the power of solutions...industry in malaysia. the company, i am humbled to announce, posted a...
TRANSCRIPT
www.ipowerbiz.com.my
L4-E-11, Enterprise 4, Technology Park Malaysia, Bukit Jalil, 5700 Kuala Lumpurtel 603 8996 8080 fax 603 8996 6880
I-POWER BERHAD (596299-D)
I-POWER BERHAD (596299-D) Incorporated in Malaysia under the Companies Act 1965
A N N U A L R E P O R T 2 0 0 7
The Power of SOLUTIONSee
|:: 01ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
Content02 | FINANCIAL HIGHLIGHTS
03 | CEO’S ADDRESS - THE YEAR IN REVIEW
12 | CORPORATE PROFILE
14 | CORPORATE INFORMATION
15 | DIRECTORS’ PROFILES
18 | CORPORATE GOVERNANCE
20 | ACCOUNTABILITY AND AUDIT
21 | DIRECTORS’ RESPONSIBILITY STATEMENT
22 | AUDIT COMMITTEE REPORT
25 | SUMMARY OF AUDIT COMMITTEE ACTIVITIES
26 | STATEMENT ON INTERNAL CONTROL
28 | CORPORATE SOCIAL RESPONSIBILITY
29 | FINANCIAL STATEMENTS
59 | ANALYSIS OF SHAREHOLDINGS
61 | NOTICE OF ANNUAL GENERAL MEETING
PROXY FORM
| :: ::02 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
YEARS
2004 2005 2006 2007
Statement of Income Data
Revenue 8,924,361 15,223,637 18,297,815 57,840,393
Income from Operations 2,084,289 5,570,621 7,197,032 10,233,675
Balance Sheet Data
Cash & Cash Equivalents 970,516 3,431,036 4,291,614 32,009,703
Working Capital 3,149,518 7,774,233 13,022,801 21,280,000
Total assets 7,999,378 13,268,379 20,581,697 49,528,000
Total shareholders’ equity 7,393,365 12,903,348 20,100,380 49,475,784
2004 2005 2006 2007
8.92
15.22
REVENUE(RM Million)
PROFIT AFTER TAX(RM Million)
2004 2005 2006 2007
2.085.57 7.2
10.2
FINANCIAL HIGHLIGHTS
$
3.5
5.36.8
8.3
2.6
18.3
57.8
|:: 03ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
CEO’S ADDRESS- THE YEAR IN REVIEW
Foreword
Dear Valued Shareholders,
On behalf of the Board of Directors of I-Power Berhad, I am delighted to present to you the Annual Report and Audited Financial Statements of the Company for the fi nancial year ended 30 June 2007 with a set of fi nancial results which we should justifi ably be proud of.
The year under review saw yet another strong and solid growth in the Company’s revenues and profi ts as we continue to aggressively establish and expand our market position and I-Power brand-name in the E-Solution industry in Malaysia.
The Company, I am humbled to announce, posted a robust and strong set of revenues totalling RM57.840 million for the fi nancial year recently ended, an increase of 216.10% when compared to RM18.298 million recorded during the prior fi nancial year ended 30 June 2006.
The Company also recorded RM10.234 million in net profi t after tax for the same period, an increase of 42.20% from RM7.197 million posted the preceding year, 30 June 2006.
The Company also added several more reputable clients such as CIMB Berhad, Sunrise Berhad, Shiseido, Tupperware and Mobif Berhad, to its steadily growing customers list.
The year’s superior performance is the direct result of all of the followings, such as:• a more focused and forward looking management, • more aggressive marketing and sales activities, • wider acceptance of the I-Power brand-name and E-Solution products, and• the Company’s strategic partnerships with IBM and other leading ICT companies.
I-Power’s more aggressive and stronger sales and business development activities in all areas such as the Company’s E-solutions products, turnkey software development services, software integration and related services, and better collaboration with System Integration partners (“SI”), have resulted in the strong set of fi nancial results for the 12 months ended 30 June 2007.
Going forward into 2008, the Board remains optimistic and confi dent of the Company’s prospects and anticipates yet another year of excitement, growth and healthy fi nancial performance. The Board remains acutely aware of its role to always act in the best interests of the Company at all times and will not rest on its laurels. The Board will seek to continue to maximize the Company’s shareholders wealth in the long run.
Industry Outlook
Let me fi rstly share with you an overview of the ICT industry outlook pertinent to the Company outlined as follows:
Overview of the Global and Malaysian Economy
The global economy, including Malaysia, is undergoing rapid development into a knowledge-based economy, where technology, driven by skills and innovation, will be among the key determinants to enhance effi ciency, productivity and competitiveness. In this respect, information and communication technology (ICT) and other technologies have become important enabling tools, leading to changes in the comparative advantage and competitiveness of economies worldwide.
| :: ::04 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
CEO’S ADDRESS (cont’d)
The application of technologies in various industries has increased over the years, in terms of value and scope. One of the factors in the measurement of total factor productivity (TFP) is capital structure, which refl ects a change in the composition of capital from a lower to a higher level technology. In Malaysia, capital structure represented 17.4 per cent of the TFP for the period 1996-2005. In the Third Industrial Master Plan (IMP3), 2006-2020, TFP is targeted to grow by 2.6 per cent. To achieve this target, increased utilisation of technology in industrial development will be one of the major contributing factors. (Source: IMP3 Third Industrial Master Plan 2006-2020, Chapter 24, Section I and plucked from http://www.btimes.com.my/Current_News/BT/imp3_pdf/chapter02.pdf/)
Development Of The Information And Communication Technology; E-CommerceFocus will continue to be given towards encouraging the wider use of e-commerce to facilitate manufacturing and trade activities. The private sector and industry associations will be encouraged to undertake more initiatives to improve the adoption of e-commerce systems across the supply chain. Greater emphasis will be given towards wider integration of business-to-business applications within the agriculture, tourism, construction, manufacturing and retail sectors. In addition, SMEs are also encouraged to leverage upon the existing networked environment, in gaining access to information and marketing their products electronically, to expand their scope beyond national and regional borders. The Government has targeted up to 10,000 SMEs to be e-enabled by 2010, through the e-Business Anchor and Thrust Projects.
(Source: IMP3 Third Industrial Master Plan 2006-2020, Chapter 24, Section III)
Prospects Of Information And Communication TechnologyThe MyICMS 886 Strategy provides the major policy thrust for further development of ICT. The strategy will position the industry towards the delivery of advanced information, communication and multimedia services by 2010. Examples of advanced value-added services which will be provided include mobile television, digital multimedia broadcasting and digital home. The strategy envisages that:
• short range communication will gradually gain higher usage in logistics and transportation, as the costs of devices and infrastructure are lowered by localised manufacturing activities;
• commercial usage of RFID is expected to generate substantial revenues to the production of RFID chips, which are targeted to achieve a global market share of 2 per cent by 2010;
• VoIP and internet telephony services will be further developed to provide higher quality services, and the demand to be created will lead to cheaper voice services. By the end of 2010, the revenues from these services are expected to reach RM1.5 billion;
• E-Commerce will be more widely applied within the manufacturing and services sectors. Business-to-business transactions will increase in fi nance and insurance, wholesale and retail, transport, storage and communication. Business-to-consumer transactions will be more prevalent within hotels and restaurants, electricity, gas and water;
• digital content development will expand rapidly, in tandem with the integrated broadband infostructure to be created under the strategy. The allocation of RM150 million under the RMK-9 for the development of the creative content industry will provide opportunities for entrepreneurs and SMEs to develop and market localised content for educational and entertainment purposes; and
• E-Learning and training services will grow, as cheaper broadband and more localised content will enable more effective e-learning solutions to be provided among schools and commercial institutions.
Other development initiatives for ICT include:• further developing Cyberjaya to be the National ICT Hub, under the second phase of the
development of MSC Malaysia, by enhancing the business-friendly environment, wireless broadband facilities and other transportation and infrastructure amenities; and
• further intensifying the efforts towards bridging the digital divide through the provision of online services nationwide to enable more Malaysians to gain access to and utilise internet-based knowledge and information resources. It is anticipated that there will be a greater demand for personal computers, with the usage in the number of computers increasing from 21.8 to 40 per 100 population by 2010.
(Source: IMP3 Third Industrial Master Plan 2006-2020, Chapter 24, Section V)
With the Government’s strong, continual support in the ICT industry, evident with the release of the Third Industrial Master Plan (IMP3) coupled with the Ninth Malaysia Plan (9MP), which gives special mention to the signifi cance of ICT, the Company believes that both the IMP3 and 9MP will generate more business opportunities in the ICT industry and I-Power Berhad will strive to make the best of such opportunities to our advantage, to establish and grow the Company further in the Malaysian market.
|:: 05ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
Based on the above favourable industry overview outlook and barring unforeseen circumstances, the Board is confi dent of I-Power delivering yet another solid year of growth in 2008.
Corporate Developments Highlights
In addition to the strong fi nancial performance delivered during the year under review, the past twelve months have also seen the Company, under the close guidance of its Board of Directors, charted an exciting series of corporate exercises which have helped consolidated the Company’s standing in the corporate world. They include (back-tracking from the most recent exercise):
(i) Announcement of Rights Issue
On 20 June 2007 the Company proposed to undertake the following:-
(a) Proposed renounceable rights issue of up to 228,690,000 new ordinary shares of RM0.10 each in I-Power (“Rights Share(s)”) with up to 76,230,000 free detachable new warrants (“Warrant(s)”) on the basis of three (3) Rights Shares with one (1) free detachable warrant for every three (3) existing ordinary shares of RM0.10 each in I-Power (“I-Power Share(s)” or “Share(s)”) held on an entitlement date to be determined later (“Proposed Rights Issue”);
(b) Proposed increase in the authorised share capital of I-Power from RM25,000,000
comprising 250,000,000 Shares to RM100,000,000 comprising 1,000,000,000 Shares; and
(c) Proposed amendments to the Memorandum and Articles of Association of the Company. (Herein referred as “Proposals”)
The Securities Commission (“SC”) and Bank Negara Malaysia (“BNM”) had vide their letters dated 13 July 2007, approved the Proposed Rights Issue.
The Proposals are expected to be completed and implemented by the 1st quarter of 2008.
(ii) Announcement of Private Placement
On 17 May 2007, the Company announced that it proposes to implement a private placement of up to 20,790,000 new ordinary shares of RM0.10 each in I-Power (“Proposed Private Placement”), representing not more than ten percent (10%) of the issued and paid-up share capital of the Company, to investors to be identifi ed later. The Proposed Private Placement was approved by the SC vide its letter dated 28 May 2007.
Subsequent to the approval, an additional 13,618,000 new ordinary shares of RM0.10 each issued at RM0.35 per share, being a portion of the Private Placement was granted listing and quotation on 15 June 2007.
(iii) Announcement of ESOS
On 13 March 2007 and 22 March 2007, Kenanga Investment Bank Berhad (formerly known as K & N Kenanga Berhad), on behalf of the Board, announced that I-Power proposed to establish an employees’ share option scheme of up to twenty percent (20%) of the issued and paid-up share capital of I-Power at any point of time (“Proposed ESOS”). Bursa Malaysia Securities Berhad had, vide its letter dated 13 April 2007, approved in principle the listing and quotation of the new ordinary shares in I-Power that may be issued pursuant to the Proposed ESOS.
On 19 April 2007, the shareholders of I-Power had passed the resolutions to approve the Proposed ESOS.Further to the announcements as outlined above, the Company’s additional 25,930,000 new ordinary shares of RM0.10 each issued pursuant to the scheme was granted listing and quotation on 9 May 2007.
CEO’S ADDRESS (cont’d)
| :: ::06 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
CEO’S ADDRESS (cont’d)
(iv) Announcement of Bonus Issue
On 3 November 2006, Kenanga Investment Bank Berhad (formerly known as K & N Kenanga Berhad), on behalf of the Board, announced that I-Power proposed to implement a bonus issue of up to 103,950,000 new ordinary shares of RM0.10 each (“Bonus Shares”) to be credited as fully paid-up on the basis of three (3) new ordinary shares of RM0.10 each (“Shares”) for every two existing (2) Shares held to the registered shareholders of the Company whose names appear in the Record of Depositors of the Company at the close of business on an entitlement date for the Proposed Bonus Issue.
In conjunction with the expected increase in the ordinary share capital of the Company arising from the issue of the Bonus Shares, the Company also proposes to increase its authorised ordinary share capital from RM10,000,000 comprising 100,000,000 Shares to RM25,000,000 comprising 250,000,000 Shares by an addition of 150,000,000 Shares (“Proposed Increase In Authorised Share Capital”).
The Proposed Bonus Issue will be effected by way of capitalising up to RM7,993,362 from the share premium reserves and up to RM2,401,638 from the retained profi ts reserve of the Company.
(v) Announcement of Private Placement
On 4 April 2006, the Company announced that it proposes to implement a private placement of up to 6,300,000 new ordinary shares of RM0.10 each in I-Power (“Proposed Private Placement”), representing not more than ten percent (10%) of the issued and paid-up share capital of the Company, to investors to be identifi ed later. The Proposed Private Placement was approved by the SC vide its letter dated 19 April 2006.
As the proposed private placement was not completed within the stipulated timeframe of 6 months due to unforeseen market conditions prevailing at the material time, the proposed exercise was granted extension by the SC vide its letter dated 2 Oct 2006.
Subsequent to the extension approval, an additional 6,300,000 new ordinary shares of RM0.10 each issued at RM0.68 per share, was granted listing and quotation on 3 November 2006.
On behalf of the Board, I am pleased to add that not only were all the above-listed corporate exercises successfully completed, but that they have also enhanced the Company’s standing in the corporate world. As a result of these corporate exercises, I-Power presently has an enlarged shares base of 212,798,000 shares compared to 63,000,000 when it was fi rst listed, an enlargement of 238%.
When completed, the rights issue will further broaden the Company’s equity base to at least 430,000,000 shares from originally 63,000,000 when the Company was listed on 18 January 2005. That’s a whopping enlargement of 583% in I-Power’s shares base.
When completed, the rights issue will also strengthen the Company’s net worth position from RM20 million as at 30 June 2006 to RM108 million, a 440% jump in net worth.
Such an enlargement of its fi nancial base will put I-Power in a strong position to take advantage of future strategic opportunities as they arise. The Company has enjoyed very strong shareholders support since its listing in 2005, and the Board looks forward to your participation in the rights issue and your continued support.
With your continued support, we are proud to add that I-Power Berhad is truly a public listed company with a public spread of over 75% and totalling over 6,600 shareholders!!! This speak volumes of the public’s confi dence in the Company, and not surprisingly so as I-Power has delivered solid growth year after year which only serves to underpin the Company’s healthy and sound fundamentals as an organisation poised for greater things to come in the foreseeable future.
The proposed rights issue is a strategic step towards that direction, which is to raise capital to fund the Company’s
|:: 07ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
strategic expansion in order to enable it to grow from strength to strength, to broaden and diversify its business base, and yet adds depth to its capability to create wealth for its shareholders in the long run.
The proposed rights issue, which is estimated to raise approximately over RM60 million, would provide ample war chest to the Board and its management team to make a sizeable acquisition in the coming months. The Company had begun negotiations with several companies to look at such Mergers & Acquisitions opportunities.
The sole objective of such an M&A initiative of acquiring companies in high growth, new exciting industries and/or companies with proven track record in established industries if concluded successfully will be to add value and depth to I-POWER’s existing business by:
1. expanding and diversifying the Company’s revenue base, 2. broadening and enriching the Company’s products offerings, 3. widening and enlarging the Company’s customer base considerably, and4. generating recurring revenues/incomes to compliment I-Power’s mainly project based revenues/incomes.
Points 1 to 4 above are aimed at providing I-Power with stable recurring incomes, and thus enhancing its business profi tability and wealth creation capability in the long run.
On the matter of wealth creation capability of I-Power Berhad in the long run, I would like to share with you, our valued shareholders, the following scenario which assumes that you have bought 100,000 I-Power’s shares at IPO price of 43 sen and still hold the shares:
Performance of RM43,000 investment in I-Power shares from IPO time
Year Description Unit Value Total Value
18 Jan 05 IPO Subscribe – 100,000 shares 43 sen per share RM43,000
July 2005 Dividend Paid 10 sen per share (RM4,300)
Net Investment 100,000 shares now RM38,700
Nov 2006 Bonus Issue 3 new shares for every 2
2006/2007 Total 250,000 shares now Post Bonus Issue
6 Sept 07 Closing. Mkt Price – 250,000 shares 40.5c per share RM101,250
Basically the above table demonstrates that if you had held on to your shareholdings subscribed at 43 sen per share at IPO price in Jan 2005, your net investment would only be RM38,700 after the dividend pay-out in July 2005. With the 3 for 2 Bonus issue in Nov 2006, your original shareholdings would have increased to 250,000 shares.
Therefore if you still hold on to your shares bought during IPO, your original net investment of RM38,700 would now be worth RM101,250 at the closing market price of 40.5 sen at 6 September 2007, an appreciation of 162% over a 31 months period. This is despite the fact that the market is presently trading at a low due primarily to the US sub-prime mortgage credit crunch.
At present levels of 40.5 sen compared to the broad market average for Mesdaq companies trading at PE of between 8 to 12 multiples, I-Power offers good value as a long term investment.
With the above illustration and the series of corporate exercises completed to-date plus the impending rights issue, it serves to confi rm that I-Power is a company with sound and solid fundamentals, and a Board committed to instilling fi scal discipline in the Company, and creating and building shareholders’ wealth in the long term, with emphasis on “the long term”.
On behalf of the Board, I would therefore like to take this opportunity to thank you, our most esteemed shareholders for your loyal and continued support, and congratulate you for taking a long term view with I-Power, as the table above aptly shows, provides you with handsome rewards. On the same note, it is worthwhile observing that great companies with dominant leadership position do not appear overnight, it takes time to attain greatness, the journey itself is long and winding, beset with risks aplenty, yet I-Power aspires to become such a great company in Malaysia. We invite you, our staunchest and most loyal of shareholders to take that long and yet rewarding journey with us, for we are determined and quietly confi dent that we will reach such an apex.
CEO’S ADDRESS (cont’d)
| :: ::08 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
CEO’S ADDRESS (cont’d)
Financial Performance Review
For the current fi nancial year to date ended 30 June 2007, the Company recorded revenues of RM57.840 million, representing an increase of 216.10% when compared to the prior year ended 30 June 2006 of RM18.298 million.
The Company’s profi t after tax generated from operating activities was a solid RM11.663 million, however, after adjusting for Employees Share Option Scheme charges of RM1.073 million, the profi t after tax for the year ended 30 June 2007 still showed a healthy RM10.234 million, an increase of 42.20% from the preceding year, 30 June 2006 of RM7.197 million.
For the 12 months ended 30th June 2007, the Company generated net cash from operating activities of RM11.494 million, and whilst its sales revenues registered an increase of 216.10% over the preceding year’s revenues, the Company is proud to report that its account receivables as a percentage of sales of RM57.840 million stood at 49% compared to last year’s of 51%, an improvement of 2% despite the hefty jump in sales of 216.10%.
In reporting to you the fi nancial performance for the year 2006/07, I would also like to continue our tradition of presenting to you, our valued equity-holders, I-Power’s sound fundamentals and key fi nancial indicators benchmarked against eight of our peers in the software sector of the Mesdaq market. Out of respect, the names of our peers will not be disclosed, nonetheless the fi gures quoted in the comparison tables are all readily available from the web-site of Bursa Malaysia Berhad. The fi gures include:
Percentage of Sales Growth Company Sales
(The Year Prior)Sales
(Current Year) %
Growth
A 26,872,748 26,232,937 (2.38)
B 3,168,098 2,488,354 (21.46)
C 11,839,135 12,763,425 7.81
D 13,197,120 8,608,333 (34.77)
E 10,986,999 9,513,744 (13.41)
F 1,211,788 1,109,956 (8.40)
G 5,366,505 5,595,695 4.27
H 6,024,005 7,451,911 23.70
IPower 18,297,815 57,840,393 216.11
Average 10,773,801 14,622,750 19.05
As can be discerned from the two tables above, I-Power’s sales performance for 2007 far exceeded that of its peer in the same software sector. Whilst half showed sales decline and the other half marginal improvement, I-Power’s sales soared 216%.
Percentage of Profi t GrowthCompany Profi ts
(The Year Prior)Profi ts
(Current Year)%
Growth
A 3,164,318 76,594 (97.58)
B (2,809,923) (1,309,107) (53.41)
C 3,865,273 4,779,323 23.65
D 2,395,293 251,308 (89.51)
E (2,057,772) (1,887,913) (8.25)
F (10,809,451) (2,483,255) (77.03)
G (3,294,559) 8,281 100.25
H (1,325,726) 44,015 103.32
IPower 7,197,032 10,233,675 42.19
Average (408,391) 1,118,707 (6.26)
In nominal value, I-Power registered the highest profi ts increase whilst in % terms, it ranks third.
(50) 0 50 100 150 200 250
Company A
Company B
Company C
Company D
Company E
Company F
Company G
Company H
I-Power
Average
(2.38)
(21.46)
7.81(34.77)
(13.41)(8.40)
4.27
23.70
19.05
216.11
Growth (%)
Percentage of Sales Growth
(97.58)
(53.41)23.65
(89.51)(8.25)
(77.03)
100.25
103.3247.13
(6.26)
(150) (100) (50) 0 50 100 150
Company A
Company B
Company C
Company D
Company E
Company F
Company G
Company H
I-Power
Average
Growth (%)
Percentage of Profi t Growth
Expenses To Sales RatioCompany Total
ExpensesSales %
Expenses to Sales
IPower 6,112,450 57,840,393 10.57
Average 6,647,539 14,622,750 45.46
I-Power’s % of expenses to sale ratio is perhaps the Company’s ongoing strength, 10.6% compared to broad market average of 45%.
Costs Per EmployeeCompany Total
ExpensesStaff
Numbers%
Costs Per Employee
IPower 6,112,450 55 111,135
Average 6,647,539 82 81,068
The Company’s costs per employee exceeded industry average, but this is offset by the fact that the company’s number of employees is lower than industry average, and shows more productivity overall.
Sales ProductivityCompany Sales Staff
NumbersSales Productivity
IPower 57,840,393 55 1,051,644
Average 14,622,750 82 178,326
This chart confi rms the point made in the preceding of I-Power’s having a team of staff members with far superior productivity when compared to the market average.
AR To SalesCompany Sales Trade
DebtorsPercentage AR To
Sales
IPower 57,840,393 28,317,988 48.96
Average 14,622,750 7,491,435 51.23
The Company has managed to keep its AR within industry average, 49% compared to 51%, notwithstanding the Company will strive to do better and target to bring its AR level down to 30% over time.
To underlie the above comparisons of I-Power with its peers in the software industry in Malaysia, I have reproduced in italics below a brief news article which sums up the situation succinctly:
“In a separate note, OSK said I-Power Bhd could possibly be the fastest growing software company on Mesdaq as its revenue and net profi t had increased for four consecutive years.
The brokerage said I-Power’s MSC status, zero borrowings, strong cashfl ow and low capital expenditure business model provided the company a solid fi nancial ground.
For the 12 months ended June 30, I-Power’s revenue surged 216% to RM57.8mil from RM18.3mil in FY06 while net profi t grew 47.1% year-on-year to RM10.6mil.
The company attributed the strong fi nancial performance to aggressive and stronger sales and business development activities in e-solutions products, turnkey software development services, software integration services and better collaboration with system integration partners.
OSK has maintained a buy recommendation on the stock with a 12-month target price of 56 sen.”
(Source - Updated : 23-08-2007 Media : The Star ;Story By : SURAJ RAJ via www.biznewsdb.com )
CEO’S ADDRESS (cont’d)
0 10 20 30 40 50
AverageI-Power10.57
45.46
(%)
0 20,000 40,000 60,000 80,000 100,000
AverageI-Power
120,000
111,13581,068
RM
0 200,000 400,000 600,000 800,000 1,000,000
AverageI-Power
1,200,000
1,051,644178,326
RM
AverageI-Power
51.2348.96
47 48 49 50 51 52
%
Expenses To Sales Ratio
Costs Per Employee
Sales Productivity
AR To Sales
|:: 09ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
CEO’S ADDRESS (cont’d)
Acknowledgment & Appreciation
In closing, on behalf of the Board of Directors, I would like to take this opportunity to thank all our staff members for their industry, loyalty, dedication and commitment. We are also indebted to our clients for their continued patronage and faith in our products and services. We would also like to express our sincerest appreciation to our principal suppliers for their support and partnership. Not forgetting of course, the management team for their leadership, foresight and vision. Most paramount of all, to all our shareholders for their continued investment in I-Power Berhad, we again say thank you very much and stay with us for the long term.
Jason Chia Kok ChinChief Executive Offi cer,I-Power Berhad
Awards & Recognitions
Awards & Recognitions Description
We are IBM’s e-Business Malaysian Premier Partner with One of the Largest IBM Certifi ed Software Professionals in Malaysia. To add to the various accolades that we have chalked from IBM is the Top Software Value Incentive Performer for 2007.
| :: ::010 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
CEO’S ADDRESS (cont’d)
|:: 011ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
CEO’S ADDRESS (cont’d)
| :: ::012 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
Overview
Established in October 2002, I-Power Berhad is a locally nurtured e-business solutions specialist and system integrator with a wide range of dominant e-Solutions products that caters for the business needs of both medium and large-sized organizations.
I-Power is headquartered in Technology Park Malaysia (TPM) Bukit Jalil, Kuala Lumpur and has a solid workforce of approximately 68 employees. I-Power has been listed in Malaysian Exchange of Securities Dealing and Automated Quotation Bhd (MESDAQ) since 18th January 2005.
Our Comprehensive e-Solutions
The most extensive suite of e-Solutions in Malaysia deployed in latest Java and IBM middlewares technologies.
Our Business Focus
CORPORATE PROFILE
CEO’S ADDRESS (cont’d)
|:: 013ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
Our Technology
ICT will ultimately become the vital enabler in supporting the services, retail, manufacturing and fi nancial areas so as to boost effi ciency, productivity and value in an increasingly competitive global environment. This in turn will increase the complexity of the IT system used and entails a more demanding solution to meet these intricate requirements.
Hence, we believe that technology could actually help create those solutions to assist organisations in increasing their effi ciency and productivity, and we only adopt the best of technologies available and continuously keep abreast of the latest technology in the industry. The technologies we have employed will enable us to consistently deliver state-of-the-art solutions to our clients, allowing them a faster time to market and fl exibility in deploying the solutions.
Open Java Standard
SQL ANSI Standard
IBM e-business Framework
Struts Application Framework
Server-centric
Solid Customisable e-Solutions
Not only I-Power’s range of e-Solutions is robust, server-centric and highly effi cient but also customisable that caters well to our clients’ business needs. Our powerful set of solutions will enable our clients’ organisations to rapidly align around key corporate goals and help their employees to collaborate more effectively.
CORPORATE PROFILE (cont’d)
CORPORATE PROFILE (cont’d)
CORPORATE INFORMATION
COMPANY SECRETARY
Chin Kim Fung (LS: 00234)
STOCK EXCHANGE LISTING
Bursa Malaysia Securities Berhad (Mesdaq Market)
PRINCIPAL BANKER
Hong Leong Bank Berhad
REGISTERED OFFICE
149A, Jalan Aminuddin BakiTaman Tun Dr Ismail60000 Kuala LumpurTel: 03-7727 3873Fax: 03-7728 5948Email: [email protected]
REGISTRAR
Insurban Corporate Services Sdn Bhd149, Jalan Aminuddin BakiTaman Tun Dr Ismail60000 Kuala LumpurTel: 03-7729 5529Fax: 03-7726 6686
PRINCIPAL PLACE OF BUSINESS
L4-E-11, Enterprise 4Technology Park MalaysiaBukit Jalil57000 Kuala LumpurTel: 03-8996 8080Fax: 03-8996 6880
SPONSOR
Aseambankers Malaysia Berhad33rd Floor, Menara Maybank,100, Jalan Tun Perak,50050 Kuala Lumpur
BOARD OF DIRECTORS
Tan Sri Dato’ Wan Sidek Bin Haji Wan Abd Rahman (Chairman)Independent, Non-Executive Director
Chia Kok ChinChief Executive Offi cer/Chief Technology Offi cer
Tan Chuek HooiExecutive Director
Hoh Chee KuanExecutive Director
Leou Thiam LaiIndependent, Non-Executive Director
Koay Ben Ree (Appointed 23 April 2007) Independent Non-Executive Director
AUDIT COMMITTEE
Tan Sri Dato’ Wan Sidek Bin Haji Wan Abd Rahman (Chairman)
Leou Thiam Lai
Tan Chuek Hooi (Resigned as Audit Committee Member on 02/11/2007)
Koay Ben Ree (Appointed on 25/05/2007)
NOMINATION COMMITTEE
Tan Sri Dato’ Wan Sidek Bin Haji Wan Abd Rahman (Chairman)
Leou Thiam Lai
REMUNERATION COMMITTEE
Tan Sri Dato’ Wan Sidek Bin Haji Wan Abd Rahman (Chairman)
Leou Thiam Lai
AUDITORS
Russell Bedford LC & Company, Chartered Accountants
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Board of Directors
Name Of Members Designation Nationality
Tan Sri Dato’ Wan Sidek Bin Haji Wan Abd Rahman
Independent Non-Executive Chairman
Malaysian
Jason Chia Kok Chin CEO / CTO Malaysian
Hoh Chee Kuan Executive Director Malaysian
Tan Chuek Hooi Executive Director Malaysian
Leou Thiam Lai Independent Non-Executive Director Malaysian
Koay Ben Ree Independent Non-Executive Director Malaysian
TAN SRI DATO’ WAN SIDEK BIN HAJI WAN ABD RAHMAN
A Malaysian and aged 71, Tan Sri Dato’ Wan Sidek is the Independent Non-Executive Chairman of I-Power Berhad. He was appointed to the Board on 1 September, 2004. He is the Chairman of the Audit Committee, the Nomination Committee and the Remuneration Committee.
He graduated from University Malaya in 1959 with a Bachelor of Economics (Honours). Upon graduation, he joined the Malaysian Administrative and Diplomatic Service.
During his tenure in the civil service, he served in several senior positions at the District, State and Federal level. Prominent among these were as the District Offi cer of Dindings and Kinta in Perak; as Federal Secretary of Sarawak (1970-1974) and as State Secretary of Pahang (1974-1977). At the Federal level, he served as Secretary-General in the Ministry of Science, Technology and Environment (1981-1982), Ministry of Information (1982-1985) and Deputy Secretary-General in the Prime Minister’s Department (1985-1988) and as Secretary-General, Ministry of Home Affairs (1988-1990).
His last posting in the civil service before he retired was as the Malaysian High Commissioner to the United Kingdom and concurrently as Malaysian Ambassador to the Republic of Ireland from 1990-1993.During the course of this career and in recognition of his contributions to the civil service and the country, he was bestowed with Honours and Awards, namely PSM (Federal), SIMP (Kelantan), DSAP (Pahang), PNBS (Sarawak), JMN, KMN and PJK.
In 1992, he was made Chairman of Kuala Lumpur Industries Holdings Berhad. He was later appointed as Chairman of Shangri-La Hotels (M) Berhad (1992) and Rahman Hydraulic Tin Berhad (1998). He currently serves as a board member of Eng Teknologi Holdings Berhad (1996), Resorts World Bhd (1997) and Olympia Industries Berhad (2001).
As at 30 June, 2007, he does not hold any ordinary shares in I-Power Berhad. He has no family relationship with any directors or substantial shareholder of the Company.
Tan Sri Dato’ Wan Sidek Bin Haji Wan Abd Rahman attended all the Board meetings held during his tenure in offi ce in the year ended 30 June, 2007.
Tan Sri Dato’ Wan Sidek Bin Haji Wan Abd Rahman has no confl ict of interest with the Company and has no conviction for offences within the past 10 years other than traffi c offences or a negative statement.
DIRECTORS’ PROFILES
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MR. CHIA KOK CHIN
A Malaysian and aged 39, Chia Kok Chin is the Chief Executive Offi cer / Chief Technology Offi cer of I-Power Berhad. He was appointed to the Board on 21 October, 2002. He graduated from Deakin University, Melbourne, Australia in 1990 with a Bachelor of Business majoring in Computing.
He started his career as an analyst programmer with Glaxo (Malaysia) Sdn Bhd in 1991. His main function was to ensure the development and maintenance of key accounting, marketing and sales system. He later joined Focus Technology Sdn Bhd in 1993 as a system analyst, where some of his main responsibilities were systems development and user requirement study.
In 1994, he joined Phileo Allied Bank Sdn Bhd where among the posts he held was as System Architect, Business Analyst and Project Manager. During his stint there, he was involved in certain main information system projects such as PalDirect, which is an Internet share trading system, and PalWorld, which is an Internet banking system.
After six years with Phileo Allied Bank Sdn Bhd, he then accepted the post of CTO with PowerSys in 2000, where he was also a major shareholder. He was the key fi gure in the R&D of several commercial e-Solutions projects which were implemented by PowerSys and he also held the IPR to PowerSys key technology competencies. Some of the projects in which he played a key role were turnkey solutions developed for e-Cosway and Deutsche Bank (Malaysia) Bhd. With the forming of I-Power, he later sold the market-proven IPR of his e-Solutions to I-Power.
As at 30 June, 2007, he held 22,310,350 ordinary shares in I-Power. He has no family relationship with any directors or substantial shareholder of the Company.”
Mr. Chia Kok Chin attended all the Board meetings held during his tenure in offi ce in the year ended 30 June, 2007.
Mr. Chia Kok Chin has no confl ict of interest with the Company and has no conviction for offences within the past 10 years other than traffi c offences or a negative statement.
MR. TAN CHUEK HOOI
A Malaysian and aged 47, Tan Chuek Hooi is the Executive Director of I-Power Berhad. He was fi rst appointed to the Board on 16 June, 2003. He is a member of the Audit Committee.
He graduated from University of Windsor, Ontario, Canada in 1983 with a Bachelor of Commerce (Honours) in Business Administration majoring in Accounting and minoring in Business Statistics.
He started his career as an accountant with United Computers Sdn Bhd in 1984. In 1986, he joined Imagineering Sdn Bhd as its Finance Manager, where he was responsible for the implementation of the company’s operation procedure.
In 1987, he accepted an appointment from Tech Pacifi c NZ Ltd in Auckland New Zealand, where he acted as its Finance Manager. During his stay, he was in charge of, among others, the company system administration, credit control and fi nancial accounting.
After seven years working in New Zealand, he then returned to Malaysia and later joined Tele Dynamics Sdn Bhd as its Financial Controller. He was mainly responsible for maintaining the company’s whole fi nancial system which included, among others, treasury function, fi nancial accounting, corporate planning and cash fl ow management.
As at 30 June, 2007, he held 200,000 ordinary shares in I-Power Berhad. Tan Chuek Hooi attended all Board meetings held during his tenure in offi ce in the year ended 30 June, 2007. He has no family relationship with any directors or substantial shareholder of the Company.
Mr. Tan Chuek Hooi has no confl ict of interest with the Company and has no conviction for offences within the past 10 years other than traffi c offences or a negative statement.
MR. HOH CHEE KUAN
A Malaysian and aged 38, Hoh Chee Kuan is an Executive Director of I-Power Berhad. He was appointed to the Board on 5 September, 2003.
He graduated from Federal Institute of Technology, Kuala Lumpur, in 2001 with a Diploma in Electrical Engineering.
DIRECTORS’ PROFILES (cont’d)
CEO’S ADDRESS (cont’d)
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He started his career as Technical Supervisor with Hitechniaga Sdn Bhd in 1992. There he was given the responsibility to oversee technical support for line printer division. In 1995, he further advanced his career by accepting an appointment as Sales Manager with LEO Computer Distribution Sdn Bhd. During his three-year tenure, he managed the sales and marketing division and was also involved in developing the company’s business strategies.
He later joined Fujitsu PC Asia Pte Ltd as Channel Manager. There he was mainly involved in channel marketing planning and helping the development of the company’s business partner.
Prior to joining I-Power, he joined Nineten Media (M) Sdn Bhd in 2001, where he acted as its General Manager. Again, he was deeply involved in the development of the company’s business strategy apart from managing the sales and marketing division.
As at 30 June, 2007, he did not hold ordinary shares in I-Power Berhad. Hoh Chee Kuan attended all the Board meetings held during his tenure in the year ended 30 June, 2007. He has no family relationship with any directors or substantial shareholder of the Company.
Mr. Hoh Chee Kuan has no confl ict of interest with the Company and has no conviction for offences within the past 10 years other than traffi c offences or a negative statement.
MR. LEOU THIAM LAI
A Malaysian and aged 51, Leou Thiam Lai is an Independent Non-Executive Director. He is the Member of the Audit Committee, the Nomination Committee and the Remuneration Committee. He was appointed to the Board on 1 September, 2004.
He studied at the Tunku Abdul Rahman College, Kuala Lumpur, and upon graduation in June 1980, he began his career in a Chartered Accountants fi rm. He left the profession to accept an appointment as the Group Accountant of a public-listed company.
Subsequently, in 1987, he started a risk management agency and in 1998, upon the approval of his Audit Licence by the Treasury, he started his own accounting fi rm, Leou & Associates, a Chartered Accountants Firm.
He is a Chartered Accountant of the Malaysian Institute of Accountants and a Fellow of the Chartered Association of Certifi ed Accountants (UK) and an Associate member of the Malaysian Institute of Taxation.
He is also in the board of Degem Berhad, United Bintang Berhad, Ramunia Holdings Berhad and Berjaya Holdings (HK) Limited. He too, serves as Chairman of the audit committee for Degem Berhad.
As at 30 June, 2007, he did not hold ordinary shares in I-Power Berhad. Leou Thiam Lai attended all the Board meetings held during his tenure in offi ce in the year ended 30 June, 2007. He has no family relationship with any directors or substantial shareholder of the Company.
Mr. Leou Thiam Lai has no confl ict of interest with the Company and has no conviction for offences within the past 10 years other than traffi c offences or a negative statement.
MR. KOAY BEN REE
A Malaysian and aged 36, Koay Ben Ree is an Independent Non-Executive Director. A new member to the Board, he was appointed on 23 April 2007.
He graduated from Universiti Malaya in 1995 with LLB (Honours). He gained admission as an Advocate & Solicitor to the High Court of Malaya in 1996. He later obtained his postgraduate qualifi cation, LLM from University of Warwick in 1997.
Koay Ben Ree started his career in law with his fi rst job as a Legal Assistant at Raslan Loong in 1996. For a year, he worked as a Foreign Lawyer at Herbert Smith in London but soon after he began work at Lee Choon Wan & Co. as a Legal Assistant. He made a steady climb in his career by being made a Partner at Zul Rafi que and Partners. In 2007, he opened his own practice with Ben and Partners.
As at 30 June 2007, he did not hold any I-Power Berhad shares. Koay Ben Ree attended one out of fi ve Board meetings held during his tenure in the year ended 30 June 2007”. He has no family relationship with any directors or substantial shareholder of the Company.
Koay Ben Ree has no confl ict of interest with the Company and has no conviction for offences within the past 10 years other than traffi c offences or a negative statement.
DIRECTORS’ PROFILES (cont’d)
Board of Directors
Roles And Principal Responsibilities
The Independent Non-Executive Chairman leads strategic planning at the Board level while the CEO and Executive Directors are responsible for the implementation of policies, executive and investment decisions. The Independent Non-Executive Director provides judgement on issues of strategy, performance and standards.
Meetings
The Board of Directors has met fi ve (5) times during the fi nancial year to drive the focus of the Company.
The attendance record of each member is shown below:
No. Name Of Members Designation Attendance Percentage Of Attendance
1 Tan Sri Dato’ Wan Sidek Bin Haji Wan Abd Rahman
Independent Non-Executive Chairman
5/5 100%
2 Chia Kok Chin CEO / CTO 5/5 100%
3 Hoh Chee Kuan Executive Director 5/5 100%
4 Tan Chuek Hooi Executive Director 5/5 100%
5 Leou Thiam Lai Independent Non-Executive Director
5/5 100%
6 Koay Ben Ree Independent Non-Executive Director
1/1 100%
Board Composition and Balance
The Board consists of six (6) members. At present, the Board consist of one (1) Independent Non-Executive Chairman, One (1 ) Chief Executive Offi cer / Chief Technology Offi cer, two (2) Executive Directors and two (2) Independent Non-Executive Directors
The profi les of the Board members can be found in pages fi fteen (15) to seventeen (17) in the Annual Report.
The Board is satisfi ed that the Board composition is balanced to ensure long term interest of all shareholders.
CORPORATE GOVERNANCE
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Directors’ Remuneration
Supply of Information
All Board members appointed on independent dates. Please refer to Directors’ Profi le in pages fi fteen (15) to seventeen (17). The Board called for meetings fi ve (5) times during the fi nancial year ended 30 June 2007.
Members of the Board will be supplied with all papers pertaining to fi nancial performance, investments, strategic direction and such prior to the Board meeting to provide suffi cient time for them to deliberate on the issues.
Appointments to the Board
The Board is appointed in a formal and transparent practice as endorsed by the Code. The Nomination Committee will make recommendations to the Board and the Board upon review and deliberation, approve the appointment. The Company Secretary will ensure that all appointments are properly made and that all legal and regulatory obligations are made.
Directors’ Training
All Directors as pursued in Guidance Note 10, have gone through Continuing Education Program training to help them to dispense their responsibilities and duties.
Re-election
One third of the Board, excluding the CEO shall retire from offi ce and eligible for re-election at each Annual General Meeting and all directors except the CEO shall retire from offi ce once in every three (3) years but shall be eligible for re-election.
Directors appointed by the Board during the fi nancial year shall be subject to retirement and re-election by shareholders in the next Annual General Meeting held following their appointments.
Relationship with Shareholders and Investors
The Board of Directors holds with utmost importance the act of keeping all shareholders and investors informed of the company’s business and corporate developments. Such information is disseminated through the company’s quarterly results and through various disclosures via the Bursa Malaysia Securities Berhad website.
The forthcoming Annual General Meeting will be a great avenue of meeting between the Board of Directors and the shareholders and investors.
Annual General Meeting
The Annual General Meeting (AGM) is the primary gathering for all shareholders to raise questions or to inquire more information on the Company’s development and fi nancial performance. The CEO and Board members are present to address all shareholders’ queries on issues relevant to the Company. However, if the queries raised are not immediately answerable during the AGM, the CEO will send a written letter containing the explanation after the AGM is over. Notice of the AGM is released to shareholders at least 21 days before the date of the meeting.
The shareholders have direct access to the Board and are encouraged to participate in the open question and answer session.
CORPORATE GOVERNANCE (cont’d)
Remuneration Band<-------------------No. Of Directors ---------------->
Financial Year Ended Financial Year Ended30 June 2007 30 June 2006
Executive directors:Below RM50,000RM50,001 – RM100,000RM150,001 - RM200,000 RM250,000 – RM300,000RM900,000 – RM950,000
1 1- 1- 11 -1 -
Non executive directors:Below RM50,000 3 2
Total 6 5
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The Board of Directors aims to present a balanced and true view of the Company’s corporate and fi nancial states of affairs.
Audit Committee
The Committee was set to assist the Board of Directors with added focus in discharging its responsibilities and duties.
Financial Reporting
The Board of Directors is satisfi ed that appropriate accounting policies have been consistently applied and supported by reasonable judgements and estimates.
A balanced and understandable assessment of the Company’s position and prospects is released through annual fi nancial statements and quarterly fi nancial results.
Quarterly fi nancial results are by the Audit Committee and approved by the Board of Directors before being released to Bursa Malaysia Berhad.
Internal Control
The Board of Directors takes into seriousness a system of internal controls covering not only fi nancial controls but also operations and compliance controls as well as risk management.
Relationship With Auditors
The Company forges a transparent and professional relationship with the Company’s auditors.
ACCOUNTABILITY AND AUDIT
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The Board of Directors takes it upon themselves to ensure each fi nancial statement for each fi nancial year are properly drawn up in accordance with applicable fi nancial policies and standards in Malaysia so as to give a true and fair view of the Company’s state of affairs as at the fi nancial year and of the results and cash fl ows of the Company for that period.
The Board of Directors takes the responsibilities of safeguarding assets of the Company, prevent and detect fraud and other irregularities seriously.
DIRECTOR’S RESPONSIBILITY STATEMENT
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Audit Committee Members
Chairman Tan Sri Dato’Wan Sidek Bin Haji Wan Abd Rahman (Independent Non-Executive Director)
MembersLeou Thiam Lai (Independent Non-Executive Director)Tan Chuek Hooi ( Resigned as Audit Committee Member on 02/11/2007)Koay Ben Ree (Independent Non- Executive Director)
Audit Committee Terms Of Reference
1. Composition
a. The Board shall elect an Audit Committee from amongst themselves (pursuant to a resolution of the Board of Directors) comprising not less than three (3) members where the majority of them shall be composed of independent non-executive members of the Board.
b. The term of offi ce of the Audit Committee is two (2) years and may be re-nominated and appointed by the Board.
c. The members of the Audit Committee shall elect a Chairman from amongst themselves who shall be an independent director. The Chairman of the Audit Committee shall be approved by the Board.
d. All members of the Audit Committee, including the Chairman, will hold offi ce only so long as they serve as Directors of the Company. Should any member of the Audit Committee cease to be a Director of the Company, his membership in the Audit Committee would cease forthwith.
e. No Alternate Director of the Board shall be appointed as a member of the Audit Committee.
f. If the number of members of the Audit Committee for any reason be reduced to below three (3), the Board of Directors shall within three (3) months of the event, appoint such number of new members as may be required to make up the minimum number of three (3) members.
2. Objectives
The primary objectives of the Audit Committee are:
a. to provide assistance to the Board in fulfi lling its fi duciary responsibilities particularly relating to business ethics, policies and practices and fi nancial management and control.
b. to provide greater emphasis on the audit functions by increasing the objectivity and independence of external and internal auditors and providing a forum for discussion that is independent of the management.
c. to maintain through regularly scheduled meetings a direct line of communication between the Board and the external auditors, internal auditors and fi nancial management.
AUDIT COMMITTEE REPORT
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3. Duties and Responsibilities
The duties and responsibilities of the Audit Committee shall be to review the following and report the same to the Board:
a. The appointment of the external auditors, the audit fee, and any questions of resignation or dismissal.
b. The nature and scope of the audit including the co-operation of auditors where more than one audit fi rm is involved.
c. The quarterly and annual fi nancial statements, focusing particular on:i. changes in accounting policies and practicesii. major judgement areasiii. signifi cant adjustments resulting from the auditiv. the going concern assumption.v. compliance with accounting standardsvi. compliance with Bursa Malaysia Securities Berhad rules and other legal requirements.
d. to discuss problems and reservations arising from the interim and fi nal audits, and any matters the auditors may wish to discuss (in the absence of management where necessary).
e. to review the internal audit programmes, consider the major fi ndings of internal audit programmes and management’s response, and ensure co-ordination between the internal and external auditors.
f. to keep under review the effectiveness of internal control systems, and in particular review the external auditors’ management letter and management’s response.
g. to discuss the related party transaction and confl ict of interest situation that may arise within the Company or the Group including any transaction, procedures or conduct that give rise to questions of management integrity.
h. to give assistance given by the employees of the Company and the Group to the auditors.i. to carry other duties and responsibility as may be agreed to by the Audit Committee and the
Board.
4. Authority
The Audit Committee shall, in accordance with a procedure to be determined by the Board and at the expense of the Company.
a. have authority to investigate any matters within its terms of reference and to seek any information it requires from any employees.
b. have right to retain persons having special competence as necessary to assist the Committee in fulfi lling its responsibilities.
c. have adequate resources to perform its duties.
d. have full and unrestricted access to any information pertaining to the Company.
e. have direct communication channels with the External Auditors and person(s) carrying out the internal audit function or activity (if any).
f. be able to convene meetings with the External Auditors, excluding the attendance of the executive members of the Committee, whenever deemed necessary.
AUDIT COMMITTEE REPORT (cont’d)
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5. Meetings and Minutes
The Audit Committee shall hold not less than four (4) meetings a year to review the quarterly results and year end fi nancial statements. In order to form the quorum for each meeting, a minimum of two (2) members present shall be Independent Directors.
In addition to the Committee members, the head of internal audit shall normally attend the meetings. Representatives of the external auditors shall attend meetings where matters relating to the audit of the statutory accounts and/or the external auditors are to be discussed.
Minutes of each meeting shall be kept and distributed to each member of the Committee and also to the other members of the Board. The Committee Chairman shall report on each meeting to the Board.
The Secretary to the Audit Committee shall be the Company Secretary.
AUDIT COMMITTEE REPORT (cont’d)
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Summary Of Activities
During the fi nancial year ended 30 June 2007, in line with the terms of reference, the Committee carried out the following activities in discharge of its functions and duties:
1. Reviewed the audit reports of the Company and the Group prepared by the external auditors and considered the major fi ndings by the auditors and management’s responses thereto;
2. Reviewed the quarterly and annual reports of the Company and the Group prior to submission to the Board for consideration and approval.
3. Reviewed the disclosure of related party transactions entered into by the Company and the Group in the annual report of the Group;
4. Met with the external auditors to review the audited fi nancial statements for the fi nancial ended 30 June 2007.
Deliberations are ongoing to engage an external professional fi rm to undertake the internal audit function. Pending the establishment of this outsourced internal audit function, the Committee took into cognizance the existence of key elements of internal control at the management and operational levels and the contribution to internal control by the existing internal quality system established under the ISO 9002 regulations, which covers a signifi cant section of the overall internal control objectives and which are regularly audited by internal as well as external quality auditors.
Meeting Attendance
The Committee held held six (6) meetings during the year ended 30 June 2007. The details of the attendance are as follows:
Directors No. of meetings attended out of total no. of meetings held during tenure of offi ce
Tan Sri Dato’ Wan Sidek Bin Haji Wan Abd Rahman
6/6
Tan Chuek Hooi 5/6
Leou Thiam Lai 6/6
Koay Ben Ree (Appointed 25/05/2007) -
SUMMARY OF AUDIT COMMITTEE ACTIVITIES
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Introduction
The Board of Directors believes that with good governance comes a sound system of internal control to safeguard our shareholders investment and the company’s assets.
Board Responsibilities
Maintain the Company’s system of internal controls and ensure the adequacy and integrity of the Company’s state of affairs.
The Board of Directors acknowledges its overall responsibility for reviewing the adequacy and integrity of the Company’s system of internal control, identifying principal risks and establishing an appropriate control environment and framework to manage risks and evaluating the Company’s operational effectiveness and effi ciency.
The Board recognizes the importance of maintaining sound internal control systems and risk management practices to ensure good corporate governance.
The Board confi rms that there is a continuous process to identify, evaluate and manage the signifi cant risks of the Group and this process is regularly reviewed by the Board
The key processes include:
• Regular and comprehensive information is provided to the management, covering fi nancial performance and key business indicators.
• Approve quarterly and audited full year fi nancial results.
• Make performance analysis on fi nancial performance and business objectives.
• Review the adequacy and effectiveness of the system of internal control in an on-going process.
System of Internal Control
The Board has a formalized reporting structure with clearly defi ned lines of accountability and delegated authority. It comprising the CEO and senior management team and ensures communication of the Company’s business objectives, operational and fi nancial issues or risks through management meetings at various levels.
STATEMENT ON INTERNAL CONTROL
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The CEO and senior management team monitor the day-to-day affairs of the Company by attending scheduled meetings both at management and operational levels and review the performance and operation reports. These include technical and operations meetings and management review meetings.
The key elements of the internal control system :
• A well defi ned organization structure with clear lines of accountability that sets out the authority delegated to the board and management committees
• Documented policies and procedures for all signifi cant processes
• There is a clearly defi ned delegation of responsibilities to the Audit Committee of the Board and the management
• Performance reports such as quarterly fi nancial review, business development and other corporate matters are regularly provided to the directors and discussed at Board meetings
• Management meetings are regularly held
The Board remains committed towards maintaining a sound system of internal controls therefore on-going reviews will be carried out to measure the effectiveness of the internal control systems and establish shareholders’ confi dence.
Internal Audit
The Board of Directors trusts that the system of internal control is adequate judging from the size of the company.
Audit Committee
The Committee was set up to assist the Board of Directors with added focus in discharging its responsibilities and duties.
STATEMENT ON INTERNAL CONTROL (cont’d)
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CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility
Corporate Social Responsibility (CSR) is a concept whereby I-Power holds with utmost importance in taking responsibility for the impact of our activities on our customers, employees, shareholders, communities and the environment in all aspects of our operations. I-Power is fully aware that our obligation extends beyond the statutory obligation to comply with legislation and therefore voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large.
The I-Power team has donated in monetary terms and tangible goods to an NGO during the natural disaster which plagued the Southern region of Malaysia.
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Content30 | DIRECTORS’ REPORT
34 | STATEMENT BY DIRECTORS
35 | STATUTORY DECLARATION
36 | INCOME STATEMENT
37 | BALANCE SHEET
38 | STATEMENT OF CHANGES IN EQUITY
39 | CASH FLOW STATEMENT
40 | DETAILED INCOME STATEMENT
42 | NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENT
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Directors’ Report
The directors submit their report and audited fi nancial statements of the company the fi nancial year ended 30 June 2007
Principal activities
The Company is principally involved in the provision of e-business software application development, software integration and related services and the sale of related products. There have been no signifi cant changes in the nature of these activities during the fi nancial year.
Financial results RMNet profi t for the year 10,233,675
In the opinion of the directors, the results of the operations of the Company during the fi nancial year have not been substantially affected by any item, transaction or event of a material and unusual nature.
Dividends
No dividend has been paid or declared by the Company since the end of the previous fi nancial year. The directors also do not recommend any dividend payment in respect of the current fi nancial year.
Reserves and provisions
There were no material transfers to and from reserves or provisions during the fi nancial year other than those disclosed in the fi nancial statements.
Issue of shares and debentures
During the fi nancial year, the authorised capital of the Company was increased from RM10,000,000 to RM25,000,000 by the creation of an additional 150,000,000 new ordinary shares of RM0.10 each.
The issued and paid up share capital of the Company was also increased from RM6,300,000 to RM21,279,800 by way of:
(a) The issuance of 6,300,000 new ordinary shares of RM0.10 each issued at RM0.68 per ordinary share for cash pursuant to a private placement which were granted listing and quotation on 3 November 2006;
(b) The bonus issue of 103,950,000 new ordinary shares of RM0.10 each on the basis of three (3) new ordinary shares of RM0.10 each for every two (2) existing ordinary shares held on 29 January 2007, by way of capitalisation from share premium and retained profi ts of RM7,886,824 and RM2,508,176 respectively. The bonus shares were granted listing and quotation on 7 February 2007;
(c) The issuance of 25,930,000 new ordinary shares of RM0.10 each at an exercise price of RM0.35 per ordinary share for cash pursuant to the Company’s Employee Share Option Scheme (“ESOS”) which were granted listing and quotation on 9 May 2007; and
(d) The issuance of 13,618,000 new ordinary shares of RM0.10 each issued at RM0.35 per ordinary share for cash pursuant to a private placement which were granted listing and quotation on 15 June 2007.
DIRECTOR’S REPORT
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DIRECTORS’ REPORT (cont’d)
The new ordinary shares issued during the fi nancial year ranked pari passu with the then existing ordinary shares of the Company.
The Company has not issued any debentures during the fi nancial year.
Share options
No options were granted to any person to take up unissued shares of the Company during the year apart from the issue of share options pursuant to the Employee Share Option Scheme (“ESOS”).
The Company’s ESOS is governed by the by-laws aproved by the shareholders at an Extraordinary General Meeting held on 19 April 2007. The ESOS was implemented on 23 April 2007 and is to be in force for a period of fi ve (5) years from the date of implementation.
The salient features and other terms of the ESOS are disclosed in Note 21 to the fi nancial statements.
On 9 May 2007, 25,930,000 new ordinary shares of RM0.10 each were issued at RM0.35 per ordinary share for cash pursuant to the ESOS. As at the end of the fi nancial year, there were no unissued shares of the Company under options.
The Company has been granted an exemption by the Companies Commission of Malaysia from having to disclose in this report the name of persons to whom options have been granted in aggregate of less than 2,000,000 options during the fi nancial year and details of their holdings as required by Section 169(11) of the Companies Act, 1965. The details of the option holders in aggregate of 2,000,000 options and above are set out below:
Number of options over ordinary shares of RM0.10 each
Balance as at 1.7.2006 Granted Exercised
Balance as at 30.6.2007
Chia Kok Chin - 13,860,000 13,860,000 -
Hoh Chee Kuan - 3,465,000 3,465,000 -
Choo Wei Choon - 2,000,000 2,000,000 -
Directors
The directors of the Company in offi ce since the date of the last report are:
Tan Sri Dato’ Wan Sidek Bin Haji Wan Abd Rahman
Chia Kok Chin
Tan Chuek Hooi
Hoh Chee Kuan
Leou Thiam Lai
Koay Ben Ree - Appointed on 23 April 2007
|:: 031ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
Directors’ interests in shares
The shareholdings in the Company of those who were directors at the end of the fi nancial year, as recorded in the Register of Directors’ Shareholdings kept under Section 134 of the Companies Act, 1965, are as follows:
None of the other directors in offi ce at the end of the fi nancial year, had held shares or benefi cial interest in shares of the Company during the fi nancial year, according to the register required to be kept under Section 134 of the Companies Act, 1965.
Directors’ benefi ts
Since the end of the previous fi nancial year, no director has received or become entitled to receive any benefi t (other than a benefi t included in the aggregate amount of emoluments received or due and receivable by the directors as shown in the fi nancial statements) by reason of a contract made by the Company or a related corporation with the 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.
There were no arrangements during or at the end of the fi nancial year, which had the object of enabling directors to acquire benefi ts by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.
DIRECTORS’ REPORT (cont’d)
Number of ordinary shares of RM0.10 each
Balance as at 1.7.2006 Bought Sold
Balance as at 30.6.2007
Shareholdings registered in the nameof directors:
Chia Kok Chin 20,237,500 50,432,350 48,359,500 22,310,350
Tan Chuek Hooi 200,000 300,000 500,000 -
Hoh Chee Kuan - 3,465,000 3,465,000 -
Number of ordinary shares of RM0.10 each
Balance as at 1.7.2006 Bought Sold
Balance as at 30.6.2007
Other shareholdings in which thedirectors are deemed to haveinterests:
Chia Kok Chin 932,000 - 932,000 -
Tan Chuek Hooi - 500,000 500,000 -
Number of options over ordinary shares of RM0.10 each
Balance as at 1.7.2006 Granted Exercised
Balance as at 30.6.2007
Chia Kok Chin - 13,860,000 13,860,000 -
Hoh Chee Kuan - 3,465,000 3,465,000 -
DIRECTORS’ REPORT (cont’d)
| :: ::032 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
Other statutory information
Before the fi nancial statements of the Company were made out, the directors took reasonable steps:
(a) to ascertain that action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and had satisfi ed themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and
(b) to ensure that any current assets which were unlikely to realise their book values in the ordinary course
of business had been written down to their expected realisable values.
At the date of this report, the directors are not aware of any circumstances:
(a) which would render the amount written off for bad debts or the amount of the provision for doubtful debts in the fi nancial statements of the Company inadequate to any substantial extent;
(b) which would render the values attributed to current assets in the fi nancial statements of the Company misleading; and
(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Company misleading or inappropriate.
In the interval between the end of the fi nancial year and the date of this report:
(a) no item, transaction or event of a material and unusual nature has arisen which, in the opinion of the directors, would substantially affect the results of the operations of the Company for the fi nancial year in which this report is made; and
(b) no charge has arisen on the assets of the Company which secures the liability of any other person nor
have any contingent liabilities arisen in the Company.
No contingent or other liability of the Company has become enforceable or is likely to become enforceable within the period of twelve months after the end of the fi nancial year which, in the opinion of the directors, will or may affect the ability of the Company to meet its obligations when they fall due.
At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or the fi nancial statements, which would render any amount stated in the fi nancial statements misleading.
Auditors The auditors, Messrs Russell Bedford LC & Company, retire and do not seek reappointment.
Signed on behalf of the Boardin accordance with a resolution of the directors,
CHIA KOK CHIN
TAN CHUEK HOOI
Kuala Lumpur
Dated: 10 October 2007
DIRECTORS’ REPORT (cont’d)
|:: 033ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
STATEMENT BY DIRECTORS The directors of I-POWER BERHAD state that, in the opinion of the directors, the accompanying fi nancial statements are drawn up in accordance with the provisions of the Companies Act, 1965 and the applicable Approved Accounting Standards in Malaysia for Entities Other Than Private Entities so as to give a true and fair view of the fi nancial position of the Company as at 30 June 2007 and of the results and the cash fl ows of the Company for the year ended on that date.
Signed on behalf of the Boardin accordance with a resolution of the directors,
CHIA KOK CHIN
TAN CHUEK HOOI
Kuala Lumpur
Dated: 10 October 2007
STATEMENT BY DIRECTORSSTATEMENT BY DIRECTORS
| :: ::034 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
STATUTORY DECLARATION I, TAN CHUEK HOOI, being the director primarily responsible for the fi nancial management of I-POWER BERHAD, do solemnly and sincerely declare that to the best of my knowledge and belief, the accompanying fi nancial statements are 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.
) ) ) )
TAN CHUEK HOOI
Before me,
COMMISSIONER FOR OATHS
Subscribed and solemnly declared by the above named TAN CHUEK HOOI at Kuala Lumpur in Wilayah Persekutuan on 10 October 2007
STATUTORY DECLARATION
|:: 035ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
FOR THE YEAR ENDED 30 JUNE 2007
Note 2007 2006
RM RM
Revenue 4 57,840,393 18,297,815
Other operating income 29,536 54,755
Purchases (41,168,364) (8,251,055)
Staff costs 5 (4,246,992) (1,083,021)
Depreciation (391,757) (258,135)
Amortisation of development costs (454,456) -
Amortisation of intellectual property rights (200,000) (200,000)
Other operating expenses (1,174,685) (1,363,327)
Profi t before tax 8 10,233,675 7,197,032
Income tax expense 9 - -
Net profi t for the year 10,233,675 7,197,032
Basic earnings per ordinary share 10 5.8 sen 11.4 sen
INCOME STATEMENT
INCOME STATEMENT
| :: ::036 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
AS AT 30 JUNE 2007
Note 2007 2006
RM RM
Non current assets
Plant and equipment 11 1,158,755 1,505,297
Intellectual property rights 12 3,100,000 3,300,000
Development expenditure 13 1,817,826 2,272,282
Current assets
Trade receivables 14 28,317,988 9,212,504
Other receivables, deposits and prepayments 15 1,425,408 143,981
Cash at bank 16,659,703 4,147,633
Fixed deposits with a licensed bank 16 15,350,000 -
61,753,099 13,504,118
Current liabilities
Trade payables 17 18,284,396 431,317
Other payables and accruals 69,500 50,000
18,353,896 481,317
Net current assets 43,399,203 13,022,801
49,475,784 20,100,380
Represented by:
Share capital 18 21,279,800 6,300,000
Share premium 19 11,109,467 4,439,362
Retained profi ts 20 17,086,517 9,361,018
Shareholders’ fund 49,475,784 20,100,380
BALANCE SHEET
|:: 037ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2007
Non distributable Distributable
Share capital
Share premium
Equity compensation
reserveRetained
profi ts Total
RM RM RM RM RM
At 1 July 2005 6,300,000 4,439,362 - 2,163,986 12,903,348
Net profi t for the year - - - 7,197,032 7,197,032
At 30 June 2006 6,300,000 4,439,362 - 9,361,018 20,100,380
Private placement on
3 November 2006 630,000 3,654,000 - - 4,284,000
Bonus issue 10,395,000 (7,886,824) - (2,508,176) -
Share options granted
under ESOS - - 1,392,441 - 1,392,441
Issue of ordinary shares
pursuant to ESOS 2,593,000 6,482,500 - - 9,075,500
Transfer from equity
compensation reserve to
share premium upon
exercise of ESOS options - 1,392,441 (1,392,441) - -
Private placement on
15 June 2007 1,361,800 3,404,500 - - 4,766,300
Share issue expenses - (376,512) - - (376,512)
Net profi t for the year - - - 10,233,675 10,233,675
At 30 June 2007 21,279,800 11,109,467 - 17,086,517 49,475,784
STATEMENT OF CHANGES IN EQUITY
| :: ::038 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
FOR THE YEAR ENDED 30 JUNE 2007
2007 2006
RM RM
Cash fl ows from/(used in) operating activities
Profi t before tax 10,233,675 7,197,032
Adjustments for:
Amortisation of development costs 454,456 -
Amortisation of intellectual property rights 200,000 200,000
Bad debts written off - 531,876
Depreciation 391,757 258,135
Share options granted to employees and directors 1,392,441 -
Government grants recognised - (48,332)
Interest income (29,536) (6,423)
Operating profi t before working capital changes 12,642,793 8,132,288
Increase in trade and other receivables (20,386,911) (5,370,342)
Increase in trade and other payables 17,872,579 116,286
Net cash from operating activities 10,128,461 2,878,232
Cash fl ows from/(used in) investing activities
Development expenditure paid - (1,466,690)
Government grants received - 351,858
Interest received 29,536 6,423
Increase in fi xed deposits pledged (15,345,000) -
Purchase of plant and equipment (45,215) (1,053,226)
Net cash used in investing activities (15,360,679) (2,161,635)
Cash fl ows from/(used in) fi nancing activities
Proceeds from issue of shares 18,125,800 -
Share issue expenses paid (376,512) -
Net cash from fi nancing activities 17,749,288 -
Net increase in cash and cash equivalents 12,517,070 716,597
Cash and cash equivalents at beginning of year 4,147,633 3,431,036
Cash and cash equivalents at end of year 16,664,703 4,147,633
Cash and cash equivalents are represented by:
Cash at bank 16,659,703 4,147,633
Fixed deposits with a licensed bank 15,350,000 -
32,009,703 4,147,633
Less: Fixed deposits pledged (15,345,000) -
16,664,703 4,147,633
CASH FLOW STATEMENT
|:: 039ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
DETAILED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2007
2007 2006
RM RM
Revenue 57,840,393 18,297,815
Other operating income:
MDC grant recognised - 48,332
Interest income on fi xed deposits 29,536 6,423
29,536 54,755
Purchases (41,168,364) (8,251,055)
Staff costs:
Directors’ remuneration
- fees 66,000 66,000
- share options granted to directors 930,353 -
- others 174,720 255,360
EPF and SOCSO 300,300 252,685
Human resources development fund 23,719 50,724
Medical fees 5,398 4,609
Salaries 2,249,536 1,902,464
Share options granted to employees 462,088 -
Staff welfare 34,878 17,869
4,246,992 2,549,711
Less: staff costs capitalised under development expenditure - (1,466,690)
(4,246,992) (1,083,021)
Depreciation (391,757) (258,135)
Amortisation of intellectual property rights (200,000) (200,000)
Amortisation of development costs (454,456) -
Other operating expenses (Appendix) (1,174,685) (1,363,327)
Profi t before tax 10,233,675 7,197,032
DETAILED INCOME STATEMENT
| :: ::040 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
I-POWER BERHAD Appendix (Incorporated in Malaysia)
FOR THE YEAR ENDED 30 JUNE 2007
2007 2006
RM RM
Other operating expenses:
Advertising and promotions 34,149 58,396
Auditors’ remuneration 32,000 17,000
Bad debts written off - 531,876
Bank charges 962 3,894
Entertainment 168,049 146,678
Gift and donation 33,460 6,311
Internship costs - 6,395
Meeting expenses 3,939 1,000
Offi ce rental 179,232 176,245
Postage, printing and stationery 28,557 25,680
Professional fees 315,313 124,621
Repair and maintenance 88,309 42,340
Secretarial fees - -
Sundry expenses 19,138 9,750
Telephone, fax and internet charges 58,075 59,197
Training expenses - -
Travelling expenses 187,252 120,229
Upkeep of offi ce 5,960 14,617
Water and electricity 20,290 19,098
1,174,685 1,363,327
DETAILED INCOME STATEMENT (cont’d)
|:: 041ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
30 JUNE 2007
1. General information
The Company is principally involved in the provision of e-business software application development, software integration and related services and the sale of related products. There have been no signifi cant changes in the nature of these activities during the fi nancial year.
The Company is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the MESDAQ Market of Bursa Malaysia Securities Berhad.
The principal place of business is located at L4-E-11, Enterprise 4, Technology Park Malaysia, Bukit Jalil, 57000 Kuala Lumpur. The registered offi ce is located at 149A, Jalan Aminuddin Baki, Taman Tun Dr. Ismail, 60000 Kuala Lumpur.
The total number of employees, inclusive of executive directors, of the Company at the end of the fi nancial year is 70 (2006: 57). The fi nancial statements were approved and authorised for issue by the board of directors on 10 October 2007.
2. Basis of preparation of the fi nancial statements
The fi nancial statements of the Company have been prepared in accordance with the provisions of the Companies Act, 1965 and the applicable Approved Accounting Standards for Entities Other Than Private Entities issued by the Malaysian Accounting Standards Board (“MASB”).
In the preparation of the fi nancial statements, the Directors are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of fi nancial statements and the reported amounts of revenues and expenses during the fi nancial year. Actual results could differ from those estimates.
Estimate and judgments are continually evaluated by the directors and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
In the process of applying the Company’s accounting policies, which are described below, management is of the opinion that there are no instances of application of judgment and estimate and assumption which are expected to have a signifi cant effect on the amounts recognised in the fi nancial statements except for the equity compensation reserve as disclosed in Note 21.
Management believes that there are no key assumptions made concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year.
At the beginning of the current fi nancial year, the Company had adopted new and revised Financial Reporting Standards (“FRSs”) which are mandatory for fi nancial periods beginning on or after 1 January 2006.
The adoption of the new and revised FRSs does not result in signifi cant changes in accounting policies of the Company.
The new standards, amendments to published standards and interpretations that may result in changes in the accounting policies of the Company and are mandatory for fi nancial periods beginning on or after 1 July 2007 or later periods, but which the Company has not early adopted are FRS 139 Financial Instruments: Recognition and Measurement (effective date yet to be determined by MASB). This new standard establishes principles for recognising and measuring fi nancial assets, fi nancial liabilities and some contracts to buy and sell non-fi nancial items. Hedge accounting is permitted only under strict circumstances. The Company will apply this standard when effective.
The fi nancial statements are presented in Ringgit Malaysia (“RM”).
NOTES TO THE FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS
| :: ::042 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
3. Signifi ciant accounting policies
Basic of accounting
The fi nancial statements of the Company have been prepared under the historical cost convention and any other bases described in the signifi cant accounting policies as summarised below.
Revenue and income recognition
Revenue from services rendered is recognised in the income statement when the services are rendered.
Revenue on maintenance contracts is recognised when the services are rendered. Interest income is recognised as it accrues (taking into account the effective yield on the asset) unless collectibility is in doubt.
Grants
Grants represent monetary grants awarded by Multimedia Development Corporation (“MDC”) under the Multimedia Super Corridor Research and Development Grant Scheme, for the purposes of supporting the Company’s research and development activities in information technology. Grants are not recognised until there is reasonable assurance that all conditions attaching to them will be complied with and that the grants will be received.
Grants related to income are recognised as income over the periods necessary to match them with the related costs which they are intended to compensate, on a systematic basis, and are presented as a credit under other operating income in the income statement. Grants related to assets are presented in the balance sheet by deducting the grants in arriving at the carrying amount of the assets.
Foreign currencies
Transactions in foreign currencies are converted into Ringgit Malaysia at rates of exchange ruling at the transaction dates. Monetary assets and liabilities in foreign currencies at the balance sheet date are translated to Ringgit Malaysia at rates of exchange ruling at that date, unless hedged by forward foreign exchange contracts, in which case the rates specifi ed in such forward contracts are used. All foreign exchange differences are taken up in the income statement.
The principal exchange rates for every unit of foreign currency ruling at balance sheet date used are as follows:
2007 2006
RM RM
United States Dollar 3.455 3.675
EURO 4.643 N/A
Singapore Dollar 2.255 N/A
Japanese Yen 0.028 N/A
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
|:: 043ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
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 of the Company. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short term non accumulating compensated absences such as sick leave are recognised when the absences occur.
(ii) Defi ned contribution plans Obligations for contributions to defi ned contribution plans such as Employees Provident Fund are
recognised as an expense in the income statement as incurred.
(iii) Share based compensation The Company operates an equity settled, share based compensation plan for the eligible employees
of the Company. The fair value of the employee services received in exchange for the grant of the share options without vesting condition is recognised as an expense in the income statement with a corresponding increase in equity.
The total amount to be recognised as compensation expense is determined by reference to the fair value of the share options at the date of the grant and the estimation of the number of share options to be exercised. The fair value of the share options is computed using a Binomial Tree Model. Measurement inputs include strike price, underlying asset price, days to expiration, expected dividend, option type, volatility and interest rate.
The equity amount is recognised in the equity compensation reserve until the option is exercised, upon which it will be transferred to share premium, or until the option expires, upon which it will be transferred directly to retained profi ts.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium account when the share options are exercised.
Income tax
Income tax on the profi t or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profi t for the year and is measured using the tax rates that have been enacted at the balance sheet date.
Deferred tax is provided for, using the ‘liability’ method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the fi nancial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profi t will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.
Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly in equity.
Inpairment of assets
The carrying amounts of assets subject to accounting for impairment are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated and an impairment loss is recognised in the income statement immediately whenever the recoverable amount is less than the carrying amount of the asset. All reversals of an impairment loss are recognised as income immediately.
NOTES TO THE FINANCIAL STATEMENTS (cont’d) NOTES TO THE FINANCIAL STATEMENTS (cont’d)
| :: ::044 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
Plant and equipment and depreciation
Plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any.
Gain and loss arising from the disposal of an asset is determined as the difference between the net disposal proceeds and the carrying amount of the asset and is recognised in the income statement.
Depreciation on plant and equipment is calculated on a straight line basis at the following annual rates based on their estimated useful lives:
Computers 20%Offi ce equipment, furniture and fi ttings 20%Renovations 20%
Intellectual property rights
Intellectual property rights are stated at cost less accumulated amortisation and impairment losses, if any. Intellectual property rights are amortised from the commencement of the income recognition to which they relate on the straight line basis over the period of expected benefi t of twenty years.
Research and development expenditure
Expenditure on research activities, undertaken with the prospect of gaining new scientifi c or technical knowledge and understanding, is expensed to the income statement as incurred.
Expenditure on development activities, whereby research fi ndings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible and the Company has suffi cient resources to complete development. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Other development expenditure is expensed in the income statement as incurred.
Capitalised development expenditure is stated at cost net of grants less accumulated amortisation and impairment losses, if any. Capitalised development expenditure is amortised from the commencement of the income recognition to which it relate on the straight line basis over the period of expected benefi t of fi ve years.
Financial instruments
Financial instruments are recognised in the balance sheet when the Company has become a party to the contractual provisions of the instrument.
Financial instruments are classifi ed as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends and gains and losses relating to a fi nancial instrument classifi ed as a liability, are reported as expense or income.
Distributions to holders of fi nancial instruments classifi ed as equity are charged directly to equity. Financial instruments are offset when the Company has legal enforceable right to offset and intends to settle either on a net basis or realise the asset and settle the liability simultaneously.
(i) ReceivablesReceivables are carried at anticipated realisable value. All known bad debts are written off and specifi c provisions are made for debts that are considered to be doubtful with regards to collection. In addition, general provisions are made to cover possible debts which are not specifi cally identifi ed.
(ii) PayablesPayables are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received.
(iii) Interest bearing borrowingsAll borrowing costs are recognised as an expense in the income statement in the period in which they are incurred.
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
|:: 045ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
(iv) Equity instrumentsOrdinary shares are classifi ed as equity. Dividends on ordinary shares are recognised in equity in the period in which they are approved for payment.
Cash fl ow statement
Cash fl ow statement is prepared using the indirect method.
Cash equivalents are short term, highly liquid investments that are readily convertible to known amount of cash and which are subject to insignifi cant risk of changes in value. For the purpose of the cash fl ow statement, cash and cash equivalents are presented net of pledged fi xed deposits.
4. Revenue
5. Staff costs
6. Share options granted to employees and directors
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
2007 2006
RM RM
e-business software application development and
maintenance services 23,412,078 10,350,652
Software integration services 34,428,315 7,947,163
57,840,393 18,297,815
2007 2006
RM RM
Salaries 2,490,256 2,223,824
Defi ned contribution plans 300,300 252,685
Other employee related expenses 1,456,436 73,202
4,246,992 2,549,711
Staff costs capitalised under development expenditure (Note 13) - (1,466,690)
4,246,992 1,083,021
2007 2006
RM RM
Staff costs recognised in income statement for
share options granted under ESOS
- Staff 462,088 -
- Executive directors (Note 7) 930,353 -
1,392,441 -
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
| :: ::046 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
7. Directors’ remuneration
The emoluments received and receivable by the directors of the Company during the fi nancial year are as follows:
The number of directors of the Company whose total remuneration during the fi nancial year fell within the following bands is analysed as follows:
2007 2006
RM RM
Executive directors:
Basic salaries and other emoluments included in:
- Income statement 174,720 174,720
- Development expenditure (Note 13) - 80,640
Share options granted under ESOS (Note 6) 930,353 -
Fees included in income statement 18,000 18,000
1,123,073 273,360
Non executive directors:
Fees included in income statement 48,000 48,000
48,000 48,000
Total 1,171,073 321,360
2007 2006
Executive directors:
Below RM50,000 1 1
RM50,001 – RM100,000 - 1
RM150,001 – RM200,000 - 1
RM250,000 – RM300,000 1 -
RM900,000 – RM950,000 1 -
Non executive directors:
Below RM50,000 3 2
Total 6 5
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
|:: 047ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
8. Profi t before tax
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
9. Income tax expense
2007 2006
RM RM
Profi t before tax is arrived at after charging:
Amortisation of
- development costs 454,456 -
- intellectual property rights 200,000 200,000
Auditors’ remuneration 32,000 17,000
Bad debts written off - 531,876
Depreciation 391,757 258,135
Directors’ remuneration
- fees 66,000 66,000
- others 1,105,073 174,720
Offi ce rental 179,232 176,245
And crediting:
Interest income on
- foreign currency deposit 2,991 6,423
- short term deposits 26,545 -
MDC grants recognised - 48,332
2007 2006
RM RM
Current estimated income tax payable - -
A reconciliation of income tax expense applicable to profi t before tax at the statutory income tax rate to income tax expense at the effective income tax rate is as follows:
2007 2006
RM RM
Profi t before tax 10,233,675 7,197,032
Taxation at statutory tax rate of 27% (2006: 28%) 2,763,000 2,015,200
Expenses not deductible for tax purposes 172,000 252,100
Deferred tax asset not recognised during the year (66,000) 31,700
Deferred tax liabilities not recognised during the year 169,000 (574,000)
Income exempted from tax (3,038,000) (1,725,000)
Income tax expense for the year - -
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
| :: ::048 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
The Company was granted pioneer status by Multimedia Development Corporation Sdn Bhd under the provisions of the Promotion of Investments (Amendment) Act, 1997. By virtue of this pioneer status, the Company’s statutory income from pioneer activities during the pioneer period from 16 December 2002 to 15 December 2007 is exempted from income tax. Dividends declared out of such profi ts are also exempted from income tax in the hands of the shareholders.
On 4 October 2007, the Company obtained approval from the relevant authorities for the extension of this pioneer status for another fi ve year period from the date of expiry of the fi rst fi ve year period.
Deferred tax asset has not been recognised in respect of the following item:
Deferred tax liabilities have not been recognised in respect of the following items:
The deferred tax asset and liabilities are not recognised as the initial recognition of the related asset and liabilities at the time of the transactions, affects neither accounting profi t nor taxable profi t.
10. Basic earnings per ordinary share
The basic earnings per ordinary share has been calculated by dividing the Company’s net profi t for the fi nancial year of RM10,233,675 (2006: RM7,197,032) by the weighted average number of ordinary shares in issue of 175,987,984 (2006: 63,000,000). The weighted average number of ordinary shares in issue is calculated as follows:
2007 2006
RM RM
Government grants received but not credited to
income statement 263,000 300,300
2007 2006
RM RM
Development expenditure incurred but not charged to
income statement 735,000 989,800
Excess of capital allowances over related depreciation
of plant and equipment 276,000 279,600
1,011,000 1,269,400
2007 2006
Number of ordinary shares at beginning of the year 63,000,000 63,000,000
Effects of shares issued pursuant to
- Private placement of 6,300,000 new ordinary shares of
RM0.10 each at an issue price of RM0.68 per share 4,246,027 -
- Bonus issue of 103,950,000 new ordinary shares of
RM0.10 each 103,950,000 -
- Exercise of ESOS options for 25,930,000 new ordinary
shares of RM0.10 each at an issue price of RM0.35 4,120,384 -
- Private placement of 13,618,000 new ordinary shares of
RM0.10 each at an issue price of RM0.35 per share 671,573 -
Weighted average number of ordinary shares 175,987,984 63,000,000
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
|:: 049ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
11. Plant and equipment
Computers
Offi ce equipment,
furniture and fi ttings Renovations Total
RM RM RM RM
2007
Cost
At beginning of year 1,740,166 164,326 30,133 1,934,625
Additions 40,015 5,200 - 45,215
At end of year 1,780,181 169,526 30,133 1,979,840
Accumulated depreciation
At beginning of year 358,590 57,179 13,559 429,328
Charge for the year 352,113 33,618 6,026 391,757
At end of year 710,703 90,797 19,585 821,085
Net book value
At 30 June 2007 1,069,478 78,729 10,548 1,158,755
2006
Cost
At beginning of year 729,135 122,131 30,133 881,399
Additions 1,011,031 42,195 - 1,053,226
At end of year 1,740,166 164,326 30,133 1,934,625
Accumulated depreciation
At beginning of year 134,730 28,930 7,533 171,193
Charge for the year 223,860 28,249 6,026 258,135
At end of year 358,590 57,179 13,559 429,328
Net book value
At 30 June 2006 1,381,576 107,147 16,574 1,505,297
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
| :: ::050 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
12. Intellectual property rights
The Intellectual Property Rights (“IPR”) were acquired from a director on a willing buyer, willing seller arrangement. Pursuant to the agreement, the assignor, the director of the Company, being the proprietor of the IPR, assigns the IPR to the Company in the work, including all associated product designs, proprietary processes, human capital, customer maintenance contracts, development rights and know how processes.
13. Development expenditure
2007 2006
RM RM
Cost
At beginning of year/end of year 4,000,000 4,000,000
Accumulated amortisation
At beginning of year 700,000 500,000
Charge for the year 200,000 200,000
At end of year 900,000 700,000
Net book value
At end of year 3,100,000 3,300,000
2007 2006
RM RM
Cost
At beginning of year 2,272,282 918,909
Additions - 1,466,690
Grants recognised - (113,317)
At end of year 2,272,282 2,272,282
Accumulated amortisation
At beginning of year - -
Charge for the year 454,456 -
At end of year 454,456 -
Net book value
At end of year 1,817,826 2,272,282
The development expenditure is arrived at after charging:
Directors’ remuneration other than fees - 80,640
Other staff costs - 1,386,050
- 1,466,690
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
|:: 051ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
14. Trade receivables
The Company’s normal trade credit terms range from 90 to 120 days (2006: 90 to 120 days). Other credit terms are assessed and approved on a case by case basis.
15. Other receivables, deposits and prepayments
16. Fixed deposits with a licensed bank
Included in the fi xed deposits with a licensed bank is an amount of RM15,345,000 (2005: RM Nil) which has been pledged to secure the banking facility granted to the Company as disclosed in Note 17.
The weighted average interest rate and average maturity of fi xed deposits with a licensed bank of the Company are as follows:
2007 2006
RM RM
Tender deposits 1,276,427 -
Sundry deposits 113,981 103,981
Prepayments 35,000 40,000
1,425,408 143,981
2007 2006
% %
Weighted average interest rate 2.82 -
2007 2006
days days
Average maturity 30 -
17. Trade payables
Letters of credit issued by a licensed bank, when converted into trust receipts upon presentation by the suppliers, will bear interest at the rate of 10.2% (2006: Nil) per annum and this trade facility is secured by way of fi xed deposits of the Company as disclosed in Note 16.
The normal trade credit terms granted to the Company range from 60 to 90 days (2006: 60 to 90 days).
2007 2006
RM RM
Trade payables 2,673,832 431,317
Letters of credit 15,610,564 -
18,284,396 431,317
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
| :: ::052 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
18. Share capital
2007 2006 2007 2006
No. ofordinaryshares
No. ofordinaryshares RM RM
Authorised:
At beginning of year 100,000,000 100,000,000 10,000,000 10,000,000
Increased during the year 150,000,000 - 15,000,000 -
At end of year 250,000,000 100,000,000 25,000,000 10,000,000
Issued and fully paid:
At beginning of year 63,000,000 63,000,000 6,300,000 6,300,000
Private placement of 6,300,000
new ordinary shares of
RM0.10 each at an issue
price of RM0.68 per share 6,300,000 - 630,000 -
Bonus issue of 103,950,000
new ordinary shares of
RM0.10 each 103,950,000 - 10,395,000 -
Exercise of ESOS options for
25,930,000 new ordinary shares
of RM0.10 each at an issue
price of RM0.35 per share 25,930,000 - 2,593,000 -
Private placement of 13,618,000
new ordinary shares of RM0.10
each at an issue price of
RM0.35 per share 13,618,000 - 1,361,800 -
At end of year 212,798,000 63,000,000 21,279,800 6,300,000
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
|:: 053ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
19. Share premium
The share premium is not distributable by way of cash dividends and may be utilised only in the manner set out in Section 60(3) of the Companies Act, 1965.
20. Retained profi ts
Based on the estimated tax credits and exempt income available, and the prevailing tax rate applicable to dividends, all of the retained profi ts of the Company are available for distribution by way of dividend without incurring additional tax liability at 30 June 2007 and the Company will be liable to incur additional income tax of about RM515,000 if all of its retained profi ts at 30 June 2006 are to be distributed by way of cash dividends.
The Company has tax exempt income account of approximately RM18,771,000 (2006: RM7,521,000) available for distribution as tax exempt dividend.
21. Equity compensation reserve
The equity compensation reserve comprises the cumulative value of employee services received for the issue of share options. When the option is exercised, the amount from the equity compensation reserve is transferred to share premium. When the share options expire, the amount from the equity compensation reserve is transferred to retained earnings.
2007 2006
RM RM
At beginning of year 4,439,362 4,439,362
Private placement of 6,300,000 new ordinary shares of
RM0.10 each at an issue price of RM0.68 per share 3,654,000 -
Bonus issue (7,886,824) -
Exercise of ESOS options for 25,930,000 new ordinary shares of
RM0.10 each at an issue price of RM0.35 per share 6,482,500
Transfer from equity compensation reserve to share premium
upon exercise of ESOS options 1,392,441 -
Private placement of 13,618,000 new ordinary shares of
RM0.10 each at an issue price of RM0.35 per share 3,404,500 -
Less: Share issue expenses (376,512) -
At end of year 11,109,467 4,439,362
2007 2006
RM RM
At beginning of year - -
ESOS of 25,930,000 options for new ordinary shares
of RM0.10 each granted to eligible employees and directors
of the Company 1,392,441 -
Exercise of ESOS options for 25,930,000 new ordinary
shares of RM0.10 each at an issue price of RM0.35 per share (1,392,441)
At end of year - -
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
| :: ::054 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D) | :: ::054
Employee Share Option Scheme (“ESOS”)
The Company’s ESOS is governed by the by-laws approved by the shareholders at an Extraordinary General Meeting held on 19 April 2007. The ESOS was implemented on 23 April 2007 and is to be in force for a period of fi ve (5) years from the date of implementation.
The salient features of the ESOS are as follows:
(i) The ESOS Committee may, at any time during the duration of the ESOS, make offers in writing to any eligible person selected by the ESOS Committee which selection shall be at the absolute discretion of the ESOS Committee;
(ii) The total number of new ordinary shares in the Company which currently has a par value of RM0.10 each (“I-Power shares”) which may be made available under the ESOS shall not exceed 20% of the total issued and paid up share capital comprising ordinary shares of the Company at any one time;
(iii) Eligibility for participation in the ESOS shall be subject to the By-Laws of the ESOS where the eligibility employees must have been confi rmed on the offer date and have served for a continuous period of at least six (6) months immediately preceding the offer date;
(iv) Provided always that the selection of any director or employee (including any key pioneer employee) for participation in the ESOS shall be at the discretion of the ESOS Committee and the decision of the ESOS Committee shall be fi nal and binding;
(v) The number of I-Power shares allocated, in aggregate, to the directors, senior management and/or the key pioneer employees of the I-Power and its subsidiaries (if any) shall not exceed 50% of the total I-Power shares available under the scheme;
(vi) The number of I-Power shares allocated to any eligible person who, either singly or collectively through persons connected with the eligible person, holds 20% or more in the issued and paid up share capital of the Company, shall not exceed 10% of the total I-Power shares available under the scheme;
(vii) The option price for each share shall be the weighted average market price of the I-Power shares for the fi ve (5) market days immediately preceding the offer date less a discount of not more than ten percent (10%) therefrom at the ESOS Committee’s discretion or the par value of the I-Power shares or at such minimum issue price of the ordinary shares as may be permitted by the provisions of the Companies Act, 1965, whichever is the higher amount;
(viii) An offer shall be valid for a period of thirty (30) calendar days from the offer date or such longer period as the ESOS Committee at its discretion, determines on a case to case basis;
(ix) An option can be exercised by any eligible person who has accepted the offer by the Company in accordance with the terms of the ESOS by notice in the prescribed form to the Company during the exercise period in respect of all or part of the I-Power shares comprised in the options, such part being in multiples of one hundred (100) I-Power shares. All options to the extent unexercised on the expiry of the option period applicable thereto shall lapse; and
(x) The new I-Power shares to be allotted upon the exercise of the options shall, upon allotment and issue, rank pari passu in all respects with the existing ordinary shares of the Company save and except that the new I-Power shares will not be entitled to any dividends, rights, allotments and/or distributions which entitlement date precedes the date of allotment of the said shares.
The options offered to take up unissued ordinary shares of RM0.10 each and the option prices are as follows:
Number of options over ordinary shares of RM0.10 each
Option price
Balance as at 1.7.2006 Granted Exercised
Balance as at 30.6.2007
Date of offer RM
23 April 2007 0.35 - 12,070,000 12,070,000 -
25 April 2007 0.35 - 13,860,000 13,860,000 -
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
|:: 055ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
The fair value of share options granted during the year was estimated using a Binomial Tree Model, taking into account the terms and conditions upon which the options were granted. The fair value of share options measured at grant date and the assumptions are as follows:
The expected volatility refl ects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of the option granted were incorporated into the measurement of fair value.
22. Commitment
23. Financial instruments
Financial risk management objectives and policies
The Company’s fi nancial risk management policy seeks to ensure that adequate fi nancial resources are available for the development of the Company’s business whilst managing its interest rate, liquidity, foreign exchange and credit risks. The Company operates within guidelines that are approved by the Board and the Company’s policy is not to engage in speculative transactions.
Interest rate risk
The Company’s primary interest rate risk relates to interest bearing debt. The Company manages its interest rate exposure by maintaining a prudent mix of fi xed and fl oating rate borrowings. The Company actively reviews its debt portfolio, taking into account the investment holding period and nature of its assets. The information on maturity dates and effective interest rates of fi nancial liabilities are disclosed in their respective notes.
2007 2006
Fair value of share options (RM) 0.0537 -
Expected volatility (%) 66.2 -
Expected days to expiration (days) 30 -
Risk free rate (%) 3.5 -
Expected dividends (RM) - -
Strike price (RM) 0.35 -
Underlying asset price (RM) 0.39 -
Option type Call -
2007 2006
RM RM
The future minimum rental payments under
non cancellable tenancy agreement are as follows:
Not later than 1 year 119,488 179,232
Later than 1 year and not later than 2 years - 119,488
119,488 298,720
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
| :: ::056 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
23. Financial instruments (cont’d)
Liquidity risk
The Company actively monitors its debt maturity profi le, operating cash fl ows and the availability of funding so as to best ensure that all funding needs are met. As part of its overall liquidity management, the Company endeavours to maintain suffi cient levels of cash or cash convertible investments to best meet its working capital requirements.
Foreign exchange risk
The Company has exposure to foreign currency risk as a result of its trade sales and purchases. The net unhedged fi nancial assets and fi nancial liabilities of the Company that are not denominated in their functional currencies are as follows:
Credit risk
Credit risks are managed by the application of credit approvals, limits and monitoring procedures. Credit risks are minimised and monitored via strictly limiting the Company’s associations to business partners with high creditworthiness. Trade receivables are monitored on an ongoing basis via the Company’s management reporting procedures. At balance sheet date, there were no signifi cant concentrations of credit risk other than from a single trade receivable which represents 71% of the total trade receivables. The maximum exposure to credit risk is represented by the carrying amount of each fi nancial asset.
Fair values
The fair values of all fi nancial assets and liabilities of the Company as at balance sheet date are not materially different from their carrying values.
24. Segmental formation
No segmental information by business activity is presented as the Company’s operations are primarily within the information, communication and technology sector.
No segmental information by geographical location is provided as the Company operates predominantly in Malaysia.
2007 2006
Functional currency of the Company RM RM
Cash and bank balances
United States Dollar 1,367 86,250
EURO 6,332 -
Trade receivables
Singapore Dollar 14,157 -
United States Dollar - 180,000
Trade payables
Japanese Yen 15,610,564 -
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
|:: 057ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
| :: ::058 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
25. Events subsequent to the balance sheet date
Subsequent to the balance sheet date, on 7 September 2007, the shareholders of the Company approved on the following:
i. Proposed renounceable rights issue of up to 228,690,000 new ordinary shares of RM0.10 each (“Rights Share(s)”) in the Company with up to 76,230,000 free detachable new warrants (“Warrant(s)”) on the basis of three (3) rights shares and one (1) free warrant for every three (3) existing ordinary shares of RM0.10 each in the Company held on an entitlement date to be determined later (“Proposed Rights Issue”); and
ii. Proposed increase in authorised share capital of the Company from RM25,000,000 comprising 250,000,000 ordinary shares of RM0.10 each to RM100,000,000 comprising 1,000,000,000 ordinary shares of RM0.10 each, to accommodate the issuance of the Rights Shares and the increase in the ordinary shares arising from the conversion of the Warrants, pursuant to the Proposed Rights Issue.
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
CEO’S ADDRESS (cont’d)
|:: 059ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
SHAREHOLDINGS STRUCTURE AS AT 7 NOVEMBER 2007
Share Capital
Authorised Share Capital RM100,000,000 Issued and fully paid-up capital RM21,279,800Class of shares Ordinary Shares of RM0.10 eachVoting rights One vote per share
DISTRIBUTION OF SHAREHOLDINGS AS AT 7 NOVEMBER 2007
SUBSTANTIAL SHAREHOLDERS AS AT 7 NOVEMBER 2007
DIRECTORS’ SHAREHOLDINGS AS AT 7 NOVEMBER 2007
ANALYSIS OF SHAREHOLDINGS
SIZE OF HOLDINGS NO. OF
HOLDERS % NO. OF
SHARES %
Less Than 100 22 0.33 950 0.00
100 - 1000 218 3.27 164,600 0.08
1001 - 10000 3,757 56.36 23,960,600 11.26
10001 - 100000 2,415 36.23 81,119,200 38.12
100001 and below 5% 253 3.80 85,124,300 40.00
5% and above 1 0.02 22,428,350 10.54
T O T A L 6,666 100.00 212,798,000 100.00
NameDirect Interest
% of Issued Capital
Deemed Interest
% of Issued Capital
Chia Kok Chin 31,878,350 14.98 0 0
Name No of shares held Total% of Issued
Capital
Direct Indirect
1. Tan Sri Dato’ Wan Sidek Bin Haji Wan Abd Rahman
0 0 0 0
2. Chia Kok Chin 31,878,350 0 0 14.98
3. Hoh Chee Kuan 0 0 0 0
4. Tan Chuek Hooi 0 0 0 0
5. Leou Thiam Lai 0 0 0 0
6. Koay Ben Ree 0 0 0 0
ITEM NO.
NAME & ADDRESSSHARE-
HOLDINGS%
1 CHIA KOK CHIN 31,878,350 14.98
2 INTER-PACIFIC EQUITY NOMINEES (TEMPATAN) SDN BHD BENEFICIARY : PLEDGED SECURITIES ACCOUNT FOR LEONG KONG HOY (AL0005)
3,919,800 1.84
3 A.A. ANTHONY NOMINEES (TEMPATAN) SDN BHD BENEFICIARY : PLEAGED SECURITIES ACCOUNT FOR ANGKASA AMAN SDN BHD
3,240,000 1.52
4 HLG NOMINEE (ASING) SDN BHD BENEFICIARY : EXEMPT AN FOR UOB KAY HIAN PTE LTD (A/C CLIENTS)
2,050,000 0.96
5 SJ SEC NOMINEES (TEMPATAN) SDN BHD BENEFICIARY : PLEDGED SECURITIES ACCOUNT FOR CHIN KA WONG (SMT)
1,762,300 0.83
6 MIDF AMANAH INVESTMENT NOMINEES (TEMPATAN) SDN BHD BENEFICIARY : PLEDGED SECURITIES ACCOUNT FOR TONG YUN MONG (MGN-TYM0004M)
1,600,000 0.75
7 OSK NOMINEES (TEMPATAN) SDN BHD BENEFICIARY OSK CAPITAL SDN BHD FOR NG BOON SING
1,500,000 0.70
8 MIDF AMANAH INVESTMENT NOMINEES (TEMPATAN) SDN BHD BENEFICIARY : PLEDGED SECURITIES ACCOUNT FOR PARAMJIT SINGH GILL (MGN-PSG0002M)
1,260,000 0.59
9 MAYBAN NOMINEES (TEMPATAN) SDN BHD BENEFICIARY : PLEDGED SECURITIES ACCOUNT FOR LOW YEW HWA
1,227,500 0.58
10 MIDF AMANAH INVESTMENT NOMINEES (TEMPATAN) SDN BHD BENEFICIARY : PLEDGED SECURITIES ACCOUNT FOR BACHINT KAUR A/P ANOKH SINGH (CTS-BKA0001)
1,200,000 0.56
11 TAN CHONG JUN 948,000 0.45
12 LOW TAT FOO 900,000 0.42
13 GAN WEE PENG 877,600 0.41
14 RAYMOND WAHAB 750,000 0.35
15 RAMPAI DEDIKASI SDN BHD 750,000 0.35
16 SULAIMAN BIN MUSA 700,000 0.33
17 NG LAI YIN 700,000 0.33
18 UNITED OVERSEAS NOMINEES (TEMPATAN) SDN BHD BENEFICIARY : PLEDGED SECURITIES ACCOUNT FOR SUSHIL KAUR A/P DULLA SINGH (MKL)
650,000 0.31
19 CIMSEC NOMINEES (TEMPATAN) SDN BHD BENEFICIARY : CIMB BANK FOR PARMJIT SINGH A/L MEVA SINGH (MY0353)
650,000 0.31
20 LIM BOON HUA 597,100 0.28
21 LOW KOON KENG 597,100 0.28
22 TAY LEW MY @ CHANG LEW MIN 554,000 0.26
23 DEVAN LINUS RAJADURAI 545,000 0.26
24 FONG KOK LEONG 514,500 0.24
25 TA NOMINEES (TEMPATAN) SDN BHD BENEFICIARY : PLEDGED SECURITIES ACCOUNT FOR GOH KHENG PEOW
500,000 0.23
26 PUBLIC NOMINEES (TEMPATAN) SDN BHD BENEFICIARY : PLEDGED SECURITIES ACCOUNT FOR LOO KEN FONG @ LOH KEN FONG (E-BMM)
500,000 0.23
27 LEE CHOOI SIA 500,000 0.23
28 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD BENEFICIARY : PLEAGED SECURITIES ACCOUNT FOR CHANG KOK KEONG (8030991)
470,000 0.22
29 LIM YEE SOON 465,000 0.22
30 LAU SU SIM 462,500 0.22
62,262,150 29.26
List of Top 30 Shareholders As At 7 November 2007
| :: ::060 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D)
ANALYSIS OF SHAREHOLDINGS (cont’d)
CEO’S ADDRESS (cont’d)
|:: 061ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Fifth Annual General Meeting of the Company will be held at the Langkawi Room, Bukit Jalil Golf & Country Resort, Jalan 3/1558, Bukit Jalil, 57000 Kuala Lumpur on Friday, 28 December 2007 at 10.00am to transact the following business:
A G E N D A
AS ORDINARY BUSINESS
1. To receive and adopt the audited Financial Statements for the fi nancial year ended 30 June 2007 and the Reports of Directors and Auditors thereon.
Resolution 1
2. To approve the payment of Directors’ fees amounting to RM66,000.00 for the fi nancial year ended 30 June 2007.
Resolution 2
3. To re-elect Koay Ben Ree, the Director who retire in accordance with Article 92(2) of the Company’s Articles of Association.
Resolution 3
4. To re-elect Leou Thiam Lai, the Director who retire in accordance with Article 116 of the Company’s Articles of Association.
Resolution 4
5. To re-appoint Tan Sri Dato’ Wan Sidek Bin Hj Wan Abd Rahman as a Director of the Company and to hold offi ce until the conclusion of the next Annual General Meeting of the Company pursuant to Section 129(6) of the Companies Act, 1965.
Resolution 5
6. To appoint Auditors and to authorize the Directors to fi x their remuneration.
Notice of Nomination pursuant to Section 172(11) of the Companies Act, 1965, a copy of which is annexed hereto and marked “Annexure A” has been received by the Company for the nomination of Messrs. Sha, Tan & Co. who have given their consent to act, for appointment as Auditors and of the intention to propose the following ordinary resolution:-
“THAT Messrs. Sha, Tan & Co. be and are hereby appointed as Auditors of the Company in place of the retiring Auditors, Messrs. Russell Bedford LC & Company to hold offi ce until the conclusion of the next Annual General Meeting at a remuneration to be determined by the Directors.”
Resolution 6
AS SPECIAL BUSINESS
To consider and, if thought fi t, pass the following resolutions:
7. ORDINARY RESOLUTION
Authority to allot shares pursuant to Section 132D of the Companies Act, 1965.
“THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and are hereby authorized to issue shares in the Company, at any time until the conclusion of the next Annual General Meeting and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fi t, provided that the aggregate number of shares issued does not exceed 10% of the issued capital of the Company for the time being, subject always to the approval of all relevant regulatory bodies being obtained for such allotments and issues.”
Resolution 7
8. To transact any other business for which due notice shall have been given in accordance with the Articles of Association of the Company and the Companies Act, 1965.
By Order of the Board,
CHIN KIM FUNG (LS:00234)Secretary
Kuala Lumpur5 DECEMBER 2007
| :: ::062 ANNUAL REPORT 2007 I-POWER BERHAD (596299-D) :: ::
CEO’S ADDRESS (cont’d)NOTICE OF ANNUAL GENERAL MEETING (cont’d)
Notes:
1. A member of the Company who is entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his/her stead. A proxy need not be a member of the Company.
2. The instrument appointing a proxy must be deposited at the Company’s Registered Offi ce, situated at No.
149A, Jalan Aminuddin Baki, Taman Tun Dr. Ismail, 60000 Kuala Lumpur, not less than forty-eight (48) hours before the time appointed for holding the meeting or at any adjournment thereof.
3. In the case of a corporate member, the instrument appointing a proxy shall be under its Common Seal or
under the hand of its attorney. 4. In the case of joint holdings, the vote of the fi rst-named in the Register of Members will be accepted to the
exclusion of other joint holders of the shares.
Explanatory notes on Special Business
Resolution pursuant to Section 132D of the Companies Act, 1965.
The proposed Ordinary Resolution No. 7 if passed, will give the Directors of the Company, from the date of the above General Meeting, the authority to allot and issue ordinary shares from the unissued capital of the Company being for such purposes as the Directors consider would be in the interest of the Company. This authority will, unless revoked or varied by the Company in General Meeting, expire at the next Annual General Meeting.
STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING
1. Date, Time and Venue of the Fifth Annual General Meeting (“AGM”)
The Fifth AGM of the Company will held as follows:-
Date: Friday, 28 December 2007
Time: 10.00am
Venue: Langkawi Room, Bukit Jalil Golf & Country Resort, Jalan 3/1558, Bukit Jalil, 57000 Kuala Lumpur
2. Directors’ who are standing for re-election/re-appointment at the Fifth AGM
Director standing for standing for re-election pursuant to Article 92(2) of the Company’s Article of Association is:
a. Koay Ben Ree
Director standing for standing for re-election pursuant to Article 116 of the Company’s Article of Association is:
a. Leou Thiam Lai
Director standing for standing for re-election pursuant to Section 129(6) of the Companies Act, 1965:
a. Tan Sri Dato’ Wan Sidek Bin Hj Wan Abd Rahman
The profi les of the above three (3) Directors and the record of their attendances at Board Meetings in the fi nancial year ended 30 June 2007 are presented in the “Directors’ Profi le” section on pages 15 to 17. Their securities holdings in the Group are presented in the “Statement of Directors’ Interest” Section on page 59.
3. Board Meetings held in the fi nancial year ended 30 June 2007
Five (5) Board Meeting were held during the fi nancial year ended 30 June 2007. A record of the Directors’ attendances at the Board Meeting is presented in the “Statement of Corporate Governance” appearing on pages 18 to 19 of the Annual Report.
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|:: 063ANNUAL REPORT 2007::I-POWER BERHAD (596299-D)
I/We
of being a member (s) of I-POWER BERHAD hereby appoint
of
or failing him/her
of
or failing him/her, the Chairman of the Meeting, as my/our proxy to vote for me/us on my/our behalf at the Fourth Annual General Meeting of the Company to be held at the Langkawi Room, Bukit Jalil Golf & Country Resort, Jalan 3/1558, Bukit Jalil, 57000 Kuala Lumpur on Friday, 28 December 2007 at 10.00 a.m. and at any adjournment thereof.
As witness by hand this ________ day of _____________ 2007
___________________ No. of Shares held ______________
Signature
Notes:
1) A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote in his/her stead. A proxy may but need not be a member of the Company and the provision of Section 149(1) (b) of the Companies Act, 1965 shall not apply.
2) Where a member appoints two (2) or more proxies, the appointment shall be invalid unless he/she specifi es the proportion of his/her holdings to be represented by each proxy.
3) The instrument appointing a proxy shall be in writing under the hand of the appointer or his/her attorney duly authorised in writing or, if the appointer is a corporation, either under Seal or under the hand of an offi cer or attorney duly authorised.
4) The instrument appointing a proxy/proxies must be deposited at the Company’s Registered Offi ce, situated at No. 149A, Jalan Aminuddin Baki, Taman Tun Dr. Ismail, 60000 Kuala Lumpur, not less than forty-eight (48) hours before the time appointed for the holding of the meeting.
ORDINARY RESOLUTIONS 1. To receive and adopt the audited Financial Statements for the fi nancial year ended 30 June 2007
and the Reports of Directors and Auditors thereon. 2. To approve the Directors’ fees of RM66,000 for the fi nancial year ended 30 June 2007.
3. To re-elect the Director who retires pursuant to Article 92(2) of the Company’s Articles of Asso-ciation, namely Koay Ben Ree.
4. To re-elect the Director who retires pursuant to Article 116 of the Company’s Articles of Association, namely Leou Thiam Lai.
5. To re-appoint the Director who retires pursuant to Section 129(6) of the Companies Act, 1965, namely Tan Sri Dato’ Wan Sidek Bin Hj Wan Abd Rahman.
6. To appoint Auditors and to authorise the Directors to fi x their remuneration. SPECIAL BUSINESS 7. To approve the ordinary resolution pursuant to Section 132D of the Companies Act, 1965.
FOR AGAINST
(BLOCK LETTERS)
PROXY FORM FOR ANNUAL GENERAL MEETING
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1st fold here
THE COMPANY SECRETARYI-POWER BERHAD
(Company No.596299-D)
No. 149A, Jalan Aminuddin Baki,Taman Tun Dr.Ismail, 60000 Kuala Lumpur
AFFIX
STAMP
HERE
www.ipowerbiz.com.my
L4-E-11, Enterprise 4, Technology Park Malaysia, Bukit Jalil, 5700 Kuala Lumpurtel 603 8996 8080 fax 603 8996 6880
I-POWER BERHAD (596299-D)
I-POWER BERHAD (596299-D) Incorporated in Malaysia under the Companies Act 1965
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