,196 13,911,687 Accumulated depreciation At 1 July 2013 92,006 10,327,554 433,134 33,775 252,331 11,138,800 Depreciation charge for the year (Note 9) 24,800 210,509 23,844 36,845 22,683 318,681 Disposals - (32,128) (1,450) - - (33,578) Write-offs - (20,453) (390) - - (20,843) At 30 June 2014 / 1 July 2014 116,806 10,485,482 455,138 70,620 275,014 11,403,060 Depreciation charge for the year (Note 9) 24,800 215,959 22,863 36,845 17,591 318,058 Disposal - (4,677) - - - (4,677) Write-offs - (1,778) - - - (1,778) At 30 June 2015 141,606 10,694,986 478,001 107,465 292,605 11,714,663 Net carrying amount At 30 June 2014 1,123,194 655,154 88,307 297,829 80,182 2,244,666 At 30 June 2015 1,098,394 708,251 66,804 260,984 62,591 2,197,024

The Group acquired a motor vehicle of RM44,431 (2014: Nil) of which RM27,734 was fi nanced through fi nance lease. The carrying amount of motor vehicles held under fi nance lease at the reporting date is RM383,649 and RM260,984 (2014: RM383,331 and RM297,829) for the Group and the Company respectively. These motor vehicles are charged to fi nancial institutions for fi nance lease disclosed in Note 28 to the fi nancial statements.

The Company’s building with a carrying amount of RM628,100 (2014: RM641,300) is pledged to a licensed bank to secure the Company’s term loan borrowings as disclosed in Note 25 to the fi nancial statements.

The cash outfl ow on acquisition of property, plant and equipment amounted to RM873,411 (2014: RM1,051,532) and RM298,606 (2014: RM311,143) for the Group and the Company respectively.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)66

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

15. Intangible assets

Product development Intellectual Goodwill expenditure property Total RM RM RM RM

Group Cost At 1 July 2013 14,744,633 12,358,679 747,424 27,850,736 Additions - 1,760,022 698,497 2,458,519 Write-offs - (1,147,436) - (1,147,436) Exchange differences - 12,555 34,407 46,962

At 30 June 2014/ 1 July 2014 14,744,633 12,983,820 1,480,328 29,208,781 Additions - 1,073,596 210,689 1,284,285 Exchange differences - 1,335,175 550,554 1,885,729

At 30 June 2015 14,744,633 15,392,591 2,241,571 32,378,795

Accumulated amortisation and impairment At 1 July 2013 8,900,555 9,889,727 238,183 19,028,465 Amortisation (Note 9) - 1,894,701 170,124 2,064,825 Write-offs - (801,864) - (801,864) Impairment during the fi nancial year (Note 9) 5,844,078 - - 5,844,078 Exchange differences - 4,216 9,436 13,652

At 30 June 2014/ 1 July 2014 14,744,633 10,986,780 417,743 26,149,156 Amortisation (Note 9) - 857,985 178,511 1,036,496 Exchange differences - 1,090,378 396,847 1,487,225

At 30 June 2015 14,744,633 12,935,143 993,101 28,672,877

Net carrying amount At 30 June 2014 - 1,997,040 1,062,585 3,059,625 At 30 June 2015 - 2,457,448 1,248,470 3,705,918

ANNUAL REPORT 2015 67

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

15. Intangible assets (cont’d)

Product development expenditure RM Company Cost At 1 July 2013 10,838,738 Additions 821,578

At 30 June 2014/ 1 July 2014 11,660,316 Additions 519,960

At 30 June 2015 12,180,276

Accumulated amortisation At 1 July 2013 9,584,406 Amortised during the year (Note 9) 1,212,049

At 30 June 2014/ 1 July 2014 10,796,455 Amortised during the year (Note 9) 857,985

At 30 June 2015 11,654,440

Net carrying amount At 30 June 2014 863,861 At 30 June 2015 525,836

(a) Amortisation of product development expenditure and intellectual properties

Amortisation of the product development expenditure and intellectual properties (consisting of digital content rights and licenses acquired) of the Group and the Company have been included in the cost of sales.

(b) Goodwill – impairment loss recognised

Management of the Group carried out a review of the recoverable amounts of goodwill on an annual basis. Additional impairment loss of RM Nil (2014: RM5,844,078) was recognised. The recoverable amount was based on value-in-use and was determined at the cash-generating unit (“CGU”) level. In determining value-in-use for the CGUs, the discount rate applied to cash fl ow projections is the Group’s internal rate of return.

16. Investments in subsidiaries Company 2015 2014 RM RM Unquoted shares at cost 38,621,883 38,621,883 Less: Accumulated impairment losses (15,278,188) (14,519,035) 23,343,695 24,102,848

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)68

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

16. Investments in subsidiaries (cont’d)

Details of the subsidiaries are as follows:

Country of Effective equity incorporation interest Name of subsidiaries 2015 2014 % % M3 Asia Sdn. Bhd. (“M3Asia”) ++,∞ Malaysia 100 100 M3 Online Sdn. Bhd. +,∞ Malaysia 100 100 M3 Mobile Technologies (S) Pte. Ltd. *,+,∞ Singapore 100 100 M3 Asia Distribution (S) Pte. Ltd. *,++, ∞ Singapore 60 60 Messaging Technologies (H.K.) Limited (“M3Tech HK”) *,+,++,∞ Hong Kong, 100 100 SAR

M3 Technologies (Thailand) Co., Ltd. *,+,++ Thailand 95 95 M3 Technologies Pakistan (Private) Limited (“M3Tech Pakistan”) *,+ Pakistan 60 60 PT Surya Genta Perkasa *,+,++ Indonesia 80 80 Virtue Partners International Limited *,+++ British Virgin 100 100 Islands Held under M3Asia M3Shoppe (Asia) Sdn. Bhd. (“M3Shoppe”) ++++,∞ Malaysia 100 100 Held under M3Tech HK M3 Technologies (Xiamen) Co., Ltd (“M3Tech Xiamen”) *,+ The People’s 95 95 Republic of China M3 Technologies (Shen Zhen) Company Limited *,++ The People’s 100 100 Republic of China Way Way Innovations Company Limited *,# Hong Kong, SAR 100 100 Held under M3Tech Pakistan M3 Technologies Middle East FZE *,+, ++ United Arab Emirates 60 60 Held under M3Tech Xiamen M3 Interactive (Shen Zhen) Co., Ltd *,+++++ The People’s 95 95 Republic of China

* Audited by fi rm of auditors other than Ecovis AHL PLT+ Involved in provision of mobile solutions++ Involved in distribution and retailing of fast-moving electronic goods and related products+++ Investment holding company++++ Involved in e-Commerce+++++ Involved in provision of e-Educational services# Dormant∞ The auditors’ report of these subsidiaries contains an emphasis of matter relating to the appropriateness of

the going concern basis of accounting used in the preparation of their fi nancial statements.

ANNUAL REPORT 2015 69

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

16. Investments in subsidiaries (cont’d)

(a) Impairment assessment of investments in subsidiaries

Investments in subsidiaries are tested for impairment when such indicators exist. This requires an estimation of the value-in-use of these investments. In making this assessment, amongst others, the management has taken into consideration the projected long-term growth in both provision for mobile solutions activities as well as the distribution and retailing activities of the respective subsidiaries of the Group.

Based on the impairment assessment performed, an additional provision for impairment of subsidiaries of RM759,153 (2014: RM3,410,661) has been made in the current year in respect of the investment in M3 Asia Sdn Bhd, M3 Online Sdn Bhd and PT Surya Genta Perkasa as the estimated recoverable amounts of the investments are lower than their carrying amounts.

17. Investment in an associate

Group 2015 2014 RM RM Unquoted shares, at cost 5,998,438 5,998,438 Share of post-acquisition reserves ^ (258,279) (27,400) 5,740,159 5,971,038

Company 2015 2014 RM RM Unquoted shares, at cost 5,998,438 5,998,438

^ Share of post-acquisition reserves is based on the unaudited management accounts of the associate for the fi nancial year ended 30 June 2014 and 2015.

The details of the associate, which is incorporated in Malaysia, is as follow:

Effective equity Name of joint venture interest Principal activities 2015 2014 % %

Fotokem Sdn. Bhd. (“Fotokem”) 23.993 23.993 Trading in photographic, digital, electronic and ICT goods & services

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)70

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

17. Investment in an associate (cont’d)

The summarised fi nancial information below represent amounts in the equity-accounted associate’s management accounts:

30.6.2015 30.4.2014 (Unaudited) (Audited) RM RM

Statement of fi nancial position Non-current assets 10,253,997 12,151,248 Current assets 36,342,039 33,005,120 Non-current liabilities (2,206,735) (2,212,805) Current liabilities (21,154,283) (16,080,088) Net assets 23,235,018 26,863,475

Statement of comprehensive income Revenue 6,629,794 80,073,092 Total expenses (7,591,071) (78,569,991) Finance cost (19,911) (387,503) (Loss)/profi t after tax/total comprehensive (loss)/ income for the year (962,277) (280,548)

The Company had on 22 November 2013 signed a profi t guarantee agreement with the vendor (a shareholder of Fotokem) for an aggregate audited profi t after taxation of RM7 million for the year ended 30 April 2014 and 30 April 2015.

During the fi nancial year, the Company has made accrual for investment income from the profi t guarantee agreement of RM1,854,663 in proportion to its equity interest in the associate, as disclosed in Note 7 to the fi nancial statements. The estimation of the investment income is based on the unaudited management accounts of the associate as at 30 June 2015, as the Directors are certain that circumstances would not change materially so as to require reversal of the investment income.

18. Interest in a joint venture

Group 2015 2014 RM RM Share of net assets of joint venture: Unquoted shares, at cost 46 46 Advances to a joint venture 1,037,184 951,603 Share of post-acquisition reserves (237,997) (218,360) 799,233 733,289 Exchange differences (70,458) (4,514) 728,775 728,775 Less: Allowance for impairment loss (728,775) (728,775) - -

ANNUAL REPORT 2015 71

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

18. Interest in a joint venture (cont’d)

Company 2015 2014 RM RM Unquoted shares, at cost 46 46 Advances to a joint venture 951,603 951,603 Less: Allowance for impairment loss (951,649) (951,649) - -

The details of the joint venture, which is incorporated in Singapore, are as follow:

Effective equity Name of joint venture interest Principal activities 2015 2014 % %

M3 Interactive (S) Pte. Ltd. 20 20 Provision of e-Educational services

On 12 June 2012, M3 Interactive has fi led a statement of claim in the High Court of Singapore against an ex-director of M3 Interactive and Nexgen Studio Pte Ltd (“Nexgen”) (Nexgen is a joint venturer) (“the defendants”). The suit was settled on 11 September 2011 via a settlement agreement, in which the defendants have agreed to pay a settlement sum of SGD120,000 to the Company. An amount of SGD50,000 has been received by M3 Interactive to date.

One the terms of the settlement was that M3 Interactive would buy over Nexgen’s share in M3 Interactive. The value of the shares is to be determined by a valuer. The parties subsequently appointed an independent valuer, BDO Pte Ltd, (“BDO”) to carry out the valuation. On 14 August 2014, the Company has removed BDO from the exercise due to disputes between parties involved. The Company has urged the defendants to do the same and provided alternative to the defendants to appoint another independent valuer to carry out the valuation. As at the date of this report, the defendants have not responded.

The Company had provided total net advances of RM951,603 (2014: RM951,603) to M3 Interactive. The advances are unsecured, interest free, and were to fund the working capital requirements of M3 Interactive. In view of recent developments and the fact that M3 Interactive has ceased operations, the Company has impaired the entire amount of the advances.

Summarised fi nancial information in respect of the joint venture is as set out below:

Group 2015 2014 RM RM Statement of fi nancial position Non-current assets 17,425 22,044 Current assets 2,136 192,634 Current liabilities (1,492,096) (1,328,792) Statement of comprehensive income Income - 28,461 Expenses 58,464 (103,597)

The auditors of M3 Interactive have qualifi ed the accounts of the joint venture for the fi nancial year ended 30 June 2015 on grounds of going concern. This has no impact on the Group as interest in the joint venture and all amounts receivable from the joint venture have been fully impaired.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)72

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

19. Inventories

Group 2015 2014 RM RM

At cost/net realisable value: Trading inventories 2,780,047 6,722,377 Goods in transit 381,057 174,089 3,161,104 6,896,466

Company 2015 2014 RM RM

At cost: Trading inventories 149,053 76,992 Goods in transit 142,353 - 291,406 76,992

During the year, the amount of inventories recognised as an expense in cost of sales of the Group was RM10,411,416 (2014: RM14,112,094).

Trading inventories are written down to their net realisable values when their marketable selling prices are below their purchased costs. In such circumstances, their expected marketable selling prices are the best available measure of their net realisable values.

20. Trade and other receivables

Group 2015 2014 RM RM Trade receivables Third parties 19,814,815 14,121,566 Less: Allowance for impairment losses (1,481,886) (1,009,248) 18,332,929 13,112,318 Other receivables Amount due from an associate 49,557 108,834 Prepayments 931,077 890,758 Sundry receivables 2,564,199 457,484 Deposits 1,597,662 1,309,682 Advances due from staff 97,430 157,933 5,239,925 2,924,691 Trade and other receivables 23,572,854 16,037,009

ANNUAL REPORT 2015 73

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

20. Trade and other receivables (cont’d)

Group 2015 2014 RM RM

Allowance for impairment losses At 1 July (1,009,248) (507,176) Addition during the fi nancial year (360,246) (502,072) Exchange differences (112,392) - At 30 June (1,481,886) (1,009,248) Trade and other receivables 23,572,854 16,037,009 Less: Prepayments (747,087) (890,758) 22,825,767 15,146,251 Add: Deposits, cash and bank balances (Note 21) 3,512,060 5,657,141 Total fi nancial assets classifi ed as loans and receivables 26,337,827 20,803,392

Company 2015 2014 RM RM

Trade receivables Third parties 4,700,028 1,900,649 Less: Allowance for impairment losses (52,603) (52,603) 4,647,425 1,848,046 Other receivables Due from subsidiaries 7,108,776 8,187,069 Prepayments 106,168 60,516 Sundry receivables 1,893,663 - Deposits 248,117 248,696 9,356,724 8,496,281 Less: Allowance for impairment losses (7,363,322) (886,119) 1,993,402 7,610,162 Trade and other receivables 6,640,827 9,458,208 Allowance for impairment losses At 1 July (938,722) (781,860) Addition during the fi nancial year (6,477,203) (156,862) Reversal during the fi nancial year - - At 30 June (7,415,925) (938,722) Trade and other receivables 6,640,827 9,458,208 Less: Prepayments (106,168) (60,516) 6,534,659 9,397,692 Add: Deposits, cash and bank balances (Note 21) 248,185 992,749 Total fi nancial assets classifi ed as loans and receivables 6,782,844 10,390,441

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)74

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

20. Trade and other receivables (cont’d)

Trade receivables of the Group and the Company are non-interest bearing and normal credit term range from 30 to 90 days (2014: 30 to 90 days). They are recognised at their original invoiced amounts which represent their fair values on initial recognition.

The Group and the Company have no signifi cant concentration of credit risk that may arise from exposure to a single customer or to groups of customers, other than as disclosed in Note 31(a).

Amounts due from subsidiaries are mainly in respect of advances. These balances are unsecured and are repayable on demand. Amounts which have been impaired relate mainly to amount due from subsidiaries, due to unfavourable market conditions and demand.

Ageing analysis of trade receivables

The ageing analysis of the Group’s and Company’s trade receivables is as follows:

Group Company 2015 2014 2015 2014 RM RM RM RM

Neither past due nor impaired 9,923,388 4,604,892 4,080,439 619,978

1 to 30 days past due not impaired 1,339,994 1,549,367 64,517 535,470 31 to 60 days past due not impaired 1,077,690 1,626,707 226,306 287,829 61 to 90 days past due not impaired 1,739,204 3,524,173 184,406 41,990 More than 91 days past due not impaired 4,252,653 1,807,179 91,757 362,779 8,409,541 8,507,426 566,986 1,228,068 Impaired and provided for 1,481,886 1,009,248 52,603 52,603 19,814,815 14,121,566 4,700,028 1,900,649

Receivables that are neither past due nor impaired

Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group or the Company.

None of the Group’s and the Company’s trade receivables that are neither past due nor impaired have been renegotiated during the fi nancial year.

Receivables that are past due but not impaired

The Group and the Company have trade receivables amounting to RM8,409,541 (2014: RM8,507,426) and RM566,986 (2014: RM1,228,068) respectively that are past due at the reporting date but not impaired. These receivables are unsecured.

The management of the Group believes that no impairment allowance is necessary in respect of these trade receivables. They are substantially companies with good collection track record and no recent history of default.

Receivables that are impaired

The Group and the Company have trade receivables amounting to RM1,481,886 (2014: RM1,009,248) and RM52,603 (2014: RM52,603) respectively that are past due and have been impaired.

ANNUAL REPORT 2015 75

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

21. Deposits, cash and bank balances

Group Company 2015 2014 2015 2014 RM RM RM RM Cash on hand and at banks 3,510,296 5,569,925 246,421 905,533 Deposits with licensed banks 1,764 87,216 1,764 87,216 3,512,060 5,657,141 248,185 992,749

Cash at banks are deposits held at call with licensed banks. Deposits with licensed banks at 30 June 2015 bore interests ranging from 2.87% to 3.15% (2014: 2.12% to 2.79%) per annum and have maturity periods ranging from 1 to 30 days (2014: 1 to 30 days) at fi nancial year end for both Group and Company.

22. Share capital, share premium and treasury shares

Number of ordinary shares of RM0.10 each Amount Total share Share capital Share capital capital and (Issued and Treasury (Issued and Share share Treasury fully paid) shares fully paid) Premium premium shares RM RM RM RM Group and Company At 1 July 2014 179,614,740 (2,557,500) 17,961,474 4,392,702 22,354,176 (565,639) Issuance of shares 6,000,000 - 600,000 180,000 780,000 -

At 30 June 2015 185,614,740 (2,557,500) 18,561,474 4,572,702 23,134,176 (565,639)

At 1 July 2013/ 30 June 2014 179,614,740 (2,557,500) 17,961,474 4,392,702 22,354,176 (565,639)

Number of ordinary shares of RM0.10 each Amount 2015 2014 2015 2014 RM RM

Authorised share capital At 1 July 2013/30 June 2014/30 June 2015 250,000,000 250,000,000 25,000,000 25,000,000

(a) Share capital

The holders of ordinary shares (except treasury shares) are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions and rank equally with regard to the Company’s residual assets.

(b) Treasury shares

This amount relates to the acquisition cost of treasury shares which are being held as treasury shares in accordance with Section 67A of the Companies Act, 1965.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)76

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

23. Other reserves

Group 2015 2014 RM RM Foreign currency translation reserve 1,624,749 (213,125)

Company 2015 2014 RM RM Special reserve 16,074,240 16,074,240

(a) Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the fi nancial 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 the functional currency of the foreign operation.

(b) Special reserve

In the fi nancial year ended 30 June 2005, the Company had obtained approval from the High Court of Malaya, pursuant to Section 64 of the Companies Act, 1965, to reduce the share premium account of the Company by RM16,074,240 and for such amount to be transferred to a Special Reserve Account and thereon to set off the goodwill arising from the acquisition of a wholly-owned subsidiary, Messaging Technologies (H.K.) Limited against the Special Reserve Account.

24. Retained earnings

Under the single tier system which came into effect from the year assessment 2008, companies are not required to have tax credit under Section 108 of the Income Tax Act, 1967 for dividend payment purposes. Under this system, tax on the Company’s profi ts is the fi nal tax and accordingly, any dividends to the shareholders are not subject to tax.

25. Loans and borrowings Group 2015 2014 RM RM Current Secured: Letters of credit - 338,696 Term loan 57,833 55,614 Obligation under fi nance leases (Note 28(b)) 102,164 88,661 159,997 482,971

ANNUAL REPORT 2015 77

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

25. Loans and borrowings (cont’d)

Group 2015 2014 RM RM

Non-current Secured: Term loan 472,832 532,544 Obligation under fi nance leases (Note 28(b)) 115,647 192,252 588,479 724,796 Total loans and borrowings Letters of credit - 338,696 Term loan 530,665 588,158 Obligation under fi nance leases (Note 28(b)) 217,811 280,913 748,476 1,207,767

Company 2015 2014 RM RM

Current Secured: Letters of credit - 338,696 Term loan 57,833 55,614 Obligation under fi nance leases (Note 29(b)) 64,638 61,675 122,471 455,985 Non-current Secured: Term loan 472,832 532,544 Obligation under fi nance leases (Note 29(b)) 84,887 149,525 557,719 682,069 Total loans and borrowings Letters of credit - 338,696 Term loan 530,665 588,158 Obligation under fi nance leases (Note 29(b)) 149,525 211,200 680,190 1,138,054

The Company is required to comply with certain covenants, including the submission of audited fi nancial statements to the lender bank within 6 months after the end of the fi nancial year. The Company must obtain lender bank approval prior to declaring dividend to shareholders.

The term loan of the Company which is obtained from a licensed bank is secured by First Party First Legal Deed of Assignment over a building of the Company as disclosed in Note 14 to the fi nancial statements.

Letters of credit facility is secured by a corporate guarantee from its subsidiary, M3 Asia Sdn. Bhd, as disclosed in note 26.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)78

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

25. Loans and borrowings (cont’d)

The loans and borrowings of the Group are denominated in the following currencies:

Group 2015 2014 RM RM Thai Baht 45,671 69,713 United States Dollar (“USD”) - 338,696 Indonesia Rupiah 22,615 - Ringgit Malaysia 680,190 799,358 748,476 1,207,767

The Company’s loans and borrowings are denominated in RM (2014: RM and USD).

The remaining maturities of the loans and borrowings as at 30 June are as follows:

Group Company 2015 2014 2015 2014 RM RM RM RM On demand or within 1 year 159,997 482,971 122,471 455,985 More than 1 year and less than 2 years 158,943 149,741 128,182 122,755 More than 2 years and less than 5 years 429,536 575,055 429,536 559,314 748,476 1,207,767 680,189 1,138,054

At reporting date, the applicable interest rates are as follows:

Group Company 2015 2014 2015 2014 % % % % Letters of credit - 1.20 - 1.20 Term loan 4.50 4.50 4.50 4.50 Obligation under fi nance leases 2.38-5.59 2.38-5.35 2.38-2.51 2.38-2.51

26. Corporate guarantee provided by a subsidiary

A subsidiary of the Group has provided corporate guarantee amounting to USD1.5 million to a fi nancial institution pertaining to a banking facility of the Company.

ANNUAL REPORT 2015 79

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

27. Deferred tax liabilities

Group 2015 2014 RM RM At 1 July 129,853 154,485 Recognised in profi t or loss (Note 12) (76,864) (15,442) Exchange differences 2,347 (9,190) At 30 June 55,336 129,853

Presented after appropriate offsetting as follows:

Group 2015 2014 RM RM Deferred tax assets - - Deferred tax liabilities 55,336 129,853 55,336 129,853

The component and movements of deferred tax liabilities and assets during the fi nancial year prior to offsetting are as follows:

Property, plant and equipment RM Group

As at 1 July 2014 129,853 Recognised in profi t or loss (76,864) Exchange differences 2,347 As at 30 June 2015 55,336 As at 1 July 2013 154,485 Recognised in profi t or loss (15,442) Exchange differences (9,190) As at 30 June 2014 129,853

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)80

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

27. Deferred tax liabilities (cont’d)

Deferred tax assets have not been recognised in respect of the following items:

Group Company 2015 2014 2015 2014 RM RM RM RM Unused tax losses and capital allowances 2,674,204 691,278 825,040 691,278 Other (taxable) temporary differences, net 6,464,048 (192,038) 5,278,954 (192,038) Amounts not recognised, net 9,138,252 499,240 6,103,994 499,240

The deferred tax assets arising from unutilised tax losses and capital allowances have only been recognised to the extent that the Group and the Company have suffi cient taxable temporary differences available, as these arose from the Company and certain subsidiaries with recent history of losses and it is not probable that future taxable profi t will be available against which the unused tax losses and unabsorbed capital allowances can be utilised. The unused tax losses and unabsorbed capital allowances are available indefi nitely for offsetting against future taxable profi ts, subject to no substantial change in shareholding under the Income Tax Act, 1967 and guidelines issued by the tax authority.

At reporting date, no deferred tax liability (2014: Nil) has been recognised for taxes that would be payable on the undistributed earnings of certain foreign subsidiaries. The Group has determined that these undistributed earnings of the subsidiaries will not be distributed in the foreseeable future. Such temporary differences for which no deferred tax liability has been recognised aggregate to RM17,151,647 (2014: RM12,279,619). The deferred tax liability relating to such temporary differences which is not recognised is estimated to be RM1,715,165 (2014: RM1,247,762).

28. Trade and other payables

Group 2015 2014 RM RM

Trade payables Third parties 8,189,599 5,200,611 Other payables Accruals 2,901,784 2,584,426 Amount due to a Director 500,000 - Sundry payables 256,617 683,304 Other statutory payables 307,731 869,595 3,966,132 4,137,325 Trade and other payables 12,155,731 9,337,936 Less: Accruals (3,271,163) (3,454,021) Add: Loans and borrowings (Note 25) 748,476 1,207,767 Total fi nancial liabilities carried at amortised cost 9,633,044 7,091,682

ANNUAL REPORT 2015 81

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

28. Trade and other payables (cont’d)

Company 2015 2014 RM RM

Trade payables Third parties 5,991,765 2,946,990 Other payables Accruals 612,898 702,928 Amount due to a Director 500,000 - Sundry payables 93,222 47,512 Other statutory payables 78,417 126,181 1,284,537 876,621 Trade and other payables 7,276,302 3,823,611 Less: Accruals (612,898) (829,109) Add: Loans and borrowings (Note 25) 680,190 1,138,054 Total fi nancial liabilities carried at amortised cost 7,343,594 4,132,556

Trade payables are non-interest bearing and the normal trade credit terms granted to the Group ranged from 30 to 90 days (2014: 30 to 90 days).

Amounts due to a Director is unsecured, interest-free and has no fi xed terms of repayment.

29. Commitments

(a) Operating lease arrangements - as lessee

The Group and the Company lease various properties under cancellable operating lease agreements. The Group and the Company are required to give appropriate notice for the termination of those agreements. Certain subsidiaries of the Group have commitments for future minimum lease payments under non-cancellable operating lease rentals as follows:

Group 2015 2014 RM RM Less than one year 272,552 465,713 Between one and fi ve years 262,620 365,883 535,172 831,596

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)82

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

29. Commitments (cont’d)

(b) Finance lease obligations

The Group and the Company have fi nance leases for certain motor vehicles (Note 14). Future minimum lease payments under fi nance leases together with the present value of the net minimum lease payments are as follows:

Group Company 2015 2014 2015 2014 RM RM RM RM

Minimum lease payments: Not later than 1 year 115,028 100,335 69,948 69,948 Later than 1 year and not later than 2 years 105,082 100,335 69,948 69,948 Later than 2 years and not later than 5 years 17,408 105,081 17,408 87,356

Total minimum lease payments 237,518 305,751 157,304 227,252 Amounts representing fi nance charges (19,707) (24,838) (7,779) (16,052)

Present value of minimum lease payments (Note 25) 217,811 280,913 149,525 211,200

Present value of payments: Not later than 1 year 102,164 88,661 64,638 61,675 Later than 1 year and not later than 2 years 98,363 91,624 67,602 64,638 Later than 2 years and not later than 5 years 17,284 100,628 17,285 84,887

Present value of minimum lease payments 217,811 280,913 149,525 211,200 Less: Amount due within 12 months (Note 25) (102,164) (88,661) (64,638) (61,675)

Amount due after 12 months (Note 25) 115,647 192,252 84,887 149,525

Other information on fi nancial risks of fi nance lease obligations is disclosed in Note 31 to the fi nancial statements.

(c) Capital commitments

Group 2015 2014 RM RM Capital expenditure approved and contracted for: - Intangible assets - 195,000

The amount disclosed for fi nancial year ended 30 June 2014 relates to the commitment to acquire intellectual properties.

ANNUAL REPORT 2015 83

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

30. Signifi cant related party disclosures For the purposes of these fi nancial statements, parties are considered to be related to the Company if the Company

has the ability, directly or indirectly, to control the party or exercise signifi cant infl uence over the party in making fi nancial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common signifi cant infl uence. Related parties may be individuals or other entities.

Related parties also include key management personnel defi ned as those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly, or indirectly. The key management personnel include all the Directors of the Company, and certain members of senior management of the Company.

The Company has related party relationship with its subsidiaries, associate, joint venture, Directors and key management personnel.

Related party transactions have been entered into the normal course of business under terms agreed between the Company and the related parties. The signifi cant related party transactions of the Group and of the Company are as follows:

(a) Signifi cant related party transactions

Company 2015 2014 RM RM Income: Subsidiaries - Service fees - 1,791,000 - Dividend income - 1,308,230

Cost of sales: Subsidiaries - Development costs 31,800 - Others: Subsidiaries - Fixed asset transfer from subsidiary - (10,469)

(b) Compensation of Directors and key management personnel

The remuneration of Directors and key management personnel during the year are as follows:

Group Company 2015 2014 2015 2014 RM RM RM RM Short-term employee benefi ts 2,649,377 3,150,766 1,184,384 1,331,984 Defi ned contribution plans and social security contributions 280,090 374,822 146,969 162,319 Others 176,000 144,000 176,000 144,000 3,105,467 3,669,588 1,507,353 1,638,303

The above remuneration relating to Directors is disclosed in Note 11 to the fi nancial statements.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)84

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

31. Financial risk management objectives and policies

The Group and the Company are exposed to fi nancial risks arising from their operations and the use of fi nancial instruments. The key fi nancial risks include credit risk, liquidity risk, interest rate risk, foreign currency risk and market price risk.

The Board of Directors reviews and agrees policies and procedures for the management of these risks. The audit committee provides independent oversight to the effectiveness of the risk management process.

It is, and has been throughout the current and previous fi nancial year, the Group’s policy that no derivatives shall be undertaken.

The following sections provide details regarding the Group’s and Company’s exposure to the above-mentioned fi nancial risks and the objectives, policies and processes for the management of these risks.

(a) Credit risk

Credit risk is the risk of loss that may arise on outstanding fi nancial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk arises primarily from trade and other receivables. For other fi nancial assets (including cash and bank balances), the Group and the Company minimise credit risk by limiting the Group’s associations to business partners with high creditworthiness. Trade receivables are monitored on an ongoing basis via the Group’s management reports.

Exposure to credit risk

Information regarding credit enhancements for trade and other receivables is disclosed in Note 20 to the fi nancial statements.

Credit risk concentration profi le

The Group determines concentrations of credit risk by monitoring the country and industry sector profi le of its trade receivables on an ongoing basis. The credit risk concentration profi le of the Group’s trade receivables at the reporting date are as follows:

2015 2014 RM % RM %

By country: Malaysia 6,274,774 34 4,082,941 31 Pakistan 10,488,167 57 7,301,445 56 Thailand 430,242 2 483,595 3 Singapore 82,495 0 115,365 1 China 325,119 2 353,037 3 Indonesia 870,121 5 759,062 6 Other countries 13,890 < 1 16,873 < 1 18,484,808 100 13,112,318 100

The Group and the Company have approximately 19% (2014: 24%) and 35% (2014: 11%) of the outstanding trade receivables as at 30 June 2015 due from various major telecommunication companies for the provision of SMS content and services.

In addition, the Group and the Company have no outstanding trade receivables (2014: 3%) due from certain key distributors and wholesalers for the sales of electronic goods and related products.

ANNUAL REPORT 2015 85

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

31. Financial risk management objectives and policies (cont’d)

(a) Credit risk (cont’d)

Financial assets that are neither past due nor impaired

Information regarding trade receivables that are neither past due nor impaired is disclosed in Note 20 to the fi nancial statements. Deposits with banks are placed with reputable bank fi nancial institutions high credit ratings and no history of default.

Financial assets that are past due but not impaired and past due and impaired

Information regarding fi nancial assets that are past due but not impaired and past due and impaired are disclosed in Note 20 to the fi nancial statements.

(b) Liquidity risk

Liquidity risk is the risk that the Group or the Company will encounter diffi culty in meeting fi nancial obligations due to shortage of funds. The Group and Company manage their debt maturity profi le, operating cash fl ows and the availability of funding so as to ensure that all refi nancing, repayment and funding needs are met. As part of its overall liquidity management, the Group and Company maintain suffi cient levels of cash and deposits at bank to meet their working capital requirements.

Analysis of fi nancial instruments by remaining contractual maturities

The table below summarises the maturity profi le of the Group’s and the Company’s liabilities at the reporting date based on contractual undiscounted repayment obligations.

Carrying Contractual On demand amount undiscounted or within 1 to cash fl ows 1 year 5 years RM RM RM RM

2015 Group Financial liabilities: Trade and other payables* 12,155,731 12,155,731 12,155,731 - Loans and borrowings^ 748,476 875,511 198,067 677,444 12,904,207 13,031,242 12,353,798 677,444 Company Financial liabilities: Trade and other payables* 7,276,302 7,276,302 7,276,302 - Loans and borrowings^ 680,190 795,297 152,987 642,310 7,956,492 8,071,599 7,429,289 642,310

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)86

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

31. Financial risk management objectives and policies (cont’d)

(b) Liquidity risk (cont’d)

Analysis of fi nancial instruments by remaining contractual maturities (cont’d)

Carrying Contractual On demand amount undiscounted or within 1 to cash fl ows 1 year 5 years RM RM RM RM

2014 Group Financial liabilities: Trade and other payables* 9,337,936 9,337,936 9,337,936 - Loans and borrowings^ 1,207,767 1,365,479 522,070 843,409 10,545,703 10,703,415 9,860,006 843,409 Company Financial liabilities: Trade and other payables* 3,823,611 3,823,611 3,823,611 - Loans and borrowings^ 1,138,054 1,286,980 491,683 795,297 4,961,665 5,110,591 4,315,294 795,297

* Excludes items which are not within the scope of MFRS 139 ^ Includes the interest portion of fi nance lease obligations and term loan

(c) Interest rate risk

Interest rate risk is the risk that the fair value or future cash fl ows of the Group’s and the Company’s fi nancial instruments will fl uctuate because of changes in market interest rates. The Group and the Company’s exposure to interest rate risk is minimised, as the Group and the Company do not have any signifi cant loans and borrowings, other than fi nance lease obligations, term loan and bank borrowings which bear interest at fi xed rates.

The investment in fi nancial assets are mainly short term in nature and they are not held for speculative purposes but have been mostly placed in fi xed deposits which yield better returns than cash at bank. As such, no sensitivity analysis of interest risk has been disclosed in the fi nancial statements.

ANNUAL REPORT 2015 87

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

31. Financial risk management objectives and policies (cont’d)

(d) Foreign currency risk Foreign currency risk is the risk that the fair value or future cash fl ows of a fi nancial instrument will fl uctuate

because of changes in foreign exchange rates. The subsidiaries of the Group transact mainly in their respective functional currencies. The transactional currency exposures arising from sales or purchases that are denominated in a currency other than the respective functional currencies of Group entities, are as follows:

Group 2015 USD EUR HKD Total RM RM RM RM

Financial assets Trade and other receivables 84 166,264 - 166,348 Cash and bank balances 78,664 - - 78,664 78,748 166,264 - 245,012 Financial liabilities Trade and other payables 677,295 - 34,422 711,717 Net exposure (598,547) 166,264 (34,422) (466,705) 2014 Financial assets Trade and other receivables 107,548 16,175 - 123,723 Cash and bank balances 55,629 - - 55,629 163,177 16,175 - 179,352 Financial liabilities Trade and other payables 543,005 - 34,196 577,201 Loans and borrowings 338,696 - - 338,696 881,701 - 34,196 915,897 Net exposure (718,524) 16,175 (34,196) (736,545)

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)88

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

31. Financial risk management objectives and policies (cont’d)

(d) Foreign currency risk (cont’d)

Sensitivity analysis for foreign currency risk

The following table demonstrates the sensitivity of the Group’s loss net of tax to a reasonably possible change in exchange rates of the respective functional currencies of the Group entities against the RM and an analysis of the effects of a change in the functional currencies of the Group entities against the RM on equity, with all other variables held constant.

Group 2015 2014 Impact on Loss net Impact on Loss net equity of tax equity of tax Increase/ Decrease/ Increase/ Decrease/ (decrease) (increase) (decrease) (increase) RM RM RM RM USD/RM - strengthened 5% 47,612 (29,927) 133,121 61,487 - weakened 5% (47,612) 29,927 (133,121) (61,487) IDR/RM - strengthened 5% 12,507 - 25,921 - - weakened 5% (12,507) - (25,921) - RMB/RM - strengthened 5% 104,280 - 113,471 - - weakened 5% (104,280) - (113,471) - PKR/RM - strengthened 5% 720,843 - 238,478 - - weakened 5% (720,843) - (238,478) - THB/RM - strengthened 5% 360,039 - 321,626 - - weakened 5% (360,039) - (321,626) - HKD/RM - strengthened 5% (110,021) - (145,219) - - weakened 5% 110,021 - 145,219 - SGD/RM - strengthened 5% (183,404) - (115,943) - - weakened 5% 183,404 - 115,943 - AED/RM - strengthened 5% 66,339 - 37,612 - - weakened 5% (66,339) - (37,612) - EUR/RM - strengthened 5% - 8,313 - - - weakened 5% - (8,313) - -

Company 2015 2014 Loss net Loss net of tax of tax Decrease/ Decrease/ (increase) (increase) RM RM USD/RM - strengthened 5% (18) 14,369 - weakened 5% 18 (14,369) THB/RM - strengthened 5% 95 - - weakened 5% (95) - PKR/RM - strengthened 5% 3,156 (3) - weakened 5% (3,156) 3

ANNUAL REPORT 2015 89

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

31. Financial risk management objectives and policies (cont’d)

(e) Market price risk

Market price risk is the risk that the fair value or future cash fl ows of the Group’s or the Company’s fi nancial instruments will fl uctuate because of changes in market prices (other than interest or exchange rates).

The Group and the Company are not exposed to market price risk as they do not have any investment in quoted equity instruments.

32. Fair value of fi nancial instruments

Determination of fair value

Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value

The following are classes of fi nancial instruments that are not carried at fair value and whose carrying amounts are

reasonable approximation of fair value: Note Trade and other receivables (other than prepayments) 20 Loans and borrowings (current liabilities) 25 Trade and other payables 28

The carrying amounts of the above fi nancial assets and liabilities are reasonable approximation of fair values due to their short-term nature. For balances with related companies, it is impracticable to determine their fair values with suffi cient reliability given these balances have no fi xed terms of repayment.

It was not practicable to estimate the fair value of the Group’s and Company’s investment in unquoted shares due to the lack of comparable quoted prices in an active market and the fair value cannot be reliable measured.

Fair value, which is determined for disclosure purposes is calculated based on the present value of future principal and interest cash fl ows, discounted at the average market rate of interest at the end of the reporting period.

As at the end of the reporting period, the carrying amounts and fair values of fi nance lease obligations and term loan of the Group are:

Group 2015 2014 RM RM Letters of credit: - Carrying amount - 338,696 - Fair value - 338,696 Term loan: - Carrying amount 530,665 588,158 - Fair value 597,352 656,139 Finance lease liabilities: - Carrying amount 217,811 280,913 - Fair value 325,979 374,151

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)90

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

32. Fair value of fi nancial instruments (cont’d)

Fair value of fi nancial instruments by classes that are carried at fair value

Fair value hierarchy

Financial instruments that are measured in the statement of fi nancial position at fair value are disclosed by the following fair value measurement hierachy:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

There are no fi nancial assets or liabilities of the Group or of the Company which are carried at fair value.

33. Capital management

The primary objective of the Group’s and the Company’s capital management is to ensure that they maintain a strong credit rating and healthy capital ratios in order to support their business and maximise shareholders’ value.

The Group and Company manage their capital structure and make adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group and Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 30 June 2015 and 30 June 2014.

The Group and the Company are not subject to any externally imposed capital requirements, other than certain debt covenants relating to the term loan (Note 25).

In addition to the covenants on term loan, the Group and the Company monitor capital using the net gearing ratio, which is net debt (or net cash) divided by equity attributable to owners of the parent. The Group’s and Company’s policy is to keep the Group and Company’s net gearing ratio at a level deemed appropriate considering business, economic and investment conditions.

Group Company 2015 2014 2015 2014 Note RM RM RM RM Loans and borrowings 25 748,476 1,207,767 680,190 1,138,054 Less: Deposits, cash and bank balances 21 (3,512,060) (5,657,141) (248,185) (992,749)

(Net cash)/net debt (2,763,584) (4,449,374) 432,005 145,305 Equity attributable to owners of the Company 26,781,541 28,528,466 31,289,994 38,795,060 Net cash/net gearing Net cash Net cash 1.38% 0.37%

ANNUAL REPORT 2015 91

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

34. Signifi cant events during the fi nancial year

(a) Bursa Malaysia Securities Sdn. Bhd. (“Bursa Securities”) had vide its letter dated 16 March 2015, approved the listing of and quotation for up to 17,961,474 new shares of the Company (or “M3Tech”) to be issued at an issue price to be determined and announced later, subject to the following conditions:

(i) M3Tech and Public Investment Bank Berhad (“PIVB”), the principal adviser of the Company, must fully comply with the relevant provisions under the ACE Market Listing Requirements of Bursa Securities pertaining to the implementation of the Proposed Private Placement;

(a) Bursa Malaysia Securities Sdn. Bhd. (“Bursa Securities”) had vide its letter dated 16 March 2015, approved the listing of and quotation for up to 17,961,474 new shares of the Company (or “M3Tech”) to be issued at an issue price to be determined and announced later, subject to the following conditions: (cont’d)

(ii) M3Tech and PIVB to inform Bursa Securities upon the completion of the Proposed Private Placement; and

(iii) M3Tech to furnish Bursa Securities with a written confi rmation of its compliance with the terms.

(b) On 16 April 2015, an announcement has been made that the Company proposed to undertake the following corporate exercises:

(i) proposed renounceable rights issue of up to 395,152,428 new ordinary shares of RM0.10 each in M3Tech (“or M3Tech Shares”) (“Rights Shares”) together with up to 296,364,321 free detachable warrants (“Warrants”) at an issue price of RM0.10 per Rights Share on the basis of four Rights Shares together with three Warrants for every two existing M3Tech Shares held on an entitlement date to be determined and announced later based on a minimum subscription level of 80,000,000 Rights Shares together with 60,000,000 Warrants (“Proposed Rights Issue with Warrants”);

(ii) proposed establishment of an employees’ share option scheme (or “Scheme”) of up to 30% of the prevailing issued and paid-up share capital of the Company (excluding treasury shares) for the eligible employees (including Directors) of M3Tech and its subsidiaries, who meet the criteria of eligibility for participation in the Scheme as set out in the by-laws containing the rules, terms and conditions of the Scheme (“Proposed ESOS”);

(iii) proposed increase in the authorised share capital of M3Tech from RM25,000,000 comprising 250,000,000 M3Tech Shares to RM200,000,000 comprising 2,000,000,000 M3Tech Shares (“Proposed Increase in the Authorised Share Capital”); and

(iv) proposed amendments to the Memorandum and Articles of Association of M3Tech to facilitate the Proposed ESOS and Proposed Increase in Authorised Share Capital in Note 34(b)(ii) and (iii) above (“Proposed Amendments to the M&A”).

(c) On 8 June 2015, the Directors have fi xed the issue price for the placement of 6,000,000 new M3Tech Shares, being the fi rst tranche of the proposed private placement in Note 34(a) at RM0.13 per placement share (“1st Issue Price”). The 1st Issue Price represents a discount of approximately 4.2% to the fi ve-day VWAP of M3Tech Shares up to and including 5 June 2015, being the market day immediately preceding the price-fi xing date, of RM0.1357 per M3Tech Share.

(d) On 16 Jun 2015, the Company has procured the written irrevocable undertakings dated 16 June 2015 from certain shareholders of M3Tech to subscribe for up to 80,000,000 Rights Shares together with up to 60,000,000 Warrants pursuant to the proposed rights issue with warrants in Note 34(b)(ii).

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)92

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

35. Signifi cant events after the fi nancial year

(a) On 7 September 2015, Bursa Securities approved the Company’s application for an extension of time of six months from 16 September 2015 to 15 March 2016 to complete the implementation of the proposed private placement disclosed in Note 34(a) to the fi nancial statements.

(b) On 17 September 2015, the Company announced that Bursa Securities approved the following:

(i) admission to the Offi cial List of Bursa Securities and the listing of and quotation for up to 296,364,321 Warrants to be issued pursuant to the Proposed Rights Issue with Warrants disclosed in Note 34(b)(i) to the fi nancial statements;

(ii) listing of up to 395,152,428 rights shares to be issued pursuant to the Proposed Rights Issue with Warrants;

(iii) listing of up to 296,364,321 new M3Tech Shares to be issued arising from the full exercise of the Warrants; and

(iv) listing of such number of new M3Tech Shares representing up to thirty percent of the prevailing issued and paid-up share capital of the Company during the duration of the ESOS (excluding treasury shares, if any) to be issued and allotted pursuant to the Proposed ESOS.

The approval granted by Bursa Securities for the Proposed Rights Issue with Warrants is subject to the following conditions:

(i) M3Tech and PIVB must fully comply with the relevant provisions under the ACE Market Listing Requirements of Bursa Securities (“ACE LR”) pertaining to the implementation of the Proposed Rights Issue with Warrants;

(ii) M3Tech and PIVB to inform Bursa Securities upon the completion of the Proposed Rights Issue with Warrants;

(iii) M3Tech to furnish Bursa Securities with a written confi rmation of its compliance with the terms and conditions of Bursa Securities’ approval once the Proposed Rights Issue with Warrants is completed; and

(iv) M3Tech is required to furnish Bursa Securities on a quarterly basis, a summary of the total number of shares listed (pursuant to the exercise of the Warrants) as at the end of each quarter together with a detailed computation of listing fees payable.

The approval granted by Bursa Securities for the Proposed ESOS is subject to the following conditions:

(i) PIVB is required to submit a confi rmation to Bursa Securities of full compliance of the ESOS pursuant to Rule 6.44 of the ACE LR and stating the effective date of implementation together with a certifi ed true copy of the resolution passed by the shareholders in general meeting; and

(b) On 8 October 2015, the Company made an announcement of issuance of circular to shareholders in relation to the:

(i) Proposed Rights Issue with Warrants;

(ii) Proposed ESOS

(iii) Proposed increase in the Authorised Share Capital; and

(iv) Proposed Amendments to the M&A.

ANNUAL REPORT 2015 93

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

36. Litigation status

During the previous fi nancial year, a singer along with Digital World (Private) Limited (“Digital World”) fi led a civil suit against a subsidiary of the Group, M3 Technologies Pakistan (Private) Limited (“the subsidiary”) and 11 other companies for infringement of rights and proceeded for recovery of damages and royalty in the amount of Rupees 165,600,000 (RM5,382,000). The subsidiary acquired such content rights from Digital World. The case is pending before the Honourable Session Court.

The subsidiary had been arrayed as Defendant no. 12 in the said suit. There is no single specifi c allegation against the subsidiary hence the legal advisors and the Directors are confi dent that the likelihood of an unfavourable outcome is quite low if not impossible and accordingly, no provision is made in the fi nancial statements. There has been no material development in the legal proceedings since the end of the previous fi nancial year.

37. Segmental information

(a) Reporting format

For management purpose, the Group is organised into business segments by the geographical areas in which the business units operate, and has four main reportable operating segments as follows:

i. Malaysia;ii. Thailand; iii. Pakistan; andiv. Other Countries.

The Board of Directors is the Group’s chief operating decision maker (“CODM”). The CODM monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment.

(b) Allocation basis and transfer pricing

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, liabilities and expenses.

Transfer prices between business segments are set on terms agreed between business segments. Segment revenue, expenses and results include transfers between business segments. These transfers are eliminated on consolidation.

Interest income

Interest income is separately reported from interest expense and excluded from calculation of segment results. Interest revenue is classifi ed under unallocated income while interest expense remains in fi nance costs.

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)94

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

37. Segmental information (cont’d)

Geographical segments

The following table provides an analysis of the Group’s revenue, results, assets, liabilities and other information by geographical segments:

Other Asian 2015 Malaysia Thailand Pakistan Countries Elimination Consolidated RM RM RM RM RM RM

Revenue External sales 20,969,488 1,577,189 10,397,300 2,343,666 - 35,287,643 Inter-segment revenue 282,313 243,588 72,862 1,583,586 (2,182,349) -

Total revenue 21,251,801 1,820,777 10,470,162 3,927,252 (2,182,349) 35,287,643

Results Segment results (2,585,943) Interest expense (39,196) Interest income 7,882 Share of results in an associate (230,879)

Loss before tax (2,848,136) Income tax expense (626,083)

Loss for the year (3,474,219)

Assets Segment assets 37,801,474 7,844,552 17,636,342 13,371,406 (38,502,353) 38,151,421 Investment in an associate 5,740,159 Tax assets 782,589

Total assets 44,674,169

Liabilities Segment liabilities 7,933,692 643,769 2,962,981 26,828,957 (25,455,303) 12,914,096 Tax liabilities 73,680

Total liabilities 12,987,776

Other segment information Capital expenditure 336,769 6,120 235,663 322,593 - 901,145 Additions of intangible assets 519,961 210,689 - 553,635 - 1,284,285 Depreciation 476,273 84,863 307,809 260,271 - 1,129,216 Amortisation 857,985 - 178,511 - - 1,036,496 Unrealised loss/(gain) on foreign exchange 806,791 (224,485) (1,857) (607,856) - (27,407) Non-cash expenses other than depreciation, amortisation and unrealised exchange differences 1,079,801 148,464 12,618 340,410 - 1,581,293

ANNUAL REPORT 2015 95

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

37. Segmental information (cont’d)

Geographical segments (cont’d)

Other Asian 2014 Malaysia Thailand Pakistan Countries Elimination Consolidated RM RM RM RM RM RM Revenue External sales 24,172,585 2,802,600 8,560,695 3,349,413 - 38,885,293 Inter-segment revenue 434,952 648,976 148,195 3,481,441 (4,713,564) -

Total revenue 24,607,537 3,451,576 8,708,890 6,830,854 (4,713,564) 38,885,293

Results Segment results (14,071,723) Interest expense (47,333) Interest income 76,608 Impairment loss on interest in a joint venture (728,775) Share of loss of a joint venture (15,027) Share of result in an associate (27,400)

Loss before tax (14,813,650) Income tax expense (557,658)

Loss for the year (15,371,308)

Assets Segment assets 47,281,416 7,736,925 12,425,067 17,727,832 (49,067,810) 36,103,430 Interest in a joint venture 5,971,038 Tax assets 582,952

Total assets 42,657,420

Liabilities Segment liabilities 16,916,415 945,837 2,806,433 12,862,729 (22,951,109) 10,580,305 Tax liabilities 149,835

Total liabilities 10,730,140

Other segment information Capital expenditure 402,221 138,199 272,136 238,976 - 1,051,532 Additions of intangible assets 821,577 - 698,497 938,445 - 2,458,519 Depreciation 482,290 119,139 298,242 265,078 - 1,164,749 Amortisation 1,212,049 - 170,124 682,652 - 2,064,825 Impairment loss of goodwill 5,844,078 - - - - 5,844,078 Unrealised loss/(gain) on foreign exchange 24,474 (228,650) 534 190,566 - (13,076) Non-cash expenses other than depreciation, amortisation and unrealised exchange differences 1,096,665 48,489 1,501 647,620 - 1,794,275

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)96

Notes to the Financial Statements (Cont’d)For the fi nancial year ended 30 June 2015

37. Segmental information (cont’d)

Non-current assets information, other than deferred tax asset, based on the geographical location of assets is as follows:

Group 2015 2014 RM RM Malaysia 8,463,019 9,550,034 Thailand** 344,881 380,430 Pakistan 1,768,125 1,588,303 Other countries** 3,069,537 1,965,085 13,645,562 13,483,852

** In previous fi nancial year this included the goodwill on consolidation allocated to the respective CGUs

Revenue from external customers classifi ed by service and product is as follows:

Group 2015 2014 RM RM Provision of mobile solutions 24,879,975 20,488,591 Sales of fast-moving electronic goods and related products 10,486,350 18,396,702 35,366,325 38,885,293

The revenue derived from various telecommunication companies in different countries constitutes 70% (2014: 53%) of the Group’s total revenue.

ANNUAL REPORT 2015 97

Supplementary Information

38. Supplementary information – breakdown of retained profi ts into realised and unrealised

The breakdown of the retained profi ts of the Group and of the Company as at 30 June 2015 into realised and unrealised profi ts is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad dated 25 March 2010 and prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profi ts or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.

The retained earnings as at reporting date may be analysed as follows:

Group 2015 2014 RM RM Total retained (loss)/profi ts of the Company and its subsidiaries • Realised (12,001,541) 5,178,916 • Unrealised (27,929) (119,359) Total share of realised loss of a joint venture (218,360) (218,360) Total share of realised loss of from an associate (258,279) (27,400) Consolidation adjustments 15,094,364 2,139,257 2,588,255 6,953,054

Company 2015 2014 RM RM Total retained profi ts • Realised (7,341,150) 925,072 • Unrealised 65,072 7,211 (7,276,078) 932,283

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)98

Location Description Land area/ Tenure Approximate Net Book Value (Built-up area) Age of Building RM

Unit1007, Block A, Pusat Offi ce Lot 2,506 sq.ft. Freehold 16 years 470,292.60Dagangan Phileo II Jalan SS 16/11, 46350 Petaling Jaya, Selangor Darul Ehsan,

Unit 708, Block A Pusat Offi ce Lot 2,506 sq.ft. Freehold 16 years 628,100.00Dagangan Phileo II Jalan SS 16/11, 46350 Petaling Jaya, Selangor Darul Ehsan,

List of Properties

ANNUAL REPORT 2015 99

Analysis of ShareholdingsAs at 30 October 2015

Authorised Capital : RM25,000,000Issued and Fully Paid-Up Capital : RM18,561,474 comprising 185,614,740 Ordinary Shares of RM0.10 eachClass of Equity Securities : Ordinary Shares of RM0.10 each (“Shares”)Voting Rights : One vote per shareholder on a show of hands or one vote per Share on a poll

Distribution Schedule of Shareholders

No. of Holders Size of Holdings No. of Shares ** % #

31 Less than 100 shares 1,400 *409 100 - 1,000 shares 333,244 0.181,109 1,001 - 10,000 shares 5,782,100 3.16646 10,001 - 100,000 shares 22,139,140 12.09135 100,001 - less than 5% of issued shares 96,410,856 52.674 5% and above of issued shares 58,390,500 31.90

2,334 Total 183,057,240 100.00

* Negligible** Excluding a total of 2,557,500 Shares bought back and retained as treasury shares

SUBSTANTIAL SHAREHOLDERS’ SHAREHOLDINGS (As per the Register of Substantial Shareholders)

Direct Interest Indirect InterestName of Substantial Shareholders No. of Shares % # No. of Shares % #

Lim Seng Boon 13,605,000 7.43 24,186,840 (i) 13.21Goh Lee Lang 24,186,840 13.21 13,605,000 (ii) 7.43Lim Keong Yew - - 13,298,000 (iii) 7.26Exodius Holdings Sdn Bhd 13,298,000 7.26 - -Papago (H.K.) Limited 17,637,500 9.63 - -Yeoh Eng Kong 10,053,600 5.49 - -Gerald Nicholas Tan Eng Hoe 9,008,900 4.92 - -

Notes:(i) Deemed interested by virtue of his spouse, Madam Goh Lee Lang’s shareholdings in M3 Technologies (Asia) Berhad(ii) Deemed interested by virtue of her spouse, Mr. Lim Seng Boon’s shareholdings in M3 Technologies (Asia) Berhad(iii) Deemed interested by virtue of his interest in Exodius Holdings Sdn Bhd

DIRECTORS’ SHAREHOLDINGS (As per the Register of Directors’ Shareholdings)

Direct Interest Indirect InterestName of Directors No. of Shares % # No. of Shares % #

Chew Shin Yong, Mark 2,130,600 1.16 1,333,400 (i) 0.73 Lim Seng Boon 13,605,000 7.43 24,186,840 (ii) 13.21

Notes:(i) Deemed interested by virtue of his benefi cial interest in Marmark (BVI) Limited pursuant to Section 6A of the Companies

Act, 1965(ii) Deemed interested by virtue of his spouse, Madam Goh Lee Lang’s shareholdings in M3 Technologies (Asia) Berhad

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)100

Analysis of Shareholdings (Cont’d)As at 30 October 2015

30 Largest Securities Account Holders (without aggregating the securities from different securities accounts belonging to the same person)

No. Name of Shareholders No. of Shares held % #

1 PAPAGO (H.K.) LIMITED 17,637,500 9.63

2 GOH LEE LANG 15,100,000 8.25

3 EXODIUS HOLDINGS SDN BHD 13,298,000 7.26

4 LIM SENG BOON 12,355,000 6.75

5 KOEK SEAM CHENG 7,185,900 3.93

6 AFFIN HWANG NOMINEES (TEMPATAN) SDN BHD 7,036,600 3.84 PLEDGED SECURITIES ACCOUNT FOR YEOH ENG KONG

7 GOH LEE LANG 6,872,600 3.75

8 KENANGA NOMINEES (TEMPATAN) SDN BHD 4,630,500 2.53 PLEDGED SECURITIES ACCOUNT FOR GERALD NICHOLAS TAN ENG HOE

9 MERCSEC NOMINEES (TEMPATAN) SDN BHD 4,508,900 2.46 PLEDGED SECURITIES ACCOUNT FOR GERALD NICHOLAS TAN ENG HOE

10 GOH CHEANG HUANG 3,770,200 2.06

11 CHOONG YEAN YAW 3,534,100 1.93

12 MERCSEC NOMINEES (TEMPATAN) SDN BHD 3,017,000 1.65 PLEDGED SECURITIES ACCOUNT FOR YEOH ENG KONG

13 MALACCA EQUITY NOMINEES (TEMPATAN) SDN BHD 3,000,000 1.64 PLEDGED SECURITIES ACCOUNT FOR QUEK SOON TIANG

14 MALACCA EQUITY NOMINEES (TEMPATAN) SDN BHD 3,000,000 1.64 PLEDGED SECURITIES ACCOUNT FOR PIONG YON WEE

15 LAI THIAM POH 2,780,000 1.52

16 GOH LEE LANG 2,214,240 1.21

17 CHEW SHIN YONG, MARK 2,130,600 1.16

18 KENANGA NOMINEES (TEMPATAN) SDN BHD 2,050,000 1.12 PLEDGED SECURITIES ACCOUNT FOR JENNY LIM FEN FUA

19 CARTABAN NOMINESS (ASING) SDN BHD 2,033,600 1.11 EXEMPT AN FOR KGI ASIA LTD

20 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 1,630,000 0.89 PLEDGED SECURITIES ACCOUNT FOR KOEK TIANG KUNG

21 CHONG SIEW PIN 1,500,000 0.82

22 ONG PEH HOON 1,350,000 0.74

23 MARMARK (BVI) LIMITED 1,333,400 0.73

24 CITIGROUP NOMINEES (ASING) SDN BHD 1,332,100 0.73 EXEMPT AN FOR OCBC SECURITIES PRIVATE LIMITED

25 LIM SENG BOON 1,250,000 0.68

26 SENG YAN CHUAN 1,208,000 0.66

27 AMANAHRAYA TRUSTEES BERHAD 1,000,000 0.55 AMANAH SAHAM SARAWAK

28 TAN CHOO JIN 1,000,000 0.55

29 LESTER RATNAKUMAR NEIL FRANCIS 808,016 0.44

30 CHIANG SIEW ENG @ LE YU AK EE 707,900 0.39

# All percentage shareholding computations are based on the issued and paid-up capital of the Company less 2,557,500 treasury shares arising from the share buy back exercise.

ANNUAL REPORT 2015 101

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the Sixteenth Annual General Meeting (“16th AGM”) of M3 TECHNOLOGIES (ASIA) BERHAD (“M3Tech” or “the Company”) will be held at Eugenia Room, Ground Floor, Sime Darby Convention Centre, No. 1A, Jalan Bukit Kiara 1, 60000 Kuala Lumpur on 10 December 2015 at 9.30 a.m. to transact the following businesses:-

A G E N D A

As Ordinary Business :

1. To receive the Audited Financial Statements for the fi nancial year ended 30 June 2015 together with the Reports of the Directors and Auditors thereon.

2. To approve the payment of Directors’ fees for the fi nancial year ended 30 June 2015.

3. To re-elect the following Directors who retire in accordance with Article 104 of the Company’s Articles of Association:-

i. Mr. Lim Seng Boon ii. Mr. Chin Chee Wing

4. To re-elect the following Directors who retire in accordance with Article 110 of the Company’s Articles of Association:-

i. Ms. Lim Kooi Siang ii. Mr. Choong Eng Choon iii. Mr. Yeoh Boon Hock iv. Dato’ Woo Hon Kong

5. To re-appoint Messrs. Ecovis AHL PLT as Auditors of the Company until the conclusion of the next Annual General Meeting and to authorise the Directors to fi x their remuneration.

As Special Business :To consider and if thought fi t, to pass the following Resolution, with or without modifi cations :-

6. ORDINARY RESOLUTION GENERAL AUTHORITY FOR THE DIRECTORS TO ISSUE SHARES PURSUANT TO SECTION

132D OF THE COMPANIES ACT, 1965

“THAT pursuant to Section 132D of the Companies Act, 1965, and subject to the approvals of the relevant governmental and/or regulatory authorities, the Directors be and are hereby empowered to allot and issue shares in the Company from time to time at such price, upon such terms and conditions, for such purposes and to such person or persons whomsoever as the Directors may deem fi t provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the issued share capital of the Company for the time being AND THAT the Directors be and are also empowered to obtain approval from the Bursa Malaysia Securities Berhad for the listing of and quotation for the additional shares so issued AND THAT such authority shall continue in force until the conclusion of the next annual general meeting of the Company.”

7. To transact any other business of which due notice shall have been given in accordance with the Companies Act, 1965.

By order of the Board

TEA SOR HUA (MACS 01324)YONG YEN LING (MAICSA 7044771)Company Secretaries

Petaling Jaya, Selangor Darul EhsanDate : 18 November 2015

Please refer to Note i

Resolution 1

Resolution 2Resolution 3

Resolution 4 Resolution 5Resolution 6Resolution 7

Resolution 8

Resolution 9

M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)102

Notice of Annual General Meeting (Cont’d)

Notes:

i. The Agenda No. 1 is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 does not require a formal approval of shareholders and hence, is not put forward for voting.

ii. A member entitled to attend and vote at the Meeting is entitled to appoint any person as his proxy to attend and vote in his instead. There shall be no restriction as to the qualifi cation of the proxy. A proxy appointed to attend and vote at the Meeting shall have the same rights as the member to speak at the Meeting.

iii. A member shall be entitled to appoint up to two (2) proxies to attend and vote at the same meeting. Where a shareholder appoints two (2) proxies, he shall specify the proportion of his shareholdings to be represented by each proxy.

iv. A proxy may but need not be a member of the Company and the provisions of Sections 149(1)(a) and (b) of the Companies Act, 1965 shall not apply to the Company.

v. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, under the seal.

vi. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple benefi cial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

vii. The instrument appointing a proxy must be deposited at the Registered Offi ce of the Company at Third Floor, No. 79 (Room A), Jalan SS21/60, Damansara Utama, 47400 Petaling Jaya, Selangor Darul Ehsan not less than 48 hours before the time for holding the Meeting or at any adjournment thereof.

viii. The depositors whose names appear in the Record of Depositors as at 3 December 2015 shall be regarded as members and entitled to attend, speak and vote at the 16th AGM.

EXPLANATORY NOTES TO SPECIAL BUSINESS

1. The Ordinary Resolution proposed under item 6 of the Agenda is a renewal of the general mandate for issuance of shares by the Company under Section 132D of the Companies Act, 1965. The Ordinary Resolution, if passed, will give the Directors of the Company from the date of the above meeting, authority to allot and issue ordinary shares from the unissued capital of the Company for such purposes as the Directors consider would be in the interest of the Company. The authority will, unless revoked or varied by the Company in General Meeting, expire at the next Annual General Meeting (“AGM”).

This general mandate will provide fl exibility to the Company for allotment of shares for any possible fund raising activities, including but not limited to further placing of shares, for the purpose of funding future investment project(s), working capital and/or acquisition(s).

Pursuant to the mandate granted to the Directors at the Fifteenth AGM held on 4 December 2014, which will lapse at the conclusion of the 16th AGM, the following new ordinary shares of RM0.10 each (“M3Tech Shares”) were issued by the Company via a private placement exercise:-

i) 6,000,000 new M3Tech Shares at an issue price of RM0.13 per share (“1st tranche”); and ii) 11,705,700 new M3Tech Shares at an issue price of RM0.105 per share (“2nd and Final tranche”)

The utilisation of gross proceeds of RM780,000.00 raised from the 1st tranche by the Company has been fully utilised for repayment to suppliers. While the proceeds of RM1,229,098.50 from the 2nd and Final tranche has yet to be utilised.

Proxy Form M3 TECHNOLOGIES (ASIA) BERHAD (482772-D)(Incorporated in Malaysia)

I/We NRIC No./Company No.(full name in capital letters)

of (full address)

being (a) member(s) of M3 TECHNOLOGIES (ASIA) BERHAD hereby appoint

NRIC No (full name in capital letters)

of (full address)

or failing him/her NRIC No. (full name in capital letters)

of (full address)

or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the Sixteenth Annual General Meeting of the Company to be held at Eugenia Room, Ground Floor, Sime Darby Convention Centre, No. 1A, Jalan Bukit Kiara 1, 60000 Kuala Lumpur on 10 December 2015 at 9.30 a.m. and at any adjournment thereof.

Please indicate with an “X” in the appropriate spaces how you wish your votes to be cast. If no specifi c direction as to vote is given, the Proxy will vote or abstain from voting at his/her discretion.

Dated this day of 2015

Signature of Member(s)/Common Seal

NOTES:

i. A member entitled to attend and vote at the Meeting is entitled to appoint any person as his proxy to attend and vote in his instead. There shall be no restriction as to the qualifi cation of the proxy. A proxy appointed to attend and vote at the Meeting shall have the same rights as the member to speak at the Meeting.

ii. A member shall be entitled to appoint up to two (2) proxies to attend and vote at the same meeting. Where a shareholder appoints two (2) proxies, he shall specify the proportion of his shareholdings to be represented by each proxy.

iii. A proxy may but need not be a member of the Company and the provisions of Sections 149(1)(a) and (b) of the Companies Act, 1965 shall not apply to the Company.

iv. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, under the seal.

v. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple benefi cial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

vi. The instrument appointing a proxy must be deposited at the Registered Offi ce of the Company at Third Floor, No. 79 (Room A), Jalan SS21/60, Damansara Utama, 47400 Petaling Jaya, Selangor Darul Ehsan not less than 48 hours before the time for holding the Meeting or at any adjournment thereof.

vii. The depositors whose names appear in the Record of Depositors as at 3 December 2015 shall be regarded as members and entitled to attend, speak and vote at the 16th Annual General Meeting.

CDS ACCOUNT NO. NO. OF SHARES HELD

No. Resolutions For Against1. To approve the payment of Directors’ fees for the fi nancial year ended 30 June 2015. 2. To re-elect Mr. Lim Seng Boon as Director who retires in accordance with Article 104 of the

Company’s Articles of Association.3. To re-elect Mr. Chin Chee Wing as Director who retires in accordance with Article 104 of the

Company’s Articles of Association. 4. To re-elect Ms. Lim Kooi Siang as Director who retires in accordance with Article 110 of the

Company’s Articles of Association. 5. To re-elect Mr. Choong Eng Choon as Director who retires in accordance with Article 110 of the

Company’s Articles of Association. 6. To re-elect Mr. Yeoh Boon Hock as Director who retires in accordance with Article 110 of the

Company’s Articles of Association.7. To re-elect Dato’ Woo Hon Kong as Director who retires in accordance with Article 110 of the

Company’s Articles of Association. 8. To re-appoint Messrs. Ecovis AHL PLT as Auditors of the Company until the conclusion of the next

Annual General Meeting and to authorise the Directors to fi x their remuneration. 9. To approve the authority for Directors to issue shares pursuant to Section 132D of the Companies

Act, 1965.

To:

M3 Technologies (Asia) Berhad (482772-D)

The Company Secretaries

Third Floor, No. 79 (Room A)

Jalan SS21/60, Damansara Utama

47400 Petaling Jaya

Selangor Darul Ehsan, Malaysia

Please fold across the line and close

Please fold across the line and close

STAMP

AN

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AL R

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OR

T 2015

M3 T

EC

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OLO

GIE

S (A

SIA

) BE

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(482772-D)

www.m3tech.com.my

M3 Technologies (Asia) Berhad (482772-D)

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