38. SIGNIFICANT EVENTS DURING THE FINANCIAL PERIOD (CONTINUED) Significant events during and subsequent to the financial year are as follows:- (continued) (c) Material litigation between Dagang NeXchange Berhad, DNeX Semiconductor Sdn. Bhd., Mimastronics Technologies Company Limited and Tethystronics Technologies Company Limited: i. Arbitration proceeding against Mimastronics Technologies Company Limited (“MIMAS”) DNeX Semiconductor Sdn. Bhd. (“DNeX Semi”), a wholly-owned subsidiary of the Company, had on 17 November 2022 issued and served a Notice of Arbitration to commence arbitration proceedings against MIMAS under rules 5.3 and 22.4 of the Asian International Arbitration Centre Arbitration Rules, 2021. MIMAS is wholly owned by Tethystronics Technologies Company Limited (“TTCL”), a special purpose vehicle ultimately owned by Beijing Integrated Circuit Advanced Manufacturing and High-End Equipment Equity Investment Fund Center (Limited Partnership) (“CGP”), which also held 40% equity interest in Silterra Malaysia Sdn. Bhd. (“Silterra”). Silterra is a 60% owned subsidiary of DNeX Semi which in turn is a subsidiary of the Company. DNeX and CGP had respectively acquired, through DNeX Semi and TTCL, 60% and 40% of the shareholding of Silterra from Khazanah Nasional Berhad (“Khazanah”) pursuant to a Share Sale and Purchase Agreement dated 31 March 2021 between DNeX, CGP and Khazanah (“SilTerra SSPA”). DNeX Semi and TTCL aimed to continue with the operations of Silterra. This necessitated compliance with the conditions imposed on the manufacturing licence (“the Licence”) issued to Silterra pursuant to the Industrial Coordination Act 1975. Amongst other things, it was a condition that at least 55% of the shareholding of Silterra was to be owned by a Malaysian entity. A breach of this condition would trigger a possible revocation of the Licence. In order to fulfil commitments made by DNeX Semi and TTCL under the SilTerra SSPA, it was necessary for DNeX Semi to raise a sum of RM120 million in Silterra for the purposes specified in Schedule 4(I) of the SilTerra SSPA. Various discussions were held between the parties to deliberate on the option of financial instruments to be used for purpose of raising the aforementioned funds. Of the options discussed, the parties had sought to opt for the possible issuance of Irredeemable Convertible Preference Shares (“ICPS”) in DNeX Semi amounting to RM100 million to be issued to and subscribed by MIMAS (“Proposed Investment”). The Proposed Investment forms the subscription exercise that was the subject of the Subscription Agreement dated 21 January 2022 entered between DNeX Semi, MIMAS and DNeX (“SSA”) by which MIMAS would become a 33.33% shareholder of DNeX Semi in return for a payment of RM100 million. The rights of the DNeX Semi and MIMAS as shareholders was to be regulated by the Shareholders Agreement dated 21 January 2022 entered between DNeX Semi, MIMAS and DNeX (“SHA”). The execution of the SSA and SHA was done in accordance with a protocol which stipulates that wet-ink versions of the signing pages were only required for the purposes of stamping. Nonetheless upon executing the two agreements, DNeX reached out to MIMAS to delay the stamping as DNeX will need to seek greater clarity on the matter from the relevant authorities in fear that it might potentially breach any regulatory conditions duly imposed by the Government of Malaysia. Financial Statements DAGANG NeXCHANGE BERHAD 300 NOTES TO THE FINANCIAL STATEMENTS
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