Always aboveHong Leong Bank Berhad PRINCIPAL BANKERS Plantation Agencies Sdn. Bhd. (2603-D) 3rd...

1 SAM ENGINEERING & EQUIPMENT (M) BERHAD

Always abovenever beneath

2CROSSOVER . ANNUAL REPORT 2018

Mightyamong the beasts

Does not turn away from any

T H E S P I R I T O F S A M


IntegrityOur pillar of long-term success that encompasses honesty, dedication and responsibility.

Value creationWe embrace a continuous improvement culture and formulate solutions through collective efforts to achieve extraordinary results.

CourageWe will accept change to take up challenges and seize opportunities that may arise.

CommitmentWe will go the extra mile to achieve our objectives and strive for higher standards in our endeavours.

CompassionWe care for others and offer support in times of difficulty in the community.

RighteousnessRighteousness is characterised by accepted standards of morality, justice, virtue or uprightness. Our every action will be consistent with these standards.

Serving OthersThis demands that we are not only fulfilled and enriched by what we do but also that others benefit from it.

Walk Straight, Act Rightvaluescoreour

CROSSOVER . ANNUAL REPORT 2018

C O N T E N T S

The fool despises wisdom, the wise embraces it

No.6-7

No. 10 The Management Team

No. 12 Profile of Directors

5.

6.

8.

9.

10.

12.

18.

20.

27.

40.

41.

57.

61.

65.

67.

150.

153.

158.

159.

Corporate InformationWisdom is Better than StrengthAll things are possible for the one who believesGroup Structure and ActivitiesThe Management Team Profile of DirectorsGroup Financial HighlightsManagement Discussion and AnalysisSustainability Statement 2018Particulars of PropertiesCorporate Governance Overview StatementAudit Committee ReportStatement on Risk Management and Internal ControlOther InformationFinancial StatementsAnalysis of ShareholdingsNotice of Annual General MeetingStatement Accompanying Notice of AGMAdministrative DetailsProxy Form

Group Structure and Activities

No. 8-9


C O R P O R AT E I N F O R M AT I O N

Chairman

Mr. Lee Hock Chye

Members

Mr. Shum Sze Keong Dato’ Mohamed Salleh Bin BajuriDato’ Sri Lee Tuck Fook

AUDIT COMMITTEE

Non-Independent Non-Executive Chairman

Mr. Tan Kai Hoe

Executive Director and Chief Executive Officer

Mr. Goh Wee Keng, Jeffrey

Non-Independent Non-Executive Director

Mr. Shum Sze Keong

Independent Non-Executive Directors

Dato’ Mohamed Salleh Bin BajuriDato’ Wong Siew HaiDato’ Sri Lee Tuck Fook Mr. Lee Hock ChyeDatuk Dr. Wong Lai Sum

BOARD OF DIRECTORS

Chairman

Datuk Dr. Wong Lai SumMembers

Dato’ Mohamed Salleh Bin BajuriDato’ Wong Siew Hai

RISK & SUSTAINABILITY COMMITTEE

Chairman

Dato’ Wong Siew Hai

Members

Mr. Tan Kai HoeMr. Lee Hock ChyeDatuk Dr. Wong Lai Sum

NOMINATING & REMUNERATION COMMITTEE

Ms. Thum Sook Fun (MIA 24701)Ms. Chin Lee Phing (MAICSA 7057836)Ms. Chew Peck Kheng (LS0009559)

COMPANY SECRETARIES

Suite 18.05, MWE PlazaNo. 8, Lebuh Farquhar10200 GeorgetownPenang.Tel: 604 - 263 1966Fax: 604 - 262 8544

REGISTERED OFFICE

www.sam-malaysia.com

COMPANY WEBSITE

Plot 17, Hilir Sungai Keluang TigaBayan Lepas Free Industrial Zone Phase IV, 11900 Bayan Lepas Penang.Tel: 604 - 643 6789Fax: 604 - 644 1700

PRINCIPAL PLACE OF BUSINESS

Citibank BerhadAmBank (M) BerhadHong Leong Bank Berhad

PRINCIPAL BANKERS

Plantation Agencies Sdn. Bhd. (2603-D)

3rd Floor, 2 Lebuh Pantai10300 GeorgetownPenang.Tel: 604 - 262 5333Fax: 604 - 262 2018

REGISTRARS

KPMG PLT (LLP0010081 - LCA & AF 0758) Level 18, Hunza Tower,163E, Jalan Kelawai, 10250 Penang.Tel: 604 - 238 2288Fax: 604 - 238 2222

AUDITORS

RM 212,730,621

(Inclusive of share premium)(As at 31 March 2018)

ISSUED AND PAID-UP CAPITAL


W I S D O M I S B E T T E R T H A N S T R E N G T H

The fool despises wisdom,

the wise embraces it


In a race, everyone runs but only one wins.

Run to win


All things are

for the one who believespossible


G R O U P S T R U C T U R E A N D A C T I V I T I E S

LKT TECHNOLOGY SDN. BHD.

(418108-T) Dormant

SAM TECHNOLOGIES (M) SDN. BHD.(1007889-D)

Ceased Operations

MEERKAT PRECISION SDN. BHD.

(265589-V)Manufacture of aircraft and other related equipment

parts, spares, components and precision engineering

parts

LKT AUTOMATION SDN. BHD.

(75724-W)Dormant

LKT INTEGRATION SDN. BHD.

(455256-X) Dormant

MEERKAT INTEGRATOR SDN. BHD.

(479992-T) Dormant

SAM TOOLING TECHNOLOGY SDN. BHD.

(265822-D)Design, development and manufacture of trim and

form dies and suspension tooling for hard disk drive

parts

SAM PRECISION (M) SDN. BHD.

(43230-K)Fabrication of precision

tools and machinery parts and manufacture of aircraft and other equipment parts,

spares, components and precision engineering parts.

SAM PRECISION (THAILAND) LIMITED

(0145543000048)Manufacture of die, jigs

and parts and cutting tools for disk drive, electronics, semiconductor and other

industries

MEERKAT TECHNOLOGY PTE. LTD.

(200008724 Z)Design, manufacture

and service support for semiconductor, electronic, disk drive, medical, solar, LED and other industrial

equipment

SAM MEERKAT (M) SDN. BHD.

(364889-X)Design and assembly of

modular or complete machine and equipment

AVITRON PRIVATE LIMITED

(201116715M)Manufacture of aircraft

components and precision engineering parts

SAM ENGINEERING & EQUIPMENT (M) BERHAD

(298188-A)


T H E M A N A G E M E N T T E A M

TEO SIEW GEOKHELENChief Financial Officer,SAMEE Group

TAN GUAN THONG Chief Operating Officer, SAM Singapore Group

GOH WEE KENGJEFFREYCEO & Executive Director

LIM KEAN THYEGeneral Manager, SAM Meerkat

NG BOON KEATChief Operating Officer,SAMEE Group

YAP HAN LINSenior Operations Director,Meerkat Precision

TEH MUN LING Vice President – FinanceSAMEE Group

SEE JORN JORN JEFFREY Senior Operations Director, SAM Precision & SAM Tooling

LIM HEE SENGPETERGeneral Manager, Avitron

StewardshipWhoever tends the fig tree will eat its fruit


TEO SIEW GEOKHELENChief Financial Officer,SAMEE Group

Age

Gender

Nationality

Date Joined

59

Female

Singaporean

15 Aug 2011

Academic / ProfessionalQualification(s)

•BachelorofAccounting, National University of Singapore, Singapore.

TAN GUAN THONG Chief Operating Officer, SAM Singapore Group

Age

Gender

Nationality

Date Joined

57

Male

Singaporean 15 Aug 2011


•BachelorofEngineering,Nanyang Technology

University of Singapore, Singapore.

GOH WEE KENGJEFFREYCEO & Executive Director

Details are disclosed inProfile of Directors.* Save as disclosed, the

management team has no family relationship with any Director and/or major shareholder of SAM Engineering & Equipment (M) Berhad, has no conflict of interest with SAM Engineering & Equipment (M) Berhad, has not been convicted for any offences within the past five years and has no public sanction or penalty imposed by the relevant regulatory bodies during the financial year ended 2018.

LIM KEAN THYEGeneral Manager, SAM Meerkat

Age

Gender

Nationality

Date Joined

51

Male

Malaysian

28 Jun 2010


•BachelorofElectrical& Electronics Engineering, Imperial College of Science &

Technology, University of London, England, UK.

NG BOON KEATChief Operating Officer,SAMEE Group

Age

Gender

Nationality

Date Joined

50

Male

Malaysian 17 Apr 2006


• MastersofScience (Mechatronics Engineering), De

Montfort University of Leicester, UK.

YAP HAN LINSenior Operations Director,Meerkat Precision

Age

Gender

Nationality

Date Joined

43

Male

Malaysian

16 Feb 2011


•BachelorofAerospace Engineering (Honours), Royal

Melbourne Institute of Technology, Victoria, Australia.

TEH MUN LING Vice President – Finance,SAMEE Group

Age

Gender

Nationality

Date Joined

47

Female

Malaysian

21 Aug 2017


•BachelorofAccountancy (Honours), Northern University

of Malaysia, Malaysia•CharteredAccountant,Malaysia

Institute of Accountants

SEE JORN JORN JEFFREY Senior Operations Director, SAM Precision & SAM Tooling

Age

Gender

Nationality

Date Joined

41

Male

Malaysian 29 Dec 2005


•DiplomainCivilEngineering,University Technology Malaysia,

Malaysia.

LIM HEE SENGPETERGeneral Manager, Avitron

Age

Gender

Nationality

Date Joined

56

Male

Singaporean

1 Jan 2017


•BachelorofMechanicalEngi-neering (First Class Honours), The Queens’ University of Belfast, UK.

•MastersofBusiness Administration, University of Leicester, UK.


P R O F I L E O F D I R E C T O R S

The plans of the

lead surely to abundancediligent


Non-Independent Non-Executive DirectorSHUM SZE KEONG

Age

Gender

Nationality

Date of Appointment

56

Male

Singaporean

4 March 2008

Present Directorship(s) and/or Appointment(s)• GeneralManager,ShumEnterprisesPte.Ltd.• Director,SingaporeAerospaceManufacturingPte.Ltd.

Past Directorship(s) and/or Appointment(s)• SeniorIndustryOfficer,SingaporeEconomicDevelopment

Board• ExecutiveDirector,GrandeHoldingsLtd.• Consultant,GrandeGroupLimited• IndependentNon-ExecutiveDirector,LafeCorporationLimitedBoard Committee Membership(s)

• AuditCommittee

Academic / Professional Qualification(s)• BachelorofScienceinAeronauticalEngineering,

Embry Riddle Aeronautical University, USA

GOH WEE KENG, JEFFREYExecutive Director & Chief Executive Officer

Academic / Professional Qualification(s)• BachelorofScience(FirstClassHonours)inAeronautical Engineering Science, Salford University, UK• MastersofScience(TurbineTechnology),CranfieldUniversity,

UK

Present Directorship(s) and/or Appointment(s)• Director,AccuronIndustrialTechnologiesLimited• President&ChiefExecutiveOfficer/DirectorofSingapore

Aerospace Manufacturing Pte. Ltd.• Chairman,SAM(Suzhou)Co.,Ltd.• Chairman,Aviatron(M)Sdn.Bhd.

59

Male

Singaporean

4 March 2008

Age

Gender

Nationality

Date of Appointment

Present Directorship(s) and/or Appointment(s) • DeputyChairman&Director,SingaporeAerospace Manufacturing Pte. Ltd.• Member,BoardofGovernors,TemasekPolytechnic• President&ChiefExecutiveOfficer/Director,Accuron Technologies Limited• ViceChairman,SingaporeRedCrossCouncil• Director,AccuronIndustrialTechnologiesLimited• Director,Alatus3DPte.Ltd.• Director,MechatronicAsiaPte.Ltd.

Past Directorship(s) and/or Appointment(s) • Chairman&Director,SPRINGSEEDSCapitalPte.Ltd.• Director,AdvancedMaterialsTechnologiesPte.Ltd.• Director,EmploymentandEmployabilityInstitute• Director,GrowthEnterpriseFundPte.Ltd.• Director,SPRINGEquityInvestmentsPte.Ltd.• ChiefExecutive,SPRINGSingapore

Board Committee Membership(s)• NominatingandRemunerationCommittee

Academic / Professional Qualification(s)• BachelorofArts(Physics)UniversityofCambridge,

UK• MastersofScience(Management)Stanford University, USA

52

Male

Singaporean

26 August 2015

Age

Gender

Nationality

Date of Appointment

Non-Independent Non-Executive ChairmanTAN KAI HOE

from left to right


from left to right

Present Directorship(s) and/or Appointment(s) • GroupDeputyChairman,CRSCHoldingsBerhad• Non-IndependentNon-ExecutiveDirector,MiluxCorporation

Berhad• SeniorIndependentNon-ExecutiveDirector,EdenIncBerhad• Directorforseveralprivatelimitedcompanies• TrusteeandTreasurerforTanSriMuhyiddinCharityGolf Foundation

Past Directorship(s) and/or Appointment(s)• Director,AmanahSahamSabahBerhad• Chairman,AgrobankBhd(formerlyknownasBankPertanian Malaysia)• ManagingDirector,JBSecuritiesSdnBhd• GeneralManager,MalayanBankingBerhad• Trustee,TabungMelayuPontianBerhadandYayasanKebajikan SDARA• IndependentNon-ExecutiveDirector,HabourLinkGroupBerhad• IndependentNon-ExecutiveDirector,AsianPacHoldingsBerhad

67

Male

Malaysian

15 March 2004

Age

Gender

Nationality

Date of Appointment

Board Committee Membership(s)• AuditCommittee• Risk&SustainabilityCommittee

Academic / Professional Qualification(s)• CharteredAccountant,Ireland• MalaysianInstituteofAccountants(MIA)(Member)

DPTJ, Independent Non-Executive DirectorDATO’ MOHAMED SALLEH BIN BAJURI

from left to right

DSPN, DMPN, Independent Non-Executive DirectorDATO’ WONG SIEW HAI

Present Directorship(s) and/or Appointment(s) • Director,PenangTechCentreBhd• Director,PenangScienceClusterBhd• Chairman,MalaysianAmericanElectronicsIndustry(MAEI), AMCHAM• HonoraryGovernor,AmericanMalaysianChamberof Commerce (AMCHAM)• Member,PEMUDAH• Member,NationalProductivityCouncil• Chairman,E&EProductivityNexusCouncil

Past Directorship(s) and/or Appointment(s)• VicePresident,TechnologyandManufacturingGroup(TMG),

Intel• GeneralManager,AssemblyandTestManufacturing(ATM),Intel• VicePresidentandManagingDirector,AsiaPacificCustomer

Center, Dell• Director,MalaysiaExternalTradeDevelopmentCorporation (MATRADE), Ministry of International Trade and Industry (MITI)• Director,NationGateGroupBhd

67

Male

Malaysian

4 June 2007

Age

Gender

Nationality

Date of Appointment

Board Committee Membership(s)• Nominating&RemunerationCommittee(Chairman)• Risk&SustainabilityCommittee

Academic / Professional Qualification(s)• BachelorofScienceinMechanicalEngineering,

University of Leeds, UK• MastersofScienceinManagementScience, Imperial College of Science & Technology, University of London, UK

Independent Non-Executive DirectorLEE HOCK CHYE

58

Male

Malaysian

8 July 2008

Age

Gender

Nationality

Date of Appointment

Board Committee Membership(s)• AuditCommittee(Chairman)• Nominating&RemunerationCommittee

Academic / Professional Qualification(s)• BachelorofLaws(Hons),NationalUniversityofSingapore, Singapore

increases power Knowledge



is strong

The

Wise


Independent Non-Executive DirectorDATUK DR. WONG LAI SUM

Age

Gender

Nationality

Date of Appointment

63

Female

Malaysian

1 October 2016

Present Directorship(s) and/or Appointment(s) • Director,PRGHoldingsBhd.• EconomicAdviser,MinisterofTransport,MinistryofTransport

Malaysia• ConjointProfessor(Practice),FacultyofBusiness,Universityof Newcastle, Australia• AssociateProfessor,FacultyofBusiness,TARUniversityCollege• Adviser,FacultyofBusinessandAccountancy,UniversityMalaya• SingaporeBusinessAdvisoryGroup,UniversityofNewcastle

Past Directorship(s) and/or Appointment(s)• ChiefExecutiveOfficerofMalaysiaExternalTradeDevelopment Corporation (MATRADE)• Director,MalaysiaPetroleumResourcesCouncil(MPRC)• Director&Trustee,MalaysiaFurniturePromotionCouncil

(MFPC)• Director,MyCEB(Tourism)• Co-Chairman,ProfessionalServicesDevelopmentCouncil, Malaysia (PSDC)• Adviser,NationalExportCouncil(MATRADE)• Director,PortKlangAuthority

Board Committee Membership(s)• Risk&SustainabilityCommittee(Chairman)• Nominating&RemunerationCommittee

Academic / Professional Qualification(s)• PhDBusiness,UniversityMalaya• MastersinPublicAdministration(MPA), University Malaya• BachelorofScience(Hons)Biochemistry, University Malaya

from left to right

SSAP, DIMP, Independent Non-Executive DirectorDATO’ SRI LEE TUCK FOOK

Age

Gender

Nationality

Date of Appointment

64

Male

Malaysian

8 July 2008

Present Directorship(s) and/or Appointment(s) • IndependentNon-ExecutiveChairman,PesonaMetroHoldings

Berhad• ManagingDirector,WCTHoldingsBerhad• ExecutiveDirector,PavilionReitManagementSdn.Bhd.• Directorforseveralprivatelimitedcompanies

Past Directorship(s) and/or Appointment(s)• VicePresidentofSamlingGroupinSarawak• ManagingDirector,RenongOverseasCorporationSdn.Bhd.• Chairman,ExecutiveCommitteeontheBoardof Peremba-Kentz Ltd• ManagingDirector,CementIndustriesofMalaysiaBerhad• ManagingDirector,ParacorpBerhad• ManagingDirector,MaltonBerhad• Director,LandmarksBerhad

Board Committee Membership(s)• AuditCommittee

Academic / Professional Qualification(s)• Member,MalaysianInstituteofAccountants(MIA)• Member,MalaysianInstituteofCertifiedPublic

Accountants• MastersinBusinessAdministration

* “Save as disclosed, the aboveDirectors have no family relationship with any Director and/ormajor shareholder of SAMEngineering & Equipment (M) Berhad, have no conflict of interest with SAM Engineering & Equipment (M) Berhad, have not been convicted for any offences within the past five years and have no public sanction or penalty imposed by the relevant regulatory bodies during the financial year ended 31 March 2018.

Details of the Directors’ attendance at Board Meetings for the financial year ended 2018 are set out in the Corporate Governance Overview Statement on page 44 of this Annual Report.”


Financial Year Ended

2014 2015 2016 2017 2018

REVENUE (RM’ 000) 452,755 451,520 620,054 537,397 598,164

PROFIT BEFORE TAX (RM’ 000) 32,394 39,474 68,672 55,354 73,187

PROFIT AFTER TAX (RM’ 000) 28,316 34,634 63,094 43,607 63,144

EARNINGS PER SHARE (Sen) 38.84 42.42 73.55 36.33 48.26

DILUTED EARNINGS PER SHARE (Sen) 21.77 26.12 47.07 32.31 NA

for the financial year ended 31 March 2018G R O U P F I N A N C I A L H I G H L I G H T S

(RM’ 000)

598,164

REVENUE

20182017201620152014

0

100,000

300,000

500,000

200,000

400,000

600,000

700,000

(RM’ 000)

(RM’ 000)

73,187

PROFIT BEFORE TAX

20182017201620152014

10,000

30,000

50,000

20,000

40,000

60,000

80,000

70,000

(RM’ 000)

0

0

10,000

30,000

50,000

20,000

40,000

60,000

70,000

(RM’ 000)

(RM’ 000)

63,144

PROFIT AFTER TAX

20182017201620152014

(Sen)

48.26

EARNINGS PER SHARE

10

30

50

20

40

60

80

70

(Sen)

0

20182017201620152014


Financial Year Ended

2014 2015 2016 2017 2018

DIVIDEND (Sen) 17.25 32.20 40.31 17.23 23.36

CASH AND CASH EQUIVALENTS (RM’ 000) 97,961 103,585 173,644 99,001 21,556

NET ASSETS PER SHARE (RM) 4.48 4.46 5.08 3.61 3.41

RETURNONEQUITY(%) 8.6 9.2 14.4 9.6 13.7

(Cont’d)for the financial year ended 31 March 2018

G R O U P F I N A N C I A L H I G H L I G H T S

20182017201620152014

0

50,000

150,000

100,000

200,000

(RM’ 000)

(RM’ 000)

21,556

CASH AND CASH EQUIVALENTS

(%)

13.7

RETURN ON EQUITY

2

6

10

4

8

12

16

14

(%)

0

20182017201620152014

(RM)

3.41

NET ASSETS PER SHARE

1

3

5

2

4

6

(RM)

0

20182017201620152014

(Sen)

23.36

DIVIDEND

10

30

20

40

50

(Sen)

0

20182017201620152014


Compared to the previous financial year, we achieved a much-improved performance for the financial year ended 2018 (“FY2018”),withpositivegrowthfrombothourAerospaceandEquipmentbusinesses.Thegoodperformancewasduetostrong market demand in both business sectors.

Aerospace

TheAerospacebusinessmanagedtoincreaserevenueby14.0%fromlastfinancialyear,toRM353.5m.Thehigherrevenueis a result of the production and delivery ramp up of aero-engine casing products as well as the precision machined products fornewprograms.Withhigherrevenue,ProfitBeforeTax(PBT)improved49.0%comparedtopreviousyear.

Equipment

TheEquipmentbusinessalsoattainedhigherrevenuescomparedtolastfinancialyear,a7.7%increasetoRM244.7m.Thiswas due to increases in our deliveries of products for the semiconductor market segment, where demand remains strong sincethesecondhalfofthefinancialyearended2017(“FY2017”).Asaresult,PBTincreasedby19.4%comparedtopreviousyear.

Group

TheGroup’sFY2018fullyearrevenuewasRM598.2m,11.3%higherthanthepreviousyear.WeachievedProfitBeforeTax(PBT)ofRM73.2mandProfitAfterTax(PAT)ofRM63.1m,whichwere32%and45%respectivelyhigherthanthepreviousyear.Revenuemixbybusinesssectorwas59%Aerospaceand41%Equipment,whichwasclosetopreviousyear’ssplitof58%Aerospaceand42%Equipment.

We have invested RM134.5m in this financial year, of which RM113.7m was for the Aerospace business. The Group ended the year with a healthy projected order book of RM3.1 billion.

The Company announced a first interim single-tier dividend of 14.01 sen per ordinary share and a special single-tier dividend of 9.35 sen per ordinary share in June 2018.

REVIEW

MANAGEMENT D I SCUSS ION AND ANALYS I S

Revenue(RM’m)

Aerospace Equipment Total

537.4

227.2

310.2

598.2

244.7

353.5

FY2017 FY2018

55.4

23.931.5

73.2

35.6 37.6

Aerospace Equipment Total

FY2017 FY2018

Profit Before Tax (PBT)(RM’m)


Total Asset Employed

Asat31March2018, theGroup’s totalassetofRM661.2mwasRM80.3mor13.8%higher than thatof31March2017.The increase was mainly due to higher property, plant and equipment, largely as a result of investments in our Aerospace business.

FINANCIAL POSITION

Property, Plant & Equipment

Intangibles & Other Assets

Trade Receivables & Other Receivables

Inventories

Cash & Cash Equivalents

100 200 300 400 500 600 7000

FY2017

FY2018

Total Assets Employed(RM’m)

MANAGEMENT D I SCUSS ION AND ANALYS I S (Cont’d)

Capital Employed

TheaverageCapitalEmployedinFY2018wasRM469mascomparedtoRM450minFY2017.

* Others include foreign currency translation reserve and hedging reserve.** Other long term liabilities include deferred tax liabilities, deferred income and provisions.

Equity

Others *

Long-Term Loan and Other Long Term Liabilities **

0

FY2017

FY2018

Capital Employed(RM’m)

100 200 300 400 500


Capital Expenditure

Following the RM78.2m investmentmade in FY2017, theGroup continued to invest for long-term growthwith capitalexpenditure of RM134.5m.

Cash Flows

Operating ActivitiesThe Group generated net cash flow of RM97.5m from its operating activities as compared to RM34.0m in the previous financial year due largely to improved profits.

Operating Activities

(RM’000) FY2018 FY2017

Operating Activities before changes in Working Capital

93 72

Changes in Working Capital 17 -25

Income Tax -12 -13

“Net Cash from Operating Activities”

98 34

Investing ActivitiesThe cash used in investing activities of RM134.3m was primarily for investment in Plant and Equipment for the new aerospace projects.

Financing ActivitiesNetCashused infinancingactivitiesofRM3.7mwasmainlyattributedtothepaymentofFY2017 interimandspecialsingle-tier dividend of RM21.7m, partially offset by bank borrowings of RM18.4m to fund the capital expenditure.

(Cont’d)FINANCIAL POSITION


FY2017

FY2018

Cash Flows(RM’m)

Financing Activities

Investing Activities

Net Cash from Operating Activities

-100-100 -50 50 100 1500


(Cont’d)FINANCIAL POSITION


Dividend

A total dividend of 23.36 sen per ordinary share (interim single-tier dividend of 14.01 sen per ordinary share and special single-tierdividendof9.35senperordinaryshare)wasdeclaredinJune2018andrepresents50%ofournetprofit.Basedonthe average share price for the month of June 2018 of RM7.46, the dividend per share of 23.36 sen translates to a dividend yieldof3.13%.

Dividend Per Share(sen)

Interim/Final

Special

10

20

30

40

50

0FY2018FY2014 FY2017FY2015 FY2016


HIGHLIGHTS


Customers & Programs

• Following the manufacturing launch of our aero-engine casing products for the new Airbus A320neo and Boeing 737max platforms in FY2017, production ramped up at the start of the financial year and increased significantly in the second half. The strong demand from these new aircraft platforms offsets the lower deliveries of casing products from the older Airbus A380 and Boeing 777 aircraft platforms.

• After a challenging start in FY2017,our newmanufacturing start-up for aerospacemachinedparts have successfully moved into steady state volume production, attaining 100% on-time delivery performance throughout the year.

• This financial year also see the progressive migration of our new aerostructures manufacturing to the new facility in Penang. Machinery to produce parts for Airbus A320neo and A350 platforms are installed and operational, with machining automation to be introduced by May 2018 through the use of the Flexible Manufacturing System (FMS).

• ForourEquipmentbusiness,weexpandedour competencewith the industrialisationof anewproduct fromoneofour core customers. The product has growth potential in the equipment testing market for semiconductor application.

Operations Initiatives

• OurEquipmentbusinessdivisionsuccessfullytransitionedintothenewfiscalyearwithanupgradedEnterpriseResourcePlanning (ERP) system, which will enable us to better manage and integrate various core and support functions. The upgradealsoallowsustoseamlesslyadoptUSDollarasthefunctionalcurrencyinourfinancialaccountingforFY2018.

• Our Aerospace business divisions embarked on digital transformation to keep abreast with new manufacturing technologies, which include the digitisation of documentation (from customer purchase orders to production records to shipping documents) and the analytics of manufacturing process data to optimise process performance.


HIGHLIGHTS


(Cont’d)

• This financial year also sees us continuing our adoption of automation in Aerospace manufacturing. Automating some of our key and supporting operations has enabled us to attain more consistency in our product and process quality, as well as flexibility to optimise available hours and workdays. We will continue to embrace automation as we position ourselves for future growth.

• Toaccommodateadditionalmachinesandnewautomation systems forouraero-enginecasingproduction,wehave expanded with a new facility in Singapore. The installation of the new machines and automation systems are on-going

and projected to complete within the next 2 years.

Core Asset Investments

• Inadditiontotheinvestmentmadethepreviousyear,weinvestedafurtherRM134.5minFY2018.Mostoftheinvestmentwas on capital equipment which translated into substantial machining capacity that came on-stream within the financial year. The added capacity for both our aerostructures and casings manufacturing is in line with our plan to progressively keep pace with the increasing market demand for the new high growth Aerospace programs in the coming years.


Aerospace

The Aerospace market outlook continues to be positive. This is evident in the market forecast and strong order book numbers provided by both Airbus and Boeing, the two biggest companies in the Aerospace industry.

The International Air Transport Association (IATA), a trade association representing the world’s airlines, has reported that the globalairlineindustryremainsprofitable,forecastingprofitgrowthof11%inyear2018comparedto2017.Thisencouragingtrend, coupled with the introduction of new aircraft platforms that are more fuel-efficient and cost-effective, has translated to strong demand for new planes now and in the near future.

The short-term market outlook remains positive for our Aerospace business. We continue to deliver parts that are used in the still-popular Boeing B737 and B787 aircraft where demand is stable, and we are ramping production on parts used in the new Airbus A320neo and Boeing 737max aircraft that are high growth programs. The new increase will make up for the decrease in demand for parts used in matured platforms like the Boeing B777 and Airbus A380. For our parts that are used in business jet applications, demand continues to be volatile as compared with the commercial airliner market.

The mid-term market outlook is also projected to be healthy. The combined order backlog for both Airbus and Boeing commercial aircraft remains at more than 13,000 units. This translates to about 9 years of backlog based on current yearly production rates.

Overthelongterm,Airbus’20YearGlobalMarketForecastReportforecastedglobalairpassengertraffictodoublebyyear2036. To keep pace with this growth, as well as that of air freight traffic, the global demand for new commercial aircraft is projected to be about 35,000 units over the next 20 years. About two-thirds of this demand will be to support traffic growth while the rest is for replacing older aircraft with newer and more fuel-efficient aircraft.

Equipment

The Semiconductors industry remains strong, with Semiconductor Equipment and Front-End Fab Equipment markets forecasted,pursuant to theSEMIDecember2017report, togrow5–7%going intoyear2018.Thisnear termpositiveoutlook will benefit our Equipment business where a substantial portion of our activities is dedicated to supporting this industry. Beyond the short term, it will be difficult to establish firm projections of the Semiconductor market due to the dynamic nature of the industry and new market-disrupting developments.

For data storage devices, we do not see improvements in the market for Hard Disk Drive (HDD). As such, we expect our existing sales backlog in our data storage devices testing segment to remain the same as that of the previous year. However, with the industrialisation of a new product from our customer for the Semiconductor test segment, we expect to grow our equipment testing integration business in the coming years.

OUTLOOK

We would like to thank all shareholders, stakeholders and supporters for the continued support for SAM Engineering and Equipment (M) Berhad and the trust you place in us.

We would also like to express our appreciation to our Chairman and members of the Board for their dedication and support in guiding us towards greater achievements and success.

The Management Team



About this Statement

SAM Engineering and Equipment (M) Berhad (“Company”) places great importance on sustainability as it is a key driver of business growth. This year, we have made good progress in our sustainability initiatives and monitored our performance across key economic, environmental and social matters. We have leveraged on past experience, improved our sustainability governance structure and prepared this statement under the guidance of multiple sources, including guidelines from Bursa Malaysia Securities Berhad, industry standards and facilitation from external consultants. This structured approach also allows our shareholders and other stakeholders to have a clear outlook of our sustainability ambition and direction.

Guided by our values, we are committed to ensuring that our business sites operate in a safe and healthy environment and that our employees, customers, suppliers and other stakeholders are well cared for. At the same time, we strive to conduct our activities in a responsible and ethical manner, provide opportunities to local communities and protect the environment we operate in. This is the foundation on which our sustainability efforts are rooted and will continue to thrust future actions and performance.

Scope

The Sustainability Statement covers sustainable initiatives, performance metrics and achievements for the financial year ended2018(“FY2018”),unlessotherwisestated.Throughstakeholderengagements,wehaveidentifiedfourkeytenetsofsustainable practices in which we are positioned to add value, as illustrated below:

Disclosure in the statement encompasses business operations of the Company in Malaysia and Singapore, specifically:

Operating Scope Business Units

Malaysian Operations SAM Meerkat (M) Sdn. Bhd.

SAM Tooling Technology Sdn. Bhd.

SAM Technologies (M) Sdn. Bhd.

SAM Precision (M) Sdn. Bhd.

Meerkat Precision Sdn. Bhd.

Singapore Operations Avitron Private Limited

Asthisisourfirstfullsustainabilitystatement,emphasisisplacedonthesebusinessunitsastheycontributed99.4%totheGroup’s revenue inFY2018.Hereinafter, theCompanyandspecifiedbusinessunitsmentionedabovewillcollectivelybereferred to as the Group, unless otherwise stated.

Sustainability Governance Structure

The Company’s Board of Directors (“Board“) drives the sustainability approach by embedding sustainability considerations into the Group’s business strategy in line with guidance to Practice 1.1 of the Malaysian Code on Corporate Governance 2017. The Group Management Sustainability Committee, guided by the Board and led by the Chief Executive Officer, oversees the overall implementation and management of sustainability initiatives. The Sustainability Committee chaired by the Chief Operating Officer of the Company is trusted to lead and supervise day-to-day operational sustainability performance, based on the direction set by the Board.

SUSTA INAB I L I TY STATEMENT 2018

Our Environmental Management

Our PeopleOur Business Performance Our Outreach


The Sustainability Committee, comprises various departments and business units (listed below). The Group Management Sustainability Committee as supported by the Sustainability Committee is responsible to monitor the implementation of the Board’s strategic sustainability direction and oversee the preparation of the annual Sustainability Statement. The respective heads of business units manage the risks and opportunities within their respective divisions and report their achievements and improvement opportunities to the Chief Operating Officer on a monthly basis.

Moving forward, the Risk & Sustainability Committee is tasked by the Board to oversee the implementation and management of sustainable practices.

Stakeholder Engagement

Our stakeholders are a vital component in our business strategy. Our approach to sustainability takes into consideration the impact of our activities to stakeholders and their expectations. Throughout the year, we engage with a wide range of key stakeholders through various channels:

Stakeholder Groups Engagement Channels

Employees Workshop discussionsInduction trainingLearning and development programmesCorporate volunteering programmesEmployee performance appraisalCorporate MemoStaff Meetings

Management Quarterly management meetingMonthly operation meetingWeekly coordinating meetingOngoing meetings and interactions

Customers Feedback surveySatisfaction assessmentsFace-to-face interaction

SUSTA INAB I L I TY STATEMENT 2018 (Cont’d)

Board of Directors

Sustainability Committee(Lead by COO)

Group ManagementSustainability Committee

(Lead by CEO)

BusinessUnits

InvestorRelations

Health &Safety Finance Human

ResourceInformationTechnology Facilities


Stakeholder Groups Engagement Channels

Vendors/Suppliers InterviewsFeedback surveyFace-to-face interactionVendor audits

Investors and shareholders Annual General MeetingFeedback surveyInvestor presentations and meetingsFinancial statements and Bursa Malaysia AnnouncementsPress releases

Directors Board and Board Committee meetingsOngoing meetings and interactions

Community Corporate volunteering programmes (e.g. community events, knowledge-sharing initiatives & partnerships with non-governmental organisations)Institutions/Universitiesinternshipprogram

Media Media releasesMedia interviews

This year, we conducted a specific exercise to identify and prioritise our stakeholders in a structured manner. As a result, we identified and engaged specifically with six key stakeholder groups (Directors, Shareholders, Management, Employees, Customers and Suppliers) to obtain constructive feedback on sustainability matters that stakeholders consider the Group should manage in priority. Feedback from our key stakeholders forms part of our materiality assessment described in the following section.

Materiality Matrix

Guided by Bursa Malaysia’s Materiality Assessment toolkit, we identified economic, environmental and social matters that are material to our business. We considered business risks and opportunities, industry trends and sector-specific disclosure topics from international guidelines, i.e. the Global Reporting Initiatives (“GRI”) standards and the Sustainability Accounting Standards Board (“SASB”). The matters selected were considered based on the impact to the business and importance of each matter to the stakeholders engaged. Our materiality matrix is displayed below:

Economic, Environment and Social Matters

1 Product and Service Quality

2 Technology, Innovation and Development

3 Economic Performance

4 Customer Satisfaction and Relationship

5 Employee Learning & Development

6 Information Technology & Cybersecurity

7 Employee Well-Being, Health and Safety

8 Ethics and Compliance

9 Supply Chain Management

10 Labour Practices

11 Waste and Hazardous Material Management

12 Energy Consumption

13 Local Communities

14 Indirect Econimic Impact

15 Diversity and Inclusion


Importance to SAM MalaysiaHighMedium

Imp

ort

ance

to

Sta

keho

lder

s Hig

hM

ediu

m 15

14

13 1211

10 7

6

54

3 12

9

8

Our Business Performance


Legend:

Our People

Our Outreach


The matters circled in red in the matrix are of high importance to our stakeholders and business:

Product and Service Quality

Technology, Innovation and Development

Economic Performance

Customer Satisfaction and Relationship

Employee Learning & Development

Cybersecurity & IT Resource Management

The identified matters have been further categorised into four tenets that reflect our approach to managing sustainability and our commitment to create value for both our business and stakeholders:


Ethics and Compliance

Technology, Innovation andDevelopment

Information Technology & Cybersecurity

Supply Chain Management



Waste and Hazardous Material Management

Energy Consumption

Labour Practices

Diversity and Inclusion


Employee Well-Being, Health and Safety

Local Communities

Indirect Economic Impact

The next section provides details on how we manage all of our identified material matters, including policies and procedures we implemented, key practices we exercise and performance indicators we monitor.

Our Business Performance

We recognise that the sustainability of our business is dependent not only upon meeting the highest quality standards, but also constantly innovating to respond to our customers’ needs, while ensuring that ethics and compliance are at the centre of every decision both in our business and in our supply chain.

As we are operating in the manufacturing and aerospace industry, we fully understand the crucial role played by technological development and innovation to drive our business. We view the relationships with our customers as a capital we seek to build, paying great attention to customers’ satisfaction and continuously improving the quality of our products and services. We are also looking for ways to effectively manage our supply chain and develop together with our suppliers and contractors.


We understand the demand by our stakeholders to show strong economic performance, which is vital for the success and sustainability of our business. Our performance is guided by our business strategy, which is implemented as part of our 3-year plan and one of the key measures of our economic performance is reflected in our revenue growth.

TheGrouprecordedafull-yearrevenueofRM598millionsinFY2018,withagroup-levelrevenuegrowthof11%comparedtolastyear.OurAerospacebusinesshasseenagrowthof14%thisfinancialyear,asignificantimprovementagainstlastyear’sperformance. This growth was supported by the production ramp-up for new products introduced, but also affected by the declineofcertainmatureproducts.OurEquipmentbusinessrecordedrevenuegrowthof8%in2018,largelyduetothenewcustomers and programmes secured related to the Semiconductor industry.



Our PeopleOur Business Performance Our Outreach


For more information on the Group’s economic performance, please refer to the Management Discussion & Analysis in this Annual Report.

Our economic footprints

Our Aerospace business, that manufactures aircraft components, and our Equipment business, that serves the Semiconductor and data storage industry, cater for international customers. Our customers are primarily based in the North American region,whichmakesup81%ofourcustomers,followedbycustomersbasedintheEuropeanregionat17%.Therestofourcustomers is based in Asia.

Staying true to our core value of serving others, we believe that improving our business profitability will allow us to enrich and benefit our stakeholders. We will continue to strive towards excellence in our economic performance while doing so responsibly and sustainably.

Ethics and Compliance

We believe that the way we do business matters to our stakeholders. Maintaining long term relationships with our stakeholders is crucial, and we believe that such relationships can only be built on trust. In line with our core value of Integrity, we are guided by our Standard Code of Conduct, Business Ethics and Conflicts of Interest collectively referred to as our “Code of Ethics” which promotes, guides and encourages professional and ethical behaviour of management and staff. We have also established a Whistle Blowing Policy to provide a channel through which employees or any external party may safely and confidentially report any violation of laws and regulations. Details of the Whistle Blowing Policy is published on the company’s website at www.sam-malaysia.com. All concerns reported via [email protected] are received by the Audit Committee Chairman.

We will continue to effectively communicate the Code of Ethics and implement the Whistle Blowing Policy throughout our operations. Kindly refer to our Company website for further details.

Technology, Innovation and Development

We believe in the crucial role played by technological development and innovation to drive the enhancement of our processes, products, services and work environment.

In FY2018, we have invested approximately RM115million in technologies aimed at improving our performance. Thisincludes the implementation of integrated automation lines in both our operations to increase productivity, allowing us to have a leaner production line with products of more consistent quality. We have also embraced robotic automation in our effort to reduce dependency on human resources and eliminate related health and safety concerns.

We will be implementing several initiatives to bring our business to Industry 4.0, which is commonly referred to as the fourth industrial revolution. We have adopted a Manufacturing Execution System (“MES”) as part of our digital transformation to measure the physical activities in our manufacturing space and transpose them into digital data for analysis and improvements. We have also adopted the Internet of Things (“IoT”) ecosystem and big data analytics in a bid to improve quality and flexibility, as well as minimising costs.

Moving forward, we will continue to drive and foster technological development and innovation within the Group, adopting leading-edge technologies where necessary to further drive growth and ensure the sustainability of our business.


North America81%

EU17%

Asia2%

Customer Base by Region

http://www.sam-malaysia.com

mailto:[email protected]



Information Technology (“IT”) & Cybersecurity

Cybersecurity is an issue that we take very seriously. As we become more digitally connected, we understand that we are facing a greater risk of cyber threats which could potentially pose a risk to the privacy and security of data belonging to our stakeholders, including those of our employees, customers and suppliers. We are committed to safeguard the privacy and security of data entrusted to us, and place great importance in investing and maintaining an IT infrastructure that implements reasonable physical and technical controls.

We have also established a set of policies to govern our cybersecurity and IT-related issues. This includes IT Security Policy, IT Usage Policy and IT Business Continuity Plan. In the face of increasingly prevalent cyber-attacks we also plan to introduce IT Cybersecurity Policy and IT Cyber Incident Response Plan which are currently being prepared in an attempt to improve our preparedness. We periodically review our policies and procedures and communicate them to our employees through trainings, to increase awareness and ensure their compliance.

Our IT department continuously monitors and assesses cybersecurity risks. In the year 2018, we have begun performing Cybersecurity Assessment, which includes gap analysis, external penetration test, internal penetration test, and web penetration test. We have consequently designed and implemented remediation actions to improve the robustness of our IT systems based on the assessment results.

Supply Chain Management

Collaborating with our suppliers is integral to manage our supply chain and promote good sourcing practices. Our actions also assist in fostering meaningful relationships with our business partners. Therefore, we place great importance on our procurement practices and supply chain management.

Our Purchasing Policy, Legal Policy and Approval Authorisation Policy guide procurement practices. We support fair bidding practices, and have a firm policy on gifts, inducements and rewards. Suppliers are also screened through a set of criteria, which includes quality of goods, going concern, and availability of certifications, including AS9100, the quality management standard for the Aerospace industry.

Our position in the supply chain allows us to encourage and assist suppliers in earning and maintaining their certifications. Some of our main initiatives include requiring suppliers to perform self-assessments against the Vendor Audit Program, as well as auditing our suppliers. During these audits, suppliers are required to upkeep a minimum score.


We pride ourselves in providing quality products and services to our customers. Quality is earned with robust internal controls and practices, experience in the business, continuous improvement in knowledge and skills, and an acute understanding of our customers’ needs.

As a demonstration of our commitment to upholding quality, our operations are certified under internationally-recognised standards. Our Equipment operations are certified under the ISO 9001:2015 and ISO 13485:2012 standards. Aerospace operations are certified under the AS9100:2016 and ISO9001:2015 standards, and holds Nadcap Certification on special processes (Non Destructive Testing (“NDT”), Chemical Processes, Laboratory, Welding, Heat Training, Coating, and Conventional machining as a special process, and Civil Aviation Authority of Singapore (“CAAS”) Singapore Airworthiness Requirements 21 (“SAR21”) Production Organisation Approval.

Documents from our quality management system such as our quality procedures and work instructions provide guidance to employees on processes, practices and operations procedures. Moreover, regular training is held to brief employees on key areas to maintain the highest quality standards.

In addition, we regularly review our internal processes, including conducting periodic product and process audits, continuous improvement initiatives, and assessing risks and implementing response plans. We also monitor our quality performance with internal indicators that are reported and reviewed regularly. We are dedicated to associating the “SAM” brand with quality through our commitment to reliability and pursuance for continuous improvement.



Included in our Mission is also our commitment towards our customers’ needs. We are dedicated to meeting their requirements through our products, services and our business management. Our operations strive to produce quality products and services via our driven workforce, which fosters long-term customer relationships and promotes customer satisfaction.

We have customers all over the world, including in Canada, in the United States of America and in Europe. Therefore, we frequently engage via platforms such as annual customer surveys, quarterly business reviews, regular conference calls, and monthly and annually performance reviews. These modes of communication allow us to monitor performance indicators of customer satisfaction, including On-Time-Delivery, Customer Satisfaction Scores, and customer complaints.

Feedback from customers are reviewed and responded to, and identified areas of improvement are translated into action plans and followed-up upon until completion. Other sections of our Statement and the rest of our Annual Report, demonstrate the way we manage our business for effective performance and quality outputs that satisfy our customers. This includes efforts in quality, promoting innovation and development, ensuring data security, ethical practice and compliance, responsible environmental practices, and responsible labour practices.

Environmental Management

We take great care in managing our impact to the environment. We are continuously working to improve our understanding of how our activities affect the environment both directly and indirectly, and seek ways to reduce our environmental footprint as much as possible.

We recognise that our main impact areas are associated with the waste generated by our operations – both hazardous and non-hazardous – as well as our energy consumption. In the following sections we outline the approach we adopt to address these issues, guided by our aspiration to live harmoniously and operate sustainably with nature.

Waste and Hazardous Material Management

Our manufacturing processes generate hazardous materials which are classified as Scheduled Waste under the Environmental Quality Act 1974 in Malaysia or listed as Controlled Hazardous Substance under The Environmental Protection and Management (Hazardous Substances) Regulations in Singapore. The hazardous waste arising from our operations includes dust, glass beads, sludge, waste oil, spent hydraulic oil, coolant, mix solvent, contaminated resins, contaminated containers, contaminated rags, waste paint, and spent activated carbon.

We noted the increasing amount of toxic and hazardous waste being disposed compared to previous years. This increase was attributable mainly to the increasing production in those sites that require special process and chemical treatment, particularly the aerospace segment as well as the Semiconductor front end business. Nevertheless, in line with the 4R waste management hierarchy, we continue to actively look for potential avenues to reduce the generation of waste, reuse, recycle and recover it wherever possible.

Toxic and Hazardous Waste Disposed(Tonnes/million RM revenue)

0.60

0.40

0.20

0.50

0.30

0.10

0.00Tonn

es/m

illionRM

reve

nue

FY2016

0.32

FY2017

0.47

FY2018

0.57



A similar strategy with regards to 4R waste management approach is also adopted for general waste produced. Last year, we reported our initiative to reduce the use of wooden crates used in transportation and packaging by replacing them with recyclable corrugated box at our sites in Malaysia. The wooden crates are now being reused for ‘in-process’ packing. This year, we have successfully increased the number of wooden crates being replaced, from 125 crates in the financial year ended2017(“FY2017”)to185cratesinFY2018.Weexpectthenumbertonearlydoubleinthecomingyearaswecontinueimplementing this initiative.

Energy Consumption

Due to the nature of our operation, energy consumption is a major sustainability issue that we are keen on addressing in a comprehensive way. We acknowledge that tackling this issue is important not only to our financial bottom line through the increased efficiency, but also vital as the resulting carbon emissions contribute negatively to the environment.

While we understand that fuel, steam, heating and cooling are all part of our total energy use, currently we are only monitoring our electricity consumption.

We are happy to report that we have successfully been more effective on our electricity consumption per million RM revenue than the previous year. We attribute this reduction to the ongoing energy-saving effort since 2015.

The implementation of our energy-saving initiative in all Malaysian sites, where the conventional High Bay lighting system was replaced with LED lighting has been completed. A similar project started in our Singapore operation this year.

We will continue to ensure that energy efficiency is considered when procuring for new equipment or machinery. We are also currently studying the feasibility of installing solar panels at our Singapore operation, in an effort to reduce our dependency on non-renewable energy sources.

Our people

We value our workforce as their talents and dedication contribute towards the success of the Group. Therefore, we uphold our commitment to them to provide for a safe and healthy workplace that promotes their career development, provides equal opportunities, and supports their welfare necessities.

Labour Practices

We strictly uphold human rights and respect the rights of all our employees. This includes the following, but is not limited to: no forced labour, no discrimination, promoting a safe and healthy workplace, no child labour, adherence to the minimum wage, and freedom of speech. This is reflected in our labour practices, which meet relevant laws and regulations, including the respective Employment Acts of Malaysia and Singapore.

Furthermore, our Singaporean operations are signatory to the Tripartite Alliance for Fair and Progressive Employment Practices (“TAFEP”). TAFEP is co-chaired by members of the Singapore National Employers Federation (“SNEF”) and National Trades Union Congress (“NTUC”), and consists of employer representatives, union leaders and government officials. The aim of the alliance is to promote the adoption of fair and responsible employment practices.

Electricity Consumption (MWh/million RM revenue)

42.0

38.0

44.0

40.0

36.0

34.0MWh/millionRM

reve

nue

FY2016

38.0

FY2017

43.1

FY2018

39.2




Raising awareness

Internal policies which govern our practice are our Employment Policy, Leave Policy, Grievances Policy, and Salaries Policy. Our labour practices are communicated in employment contracts and via trainings and briefings, including our Misconduct Briefing and New Hire Orientation. In addition, we have internal grievance channels for our employees, as shown below:

[email protected] Employees may provide feedback or report on cases observed through this channel. Communications received through this channel is managed by the Human Resource (HR) Department.

InFY2018,therehavenotbeenanycasesreportedthroughthegrievancechannels.

Foreign workforce

There are 218 foreigners employed in the Group’s workforce, especially in unskilled labour roles. We make certain that our employees are hired in line with relevant laws and regulations, via a structured recruitment process conducted by our Human Resource department. In addition, the workforce is provided with benefits to support their employment experience with us. This includes bearing annual levy fees required by local governments, providing free housing, medical allowance and food allowance for our canteens. We do not hold their passports, unless the foreign employee has requested such of Management. In this event, written consent is obtained from foreign workers.

Diversity and Inclusion

We promote a diverse workforce, and ensure that our people are hired and rewarded based on merit and talent. This is reinforced by our Employment Policy and Salaries Policy. Our employment statistics are set as below:

Employee statistics Employees by age group Employees by contract

Men 83% Over 50 9% Permanent 82%

Women 17% 30 to 50 46% Contract 18%

Below 30 45%

It is a common pattern for the heavy machinery equipment manufacturing industry to have a predominantly male workforce.


As the business grows, we want our employees to grow with us. Thus, we develop our employees’ skills and knowledge for effectiveperformance,torespondtoourclient’sneeds,andtomeetouremployees’careerdevelopmentgoals.Yearonyear, we invest in our employees’ learning and development, and continuously review our programmes to ensure our training programmes are relevant and of high quality.

Our efforts have been recognised by external parties and we were awarded: Singapore Industrial & Services Employees’ Union (“SISEU”) Plaque of Commendation Award in 2017, and the Malaysian Jabatan Tenaga Malaysia (“JTM”) Strategic Partner Award in ‘Machining Technology Training Programme’ by the Malaysian Ministry of Human Resources in 2017.

Training and career development with SAM Internal policies and programmes which guide our direction include our Training Policy and Succession Planning Programme. In line with the abovementioned, the Group performs their Training Need Analysis annually. This analysis aims to identify gaps between current employee training programmes and external factors, such as industry and regulatory changes, employees’ expectations, latest technology, etc.




Annually, we commit to a training budget against which, we tailor technical and soft skill trainings to ensure our employees are equipped with the latest knowledge and adequate skillset for their job scope.

FY2017 FY2018

Annual training budget (RM) 1,361,436 1,318,565

Employees are offered various types of training to ensure career development. The trainings include structured on-the-job training (“OJT”), quality, safety and team building trainings.

Structured OJT is a highly technical and specified training programme, targeted at employees with a more technical scope of the work. Employees are briefed by external trainers on the application of new machinery and technology utilised at SAM. Furthermore, quality trainings are rolled out annually to educate and refresh employees on our quality management systems and stringent internal processes. Soft skills and team trainings are provided to brief employees on leadership qualities, stress management, and team management. Further information on the safety trainings are discussed below.

FY2017 FY2018

Structured OJT Softskills/Quality/Safety/TeamTraining

Structured OJT Softskills/Quality/Safety/TeamTraining

Total training hours 12,667 18,652 34,324 27,768

Career development programmes

In addition to annual trainings, career development are provided through various initiatives. This includes the following:

Type of initiative Brief description and aim of the initiative

Succession planning A process to groom internal talent via focused training and development.

Job rotation Employees are exposed to different scopes of work, enabling them to develop a variety of experiences.

Career counselling and mentoring Employees are encouraged to mentor junior employees, share knowledge on field, and develop two-way channels of communication to provide constructive feedback. In addition, we have introduced the Skill Competency Matrix to illustrate key areas of career and skill growth available to employees.

Scholarship offers to pursue further education

Outstanding staff are offered scholarships to further develop their skills.

Employee Well-being, Health and Safety

Workplace safety is our first priority. We continuously endeavour to provide a safe working environment to all employees and contractors through rigorous internal processes and procedures, and instilling awareness of a safe work culture. Alongside safe work practices, we provide for our employees’ welfare and benefits to support them.

Health and safety

The Group’s Occupational Safety & Health Policy underlines our safety commitments, which guide the safety culture and practices at the workplace. In addition to the said policy, the Group’s Environmental Safety & Health (“ESH”) Committee provides leadership. Key roles and responsibilities of ESH Committee include:

• Assistinginthedevelopmentofsafety&healthrulesandsystemofwork;• Reviewingtheeffectivenessofsafety&healthprogrammes;• Carryingoutstudiesonaccidenttrends,incidentsanddiseases;• Meetingbi-monthlytoreviewregulatoryandlicensecompliancemonitoringprogrammes;and• Reviewingsafety&healthpolicies,andprovidingrecommendationsforanyrevision.



With systematic reporting lines in place, we monitor and review our safety performance indicators internally and report the indicatorstotherelevantauthoritiesinthecountrieswhereweoperate.InFY2018,therehavenotbeenanyincidentsoffatalities.

Health and safety programmes and training

Extensive measures are in place to promote safety awareness and to brief employees on preventive measures and response actions. The initiatives carried out at each site are reviewed during scheduled EHS meetings respectively, and are aligned to regulatory requirements in Malaysia and Singapore. The Group’s operations are assessed by external regulators, which includes the Chemicals Health Risk Assessment (“CHRA”).

Safety briefings to all employees are provided in the Employee Orientation Programme. In addition, specific safety trainings and programmes are rolled out to target employees with certain scopes of work. Scopes of work includes first aider course for site safety officers, employees who perform signalling overhead crane operations, employees who operate forklifts and employees who handle chemicals. Employees who work in factories are provided an average of 15 hours of training a year. Some key trainings are set out below:

Safety training

Name of the training Description of the training Employee category

Emergency Response Team (ERT)

Training on first aid, responding to chemical spills, and fire-fighting training alongside the local fire department.

All assigned ERT members

Chemical Safety Handling Informing on our procedures to appropriately handle chemicals, the importance of personal protective equipment (“PPE”), and safe storage.

Employees handle chemicals

EHS Awareness Training for contractors & Employees

Briefing contractors on relevant regulatory compliance safe work practices.

All contractors assigned to SAM

Ergonomics awareness Awareness trainings based on conducted ergonomics risk assessments.

Employees exposed to potential ergonomics risks

Roles & Responsibilities of EHS Committee

Briefing on legal compliance as assigned to EHS Committee. Supervisors/EHSCommittee and Engineers

Hazards Identification, Risk Assessment & Control (“HIRADC”)

Informing on methodology in identifying and analysing hazards and implementing risk control measures.

Managers, Engineers & Supervisory level employees

Singapore Workplace Safety and Health Council (“WSH”) Workshop on Rigging and Signalling

Briefing employees on regulations, responsibilities, hazards and safe practices involving overhead gantry cranes.

Shopfloor Workers

Singapore Workforce Skills Qualifications (“WSQ”) Operate Forklift

Learning to operate the forklift safely and proficiently according to the industry’s standard.

Shopfloor Workers who are required to drive forklifts

Apply Workplace Health and Safety in Metalwork

Identify own roles and responsibilities in metalworking, follow safe work procedures and to responds to fire emergency.

All Shop Floor Workers

To prepare for emergencies, we have an emergency response team that functions 24 hours a day. As shown above, the team is specifically trained in the areas of fire response, chemical spill response, and first aid. In addition, fire drills and emergency evacuation drills are conducted regularly, and emergency communication flows are established with the nearest hospitals. Furthermore, our factory employees are provided with annual medical surveillance programme. Our safety practices are consistently reviewed and reported, as we commit ourselves to upholding a safe and healthy workplace is top priority.



Employee well being

The benefit schemes and employee engagement initiatives to better meet employees’ needs. Some of our employee welfare provisions include medical allowances are reviewed annually, life insurance claims, transport allowances, parental leave and tokens for pivotal life events, like marriage and child birth. Additionally, Long Service Awards are granted to long-serving employeesasagestureofappreciationoftheircontributions.InFY2018,99employeeshavereceivedthisaward.

The Sports & Recreation Committee organises annual activities for the employees to encourage a balanced lifestyle and social time with colleagues. The said committee had hosted sports activities such as badminton and futsal matches, hiking and bowling. A cooking lesson in preparing sushi was also organised, which was happily received by our employees. On a granderscale,wehostedourDinner&Dance,YearEndAppreciationlunchandfestivelunches.Furthermore,weheldhealthand safety talks for employees, and hosted a Blood Drive Donation.

Our Outreach

We believe in giving back to the community and investing in the future of our generation. With the resources we have as the business grows, we provide for areas in need in the community in hopes of sharing created value and providing opportunities to these communities.

Local Communities and Indirect Economic Impact

We run an education sponsorship programme, called Titian Harapan. The programme aims to support students from low income families in Malaysia, children of the Malaysian operation’s employees and students in the Penang Skilled Development Centre (PSDC). As part of Titian Harapan, the Company provides school necessities, including payment for tuition fees, and for purchasing school books and school uniforms and shoes.

In addition, the PSDC programme supports students that have studied subjects which are relevant to the Company’s business. These students sign trainee contracts with our Malaysian operations, and are awarded full employee contracts upon graduation. Under PSDC, the Company sponsors students under two schemes – the Malaysian Skills Certification System and Meister Programme. The latter is a government-led initiative, which the Company began participation in 2018.

To date, we have sponsored approximately 810 students, amounting to RM571,118 since the initiation of the sponsorship programme in 2011. As for the PSDC students, we have sponsored 21 students and a total of RM143,820.

PSDC – Malaysian Skills Certification System FY2016 FY2017 FY2018

No. of students 2 3 14

Total sponsorship amount (RM) 5,400 13,500 116,720

PSDC – Meister Program FY2018

No. of student 2

Total sponsorship amount (RM) 8,200

Moreover, we collaborate with local colleges in Johor, Malaysia to provide apprenticeship programmes to students. In Singapore, we participate in local talent development programmes that provide opportunities for the local youth to gainworkplace experience. Below, we describe the programmes:


Name of programme Description

YoungTalentProgramme(“YTP”) YTPprovidesopportunitiesforyoungtalenttogainglobalexposureandmarketimmersion experience. Avitron signed an agreement with International Enterprise (“IE”) Singapore, a statutory body under the Ministry of Trade, for 2 undergraduates of Nanyang Technological University (“NTU”) to embark on this programme.

Profession-Conversion-Programme (“PCP”)

PCP is an initiative run by the Singaporean government to support career changes for people in mid-career positions. Avitron signed an agreement with Temasek Polytechnic, to hire up to 15 personnel. These trainees are placed through industry-recognised training programmes to acquire the necessary skills for the new occupations.

Outlook for Sustainability

Managing sustainability will continue to be an integral part of the business activities at our operations. We recognise the benefits in managing sustainability matters related to our business, and will drive continued improvements to governance, policy, practices and reporting of these matters across the organisation.

While we expect the coming years to be challenging in our industries, our commitment to sustainability can only be strengthened. We fully understand that such is vital in maintaining a competitive edge and driving us closer towards realising our vision of becoming a strong global player in the industries we are in.

We encourage our employees, suppliers, customers and investors to make this commitment towards sustainability a collaborative effort to influence positive and sustainable change in the world we live in.

exceptional strengthCollaborating together as one is our



held as at 31 March 2018PA R T I C U L A R O F P R O P E R T I E S

Location Tenure Area(sq. ft.)

Build-uparea

(sq. ft.)

Description Approximateage of

building

Expirydate

Date of revaluation

Net BookValue at

31 Mar 2018(RM’000)

SAM TECHNOLOGIES (M) SDN. BHD. / LKT AUTOMATION SDN. BHD. – PE2/4Plot 7 Hilir Sungai Keluang 4,Bayan Lepas Free Industrial Zone Phase 4,11900 Penang.

Leasehold 60 years

111,988 18,472

26,000

Office &Factory

Office & Factory

25 years

18 years

9 September 2051

14 August2009

5,304

SAM PRECISION (M) SDN. BHD. – PE1Plots 31-34 Lengkok Kampung Jawa 2,Bayan Lepas Non-Free Industrial Zone Phase 3, 11900 Penang.

Leasehold60 years

54,013 33,500 Office &Factory

32 years 22 November

2041

14 August2009

2,596

SAM PRECISION (M) SDN. BHD. / SAM TOOLING TECHNOLOGY SDN. BHD. – PE5Plot 77 Lintang Bayan Lepas,Bayan Lepas Non-Free Industrial Zone Phase 4,11900 Penang.

Leasehold60 years


16 years 16 June 2057

14 August2009

7,689

MEERKAT PRECISION SDN. BHD. / CORPORATE OFFICE – PE3Plot 17 Hilir Sungai Keluang 3, Bayan Lepas Free Industrial Zone Phase 4,11900 Penang.

Leasehold60 years


20 years 14 May 2051 14 August2009

12,495

SAM MEERKAT (M) SDN. BHD. – PE6Plot 103, Hilir SungaiKeluang Lima, Taman Perindustrian Bayan Lepas 4,11900 Penang, Malaysia.

SAM MEERKAT (M) SDN. BHD. – PE7Plot 104, Hilir Sungai Keluang Lima, Taman Perindustrian Bayan Lepas 4,11900 Penang, Malaysia.

Leasehold60 years

Leasehold60 years

176,629

148,218

92,500

134,000

Office &Factory

Office &Factory

10 years

9 years

18 December

2074

23 April 2068

17 August2009

17 August2009

9,906

10,392

Note:1. The land area disclosed herein based on the survey conducted by Jabatan Ukur dan Pemetaan Pulau Pinang.

54321

1

2

3

4

5


The Board of Directors of SAM Engineering & Equipment (M) Berhad (“Company”) is committed to ensuring that the Company meets the principles and applies the practices of corporate governance as set out in the Malaysian Code on Corporate Governance 2017 (“Code”).

The Board steadfastly believes that such principles and practices of the Code are essential to uphold the business integrity of the Company and its subsidiaries (collectively, the “Group”) and to enhance shareholder value.

The Group in their conduct of business and management is not just guided by the Code but also by its Core Values which balances the commercial and financial success with the interests of all stakeholders. A description of these Core Values is available at the Company’s website.

This corporate governance overview outlines the corporate governance practices which have been applied by the Board of the Company during the financial year ended 2018 (“FY2018”), where possible, and applicable laws to be a dynamic framework within which the Group would conduct its business. Please note that the following statement is to be read together with the Corporate Governance Report, which is available on the Company’s website at http://www.sam-malaysia.com.

Principle A: Board Leadership and Effectiveness

Part 1 - Board Responsibilities

Intended Outcome 1.0• Every company is headed by a Board, which assumes responsibility for the company’s leadership and is

collectively responsible for meeting the objectives and goals of the company

1.1 Strategic aims, values and standards

The Board plays a pivotal role in the stewardship of the Group’s direction and operations, and ultimately the enhancement of long-term shareholder value.

The Board is responsible for the leadership, oversight and overall management of the Company. The Board is one that is effective and is made up of a combination of the Executive Director who has intimate knowledge of the business and Non-Executive Directors who comes from diversified industries/business backgrounds to bring broad business and commercial experience to the Group. The Board has the overall responsibility for corporate governance, establishing goals, strategies and direction, reviewing the Group’s performance and critical business issues and ultimately the enhancement of long term shareholders’ value. It monitors and delegates the implementation of the strategic direction to the management.

The Board reviews the strategic plan of the Group tabled by Management at its meeting. The review would cover the performance targets and long-term plans of the Group to be met by Management.

If the Board is satisfied with the strategic plan of the Group as presented by the Management, of which shall be implemented by the Management accordingly. The Board would continue to monitor the plan to ensure its implementation.

The Board’s role is to oversee the performance of the management to determine whether the business is properly managed. The Board gets updates from Management at the quarterly Board meetings when reviewing the unaudited quarterly results. During such meetings, the Board participates actively in the discussion on the performance of the Group.

The Board also has a formal schedule of matters reserved solely for its decisions such as approving acquisition and divestiture, major capital expenditure, projects and budgets, quarterly and annual financial statements as well as monitoring of financial and operating performance of the Group. The oversight of such matters enshrines the Board’s control over the Group.

C O R P O R AT E G O V E R N A N C E O V E R V I E W S TAT E M E N T

http://www.sam-malaysia.com/

http://www.sam-malaysia.com/


Principle A: Board Leadership and Effectiveness (Cont’d)

Part 1 - Board Responsibilities (Cont’d)

1.1 Strategic aims, values and standards (Cont’d)

As part of its efforts to ensure the effective discharge of its duties, the Board has delegated certain functions and responsibilities to the following respective Board Committees:

• Audit Committee (“AC”)• Risk & Sustainability Committee (“RSC”); and• Nominating & Remuneration Committee (“NRC”)

The Chairman of each Board Committee will report to the Board on the outcome of the Committee’s meeting which also includes the key issues deliberated at the Committee’s meetings.

Each Committee operates within specific terms of reference that were drawn up with reference to the Code and the Board Committees discharge their duties in accordance to its Terms of Reference.

Notwithstanding the delegation of specific powers, the Board retains full responsibility for the direction and control of the Company and the Group. The ultimate responsibility for decision-making on all matters lies with the Board.

1.2 The Chairman of the Board

The Board has elected a Chairman from amongst the members of the Board who is a Non-Executive Director. Mr. Tan Kai Hoe as the Company’s Non-Independent Non-Executive Chairman provides leadership and guidance to the Board and is responsible for ensuring effectiveness of the Board’s performance. Mr. Tan Kai Hoe works closely with the rest of the Board members in forming policies and strategies to align the business activities driven by the Management.

1.3 Separation of Position of Chairman and Chief Executive Officer (“CEO”)

There is clear division of responsibilities of the Chairman and the Executive Director & CEO. The Board is led by the Non-Independent Non-Executive Chairman while the Management is shepherded by the Executive Director & CEO.

The roles and responsibilities of both the Chairman and the Executive Director & CEO are more particularly set out in the Board Charter which is available at the Company’s website.

1.4 Qualified and Competent Company Secretaries

In compliance with Practice 1.4 of the Code, the Board is supported by suitably qualified and competent Company Secretaries. The Company Secretaries play an advisory role to the Board in relation to the Company’s Constitution, Board’s policies and procedures and compliance with the relevant regulatory requirements, codes or guidelines and legislations.

In the event that the Company Secretaries fail to fulfil their functions effectively, the terms of appointment permit their removal and appointment of a successor only by the Board as a whole.

In performing their duties, the Company Secretaries carry out, amongst others, the following tasks:-

• Statutory duties as required under the Companies Act 2016, Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Listing Requirements”) and Capital Market and Services Act, 2007;

• Facilitating and attending Board Meetings and Board Committee Meetings, respectively;• Facilitating and attending the General Meeting(s);• Ensuring that Board Meetings and Board Committee Meetings, respectively are properly convened and the

proceedings are properly recorded;• Ensuring timely communication of the Board decisions to the Management for further action;• Ensuring that all appointments to the Board and/or Board Committees are properly made in accordance with the

relevant regulations and/or legislations;• Maintaining records for the purpose of meeting statutory obligations of applicable jurisdictions;

C O R P O R AT E G O V E R N A N C E O V E R V I E W S TAT E M E N T (Cont’d)





1.4 Qualified and Competent Company Secretaries (Cont’d)

• Facilitating the provision of information as may be requested by the Directors from time to time in an expeditious manner and ensuring adherence to Board policies and procedures;

• Facilitating the conduct of the assessments to be undertaken by the Board and/or Board Committees as well as to compile the results of the assessments for the Board and/or Board Committee’s notation;

• Assisting the Company on the lodgements of documents with relevant statutory and regulatory bodies;• Assisting the Board with the preparation of announcements for release to Bursa Malaysia Securities Berhad (“Bursa

Securities”) and Securities Commission Malaysia; and• Rendering advice and support to the Board and Management.

The Company Secretaries keep the Board abreast with the latest regulatory updates and also ensure that deliberations at Board and Board Committee meetings are well documented.

The Board is satisfied with the performance and support rendered by the three (3) qualified and experienced Company Secretaries to the Board in discharge of its functions.

1.5 Access to Information and Meeting Materials

The Board recognises that the decision-making process is highly contingent on the quality of information furnished. All members of the Board have full unrestricted access to any information pertaining to the Company and the Group business and affairs.

The Board is furnished with information and documents at least 7 days in advance of meetings (or a shorter time period when unavoidable) to allow them sufficient time to appreciate the issues being deliberated and to expedite the process of decision making. All information and documents furnished to the Board are comprehensive and encompasses both quantitative and qualitative factors to increase the quality of the Board’s understanding and knowledge of the matter.

Management may be invited to attend Board meetings to provide the Board detailed explanations and clarifications on certain matters that are tabled to the Board. The Board has full unrestricted access to any information pertaining to the Group and its business affairs including verbal explanations from Management and related personnel on related topics being deliberated, and the services of the Company Secretary to ensure procedures are complied with. The Board may seek (upon approval of the Chairman) independent advice on any related matter at the expense of the Company.

All deliberations and decisions made at the Board meetings are recorded by the Company Secretaries including whether any Directors abstained from voting or deliberating on a particular matter. Minutes of the meeting are circulated to the Board and the Management for review and comments in a timely manner before the minutes of the last Board meeting are confirmed at the next Board meeting.




1.5 Access to Information and Meeting Materials (Cont’d)

The Board ordinarily meets at least four (4) times a year with additional meetings convened when urgent and important decisions needed to be taken between the scheduled meetings. During the financial year ended 31 March 2018, the Board met on four (4) occassions where it deliberated upon and considered various matters. The attendance record of the Directors for the financial year ended 31 March 2018 was satisfactory. This is evidenced by the attendance record of the Directors at the Board meetings during their tenure in office as set out in the table below:

Directors Attendance

Tan Kai Hoe 4/4

Goh Wee Keng, Jeffrey 4/4

Shum Sze Keong 4/4

Dato’ Mohamed Salleh Bin Bajuri 4/4

Dato’ Seo Eng Lin, Robin* 1/1

Dato’ Wong Siew Hai 4/4

Dato’ Sri Lee Tuck Fook 3/4

Lee Hock Chye 4/4

Datuk Dr Wong Lai Sum 4/4

* Dato’ Seo Eng Lin, Robin retired on 25 July 2017.

All the Directors have complied with the minimum 50% attendance requirement in respect of Board Meeting as stipulated in the Listing Requirements. In the intervals between Board Meetings, for any matters requiring Board’s decisions, the Board’s approvals are obtained through circular resolutions. The resolutions passed by way of such circular resolutions are then noted at the next Board Meeting.

It is a policy for Directors to devote sufficient time and efforts to carry out their responsibilities. This commitment is given to the Board at the time of appointment as Directors.

The Board is satisfied with the level of time committed by the Directors towards fulfilling their roles and responsibilities as Directors of the Company.

Intended Outcome 2.0• There is demarcation of responsibilities between the board, board committees and management. • There is clarity in the authority of the board, its committees and individual directors.

2.1 Board Charter

The Board Charter, which is available at the Company’s website, establishes the clear and unambiguous functions and roles of the Board and those delegated to the Chairman, Board Committees, the Executive Director & CEO and Management as part of initiative to enhance accountability.

The Board reviews the Board Charter from time to time to ensure its relevance in aiding the Board to discharge its duties and responsibilities in view of current laws and regulations. The Board Charter was recently reviewed by the Board on 24 May 2018 to re-align the existing governance practices in the Company with the Code and Listing Requirements, where possible or relevant.

Intended Outcome 3.0• The Board is committed to promoting good business conduct and maintaining a healthy corporate culture that

engenders integrity, transparency and fairness. • The Board, management, employees and other stakeholders are clear on what is considered acceptable

behaviour and practice in the company.






3.1 Code of Ethics and Whistle Blowing Policy

The Standard Code of Conduct, Business Ethics, Conflicts of Interest (collectively referred to as “Code of Ethics”) and Whistle Blowing Policy (“WBP”) of the Group are available on the Company’s website.

The Code of Ethics sets out such standards of ethics and conduct expected from the Board, management and employees.

The WBP outlines when, how and to whom a concern could be properly raised about the actual or potential corporate fraud and or breach of ethics involving employees, Management or Director(s) of the Group.

Part 2 - Board Composition

Intended Outcome 4.0• Board decisions are made objectively in the best interests of the company taking into account diverse

perspectives and insights.

4.1 Board Composition

The Board composition, as at the date of this statement, comprises of five (5) Independent Non-Executive Directors out of eight (8) Directors in the Board. Therefore, the following prescribed requirements have been fully complied by the Board:

• Paragraph 3.04(1) of the Listing Requirements which stipulates that at least 2 directors or 1/3 of the board of directors, whichever is the higher, are independent directors; and

• Practice 4.1 of the Code, where at least half of the board comprises Independent Directors

The existing composition of the Board is as set out below:

Directors Designation

Tan Kai Hoe Non-Independent Non-Executive Chairman

Goh Wee Keng, Jeffrey Executive Director & CEO

Shum Sze Keong Non-Independent Non-Executive Director

Dato’ Mohamed Salleh Bin Bajuri Independent Non-Executive Director

Dato’ Wong Siew Hai Independent Non-Executive Director

Dato’ Sri Lee Tuck Fook Independent Non-Executive Director

Lee Hock Chye Independent Non-Executive Director

Datuk Dr Wong Lai Sum Independent Non-Executive Director

The profile of each Director is presented in the relevant section of this Annual Report.

The Directors, with their different background and specialisation, collectively bring with them a wide range of experience and expertise in areas such as finance, engineering, corporate affairs, legal, marketing and operations.

The Independent Non-Executive Directors bring objective and independent judgment to the decision making of the Board and provide a capable check and balance to the Executive Director and management. They contribute significantly in areas such as policy and strategy development, performance monitoring, allocation of resources as well as improving governance and controls.

Together with the Executive Director & CEO who has intimate knowledge of the business, the Board is constituted by individuals who are committed to business integrity and professionalism in all its activities and have proper understanding of and competence to deal with the current and emerging business issues.



Part 2 - Board Composition (Cont’d)

4.2 Tenure of Independent Non-Executive Directors

The concept of independence adopted by the Board conforms with the definition of an Independent Director under paragraph 1.01 and Practice Note 13 of the Listing Requirements. An Independent Director is not a member of management and is free from any business or other relationship which could interfere with the exercise of independent judgment or the ability to act in the best interests of the Company.

On 26 September 2007, Singapore Precision Engineering Limited and Singapore Aerospace Manufacturing Pte Ltd (“SAM Singapore”), collectively, acquired 44.787% of the entire issued share capital of the Company. Thus making SAM Singapore effectively the controlling shareholder.

In view of the foregoing, the NRC and the Board had determined that the period of nine (9) years shall commence with effect from 26 September 2007 or the date of appointment of each Independent Director, whichever shall be the later.

The Board is mindful of the practice in the Code, whereby the tenure of an independent director is subject to a cumulative term limit of nine years. Upon completion of the nine year tenure, an independent director may continue to serve on the board as a non-independent director. If the Board intends to retain an independent director beyond the term limit of nine years, it should justify and seek annual shareholders’ approval. The Board is also mindful of Practice 4.2 of the Code which requires the Board to seek annual shareholders’ approval through a two-tier voting process, if the Board continues to retain an independent director after the twelfth year.

In ascertaining the independent status of the Directors, the Board continues to believe that tenure should not form part of the assessment criteria. It is of the view that the fiduciary duties of Directors are the primary concern of all Directors, regardless of their status. In fact, continued tenure brings stability to the Board as the Group benefits from their mix of skills, professional and commercial experience, technical expertise in their relevant fields and competencies for informed and balanced decision-making by the Board.

Dato’ Mohamed Salleh Bin Bajuri, Dato’ Wong Siew Hai, Dato’ Sri Lee Tuck Fook and Mr Lee Hock Chye have all served the Company as Independent Non-Executive Directors for a cumulative term of more than 9 years from 26 September 2007.

The NRC had conducted annual performance evaluation and assessment on these Independent Non-Executive Directors and is of the opinion that they remain independent premised upon the following reasons:

(a) They fulfilled the criteria for independence as stated in the Listing Requirements.(b) Their long tenure of service has allowed them to be thoroughly acquainted with the business operations of the

Group which in turn has enabled them to participate actively and contribute positively to deliberation at Board Committees and Board meetings.

(c) Their wide-ranging professional, corporate and commercial experience provide the Board with diverse set of expertise, skills and competencies.

(d) They are objective and impartial in expressing their views and opinions during meetings, have always exercised due care and carried out their duties in the best interest of the Company and shareholders.

(e) They have devoted their time and effort for an informed and balanced deliberation at Board and Board Committees meetings and their attendance record at these meetings reflect their commitment to the Group.

The Board has accepted the foregoing rationale and has agreed for the re-appointment Dato’ Mohamed Salleh Bin Bajuri, Dato’ Wong Siew Hai, Dato’ Sri Lee Tuck Fook and Mr Lee Hock Chye to continue as Independent Non-Executive Directors of the Company, subject to approval of the shareholders at the forthcoming Annual General Meeting.

4.3 Diversity of Board and Senior Management

In the Company’s Board Diversity Policy, the Board encourages diversity and there is no discrimination on any basis, including but not limited to, race, age, ethnicity and gender. The Board is of the opinion that the evaluation of suitability of candidates should be based on their performance and merit, in the context of skills, time commitment and experience to bring value and expertise to the Board.






4.4 Gender diversity

As mentioned above, the Board did not set specific target on gender diversity for the Company and currently, Datuk Dr. Wong Lai Sum is the only female Director on the Board. Her profile can be found at the relevant section of this Annual Report.

4.5 Board appointment

The Board is responsible for the appointment of new Directors, and the NRC is delegated with the role of screening and conducting an initial selection, which includes an external search, before making a recommendation to the Board. The NRC has the authority to obtain the services of professional recruitment firms to source for candidates for directorship or seek independent professional advice whenever necessary.

As part of the roles of the NRC, the NRC also evaluates the suitability of potential candidates for appointment to the Board based on, among others, experience, commitment (including time commitment), competency, and (if applicable) such relevant regulatory criteria for assessing independence. The NRC will then recommend the successful candidates for approval and appointment by the Board.

4.6 Nominating and Remuneration Committee

The NRC of the Company comprises exclusively of Non-Executive Directors, a majority of whom are Independent Directors.

The Members of the NRC and their meeting attendance during their tenure in office for the financial year under review are as set out below.

Designation Directors Attendance

Chairman Dato’ Wong Siew Hai 3/3

Members Mr. Tan Kai Hoe 3/3

Dato’ Seo Eng Lin, Robin* 1/1

Mr. Lee Hock Chye 3/3

Datuk Dr. Wong Lai Sum** 2/2

Note:* Dato’ Seo Eng Lin, Robin retired on 25 July 2017.** Datuk Dr. Wong Lai Sum appointed on 25 July 2017.

During the year, the NRC carried out the following activities:(a) Reviewed and assessed the mix of skills, expertise, composition, size and experience of the Board, contribution of

each Director, the effectiveness of the Board as a whole, Board Committees and the re-election of Directors who retire by rotation.

(b) Reviewed and adopted the new Board Evaluation form pursuant to the Code.(c) Reviewed the Board Evaluation Report for FY2018.(d) Discussed the character, experience, integrity and competency of the Directors and the CFO and ensured all of

them have the time to discharge their roles.(e) Reviewed the Directors’ retirement by rotation and recommended to the Board, Directors who are due for retirement

at the Annual General Meeting (“AGM”).(f) Reviewed and recommended the retention of Independent Non-Executive Directors who have served a cumulative

term of more than nine (9) years to the Board for endorsement and to seek shareholders’ approval at the AGM.(g) Reviewed and recommended the Directors’ Fees for the Non-Executive Directors.(h) Reviewed the NRC’s Report for inclusion in the Annual Report.(i) Reviewed the Term of Reference of NRC.(j) Reviewed the proposed Employees’ Share Grant Scheme (“Proposed ESGS”).





4.6 Nominating and Remuneration Committee (Cont’d)

The Directors are fully aware of the importance of keeping abreast with the latest changes and developments in the industries in which the Group operates as well as the economic, financial and governance issues in order to enhance the effectiveness in discharging their responsibilities as Directors.

All Directors have attended and completed the Mandatory Accreditation Programme (“MAP”). During the year under review, the Directors attended various briefings, seminars, conferences, trade shows, plant visits, and speaking engagements covering areas including corporate governance, relevant industrial developments, financial, risk managements, leadership and global business developments.

Some of the training programmes attended by the Directors during the financial year under review included the following:

Directors Trainings

Tan Kai Hoe • What Directors Need To Know On Reporting & Disclosure Obligations• New MCCG 2017 Understand The Principles & Desired Outcomes• Sustainability Reporting For The Board Of Directors – Governance & Sustainability

Goh Wee Keng • Sustainability Reporting• What Directors Need To Know On Reporting & Disclosure Obligations• New MCCG 2017 Understand The Principles & Desired Outcomes• Sustainability Reporting For The Board Of Directors – Governance & Sustainability• Enhancing Communication With Stakeholders

Shum Sze Keong • Bursa Risk Management Programme – “I Am Ready to Manage Risks”• What Directors Need To Know On Reporting & Disclosure Obligations• New MCCG 2017 Understand The Principles & Desired Outcomes• Sustainability Reporting For The Board Of Directors – Governance & Sustainability• Capital Market Conference 2017• Driving Financial Integrity & Performance – Enhancing Financial Literacy

Dato’ Mohamed Salleh Bin Bajuri

• The Key Changes In The Companies Act 2016• Companies Act 2016 & Malaysia Code On Corporate Governance • What Directors Need To Know On Reporting & Disclosure Obligations• New MCCG 2017 Understand The Principles & Desired Outcomes• Sustainability Reporting For The Board Of Directors – Governance & Sustainability


• Speaker For InspireMe Talk: “What It Takes To Be A Successful Engineer”• Guest Speaker For TaxMax – The 43rd Series - One Bold Step In The Right Direction• Case Study Workshop For Independent Directors• Remuneration Committee: Attracting And Retaining The Best Talents• Rethinking Independent Directors: A New Frontier• What Directors Need To Know On Reporting & Disclosure Obligations• New MCCG 2017 Understand The Principles & Desired Outcomes• Sustainability Reporting For The Board Of Directors – Governance & Sustainability

Dato’ Sri Lee Tuck Fook

• Companies Act 2016 – Key Insights & Implication For Directors, Auditors/Accountants & Company Secretaries

• Opportunities Amidst Geopolitical Shifts• Sustainability Engagement Series For Directors/Chief Executive Officers 2017

Lee Hock Chye • Driving Financial Integrity & Performance – Enhancing Financial Literacy • What Directors Need To Know On Reporting & Disclosure Obligations• New MCCG 2017 Understand The Principles & Desired Outcomes• Sustainability Reporting For The Board Of Directors – Governance & Sustainability





4.6 Nominating and Remuneration Committee (Cont’d)

Directors Trainings

Datuk Dr. Wong Lai Sum

• Enhanced Understanding Of Risk Management & Internal Control• Changes Affecting Directors Under The Companies Act 2016: What Every Director Needs

To Know• Remuneration Committee: Attracting And Retaining The Best Talents• What Directors Need To Know On Reporting & Disclosure Obligations• New MCCG 2017 Understand The Principles & Desired Outcomes• Sustainability Reporting For The Board Of Directors – Governance & Sustainability

Upon review, the Board concluded that the Directors’ Trainings for the FY2018 were adequate.

In line with the amendment of the Listing Requirements and the Code, the terms of reference of the NRC were revised and updated by the Board on 24 May 2018.

Intended Outcome 5.0• Stakeholders are able to form an opinion on the overall effectiveness of the board and individual directors.

5.1 Annual assessment of the Directors, Board as a whole and Board Committees

The Board through the NRC conducts an annual evaluation to appraise the effectiveness of the Board as a whole, the effectiveness of the Board Committees and the further required mix of skills and experiences to enhance Board efficacy. The said evaluation on the Board covers board size, mix or composition, conduct of Board meetings and Directors’ skills set matrix.

The Board Committees are assessed based on their roles and scope of work, frequency and length of meetings, supply of sufficient and timely information to the Board and also overall effectiveness and efficiency in discharging their duties.

The results of the evaluation are then collated, distilled, summarised and reported to the Board by the NRC Chairman with an aim towards continuous improvement of the Board, Directors and Board Committees.

Each Director is also evaluated by the NRC through an annual self-review method wherein the Directors would assess their own performance based on their contributions and competencies in their dealings with the Board and the relevant Board Committees.

In addition to the foregoing, the NRC also assesses the independence of each of the Independent Non-Executive Directors annually, taking into account the individual Director’s ability to exercise independent judgment at all times and to contribute to the effective functioning of the Board. All findings by the NRC will be reported to the Board.

During the FY2018, the NRC also conducted an assessment of the Directors who are subject to retirement at the forthcoming AGM in accordance with the provisions of the Constitution of the Company. Upon recommendation by the NRC of the proposed re-election of the relevant directors, the Board had recommended and supported the re-election of the relevant Directors to be tabled at the AGM for shareholders’ approval.




Intended Outcome 6.0• The level and composition of remuneration of directors and senior management take into account the company’s

desire to attract and retain the right talent in the board and senior management to drive the company’s long-term objectives.

• Remuneration policies and decisions are made through a transparent and independent process.

6.1 Remuneration Policy

All Directors are paid Directors’ Fees of RM50,000 per annum each for serving as members of the Board. In recognition of their commitment and additional time contributed, the Directors will also receive annual Committee Fees of RM5,000 for participating in each Board Committee, inclusive of those formed on ad-hoc basis. The Directors’ fees are appropriate to their contribution, taking into consideration effort, commitment and time spent as well as the responsibilities of the Directors.

All Non-Executive Directors are also paid a meeting allowance of RM2,000 for each meeting attended. The Executive Director & CEO is not entitled to any meeting allowance.

The Board collectively determined the remuneration for the Non-Executive Directors to ensure the same is appropriately reflective of experience and the level of responsibilities and contributions including the number of the scheduled meetings for the Board, and Board committees; and are competitive compared with the prevailing market practices. Each of the Non-Executive Directors abstained from deliberating and voting on his or her own remuneration.

For the FY2018, the NRC had performed its duty to assess the remuneration package of its Executive Director and Senior Management.

In addition, the NRC had also deliberated on the Directors’ fees for the financial year ending 2019 (“FY2019”) which is subject to the shareholders’ approval at the forthcoming AGM. Further to the deliberations, the NRC had reported to the Board its recommendation and findings.

Intended Outcome 7.0• Stakeholders are able to assess whether the remuneration of directors and senior management is commensurate

with their individual performance, taking into consideration the company’s performance.

7.1 Details of the remuneration of Directors

Pursuant to Section 230 of the Companies Act 2016, the fees of the Directors and any benefits payable to the directors of a listed company and its subsidiaries shall be approved by a general meeting. The relevant resolutions in relation to the Directors’ remuneration payable to the Directors for the FY2019 shall be presented to the shareholders for approval at the forthcoming AGM.






7.1 Details of the remuneration of Directors (Cont’d)

The remuneration of each Director for the FY2018 is set out as follows:

Name

Amount in Ringgit Malaysia (RM)

Directors Fees Meeting Allowance

Salaries, Bonuses, Benefits-in-kind and other emoluments

EXECUTIVE DIRECTOR

Goh Wee Keng, Jeffrey 50,0001 - -

NON EXECUTIVE DIRECTORS

Tan Kai Hoe 55,0002 16,000 -

Shum Sze Keong 55,000 18,000 -

Dato’ Mohamed Salleh 60,000 20,000 1,699

Dato’ Wong Siew Hai 60,000 20,000 1,699

Dato’ Sri Lee Tuck Fook 55,000 12,000 1,699

Lee Hock Chye 60,000 24,000 1,699

Datuk Dr. Wong Lai Sum 56,6673 16,000 1,699

Dato’ Seo Eng Lin4 20,0004 6,000 -

1 Paid directly to SAM Singapore where he is employed as at the date of this Report2 Paid directly to Accuron where he is employed as at the date of this Report.3 Amount is pro-rated in view of her appointment to the NRC on 25 July 2017.4 Retired w.e.f. 25 July 2017.

7.2 Remuneration of Senior Management

The Company considers the remuneration of the senior Management to be sensitive and proprietary in view of the competitive nature of human resource market. Thus, the Company does not intend to adopt the recommendation to disclose the detailed remuneration of each member of senior management in bands of RM50,000 on a named basis. Furthermore, this is also to preserve confidentiality, negative impact arising from the disclosure, and the larger need to maintain a stable work environment to meet long-term strategic goals.

The remuneration package of the employees of the Company benchmarked with the industry and is in line with the industry practice. In addition, their annual increments and bonus payouts are based on performance.

Principle B: Effective Audit and Risk Management

Part 1 - Audit Committee

Intended Outcome 8.0• There is an effective and independent Audit Committee.• The board is able to objectively review the Audit Committee’s findings and recommendations. The company’s

financial statement is a reliable source of information.

8.1 The Chairman of the Audit Committee is not the Chairman of the Board

The Company complied with the Practice 8.1 of the Code which stipulates that the Chairman of the Audit Committee (“AC”) is not the Chairman of the Board.



Principle B: Effective Audit and Risk Management (Cont’d)

Part 1 - Audit Committee (Cont’d)

8.1 The Chairman of the Audit Committee is not the Chairman of the Board (Cont’d)

The AC is an independent Board Committee, led by an Independent Non-Executive Director, which assists the Board in the discharge of its responsibilities for corporate governance, internal controls and reporting.

The terms of reference of the AC is available on the Company’s website.

The members of the AC possess vast experience and skills in understanding and attending to matters falling under the purview of the AC. They are more than qualified to review the accuracy of the Group’s financial statement from various perspectives in view of each member’s skills and qualifications prior to recommendation of the same to the Board.

Further details pertaining to the AC is set out in the AC Report contained in this Annual Report.

8.2 Former key audit partner

Practice 8.2 of the Code requires the AC to have a policy that requires a former key audit partner to observe a cooling-off period of at least two years before being appointed as a member of the Audit Committee.

The Terms of Reference of the AC have been updated accordingly in order for the AC to formalise such policy.

8.3 Suitability, objectivity and independence of the external auditor

In accordance with the Terms of Reference of the AC, the AC, on an annual basis should review and monitor the suitability and independence of the external auditors.

The External Auditors have an obligation to bring to the attention of the Board, the AC and the Management any significant defects in the Company’s systems of reporting, internal control and compliance with approved accounting standards as well as legal and regulatory requirements. The External Auditors of the Company are invited to attend at least two meetings of the AC a year without the presence of Management.

The AC annually assesses the External Auditors against a set of assessment criteria that has been approved by the Board. The scope of assessment which is described in the Audit Committee Report in this Annual Report includes, amongst others, an assessment on the suitability, objectivity and independence of the External Advisors. All findings from the AC are then reported to the Board for further action, if any.

The Board, through the AC, has assessed and affirmed the independence, objectivity and suitability of the External Auditors to continue in office.

In compliance with Malaysian Institute of Accountants (“MIA”) by-laws, the Audit Partners are rotated every five (5) years to ensure objectivity, independence and integrity of the audit opinions. Such assurance was also given by the External Auditors in the Audit Planning Memorandum and Audit Finding Report presented to the AC.

The AC is satisfied with the competence and independence of the external auditors and had recommended the re-appointment of the external auditors for shareholders’ consideration at the AGM.

The Internal Audit function of the Company works with the External Auditors to ensure as complete an audit coverage of the Company’s activities as possible. In view of this the Company has established a seamless arrangement to meet the professional requirements of the External Auditors.

Details on the audit fees payable to External Auditors; the key features of the relationship between the AC and the External Auditors; and a summary of the activities of the AC during the financial year are set out in the Audit Committee Report in this Annual Report.




Part 1 - Audit Committee (Cont’d)

8.4 Qualification of the Audit Committee

All AC members are financially literate and two of the AC are the members of the Malaysian Institute of Accountants (“MIA”) thus fulfilling the requirement under paragraph 15.09(1)(c)(i) of the Listing Requirements which requires at least one (1) of the AC members to be a member of the MIA.

AC Committee members acknowledge the need for continuous education and trainings. For the FY2018, members of AC attended training on the developments in accounting and auditing standards, practices and rules.

8.5 Composition of the Audit Committee

The AC comprises four (4) Non-Executive Directors, of whom three (3) are Independent Directors.

This is in compliance with Paragraph 15.09 (1)(c) of the Listing Requirements, which stipulates that “all the audit committee members must be non-executive directors, with a majority of them being independent directors”.

In terms of the Step-Up Practice 8.4 of the Code which recommends that the AC should comprise solely of Independent Directors, the Company does not intend to adopt such step-up practice for the time being.

Part 2 - Risk Management and Internal Control Framework

Intended Outcome 9.0• Companies make informed decisions about the level of risk they want to take and implement necessary controls

to pursue their objectives.• The board is provided with reasonable assurance that adverse impact arising from a foreseeable future event or

situation on the company’s objectives is mitigated and managed.

9.1 Establishment of risk management and internal control framework

The Board undertakes overall responsibility for risk oversight and risk management. In view of this, the Board has, in place, a structured enterprise risk management framework for the Group which is to identify, monitor, control and report on principal risks faced by the Group on regular basis.

9.2 Features of its risk management and internal control framework

Details of the Group’s enterprise-wide risk management framework are outlined in the Statement on Risk Management and Internal Control in this Annual Report.

9.3 Risk and Sustainability Committee (“RSC”)

The Risk Management Committee (“RMC”) was established on 12 August 2013.

On 24 May 2018, the Board decided to put Sustainability Management under the purview of RMC and to change the name of the RMC to RSC.




Part 2 - Risk Management and Internal Control Framework (Cont’d)

9.3 Risk and Sustainability Committee (“RSC”) (Cont’d)

The members of RSC, comprises wholly of Independent Non-Executive Directors. The Members of the RSC and their meeting attendance during their tenure in office for the financial year under review are as set out below.

Designation Directors Attendance

Chairman Dato’ Wong Siew Hai 2/2

Members Datuk Dr. Wong Lai Sum 1/1

Dato’ Mohamed Salleh Bin Bajuri 2/2

Dato’ Seo Eng Lin, Robin 1/1

* Dato’ Seo Eng Lin, Robin retired on 25 July 2017.* Datuk Dr. Wong Lai Sum appointed on 25 July 2017 and re-designated as Chairman of the Committee on 22 Feb

2018.* Dato’ Wong Siew Hai was re-designated as Member of the Committee on 22 Feb 2018.

Dato’ Mohamed Salleh Bin Bajuri is the representative of the AC to the RSC and serves to keep the AC apprised of any risk management issues of a financial nature that would require the attention of the AC. During the year under review, there was no major financial related issue which required reporting to and deliberation by the AC.

In addition, the AC has included, as part of its regular meeting agenda, for the identification of risk areas which should be brought to the attention of the RSC.

The formation of the RSC arose from the Board’s decision to have a dedicated committee focused on the identification, monitoring and prioritisation of risks that affect the Group followed by coordinated efforts and resources to minimise their potential impact to the Group’s operations whilst maximising realisation of opportunities. The risk management function was previously under the purview of the Audit & Risk Management Committee.

The RSC is tasked pursuant to its of terms reference to review amongst others, the Group’s risk management framework and policy; and to provide assurance to the Board that a sound risk management and internal control system is in place and in accordance with the requirements of regulatory bodies.

During the year under review, the RSC carried out the following activities:

(a) Reviewed and endorsed the Statement on Risk Management and Internal Control.(b) Identified and monitored the top 5 Group Risks by business segments and on Group-wide basis.(c) Reviewed the Key Risks Indicators (“KRI”) and worked with management to minimise its impact to the Group.(d) Received update on Business Continuity Plan from management and monitored developments.

Intended Outcome 10.0• Companies have an effective governance, risk management and internal control framework and stakeholders

are able to assess the effectiveness of such a framework.

10.1 Internal audit function

The key features and state of internal control and risk management of the Group are furnished in the Statement on Risk Management and Internal Control in this Annual Report.

An independent Internal Audit function, which reports directly to the AC, was established in line with the Code and the Listing Requirements. Detailed information on the internal audit function is outlined in the Audit Committee Report.

None of the internal audit personnel has any relationship or conflict of interest that could impair their objectivity and independence in conducting their internal audit functions.



Principle C: Integrity in Corporate Reporting and Meaningful Relationship with Stakeholders

Part 1 - Communication With Stakeholder

Intended Outcome 11.0• There is continuous communication between the company and stakeholders to facilitate mutual understanding

of each other’s objectives and expectations.• Stakeholders are able to make informed decisions with respect to the business of the company, its policies on

governance, the environment and social responsibility.

11.1 Effective, transparent and regular communication with its stakeholders

The key element of the Company’s dialogue with its shareholders is the opportunity to gather views of, and answer questions from, individuals and institutional shareholders, on all issues relevant to the Group through the annual general meetings or the extraordinary general meetings.

At these general meetings, shareholders are provided time to seek clarifications or provide feedback both about the resolutions being proposed or about the Group’s operations/prospects in general. The Board will respond to all queries and take note of all suggestions put forth by shareholders. Where it is not possible to provide immediate answers, the Chairman will undertake to furnish the shareholder with a written answer after the meeting.

The Company also holds briefings for fund managers, institutional investors and investment analysts.

While the Company endeavours to provide as much information as possible to its shareholders and stakeholders, it is mindful of the legal and regulatory framework governing the release of material and price-sensitive information. Such material and price-sensitive information are not released unless it has been duly announced or made public through the proper channels.

The Board recognises that the Independent Directors are vital towards protecting the interests of shareholders. Shareholders and stakeholders could communicate their concern to the Independent Directors through mail to the Company’s registered address or via e-mail on the Company website to [email protected].

Part 2 - Conduct of General Meetings

Intended Outcome 12.0• Shareholders are able to participate, engage the board and senior management effectively and make informed

voting decisions at General Meetings.

12.1 Notice for an Annual General Meeting

General Meeting serves as the principal platform for the Board and Management to engage with shareholders and encourage effective shareholders’ communication on the Company’s performance, corporate and business developments and any other matters affecting shareholder interests. The Company Secretaries, by order of the Board, served a notice of AGM to all shareholders of the Company at least 28 days prior to its forthcoming AGM to provide the shareholders sufficient time to consider the proposed resolutions that will be discussed and decided at the AGM. Notice of the AGM clearly sets out details of the resolutions proposed accompanied by explanatory notes on the rationale of each resolution to enable the shareholders to make informed decisions in exercising their voting rights.

The Notice of AGM also provides information to the shareholders with regard to, amongst others their entitlement to attend the AGM, the right to appoint a proxy and also the qualifications of a proxy.

To further promote participation of members through proxy(ies), which is in line with the insertion of Paragraph 7.21 of the Listing Requirements, the Company’s Constitution includes explicitly the right of proxies to speak at general meetings, to allow a member who is an exempt authorised nominee to appoint multiple proxies for each omnibus account it holds and expressly disallows any restriction on proxy’s qualification.



Principle C: Integrity in Corporate Reporting and Meaningful Relationship with Stakeholders (Cont’d)

Part 2 - Conduct of General Meetings (Cont’d)

12.2 Attendance in General Meetings

The General Meeting also serves as an avenue for the Chairman and the Board members to engage in a two-way communication with shareholders where the shareholders are encouraged to participate in the question-and-answer session with the Board personally and exercise their right to vote on the proposed resolutions. The Board will ensure that all Board members, particularly the chairperson of each Board Committee will attend general meetings to facilitate engagement with shareholders and to address any relevant questions and concerns raised by the shareholders. The external auditors will be present at the AGM to respond to any queries from shareholders on the audit conducted, the preparation and content of the auditors’ report, the accounting policies adopted by the Group, and the independent audit review of the Group’s financial position.

12.3 Voting

The Company’s General Meeting is not held in a remote location. The Board conducts poll voting for all resolutions set out in the notice of a general meeting and posts a summary of key matters discussed at the AGM on the Company’s website.

Shareholders are allowed to appoint any person(s) as their proxies to attend, participate, speak and vote in his/her stead at a general meeting.

The Board is contemplating adopting electronic voting to facilitate greater shareholder participation at general meetings.

Practice 12.3 of the Code encourages listed companies with a large number of shareholders to facilitate:• Voting in absentia; and• Participation remotely at General Meetings.

As a listed entity on Bursa Securities in Malaysia, the Board noted that a majority of the shareholders of the Company reside in Malaysia and predominantly in Penang. Therefore, the general meetings of the Company have always been held in Penang.

Compliance Statement

The Board is satisfied that to the best of its knowledge, the Company is substantially in compliance with the principles and practices set out in the new Code as well as the relevant Listing Requirements for the FY2018. Any practices in the new Code which have not been implemented during the financial year will be reviewed by the Board and implemented where possible and relevant to the Group’s business.

This Statement has been reviewed and approved by the Board of Directors at a meeting held on 24 May 2018.



The Audit Committee (“AC”) is an independent Board Committee which assists the Board of Directors (“Board”) of SAM Engineering & Equipment (M) Berhad (“Company”) in the discharge of its responsibilities for corporate governance, internal controls and financial reporting.

Objectives

The key function of the AC is to assist the Board in fulfilling the following oversight objectives on the activities of the Company and its subsidiaries (collectively, the “Group”):(a) Oversee financial reporting; (b) Review reports from internal and external auditors to validate and evaluate existing policies, establish audit quality and

ensure compliance with Group’s policies;(c) Ensure that proper processes and procedures are in place to comply with all laws, rules and regulations, directives and

guidelines established by the relevant regulatory bodies; (d) Oversee the implementation of the Whistle Blowing Policy and Procedures for the Group, and ensuring effective

administration thereof by the Internal Audit Manager;(e) Investigate any concerns received on possible improprieties within the Group; and(f) Evaluate the internal and external audit processes.

The Board had on 22 February 2018 reviewed and approved the terms of reference of the AC (“TOR”) to further enhance corporate governance by taking into account provisions of the Malaysian Code on Corporate Governance 2017 (“MCCG”). The Company has uploaded the TOR onto the Company’s website at www.sam-malaysia.com.

Composition

The AC is comprised solely of Non-Executive Directors with a majority being Independent Directors. Their attendance at the 4 Committee meetings held during the financial year under review is tabulated below.

Designation Designation Attendance

Chairman Lee Hock Chye(Independent Non-Executive Director)

4/4

Members Dato’ Mohamed Salleh Bin Bajuri(Independent Non-Executive Director)

4/4

Dato’ Sri Lee Tuck Fook(Independent Non-Executive Director)

3/4

Shum Sze Keong(Non-Independent Non-Executive Director)

4/4

Dato’ Mohamed Salleh Bin Bajuri and Dato’ Sri Lee Tuck Fook are Chartered Accountants registered with the Malaysian Institution of Accountants. The above composition of the AC meets the requirements of paragraph 15.09(1)(c) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“MMLR”), which stipulates that at least one member of the AC must be a qualified accountant.

All members of the AC are financially literate and are able to analyse and interpret financial statements to effectively discharge their duties and responsibilities as members of the AC.

The Nominating and Remuneration Committee (“NRC”) had on 24 May 2018 reviewed the terms of office and performance of the AC members. Based on its review, the NRC is satisfied that the AC and its members have discharged their functions, duties and responsibilities in accordance with the TOR and supported the Board in ensuring the Group upholds appropriate corporate governance standards.

A U D I T C O M M I T T E E R E P O R T



Summary of Activities during the Financial Year

In line with the TOR, the AC held four (4) meetings during the financial year and carried out the following activities:

Financial results

(a) Reviewed the quarterly interim unaudited financial statements and the annual audited financial statements of the Group prior to submission to the Board for its consideration and approval focusing particularly on changes in or implementation of major accounting policies, significant and unusual events and compliance with applicable accounting standards approved by the Malaysian Accounting Standards Board (“MASB”).

(b) Received verbal assurance from the CFO that adequate processes and controls were in place for an effective and efficient financial statements close process in the preparation of the quarterly consolidated financial statements.

External auditors

(c) Reviewed the external auditors’ scope of work, proposed audit fee and audit plan for the year under review.(d) Approved and adopted policies and procedures to assess the suitability and independence of external auditors.(e) Met with the external auditors twice, in the absence of management, to review the adequacy and effectiveness of the

system of internal control and any other areas of concern arising from their interim and final audit. No major concerns were raised by the external auditors.

(f) Reviewed and assessed the performance of the existing external auditors for the Group.(g) Reviewed with external auditors any significant findings in relation to audit.(h) Discussed reservation arising from audit and any other matters the external auditors had wished to discuss.(i) Reviewed the assistance provided by the Group to the external auditors and the overall conduct of the audit.(j) Reviewed and evaluated the independence of the external auditors, obtained assurance of independence from the

external auditors and recommended the re-appointment of the Group’s external auditors.

Internal auditors

(k) Reviewed the adequacy and relevance of the scope, function, competency and resources of internal audit function and that it has the necessary authority to carry out its work.

(l) Reviewed the internal audit plan adopted by the internal audit function.(m) Reviewed the internal audit reports, audit recommendations made and Management’s responses to these

recommendations and actions taken to improve the system of internal control and procedures. Where appropriate, the AC has directed Management to rectify and improve control procedures and workflow processes based on the internal auditors’ recommendations and suggestions for improvement.

(n) Reviewed the implementation of these recommendations through follow up audit reports from the internal auditors.(o) Reported to the Board on its activities and significant findings and results.(p) Reviewed any appraisal or assessment of the performance of the Internal Audit Manager and outsourced service

providers.(q) Reviewed the circular to shareholders on recurrent related party transactions (“RPPT”) of a revenue nature and trading

nature.(r) Reviewed related party transactions entered into by the Group.(s) Reviewed the RRPT and ensured that these RRPT comply with approved procedures and policies and the mandate from

the shareholders.(t) Reviewed the Statement on Risk Management and Internal Control which provides an overview of the state of internal

controls and risk management within the Group and also the AC’s Report prior to the Board’s approval for inclusion in the Annual Report.

Related Party Transactions (“RPT”) and Recurrent Related Party Transactions (“RRPT”)

(a) Reviewed the reports of RPT and RRPT to ensure the actual transacted amounts were within the prescribed approved limit.

(b) Reviewed and ensured that proper records are maintained to identify and capture all the RPT and RRPT.(c) Reviewed the proposed renewal of existing and new shareholders’ mandate for RRPT Of A Revenue And/Or Trading

Nature before recommending to the Board.

A U D I T C O M M I T T E E R E P O R T (Cont’d)


A U D I T C O M M I T T E E R E P O R T

Summary of Activities during the Financial Year (Cont’d)

Internal audit function

The AC is assisted by an in house internal audit function together with outsourced internal audit service providers in discharging its duties and responsibilities. The in house internal audit function headed by Internal Audit Manager, Mr. Lim Aik Luen. He is the holder of a degree in accounting and a member of Institute of Internal Auditors Malaysia. The Internal Audit plan is approved by the AC covering three main areas namely internal control, risk management and governance process. Based on the audit plan proposed by the Internal Audit Manager and approved by the AC, audit work is conducted by outsourced internal audit service providers. The Group’s Internal Audit function reports directly to the AC.

As part of the audit work, the Internal Audit function would review the adequacy and effectiveness of the internal control system, compliance with rules, regulations, policies and procedures and also evaluates efficiency of key business processes. These processes provide reasonable assurance that such internal control system would continue to operate satisfactorily and effectively in the Group. The internal audit function also conducts investigations and interviews when required or at the request of the AC.

The internal audit function submits the internal audit report with audit findings and recommendations on areas of concern to the AC for its review and deliberation on a quarterly basis.

During the financial year, internal audit was conducted in the following areas: (a) Employee Travelling and Claims (b) Procurement(c) Production Planning and Controls Management

The AC is pleased to confirm that the results of each of these audits are satisfactory.

The Risk & Sustainability Committee (“RSC”) invites the Internal Audit Manager to attend its meetings. If the Internal Audit Manager is of the opinion that an audit should be conducted on any area, the Internal Audit Manager will, and if requested by the RSC, shall propose to AC that an audit be conducted on the relevant area.

During the financial year, the total costs incurred for the Internal Audit Function was RM248,440.

Accountability and Audit

Financial reporting

The Board aims to provide and present a balanced and meaningful assessment of the Group’s financial performance and prospects, primarily through the annual financial statements and quarterly announcements of results to shareholders as well as the Management Discussion and Analysis and the Sustainability Reporting section of the Annual Report. The Board is assisted by the AC to oversee the Group’s financial reporting processes and the quality of its financial reporting.

Internal control & risk management

The Board undertakes overall responsibility for risk oversight and risk management. In view of this, the Board has in place a structured enterprise risk management framework for the Group which is to identify, monitor, control and report on principal risks faced by the Group on a regular basis.

The RSC reviews and recommends risk management policies and strategies for the Group as well as assists the Board to discharge its risk management and statutory responsibilities in managing the overall risk exposure of the Group.

The key features and state of internal control and risk management of the Group is furnished in the Statement on Risk Management and Internal Control in this Annual Report.

(Cont’d)


Accountability and Audit (Cont’d)

Relationship with external auditors (Cont’d)

The External Auditors of the Company fulfil an essential role on behalf of Company in giving an assurance to the shareholders and others, of the reliability of the financial statements of the Group. The External Auditors have an obligation to bring to the attention of the Board of Directors, the AC and Management any significant defects in the Group’s systems of reporting, deficiencies in internal control and failure to comply with approved accounting standards and legal and regulatory requirements.

The audit fees payable by the Company and by the Group to the external auditors amounted to RM49,000 and RM218,000 respectively. The non-audit fees payable by the Company and by the Group to the external auditors and a company affiliated to the external auditors amounted to RM57,000.

The details of non-audit fees for the Group are stated below:

Details RM

Advisory services pertaining to the Sustainability Statement 40,000

Review of audit work papers done by third party auditor 13,000

Review of Statement on Risk Management and Internal Control 4,000

Total 57,000

The internal audit function of the Company works with the External Auditors to ensure as complete an audit coverage of the Group’s activities as possible. Thus, the Company has established a seamless arrangement to meet the professional requirements of the External Auditors.

The Board, through the AC, has assessed and affirmed the independence and suitability of the External Auditors to continue in office annually. The scope of the assessment covered calibre of the audit firm, team, fees, scope and planning as well as quality of processes and performance, independence and objectivity and client communication. The Board has formalised a set of criteria on assessment on the independence and suitability of external auditors as well as to govern circumstances and threshold under which contracts for provision of non-audit services could be entered into by the external auditors.

Directors’ Responsibility Statement in Respect of the Preparation of the Audited Financial Statements

The Board is responsible for ensuring that the financial statements give a true and fair view of the state of affairs of the Group and of the Company as at the end of the financial year and of their profit or loss and cash flows for the year then ended. In preparing the financial statements, the Directors have ensured compliance with applicable approved accounting standards in Malaysia and the provisions of the Companies Act 2016.

In preparing the financial statements, the Directors have selected and applied consistently suitable accounting policies and made reasonable and prudent judgments and estimates.

The Directors also have a general responsibility for taking steps to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

This AC Report is issued in accordance with a resolution of the Board of Directors dated 24 May 2018.

A U D I T C O M M I T T E E R E P O R T (Cont’d)


Board Responsibility

The Board of Directors (“Board”) of SAM Engineering & Equipmant (M) Berhad affirms its overall responsibility for the Group’s system of internal control and risk management and for reviewing the adequacy and integrity of the system. The system of internal control covers governance, risk management, financial strategy and organisational, operational, regulatory and compliance control. However, the Board recognises that this system is designed to manage, rather than eliminate, the risk of not adhering to the Group’s policies and achieving goals and objectives. Therefore, the system provides reasonable, but not absolute, assurance against the occurrence of any material misstatement, loss or fraud.

The adequacy and effectiveness of risk management and internal controls are reviewed by the Audit Committee (“AC”) through internal audits conducted. The internal audits are mainly outsourced to external service providers. Internal Control issues as well as actions taken by Management to address these issues are tabled by the Internal Audit Manager and outsourced service providers for deliberation during the AC meetings.

Each business unit and their supporting departments have implemented its own control processes under the leadership of the Chief Executive Officer (“CEO”), who is responsible for business and regulatory governance.

Risk Management

The Group has in place an Enterprise Risk Management Framework in accordance with the principles and guidelines outlined under the Committee of Sponsoring Organisation of the Treadway Commission’s Enterprise Risk Management Integrated Framework and is embedded in the Group’s management systems. In order to manage risk in our activities and ensure they are aligned with the Group’s strategic objectives and regulatory requirements, we implemented a risk management framework to identify, measure, assess and manage risks faced by the Group.

The Board has delegated authority to the Risk and Sustainability Committee (“RSC”) to undertake the review of the existing risk management framework and risks dashboards, which detail the likelihood and impact of the significant risks and their corresponding action plans.

The functioning of the RSC is supported by the Chief Risk Officer, key management staff and the risk management section of the business units or functional groups led by the head of each such unit or group.

Risk Management Framework

The Group’s overall risk management framework is as illustrated in the diagram below:

Internal Environment

• Management sets a philosophy regarding risk and establishes risk appetite.• Management sets organisational tone at the top for risk management.

Objective Setting

• Management sets objectives that support and align with the entity’s mission consistent with its risk appetite.• Management identifies the risk appetite and parameters.

Event Identification

• Process to identify potential events from internal/external sources affecting achievement of objectives.• Potential industry risks.• Identification of preliminary risks.

S TAT E M E N T O N R I S K M A N A G E M E N T A N D I N T E R N A L C O N T R O L


Risk Management (Cont’d)

Risk Management Framework (Cont’d)

The Group’s overall risk management framework is as illustrated in the diagram below: (Cont’d)

Risk Assessment, Response and Control Activities

• Risks are associated with objectives that may be affected and are assessed on both an inherent and a residual basis considering both likelihood and impact.

• Evaluate possible responses including avoid, accept, reduce and sharing risk.• Align response with risk tolerances and appetite.• Policies and procedures are established and executed to help enable risk response.• Discussions to scrutinise and validate preliminary, risks identified as well as new potential risks.

Information and Communication

• Relevant information for decision-making is captured and communicated timely to help enable management to execute within their respective roles and responsibilities.

• Overall risks discussion with senior management.

Monitoring and Reporting

• Enterprise Risk Management capabilities are continuously monitored and enhanced as necessary as to align with dynamic environment.

• Baseline risk profiles for all risks identified and shortlisted principal risks will be presented to Management.• Report and tracking the outcome of Enterprise Risk Management through risk register dashboard to Management and

Risk Management Committee.

The framework is reviewed and revised as and when necessary to ensure it remains relevant and adequate to manage SAM Group’s risks, which continue to evolve along with the changing business environment.

Internal Control System

Key Internal Control Processes

1. Authority and Responsibility

(a) Responsibilities are delegated to Board Committees through clearly defined Terms of Reference which are reviewed and revised when necessary.

(b) The Group has a clear organisation structure with well-defined lines of reporting and appropriate levels of responsibility.

(c) The Authority Limits Document is reviewed and revised when necessary to reflect the authority and authorisation limits of Management.

2. Planning, Monitoring and Reporting

(a) An annual planning and budgetary exercise is undertaken, deliberated and approved by the Board before implementation.

(b) Updates on the Group’s business and operations are provided to the Board at every meeting together with the financial performance variances.

(c) The Chief Financial Officer (“CFO”) is required to assure the AC that adequate processes and controls are in place for an effective and efficient financial close process in the preparation of each quarterly consolidated financial statement.

S TAT E M E N T O N R I S K M A N A G E M E N T A N D I N T E R N A L C O N T R O L (Cont’d)


S TAT E M E N T O N R I S K M A N A G E M E N T A N D I N T E R N A L C O N T R O L

Internal Control System (Cont’d)

Key Internal Control Processes (Cont’d)

3. Policies and Procedures

Clear, formalised and documented internal policies, standards and procedures are in place to ensure compliance with internal controls and relevant laws and regulations. Reviews are performed to ensure that documents remain current and relevant. The policies and procedures are documented in the Corporate Manual and Quality Manual and are reviewed and updated when applicable. Common Group policies are available on intranet for easy access by employees.

4. Audits

The AC assesses compliance with policies and procedures as well as relevant laws and regulations through internal audits performed. The Internal Manager and outsourced service providers reports directly to the AC to assist the AC in discharging their duties and responsibilities.

The details of activities carried out by the AC are reported in the Audit Committee Report of the Annual Report.

5. Conduct of Staff

(a) A Standard of Conduct, Business Ethics and Conflicts of Interest is established for all employees and defines the ethical standards and conduct of work required.

(b) A Whistleblower Policy is also established to provide an avenue for staff or any external party to report any breach or suspected breach of any law or regulation in a safe and confidential manner.

(c) A Personnel Data Protection Policy is established for the management, control and protection of confidential information used by the Group to avoid leakage and improper use of such information.

(d) Segregation of duties is practised whereby conflicting tasks are distributed amongst different employees to reduce the possibility of error and fraud.

6. Business Continuity Management

The Company and its major subsidiaries have established the Business Continuity Management (“BCM”) Policy which sets out the objectives, scope, strategies and emergency response procedures as well as the line of authority and responsibility for effective implementation of business continuity management. In addition, Business Continuity Plans are established for critical business functions and critical application systems.* Note: Sam Precision (Thailand) Limited was excluded from the BCM.

Review of this Statement

Audit Committee

While the AC has reviewed this Statement and addressed individual lapses in internal control and risk management via the Internal Audit Manager during the course of internal audits carried throughout the year, it has not identified any circumstances which suggest any fundamental deficiencies in the Group’s internal control system and risk management.

External Auditors

The external auditors have reviewed this Statement on Risk Management and Internal Control pursuant to the scope set out in Audit and Assurance Practice Guide (“AAPG”) 3, Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual Report issued by the Malaysian Institute of Accountants (“MIA”) for inclusion in the annual report of the Group for the financial year ended 2018 (“FY2018”), and reported to the Board that nothing has come to their attention that causes them to believe that the statement intended to be included in the annual report of the Group, in all material respects:

a) has not been prepared in accordance with the disclosures required by paragraphs 41 and 42 of the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issues, or

b) is factually inaccurate.

(Cont’d)


Review of this Statement (Cont’d)

External Auditors (Cont’d)

AAPG 3 does not require the external auditors to consider whether the Directors’ Statement on Risk Management and Internal Control covers all risks and controls, or to form an opinion on the adequacy and effectiveness of the Group’s risk management and internal control system including the assessment and opinion by the Board of Directors and management thereon. The auditors are also not required to consider whether the processes described to deal with material internal control aspects of any significant problems disclosed in the annual report will, in fact, remedy the problems.

Conclusion

Notwithstanding the fact that the Group’ system of risk management and internal controls do not eliminate the possibility of collusion, deliberate circumvention of procedures by employees, fraud or other unforeseen circumstances, the Board has received assurance from the CEO and CFO that the Group’s risk management and internal control system are operating adequately and effectively, in all material aspects.

The Board is of the view that the system of internal control and risk management which are in place for the year under review, and up to the date of approval of this Statement, is sound and sufficient to safeguard shareholders’ investment, the interest of customers, regulators, employees and other stakeholders, and the Group’s assets.

This statement on Risk Management and Internal Control is issued in accordance with a resolution of the Board of Directors dated 24 May 2018.

S TAT E M E N T O N R I S K M A N A G E M E N T A N D I N T E R N A L C O N T R O L (Cont’d)


O T H E R I N F O R M AT I O N

Recurrent Related Party Transactions (RRPT) of revenue or trading nature for the year ended 31 March 2018

Details of RRPT made during the financial year ended 31 March 2018 pursuant to the shareholders’ mandate obtained by the company at the Annual General Meeting held on 17 August 2017 are as follows:

Related Party with whom the Group is transacting

Nature of transactions

Companies within the Group involved in RRPT

Amount in RM’000

Interested Related Party Relationship

SAM SingaporeGroup

Sales of aerospace parts and other precision tools

SAMEE Group 123,761 Tan Kai Hoe, Goh Wee Keng,Shum Sze Keong, Teo Siew Geok, Tan Guan Thong, Ng Boon Keat, Temasek, Accuron, SAM Singapore

Tan Kai Hoe is the Non-Independent Non-Executive Chairman of SAMEE, Director and Deputy Chairman of SAM Singapore and Director and President & CEO of Accuron.

Goh Wee Keng is the Executive Director and CEO of SAMEE, the Director/President and CEO of SAM Singapore. He is also a Director of certain subsidiaries of SAMEE and SAM Singapore, Aviatron and SAM (Suzhou) Co. Ltd.

Shum Sze Keong, is a Non- Independent Non-Executive Director of SAMEE and a Director of SAM Singapore.

Teo Siew Geok, is the Chief Financial Officer of SAMEE Group, Director of SAM Technologies (M) Sdn Bhd, a subsidiary of SAMEE and also a Director of JEP Precision Engineering Pte Ltd.

Tan Guan Thong, Chief Operating Officer of SAM Singapore Group, Director of certain subsidiaries of SAMEE and SAM (Suzhou) Co. Ltd.

Ng Boon Keat, Chief Operating Officer of SAMEE Group, Director of certain subsidiaries of SAMEE and Aviatron.

Accuron and Temasek are related corporations to SAM Singapore, the immediate holding company of SAMEE.

Sale of modular or complete machine, equipment and spare parts

-

Sales of fabrication/ machining services

10

Provision of engineering services and administrative services

592

Provision of corporate management services

4

Purchase of fabrication/ machining services

(24,018)

Purchase of modular or complete machine, equipment, component and spare parts

(75)

Purchase of engineering and administrative services

(4,180)

Purchase of corporate management services

(1,916)

Rental of office and factory premises

(4,321)

Rental of machine (103)


Recurrent Related Party Transactions (RRPT) of revenue or trading nature for the year ended 31 March 2018 (Cont’d)

Notes:

SAMEE : SAM Engineering & Equipment (M) Berhad

SAMEE Group : SAM Engineering & Equipment (M) Berhad and its subsidiaries

SAM Singapore : Singapore Aerospace Manufacturing Pte Ltd, the immediate holding company of SAMEE

SAM Singapore Group : SAM Singapore and its subsidiaries / associates excluding SAMEE Group

Aviatron : Aviatron (M) Sdn Bhd, a subsidiary of SAM Singapore

Accuron : Accuron Technologies Limited, the immediate holding company of SAM Singapore

Temasek : Temasek Holdings (Private) Limited, the immediate holding company of Accuron

JEP Precision Engineering Pte Ltd

: 15% owned by SAM Singapore

Material Contracts Involving Interests of Directors and Major Shareholders

There were no material contracts of the Company and its subsidiaries involving interests of directors and major shareholders for the financial year under review.

O T H E R I N F O R M AT I O N (Cont’d)


Financial Statements

68. Directors’ Report

72. Statements of Financial Position

74. Statements of Profit or Loss and Other Comprehensive Income

76. Consolidated Statement of changes in Equity

78. Statement of Changes in Equity

79. Statements of Cash Flows

82. Notes to the Financial Statements

146. Statement by Directors

146. Statutory Declaration

147. Independent Auditors’ Report


The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 31 March 2018.

Principal activities

The principal activities of the Company are investment holding and provision of corporate management services.

The principal activities of its subsidiaries are as stated in Note 5 to the financial statements.

There has been no significant change in the nature of these activities during the financial year.

Ultimate holding company

The Company is a subsidiary of Temasek Holdings (Private) Limited, of which is incorporated in the Republic of Singapore and regarded by the Directors as the Company’s ultimate holding company, during the financial year and until the date of this report.

Subsidiaries

The details of the Company’s subsidiaries are disclosed in Note 5 to the financial statements.

Results

GroupRM’000

CompanyRM’000

Profit for the year attributable to owners of the Company 63,144 30,627

Reserves and provisions

There were no material transfers to or from reserves and provisions during the financial year under review except as disclosed in the financial statements.

Dividends

Since the end of the previous financial year, the amount of dividends paid by the Company were as follows:

i) In respect of the financial year ended 31 March 2017 as reported in the Directors’ Report of that year:

• a first interim single tier dividend of 10.28 sen per ordinary share totalling RM12,943,799 was declared on 9 June 2017 and paid on 15 August 2017; and

• a special single tier dividend of 6.95 sen per ordinary share totalling RM8,750,914 was declared on 9 June 2017 and paid on 15 August 2017.

ii) In respect of the financial year ended 31 March 2018:

• a first interim single tier dividend of 14.01 sen per ordinary share was declared on 7 June 2018 and to be paid on 10 August 2018 ; and

• a special single tier dividend of 9.35 sen per ordinary share was declared on 7 June 2018 and to be paid on 10 August 2018 .

The Directors did not propose any other dividend to be paid for the current financial year.

D I R E C T O R S ’ R E P O R Tfor the year ended 31 March 2018


Directors of the Company

Directors who served during the financial year until the date of this report are:

Tan Kai HoeGoh Wee KengShum Sze KeongDato’ Mohamed Salleh Bin BajuriDato’ Wong Siew HaiDato’ Sri Lee Tuck FookLee Hock ChyeDatuk Dr Wong Lai SumDato’ Robin Seo Eng Lin (Retired on 25 July 2017)

Directors of subsidiaries

Pursuant to Section 253(2) of the Companies Act 2016, the Directors who served in the subsidiaries during the financial year and up to the date of this report are as follows:

Goh Wee KengNg Boon KeatTan Guan ThongTeo Siew Geok

Directors’ interests in shares

The interests and deemed interests in the ordinary shares of the Company and of its related corporations of those who were Directors at financial year end (including the interests of the spouses and/or children of the Directors who themselves are not Directors of the Company) as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary shares

Balance at 1.4.2017

Bought/ (Sold)

Balance at 31.3.2018

Interest in the Company:

Goh Wee Keng

Direct interest:

- own 1,702,523 - 1,702,523


Indirect interest:

- others* 11,800 - 11,800

* Interest pursuant to Section 59(11)(c) of the Companies Act 2016.

None of the other Directors holding office at 31 March 2018 had any interest in the ordinary shares of the Company and of its related corporations during the financial year.

D I R E C T O R S ’ R E P O R T (Cont’d)for the year ended 31 March 2018



Directors’ benefits

Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than those fees and other benefits included in the aggregate amount of remuneration received or due and receivable by Directors as shown in the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.

There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Issue of shares and debentures

During the financial year, the Company increased its issued and paid-up share capital from RM193,250,276 comprising 125,890,276 ordinary shares to RM212,731,460 comprising 135,166,967 ordinary shares as a result of the conversion of 19,481,184 5-year 4% ICULS into 9,276,691 ordinary shares on the basis of one ICULS for approximately 0.476 ordinary shares.

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

Options granted over unissued shares

No options were granted to any person to take up unissued shares of the Company during the financial year.

Irredeemable convertible unsecured loan stocks (“ICULS”)

On 25 September 2012, the Company issued 135,000,000 units of 5-year 4% ICULS at RM135,000,000 as part of the purchase consideration for the acquisition of the entire equity interest in Avitron Private Limited from Singapore Aerospace Manufacturing Pte. Ltd.. The ICULS matured on 25 September 2017.

The salient features of the ICULS are disclosed in Note 22 to the financial statements.

Indemnity and insurance costs

During the financial year, the total cost of insurance amounting to RM48,000 was incurred by the Company to cover the Directors of the Group and of the Company for a total sum insured of RM40 million. There were no indemnity given to or insurance effected for the officers and auditors of the Group and of the Company.

Other statutory information

Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that:

i) all known bad debts have been written off and adequate provision made for doubtful debts, and

ii) any current assets which were unlikely to be realised in the ordinary course of business have been written down to an amount which they might be expected so to realise.


Other statutory information (Cont’d)

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

i) that would render the amount written off for bad debts or the amount of the provision for doubtful debts in the Group and in the Company inadequate to any substantial extent, or

ii) that would render the value attributed to the current assets in the financial statements of the Group and of the Company misleading, or

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

iv) not otherwise dealt with in this report or the financial statements that would render any amount stated in the financial statements of the Group and of the Company misleading.

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

i) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures the liabilities of any other person, or

ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year.

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

In the opinion of the Directors, other than the impairment loss on investments in subsidiaries as disclosed in Note 17, the financial performance of the Group and of the Company for the financial year ended 31 March 2018 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report.

Subsequent event

The details of such event are disclosed in Note 31 to the financial statements.

Auditors

The auditors, KPMG PLT have indicated their willingness to accept re-appointment.

The auditors’ remuneration is disclosed in Note 17 to the financial statements.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Tan Kai Hoe Goh Wee Keng

Director Director

Date: 25 June 2018



S TAT E M E N T S O F F I N A N C I A L P O S I T I O Nas at 31 March 2018

Group Company

Note2018

RM’0002017

RM’0002018

RM’0002017

RM’000

Assets

Property, plant and equipment 3 240,654 148,688 639 869

Intangible assets 4 14,640 3,706 27 11

Investments in subsidiaries 5 - - 272,929 227,559

Deferred tax assets 6 2,326 2,883 - -

Derivative financial assets 7 441 - - -

Total non-current assets 258,061 155,277 273,595 228,439

Trade and other receivables 8 196,243 182,811 9,754 34,372

Inventories 9 178,959 141,871 - -

Derivative financial assets 7 2,994 480 - -

Current tax assets 3,387 1,489 62 29

Cash and bank balances 21,556 99,001 298 2,731

Total current assets 403,139 425,652 10,114 37,132

Total assets 661,200 580,929 283,709 265,571

Equity

Share capital 10 212,731 193,250 212,731 193,250

Reserves 11 248,342 261,782 40,070 50,618

Equity attributable to owners of the Company 461,073 455,032 252,801 243,868


Group Company

Note2018

RM’0002017

RM’0002018

RM’0002017

RM’000

Liabilities

Loans and borrowings 12 12,120 - - -

Deferred income 13 892 778 - -

Provisions 14 719 - - -

Deferred tax liabilities 6 5,083 2,791 - 84

Total non-current liabilities 18,814 3,569 - 84

Loans and borrowings 12 6,292 352 - 352

Deferred income 13 87 98 - -

Trade and other payables 15 163,990 103,214 30,908 21,267

Derivative financial liabilities 7 81 636 - -

Provisions 14 6,186 8,789 - -

Current tax liabilities 4,677 9,239 - -

Total current liabilities 181,313 122,328 30,908 21,619

Total liabilities 200,127 125,897 30,908 21,703

Total equity and liabilities 661,200 580,929 283,709 265,571

S TAT E M E N T S O F F I N A N C I A L P O S I T I O Nas at 31 March 2018

(Cont’d)

The notes on pages 82 to 145 are an integral part of these financial statements.


S TAT E M E N T S O F P R O F I T O R L O S S A N D O T H E R C O M P R E H E N S I V E I N C O M E

for the year ended 31 March 2018

Group Company

Note2018

RM’0002017

RM’0002018

RM’0002017

RM’000

Revenue 16 598,164 537,397 50,149 79,573

Cost of sales (494,898) (458,095) - -

Gross profit 103,266 79,302 50,149 79,573

Other operating income 12,168 8,915 95 487

Distribution expenses (2,786) (2,589) (9) (8)

Administrative expenses (30,874) (25,428) (13,441) (8,964)

Other operating expenses (8,681) (5,209) (6,223) (1,101)

Results from operating activities 73,093 54,991 30,571 69,987

Interest income 164 447 - -

Finance costs 18 (70) (84) (28) (84)

Net finance costs 94 363 (28) (84)

Profit before tax 17 73,187 55,354 30,543 69,903

Tax expense 20 (10,043) (11,747) 84 174

Profit for the year 63,144 43,607 30,627 70,077


Group Company

Note2018

RM’0002017

RM’0002018

RM’0002017

RM’000

Items that are or may be reclassified subsequently to profit or loss

Cash flow hedge 4,348 (2,446) - -

Foreign currency translation differences for foreign operations (39,757) 20,447 - -

Total other comprehensive (expense)/income for the year, net of tax (35,409) 18,001 30,627 70,077

Total comprehensive income for the year 27,735 61,608 30,627 70,077

Profit for the year attributable to:

Owners of the Company 63,144 43,607 30,627 70,077

Total comprehensive income for the year attributable to:

Owners of the Company 27,735 61,608 30,627 70,077

Basic earnings per ordinary share (sen) 21 48.26 36.33 - -

Diluted earnings per ordinary share (sen) 21 - 32.31 - -

(Cont’d)

S TAT E M E N T S O F P R O F I T O R L O S S A N D O T H E R C O M P R E H E N S I V E I N C O M E





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C O N S O L I D AT E D S TAT E M E N T O F C H A N G E S I N E Q U I T Y


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C O N S O L I D AT E D S TAT E M E N T O F C H A N G E S I N E Q U I T Y (Cont’d)

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for the year ended 31 March 2018S TAT E M E N T O F C H A N G E S I N E Q U I T Y

Attributable to owners of the Company

Non-distributable Distributable

Sharecapital

RM’000

Share premiumRM’000

Capital reserveRM’000

Retained earningsRM’000

Total equity

RM’000

At 1 April 2016 86,322 23,835 82,287 26,507 218,951

Profit for the year representing total comprehensive income for the year - - - 70,077 70,077

Conversion of ICULS (Note 22) 39,568 43,525 (66,659) (10,850) 5,584

Dividends to owners of the Company (Note 23) - - - (50,744) (50,744)

Total transactions with owners of the Company 39,568 43,525 (66,659) (61,594) (45,160)

125,890 67,360 15,628 34,990 243,868

Transfer in accordance with Section 618(2) of the Companies Act 2016 67,360 (67,360) - - -

At 31 March 2017 193,250 - 15,628 34,990 243,868

Note 10 Note 11

At 1 April 2017 193,250 15,628 34,990 243,868

Profit for the year representing total comprehensive income for the year - - 30,627 30,627

Conversion of ICULS (Note 22) 19,481 (15,628) (3,853) -

Dividends to owners of the Company (Note 23) - - (21,694) (21,694)

Total transactions with owners of the Company 19,481 (15,628) (25,547) (21,694)

At 31 March 2018 212,731 - 40,070 252,801

Note 10 Note 11



Group Company

Note2018

RM’0002017

RM’0002018

RM’0002017

RM’000

Cash flows from operating activities

Profit before tax 73,187 55,354 30,543 69,903

Adjustments for:

Depreciation of property, plant and equipment 3 20,571 16,393 299 322

Amortisation of intangible assets 4 2,013 527 6 6

Amortisation of government grant 13 92 118 - -

Fair value (gain)/loss on derivatives (1,991) 1,181 - -

Gain on disposal of plant and equipment - (81) - -

Interest income (164) (447) (457) (307)

Plant and equipment written off - 8 - -

Interest expense 18 70 84 28 84

Dividend income 16 - - (39,610) (70,745)

Gain on liquidation of a subsidiary A - - - (254)

Impairment loss on amount due from a subsidiary - - 10 -

- investments in subsidiaries - - 4,630 -

- plant and equipment 3 254 - - -

- intangible assets 4 254 - - -

Provision for

- warranties 14 2,349 1,007 - -

- onerous contract 14 961 - - -

Reversal of provision of warranties 14 (4,273) (2,077) - -

Operating profit/(loss) before changes in working capital 93,323 72,067 (4,551) (991)

Changes in working capital:

Trade and other receivables B (16,844) (17,951) (25,392) (5,382)

Inventories (35,469) (18,442) - -

Trade and other payables 67,040 11,262 49,259 44,379

Provisions 1,972 - - -

Cash generated from operations 110,022 46,936 19,316 38,006

Income tax paid (12,474) (12,953) (33) (22)

Net cash from operating activities 97,548 33,983 19,283 37,984

S TAT E M E N T S O F C A S H F L O W Sfor the year ended 31 March 2018



Group Company

Note2018

RM’0002017

RM’0002018

RM’0002017

RM’000

Cash flows from investing activities

Purchase of plant and equipment C (122,246) (75,034) (69) (175)

Purchase of intangible assets D (12,225) (3,177) (22) -

Interest received 164 447 457 307

Proceeds from disposal of plant and equipment - 134 - -

Proceeds from liquidation of a subsidiary A - - - 254

Net cash (used in)/from investing activities (134,307) (77,630) 366 386

Cash flows from financing activities

Dividends paid (21,694) (50,744) (21,694) (50,744)

Interest paid (388) (725) (388) (725)

Drawdown of term loans 12,120 - - -

Drawdown of other borrowings, net 6,292 - - -

Net cash used in financing activities (3,670) (51,469) (22,082) (51,469)

Net decrease in cash and cash equivalents (40,429) (95,116) (2,433) (13,099)

Cash and cash equivalents at 1 April 99,001 173,644 2,731 15,830

Effect of exchange rate fluctuations on cash and cash equivalents (37,016) 20,473 - -

Cash and cash equivalents at 31 March E 21,556 99,001 298 2,731

NOTES

A. Liquidation of a subsidiary

During the financial year ended 31 March 2017, the Company completed the liquidation of SAM Meerkat (Suzhou) Co., Ltd..

(Cont’d)


NOTES (Cont’d)

A. Liquidation of a subsidiary (Cont’d)

The liquidation had the following effect on the Group’s and Company’s assets and liabilities on liquidation date.

2017RM’000

Group

Cash and cash equivalents 254

Net assets 254

Consideration received, satisfied in cash (254)

Gain on liquidation -

Company

Cost of investment 1,374

Less: Impairment loss (1,374)

-

Proceeds from liquidation (254)

Gain on liquidation (254)

B. During the financial year, amount due from subsidiaries of RM50,000,000 (2017: RM40,000,000) was capitalised into equity by a subsidiary via the issuance of ordinary shares to the Company.

C. Purchase of plant and equipment

During the financial year, the Group and the Company acquired plant and equipment with an aggregate amount of RM120,550,000 and RM69,000 respectively (2017: RM58,512,000 and RM175,000) of which RM22,069,000 and Nil (2017: RM20,373,000 and Nil) was included in prepayments at the end of the reporting period.

D. Purchase of intangible assets

During the financial year, the Group and the Company acquired intangible assets with an aggregate amount of RM13,218,000 and RM22,000 respectively (2017: RM2,809,000 and Nil). Additionally, RM188,000 and Nil (2017: RM1,181,000 and Nil) was included in prepayments at the end of the reporting period.

E. Cash and cash equivalents

Cash and cash equivalents included in the statements of cash flows comprise cash and bank balances as shown on the statements of financial position.


(Cont’d)



SAM Engineering & Equipment (M) Berhad is a public limited liability company, incorporated and domiciled in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad. The addresses of the principal place of business and registered office of the Company are as follows:

Principal place of business

Plot 17, Hilir Sungai Keluang TigaBayan Lepas Free Industrial ZonePhase 411900 Penang

Registered office

Suite 18.05, MWE PlazaNo.8, Lebuh Farquhar10200 Penang

The consolidated financial statements of the Company as at and for the financial year ended 31 March 2018 comprise the Company and its subsidiaries (together referred to as the “Group” and individually referred to as “Group entities”).

The principal activities of the Company are investment holding and provision of corporate management services. The principal activities of the subsidiaries are stated in Note 5 to the financial statements.

The immediate holding company is Singapore Aerospace Manufacturing Pte. Ltd. whilst the penultimate holding company is Accuron Technologies Limited. The ultimate holding company is Temasek Holdings (Private) Limited. All the above companies are incorporated in the Republic of Singapore.

These financial statements were authorised for issue by the Board of Directors on 25 June 2018.

1. Basis of preparation

(a) Statement of compliance

The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.

The following are accounting standards, amendments and interpretations that have been issued by the Malaysian Accounting Standards Board (“MASB”) but have not been adopted by the Group and the Company:

MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2018• MFRS 9, Financial Instruments (2014)• MFRS 15, Revenue from Contracts with Customers• Clarifications to MFRS 15, Revenue from Contracts with Customers• IC Interpretation 22, Foreign Currency Transactions and Advance Consideration• Amendments to MFRS 1, First-time Adoption of Malaysian Financial Reporting Standards (Annual Improvements

to MFRS Standards 2014-2016 Cycle)• Amendments to MFRS 2, Share-based Payment – Classification and Measurement of Share-based Payment

Transactions• Amendments to MFRS 4, Insurance Contracts – Applying MFRS 9 Financial Instruments with MFRS 4 Insurance

Contracts• Amendments to MFRS 128, Investments in Associates and Joint Ventures (Annual Improvements to MFRS

Standards 2014-2016 Cycle)• Amendments to MFRS 140, Investment Property – Transfers of Investment Property

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S

http://masb.org.my/pdf/MFRS 1 042015.pdf

http://masb.org.my/pdf/MFRS 140 042015.pdf


(Cont’d)

1. Basis of preparation (Cont’d)

(a) Statement of compliance (Cont’d)

MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2019• MFRS 16, Leases• IC Interpretation 23, Uncertainty over Income Tax Treatments• Amendments to MFRS 3, Business Combinations (Annual Improvements to MFRS Standards 2015-2017 Cycle)• Amendments to MFRS 9, Financial Instruments – Prepayment Features with Negative Compensation• Amendments to MFRS 11, Joint Arrangements (Annual Improvements to MFRS Standards 2015-2017 Cycle)• Amendments to MFRS 112, Income Taxes (Annual Improvements to MFRS Standards 2015-2017 Cycle)• Amendments to MFRS 119, Employee Benefits: Plan Amendment, Curtailment or Settlement• Amendments to MFRS 123, Borrowing Costs (Annual Improvements to MFRS Standards 2015-2017 Cycle)• Amendments to MFRS 128, Investments in Associates and Joint Ventures – Long-term Interests in Associates

and Joint Ventures

MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2021• MFRS 17, Insurance Contracts

MFRSs, Interpretations and amendments effective for annual periods beginning on or after a date yet to be confirmed

• Amendments to MFRS 10, Consolidated Financial Statements and MFRS 128, Investments in Associates and Joint Ventures – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The Group and the Company plan to apply the abovementioned accounting standards, amendments and interpretations, where applicable, in the respective financial years when the above mentioned accounting standards, amendments or interpretations become effective except as mentioned below:

MFRS 9 Financial Instruments

MASB issued the final version of MFRS 9, Financial Instruments which reflects all phases of the financial instruments project and replaces MFRS 139, Financial Instruments: Recognition and Measurement and all previous versions of MFRS 9. The standard introduces new requirements for classification and measurement, impairment and hedge accounting. MFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required.

During the financial year, the Group has performed an impact assessment of all three aspects of MFRS 9. This assessment is based on currently available information and may be subject to changes arising from further reasonable and supportable information being made available to the Group in 2018 when the Group will adopt MFRS 9. Overall, the Group expects no significant impact on its statement of financial position and equity.

MFRS 15 Revenue from Contracts with Customers

MFRS 15 replaces the guidance in MFRS 111, Construction Contracts, MFRS 118, Revenue, IC Interpretation 13, Customer Loyalty Programmes, IC Interpretation 15, Agreements for Construction of Real Estate, IC Interpretation 18, Transfers of Assets from Customers and IC Interpretation 131, Revenue - Barter Transactions Involving Advertising Services.

MFRS 15 establishes a five-step model to account for revenue arising from contracts with customers. Under MFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.




(a) Statement of compliance (Cont’d)

MFRS 15 Revenue from Contracts with Customers (Cont’d)

The Group has assessed the estimated impact that the initial application of MFRS 15 will have on its consolidated financial statements for financial year ended 31 March 2018. The estimated impacts on initial application based on the assessment performed are as follows:

Statement of profit or loss and other comprehensive income for the year ended

31 March 2018

As currently stated

RM’000

Expected restatement

RM’000

Group

Revenue 598,164 611,116

Cost of sales (494,898) (506,511)

Statement of financial position as at31 March 2018

As currently stated

RM’000

Expected restatement

RM’000

Group

Inventories 178,959 89,884

Contract assets - 103,648

The adoption of MFRS 15 is not expected to materially impact the equity of the Group as at 1 April 2017.

MFRS 16 Leases

MFRS 16 replaces the guidance in MFRS 117, Leases, IC Interpretation 4, Determining whether an Arrangement contains a Lease, IC Interpretation 115, Operating Leases – Incentives and IC Interpretation 127, Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

MFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligations to make lease payments. There are recognition exemptions for short-term leases and leases of low-value items. Lessor accounting remains similar to the current standard which continues to be classified as finance or operating lease.

The Group is currently assessing the financial impact that may arise from the adoption of MFRS 16.

(Cont’d)




(b) Basis of measurement

The financial statements have been prepared on the historical cost basis other than as disclosed in the financial statements.

(c) Functional and presentation currency

These financial statements are presented in Ringgit Malaysia (“RM”), which is the Company’s functional currency. All financial information is presented in RM and has been rounded to the nearest thousand, unless otherwise stated.

(d) Use of estimates and judgements

The preparation of the financial statements in conformity with MFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements other than those disclosed in Note 6 - Deferred tax assets, Note 9 - Inventories and Note 14 - Provisions.

2. Significant accounting policies

The accounting policies set out below have been applied consistently to the periods presented in these financial statements and have been applied consistently by Group entities, unless otherwise stated.

(a) Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities, including structured entities, controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing control only when such rights are substantive. The Group also considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return.

Investments in subsidiaries are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of investment includes transaction costs.

(ii) Business combinations

Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group.

For new acquisitions, the Group measures the cost of goodwill at the acquisition date as:• the fair value of the consideration transferred; plus• the recognised amount of any non-controlling interests in the acquiree; plus• if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree;

less• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

(Cont’d)



(Cont’d)


2. Significant accounting policies (Cont’d)

(a) Basis of consolidation (Cont’d)

(ii) Business combinations (Cont’d)

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

For each business combination, the Group elects whether it measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets at the acquisition date.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

(iii) Acquisitions of non-controlling interests

The Group accounts for all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions between the Group and its non-controlling interest holders. Any difference between the Group’s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves.

(iv) Acquisitions from entities under common controls

Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established; for this purpose comparatives are restated. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group controlling shareholder’s consolidated financial statements. The components of equity of the acquired entities are added to the same components within Group equity and any resulting gain/loss is recognised directly in equity.

(v) Loss of control

Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former subsidiary, any non-controlling interests and the other components of equity related to the former subsidiary from the consolidated statement of financial position. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

(vi) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

(b) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are retranslated to the functional currency at the exchange rate at that date.

Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of the reporting date, except for those that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.



(b) Foreign currency (Cont’d)

(i) Foreign currency transactions (Cont’d)

Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of a financial instrument designated as a hedge of currency risk, which are recognised in other comprehensive income.

In the consolidated financial statements, when settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented in the foreign currency translation reserve (“FCTR”) in equity.

(ii) Operations denominated in functional currencies other than Ringgit Malaysia

The assets and liabilities of operations denominated in functional currencies other than RM, including goodwill and fair value adjustments arising on acquisition, are translated to RM at exchange rates at the end of the reporting period. The income and expenses of foreign operations are translated to RM at exchange rates at the dates of the transactions.

Foreign currency differences are recognised in other comprehensive income and accumulated in the FCTR in equity. However, if the operation is a non-wholly owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the FCTR related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.

When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation, the relevant proportion of the cumulative amount is reattributed to non-controlling interests.

(c) Financial instruments

(i) Initial recognition and measurement

A financial asset or a financial liability is recognised in the statement of financial position when, and only when, the Group or the Company becomes a party to the contractual provisions of the instrument.

A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrument not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument.

An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised as fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.

(Cont’d)



(Cont’d)



(c) Financial instruments (Cont’d)

(ii) Financial instrument categories and subsequent measurement

The Group and the Company categorise financial instruments as follows:

Financial assets

(a) Financial assets at fair value through profit or loss

Fair value through profit or loss category comprises financial assets that are held for trading, including derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial assets that are specifically designated into this category upon initial recognition.

Derivatives that are linked to and must be settled by delivery of unquoted equity instruments whose fair values cannot be reliably measured are measured at cost.

Other financial assets categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss.

(b) Loans and receivables

Loans and receivables category comprises debt instruments that are not quoted in an active market.

Financial assets categorised as loans and receivables are subsequently measured at amortised cost using the effective interest method.

All financial assets, except for those measured at fair value through profit or loss, are subject to review for impairment (see Note 2(g)(i)).

Financial liabilities

All financial liabilities are subsequently measured at amortised cost other than those categorised as fair value through profit or loss.

Fair value through profit or loss category comprises financial liabilities that are derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial liabilities that are specifically designated into this category upon initial recognition.

Derivatives that are linked to and must be settled by delivery of equity instruments that do not have a quoted price in an active market for identical instruments whose fair values otherwise cannot be reliably measured are measured at cost.

Other financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss.

(iii) Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

Fair value arising from financial guarantee contracts are classified as deferred income and is amortised to profit or loss using a straight-line method over the contractual period or, when there is no specified contractual period, recognised in profit or loss upon discharge of the guarantee. When settlement of a financial guarantee contract becomes probable, an estimate of the obligation is made. If the carrying value of the financial guarantee contract is lower than the obligation, the carrying value is adjusted to the obligation amount and accounted for as a provision.


(Cont’d)



(c) Financial instruments (Cont’d)

(iv) Hedge accounting

Cash flow hedge

A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction and could affect the profit or loss. In a cash flow hedge, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income and the ineffective portion is recognised in profit or loss.

Subsequently, the cumulative gain or loss recognised in other comprehensive income is reclassified from equity into profit or loss in the same period or periods during which the hedged forecast cash flows affect profit or loss. If the hedge item is a non-financial asset or liability, the associated gain or loss recognised in other comprehensive income is removed from equity and included in the initial amount of the asset or liability. However, loss recognised in other comprehensive income that will not be recovered in one or more future periods is reclassified from equity into profit or loss.

Cash flow hedge accounting is discontinued prospectively when the hedging instrument expires or is sold, terminated or exercised, the hedge is no longer highly effective, the forecast transaction is no longer expected to occur or the hedge designation is revoked. If the hedge is for a forecast transaction, the cumulative gain or loss on the hedging instrument remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, any related cumulative gain or loss recognised in other comprehensive income on the hedging instrument is reclassified from equity into profit or loss.

(v) Derecognition

A financial asset or part of it is derecognised when, and only when the contractual rights to the cash flows from the financial asset expire or control of the asset is not retained or substantially all of the risks and rewards of ownership of the financial asset are transferred to another party. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in the profit or loss.

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged, cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in the profit or loss.

(d) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less any accumulated depreciation and any accumulated impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets also includes the cost of materials and direct labour. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs. Costs also may include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.


(Cont’d)



(d) Property, plant and equipment (Cont’d)

(i) Recognition and measurement (Cont’d)

When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and is recognised net within “other operating income” and “other operating expenses” respectively in profit or loss.

(ii) Subsequent costs

The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group or the Company, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised to profit or loss. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

(iii) Depreciation

Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed, and if a component has a useful life that is different from the remainder of that asset, then that component is depreciated separately.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment from the date that they are available for use. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Property, plant and equipment under construction are not depreciated until the assets are ready for their intended use.

The estimated useful lives for the current and comparative periods are as follows:

Years

Buildings 30

Electrical installation and fittings 4 - 50

Factory equipment 3 - 10

Motor vehicles 5

Office equipment, furniture and fittings 3 - 20

Plant and machinery 5 - 10

The leasehold land of the Group are amortised over the lease period of 60 years. Leasehold land which in substance is a finance lease is classified as property, plant and equipment.

Depreciation methods, useful lives and residual values are reviewed at the end of the reporting period, and adjusted as appropriate.



(e) Leased assets

Operating lease

Leases, where the Group or the Company does not assume substantially all the risks and rewards of the ownership are classified as operating leases and, except for property interest held under operating lease, the leased assets are not recognised on the statement of financial position. Property interest held under an operating lease, which is held to earn rental income or for capital appreciation or both, is classified as investment property and measured using fair value model.

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred.

(f) Intangible assets

(i) Computer software

Computer software are measured at cost less any accumulated amortisation and any accumulated impairment losses.

(ii) Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss as incurred.

Expenditure on development activities, whereby the application of research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to and has sufficient resources to complete development and to use or sell the asset.

The expenditure capitalised includes the cost of materials, direct labour and overheads costs that are directly attributable to preparing the asset for its intended use. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs. Other development expenditure is recognised in profit or loss as incurred.

Capitalised development expenditure is measured at cost less any accumulated amortisation and any accumulated impairment losses.

(iii) Amortisation

Amortisation is based on the cost of the asset less its residual value. Computer software are amortised on a straight-line basis over a period of 3 to 6 years while development expenditure are amortised on a straight-line basis over a period of 10 years. Amortisation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted, if appropriate.

(g) Impairment

(i) Financial assets

All financial assets (except for financial assets categorised as fair value through profit or loss and investments in subsidiaries) are assessed at each reporting date whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset. Losses expected as a result of future events, no matter how likely, are not recognised.

(Cont’d)



(Cont’d)



(g) Impairment (Cont’d)

(i) Financial assets (Cont’d)

An impairment loss in respect of loans and receivables is recognised in profit or loss and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account.

If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, to the extent that the asset’s carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss.

(ii) Other assets

The carrying amounts of other assets (except for inventories and deferred tax assets) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit.

An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit exceeds its estimated recoverable amount.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amounts of the assets in the cash-generating unit (groups of cash-generating units) on a pro rata basis.

Impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to profit or loss in the financial year in which the reversals are recognised.

(h) Inventories

Inventories are measured at the lower of cost and net realisable value.

The cost of inventories is calculated using the first-in, first-out method and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of work-in-progress and manufactured inventories, cost includes an appropriate share of production overheads based on normal operating capacity.

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


(Cont’d)



(i) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in fair value with original maturities of three months or less, and are used by the Group and the Company in the management of their short-term commitments.

(j) Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

(i) Warranties

A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.

(ii) Onerous contracts

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract.

(k) Revenue and other income

(i) Goods sold

Revenue from the sale of goods in the course of ordinary activities is measured at fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised.

(ii) Services

Revenue from services rendered is recognised when the services have been performed or rendered.

(iii) Dividend income

Dividend income is recognised in profit or loss on the date that the Group’s or the Company’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

(iv) Interest income

Interest income is recognised as it accrues using the effective interest method in profit or loss.


(Cont’d)



(k) Revenue and other income (Cont’d)

(v) Government grants

Government grants are recognised initially as deferred income at fair value when there is reasonable assurance that they will be received and that the Group will comply with the conditions associated with the grant; they are then recognised in profit or loss as other income on a systematic basis over the useful life of the asset.

Grants that compensate the Group for expenses incurred are recognised in profit or loss as other income on a systematic basis in the same periods in which the expenses are recognised.

(l) Borrowing costs

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed.

(m) Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous financial years.

Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period.

The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are not discounted.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax assets and liabilities on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Unutilised reinvestment allowance, being a tax incentive that is not a tax base of an asset, is recognised as a deferred tax asset to the extent that it is probable that the future taxable profits will be available against the unutilised tax incentive can be utilised.


(Cont’d)



(n) Employee benefits

(i) Short-term employee benefits

Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(ii) State plans

The Group’s contributions to statutory pension funds are charged to profit or loss in the financial year to which they relate. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

(o) Earnings per ordinary share

The Group presents basic and diluted earnings per share data for its ordinary shares (“EPS”).

Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held.

Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes.

(p) Operating segments

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

(q) Equity instruments

Instruments classified as equity are measured at cost on initial recognition and are not remeasured subsequently.

(i) Issue expenses

Costs directly attributable to the issue of instruments classified as equity are recognised as a deduction from equity.

(ii) Ordinary shares

Ordinary shares are classified as equity.


(Cont’d)



(r) Compound financial instruments

A compound financial instrument is a non-derivative financial instrument that contains both a liability and an equity component.

Compound financial instruments issued by the Company comprise Irredeemable Convertible Unsecured Loan Stocks that can be converted to share capital at the option of the holder, when the number of shares to be issued does not vary with changes in their fair value.

The proceeds are first allocated to the liability component, determined based on the fair value of a similar liability that does not have a conversion feature or similar associated equity component. The residual amount is allocated as the equity component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition.

Interest and losses and gains relating to the financial liability are recognised in profit or loss. On conversion, the financial liability is reclassified to equity; no gain or loss is recognised on conversion.

(s) Contingent liabilities

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is not recognised in the statements of financial position and is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(t) Fair value measurements

Fair value of an asset or a liability, except for lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market.

For non-financial asset, the fair value measurement takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair value are categorised into different levels in a fair value hierarchy based on the input used in the valuation technique as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: unobservable inputs for the asset or liability.

The Group recognises transfers between levels of the fair value hierarchy as of the date of the event or change in circumstances that caused the transfers.


3.

Pro

per

ty, p

lant

and

eq

uip

men

t

At

1 A

pri

l 201

7R

M’0

00A

dd

itio

nsR

M’0

00

Wri

tten

o

ffR

M’0

00R

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ssifi

cati

on

RM

’000

Eff

ect

of

mo

vem

ents

in

exc

hang

e ra

tes

RM

’000

At

31 M

arch

201

8R

M’0

00

Gro

up

Co

st

2018

Leas

ehol

d la

nd18

,157

--

-(1

,268

)16

,889

Bui

ldin

gs

57,2

11-

--

(5,1

79)

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Elec

tric

al in

stal

latio

n an

d fi

ttin

gs

14,1

0344

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,089

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Fact

ory

equi

pm

ent

24,3

132,

190

(203

)

2,63

6(1

,642

)27

,294

Mot

or v

ehic

les

1,99

328

5-

-(1

02)

2,17

6

Offi

ce e

qui

pm

ent,

furn

iture

and

fitt

ing

s 28

,366

2,60

7(4

,975

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13

6(1

,770

)24

,364

Plan

t an

d m

achi

nery

254,

972

61,7

25(3

,050

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5

4,57

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5,89

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ital e

xpen

ditu

re-in

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gre

ss36

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351)

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435,

743

120,

550

(8,2

28)

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6,94

5)51

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0

(Cont’d)



(Cont’d)


3.

Pro

per

ty, p

lant

and

eq

uip

men

t (C

ont

’d)

At

1 A

pri

l 201

6R

M’0

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ect

of

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31 M

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up

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-28

518

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tric

al in

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Fact

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(106

)-

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13

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les

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993

Offi

ce e

qui

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ent,

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iture

and

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ing

s 28

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4(1

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)(3

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t an

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nery

225,

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2)(7

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ss-

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36,

628

364,

411

58,5

12(1

,938

)(2

,072

)16

,830

435,

743


(Cont’d)


3.

Pro

per

ty, p

lant

and

eq

uip

men

t (C

ont

’d)

At

1 A

pri

l 201

7R

M’0

00

Dep

reci

atio

n fo

r th

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arR

M’0

00

Imp

airm

ent

loss

RM

’000

Wri

tten

o

ffR

M’0

00

Eff

ect

of

mo

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hang

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tes

RM

’000

Acc

umul

ated

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ciat

ion

RM

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Acc

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ated

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pai

rmen

tR

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At

31 M

arch

201

8R

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Gro

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Dep

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2018

Leas

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nd4,

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(229

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Fact

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t an

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213,

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13,3

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20,5

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(Cont’d)


3.

Pro

per

ty, p

lant

and

eq

uip

men

t (C

ont

’d)

At

1 A

pri

l 201

6R

M’0

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Dep

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--

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27

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tric

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ttin

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les

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315

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ce e

qui

pm

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iture

and

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ing

s 24

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1,84

0(1

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39)

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t an

d m

achi

nery

193,

385

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3521

3,88

1

260,

893

16,3

93(1

,930

)(2

,019

)13

,718

287,

055


(Cont’d)


3. Property, plant and equipment (Cont’d)

At 31 March 2018

RM’000

At 1 April 2017

RM’000

Group

Carrying amounts

Leasehold land 12,757 14,140

Buildings 35,625 41,284

Electrical installation and fittings 2,253 2,834

Factory equipment 11,265 9,138

Motor vehicles 397 210

Office equipment, furniture and fittings 4,134 3,363

Plant and machinery 141,644 41,091

Capital expenditure-in-progress 32,579 36,628

240,654 148,688

At 1 April

RM’000Additions

RM’000

Written off

RM’000

At 31 March

RM’000

Company

Cost

2018

Motor vehicles 523 - - 523

Office equipment, furniture and fittings 2,347 69 (257) 2,159

Electrical installation and fittings 1,002 - - 1,002

Factory equipment 13 - - 13

3,885 69 (257) 3,697

2017

Motor vehicles 523 - - 523

Office equipment, furniture and fittings 3,205 175 (1,033) 2,347

Electrical installation and fittings 1,002 - - 1,002


4,743 175 (1,033) 3,885


(Cont’d)


3. Property, plant and equipment (Cont’d)

At 1 April

RM’000

Depreciation for the year

RM’000

Written off

RM’000

At 31 March

RM’000

Company

Depreciation

2018

Motor vehicles 344 69 - 413

Office equipment, furniture and fittings 1,936 201 (257) 1,880

Electrical installation and fittings 724 29 - 753


3,016 299 (257) 3,058

2017

Motor vehicles 275 69 - 344

Office equipment, furniture and fittings 2,764 205 (1,033) 1,936

Electrical installation and fittings 677 47 - 724

Factory equipment 11 1 - 12

3,727 322 (1,033) 3,016

At 31 March 2018

RM’000

At 1 April 2017

RM’000

Carrying amounts

Motor vehicles 110 179

Office equipment, furniture and fittings 279 411

Electrical installation and fittings 249 278

Factory equipment 1 1

639 869

3.1 Security - Group

Certain leasehold land and buildings with carrying amount of RM Nil (2017: RM12,382,000) are charged to a bank as securities for bank facilities granted to a subsidiary. The securities have been discharged during the current financial year.


(Cont’d)


4. Intangible assets

At 1 April 2017

RM’000Additions

RM’000

Written off

RM’000

Effect of movements in exchange

ratesRM’000

At 31 March

2018RM’000

Group

2018

Cost

Development expenditure 2,420 11,086 - - 13,506

Computer software 7,224 2,132 (73) (413) 8,870

9,644 13,218 (73) (413) 22,376

At 1 April

2016RM’000

AdditionsRM’000


rates RM’000

At 31 March

2017RM’000

2017

Cost

Development expenditure - 2,420 - 2,420

Computer software 6,605 389 230 7,224

6,605 2,809 230 9,644

At 1 April

2017RM’000

Amortisation for the year

RM’000

Written off

RM’000

Impairmentloss

RM’000


ratesRM’000

At 31 March

2018 RM’000

2018

Accumulated amortisation and impairment loss

Development expenditure 38 1,246 - - (16) 1,268

Computer software 5,900 767 (73) 254 (380) 6,468

5,938 2,013 (73) 254 (396) 7,736


(Cont’d)


4. Intangible assets (Cont’d)

At 1 April

2016RM’000

Amortisation for the year

RM’000


rates RM’000

At 31 March

2017RM’000

2017

Accumulated amortisation

Development expenditure - 38 - 38

Computer software 5,217 489 194 5,900

5,217 527 194 5,938

2018RM’000

2017RM’000

Group

Carrying amounts

Development expenditure 12,238 2,382

Computer software 2,402 1,324

14,640 3,706

Company

Computer software

Cost

At 1 April 2,559 2,559

Additions 22 -

Written off (68) -

At 31 March 2,513 2,559

Amortisation

At 1 April 2,548 2,542

Amortisation for the year 6 6

Written off (68) -

At 31 March 2,486 2,548

Carrying amount

At 31 March 27 11


(Cont’d)


5. Investments in subsidiaries - Company

2018RM’000

2017RM’000

Unquoted shares, at cost

At 1 April 255,560 216,934

Additions 50,000 40,000

Written off - (1,374)

At 31 March 305,560 255,560

Accumulated impairment

At 1 April 28,001 29,375

Impairment loss (Note 17) 4,630 -

Written off - (1,374)

At 31 March 32,631 28,001

Unquoted shares, net 272,929 227,559

During the financial year, the Company subscribed for additional 50,000,000 (2017: 40,000,000) ordinary shares in a subsidiary for RM50,000,000 (2017: RM40,000,000) through the capitalisation of an equivalent amount due from the said subsidiary.

Details of the subsidiaries are as follows:

Name of entity

Principal place of business/Country of

incorporation

Effective ownership

interest and voting interest Principal activities

2018%

2017%

SAM Meerkat (M) Sdn. Bhd.

Malaysia 100 100 Design and assembly of modular or complete machine and equipment

SAM Tooling Technology Sdn. Bhd. (“SAMTT”)

Malaysia 100 100 Design, development and manufacture of trim and form dies and suspension tooling for hard disk drive parts

Avitron Private Limited* Republic of Singapore

100 100 Manufacture of aircraft components and precision engineering parts

SAM Technologies (M) Sdn. Bhd.(1)

Malaysia 100 100 Ceased operations


(Cont’d)


5. Investments in subsidiaries - Company (Cont’d)

Details of the subsidiaries are as follows: (Cont’d)

Name of entity

Principal place of business/Country of

incorporation

Effective ownership

interest and voting interest Principal activities

2018%

2017%

SAM Precision (M) Sdn. Bhd. (“SAMPM”)

Malaysia 100 100 Fabrication of precision tools and machinery parts and manufacture of aircraft and other equipment parts, spares, components and precision engineering parts

Meerkat Integrator Sdn. Bhd.

Malaysia 100 100 Dormant

Meerkat Precision Sdn. Bhd.

Malaysia 100 100 Manufacture of aircraft and other related equipment parts, spares, components and precision engineering parts

LKT Automation Sdn. Bhd. Malaysia 100 100 Dormant

LKT Integration Sdn. Bhd. Malaysia 100 100 Dormant

LKT Technology Sdn. Bhd. Malaysia 100 100 Dormant

Held by SAMTT

SAM Precision (Thailand) Limited*

Thailand 100 100 Manufacture of die, jigs and parts and cutting tools for disk drives, electronics, semi-conductor and other industries

Held by SAMPM

Meerkat Technology Pte. Ltd.*

Republic of Singapore

100 100 Design, manufacture and service support for semiconductor, electronic, disk drive, medical, solar, LED and other industrial equipment

* Not audited by member firms of KPMG International.(1) Ceased operation subsequent to the end of the financial reporting period.


6.

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2017

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2017

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6.

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167

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378

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(Cont’d)


6. Deferred tax assets/(liabilities) (Cont’d)

Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following items (stated at gross):

2018RM’000

2017RM’000

Group

Tax loss carry-forwards 46,851 47,952

Unabsorbed capital allowance 8,706 8,385

Provisions and others 4,720 3,776

60,277 60,113

Company

Tax loss carry-forwards 2,868 2,359

Unabsorbed capital allowance 1,788 1,582

Provisions and others 2,896 220

7,552 4,161

The tax loss carry-forwards, unabsorbed capital allowance and other temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profits will be available against which the Group and the Company can utilise the benefits therefrom.

7. Derivative financial assets/(liabilities) - Group

Nominal value

RM’000

Non-current assets

RM’000

Current assets

RM’000

Current liabilitiesRM’000

2018

Derivatives used for hedging

- Forward exchange contracts 119,344 441 2,994 (81)

2017

Derivatives held for trading at fair value through profit or loss

- Forward exchange contracts 26,748 - 179 -


- Forward exchange contracts 44,374 - 301 (636)

71,122 - 480 (636)


(Cont’d)


7. Derivative financial assets/(liabilities) - Group (Cont’d)

Forward exchange contracts are used to manage the foreign currency exposures arising from the Group’s receivables and payables denominated in currencies other than the functional currencies of Group entities. The majority of the forward exchange contracts have maturities of less than one year after the end of the reporting period save for certain ones used to hedge the purchase of plant and machinery. When necessary, the forward contracts are rolled over at maturity.

8. Trade and other receivables

Note2018

RM’0002017

RM’000

Group

Trade

Amounts due from:

- immediate holding company 8.1 15,580 36,802

- related companies 8.1 1,075 1,388

External parties 119,250 95,068

135,905 133,258

Non-trade

Amounts due from:

- immediate holding company 8.1 874 996

- related companies 8.1 8 74

Other receivables 7,165 3,594

Deferred expenses 6,694 -

Deposits 451 187

Prepayments 8.2 45,146 44,702

60,338 49,553

196,243 182,811

Company

Non-trade

Amounts due from:

- subsidiaries 8.1 9,172 33,974

- related company 8.1 - 55

Other receivables 89 72

Deposits 42 39

Prepayments 451 232

9,754 34,372


(Cont’d)


8. Trade and other receivables (Cont’d)

8.1 Amounts due from immediate holding company, subsidiaries and related companies

The trade amounts due from immediate holding company and related companies are subject to normal trade terms.

The non-trade amounts due from immediate holding company, subsidiaries and related companies are unsecured, interest-free and repayable on demand. Included in amount due from subsidiaries of the Company is RM273,000 (2017: RM30,934,000) which carries interest at 2.745% (2017: 2.745%) per annum.

8.2 Prepayments

Included in prepayments of the Group is RM22,257,000 (2017: RM21,554,000) paid for the purchase of plant and machinery and intangible assets.

9. Inventories - Group

2018RM’000

2017RM’000

Raw materials 76,072 56,017

Work-in-progress 86,414 78,851

Manufactured inventories 16,473 7,003

178,959 141,871

Recognised in profit or loss:

Inventories recognised as cost of sales 478,744 455,350

Reversal of inventories written down included in cost of sales (2,098) (2,198)

10. Share capital - Group/Company

Issued and paid up

AmountRM’000

Number of shares(’000)

At 1 April 2016 86,322 86,322

Conversion of ICULS to ordinary shares ^ 39,568 39,568

Transfer from share premium in accordance with Section 618(2) of the Companies Act 2016 (Note 10.1) 67,360 -

As at 31 March 2017/1 April 2017 193,250 125,890

Conversion of ICULS to ordinary shares ^ 19,481 9,277

212,731 135,167

^ conversion of 19,481,184 (2017: 83,092,236) units of 5-year 4% Irredeemable Convertible Unsecured Loans Stocks (“ICULS”) into 9,276,691 (2017: 39,567,728) ordinary shares on the basis of one ICULS for approximately 0.476 ordinary shares in the Company.


(Cont’d)


10. Share capital - Group/Company (Cont’d)

The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company.

10.1 Share premium comprised the premium paid on subscription of shares and conversion of ICULS into ordinary shares in the Company over and above the par value of the shares.

In accordance with Section 618 of Companies Act 2016, any amount standing to the credit of the share premium account has become part of the Company’s share capital. The Company has twenty-four months upon the commencement of Companies Act 2016 on 31 January 2017 to utilise the credit.

10.2 Included in share capital is share premium amounting to RM77,564,000 (2017: RM67,360,000) that is available to be utilised in accordance with Section 618(3) of Companies Act 2016 on or before 30 January 2019 (twenty-four months from commencement of Section 74).

10.3 The concept of authorised share capital and par value of share capital have been abolished on the commencement of Companies Act 2016 on 31 January 2017.

11. Reserves

Note2018

RM’0002017

RM’000

Group

Non-distributable

Capital reserve - ICULS (equity component) 11.1 - 15,628

Hedging reserve 11.2 2,572 (1,776)Translation reserve 11.3 40,411 80,168

42,983 94,020

Distributable

Retained earnings 205,359 167,762

248,342 261,782

Company

Non-distributable

Capital reserve - ICULS (equity component) 11.1 - 15,628

Distributable

Retained earnings 11.4 40,070 34,990

40,070 50,618

The movements in the reserves are disclosed in the statements of changes in equity.


(Cont’d)


11. Reserves (Cont’d)

11.1 Capital reserve

The capital reserve comprises the residual amount of the ICULS after deducting the fair value of the liability component from the fair value of the instrument as a whole (Note 22).

11.2 Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedges related to hedged transactions that have not yet occurred.

11.3 Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

11.4 Retained earnings

The entire retained earnings of the Company is eligible to be paid out as dividends under the single-tier company income tax systems in accordance with the Finance Act, 2007.

12. Loans and borrowings

2018RM’000

2017RM’000

Group

Current

Unsecured

ICULS (liability component) - 352Onshore foreign currency loans 6,292 -

6,292 352Non-current

Unsecured

Term loan – variable rate 12,120 -

18,412 352

Company

Current

Unsecured

ICULS (liability component) - 352

The movements of the ICULS (liability component) are disclosed in Note 22.


(Cont’d)


12. Loans and borrowings (Cont’d)

12.1 Reconciliation of movement of liabilities to cash flows arising from financing activities - Group

At 1 April2017

RM’000Drawdown

RM’000

At 31 March2018

RM’000

Onshore foreign currency loans - 6,292 6,292

Term loan - 12,120 12,120

- 18,412 18,412

13. Deferred income - Group

2018RM’000

2017RM’000

Non-current

Government grant 892 778

Current

Government grant 87 98

979 876

Government grant

The Group received a government grant for the purchase of plant and machinery. The grant is amortised over the useful life of the plant and machinery. During the financial year, RM91,712 (2017: RM117,632) was amortised and recognised as other income in profit or loss.


14. Provisions - Group

Provision for warranty

RM’000

Provision for onerous

contract RM’000

Total RM’000

At 1 April 2016 9,282 - 9,282

Provisions made during the year 1,007 - 1,007

Reversed to profit or loss (2,077) - (2,077)

Effect of movements in exchange rates 577 - 577

At 31 March 2017 8,789 - 8,789

At 1 April 2017 8,789 - 8,789

Provisions made during the year 2,349 961 3,310

Reversed to profit or loss (4,273) - (4,273)

Effect of movements in exchange rates (921) - (921)

At 31 March 2018 5,944 961 6,905

Presented as:

At 31 March 2017 - Current 8,789 - 8,789

Non-current - 719 719

Current 5,944 242 6,186

At 31 March 2018 5,944 961 6,905

Warranties

Warranties represent estimated liabilities for defects arising from products sold under warranty. The provision is based on management’s estimate made from historical warranty data associated with the products and judgement on the probability of a defect arising from products sold.

Onerous contracts

A provision for onerous contracts is recognised when the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be derived. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract.

(Cont’d)



(Cont’d)


15. Trade and other payables

Note2018

RM’0002017

RM’000

Group

Trade

Amounts due to:


- related companies 15.1 2,439 270

External parties 65,989 29,161

71,028 32,006

Non-trade

Amounts due to:


- related companies 15.1 4,320 2,863

Other payables 10,247 2,392

Accrued expenses 66,572 60,305

92,962 71,208

163,990 103,214

Company

Non-trade

Amounts due to:


- subsidiaries 15.1 23,439 17,984

Other payables 101 20

Accrued expenses 4,420 1,548

30,908 21,267

15.1 Amounts due to immediate holding company, subsidiaries and related companies

The trade amounts due to immediate holding company and related companies are subject to normal trade terms.

The non-trade amounts due to immediate holding company, related companies and subsidiaries are unsecured, interest-free and payable on demand.


(Cont’d)


16. Revenue

2018RM’000

2017RM’000

Group

Invoiced value of goods sold less discounts and returns 597,859 536,608

Support services rendered 305 789

598,164 537,397

Company

Dividend income from subsidiaries 39,610 70,745

Interest income 457 307

Management fee 10,082 8,521

50,149 79,573

17. Profit before tax

Profit before tax is arrived at after charging:

Group Company

Note2018

RM’0002017

RM’0002018

RM’0002017

RM’000

Auditors’ remuneration

Audit fees (statutory audit)

KPMG PLT

- current year 218 215 49 49

- prior year - 1 - 1

Other auditors

- current year 198 158 - -

- prior year - (4) - -

Non-audit fees

KPMG PLT 17 20 17 20

Affiliate of KPMG PLT 40 - 40 -

Other auditors - 3 - -

Impairment loss on investment in subsidiaries 5 - - 4,630 -


(Cont’d)


17. Profit before tax (Cont’d)

Profit before tax is arrived at after charging: (Cont’d)

Group Company

Note2018

RM’0002017

RM’0002018

RM’0002017

RM’000

Inventories written off 1,147 - - -

Realised loss on foreign exchange, net 2,049 265 66 50

Fair value loss on derivatives - 1,181 - -

Personnel expenses

- Wages, salaries and others (including Directors’ emoluments) 95,241 80,133 9,682 5,757

- Employees’ Provident Fund contributions 9,872 8,116 933 525

- Restructuring termination benefit 2,786 - - -

Rental expense on

- floor space and premises 6,836 4,435 9 -

- machinery and equipment 190 138 17 16

- motor vehicles 23 82 12 5

and after crediting:

Unrealised gain on foreign exchange, net 2,835 841 95 233

Gain on liquidation of a subsidiary - - - 254

Fair value gain on derivatives 1,991 - - -

18. Finance costs

2018RM’000

2017RM’000

Interest expense on:

Group

Onshore foreign currency loans 9 -

Term loan – variable rate 33 -

ICULS (Note 22) 28 84

70 84

Company

ICULS (Note 22) 28 84


(Cont’d)


19. Key management personnel compensation

Key management personnel compensation are as follows:

Group Company2018

RM’0002017

RM’0002018

RM’0002017

RM’000

Directors of the Company

- Fees 472 468 472 468

- Other emoluments 132 142 132 142

604 610 604 610

Other Directors

Current Director:

- Remuneration 2,176 1,339 - -

- Employees’ Provident Fund contributions 158 162 - -

2,334 1,501 - -

2,938 2,111 604 610

The estimated monetary value of benefits-in-kind receivable by Directors of the Group and of the Company amounted to RM8,000 (2017: Nil).

20. Tax expense

Major components of tax expense include:

Group Company

2018RM’000

2017RM’000

2018RM’000

2017RM’000

Income tax expense

Malaysian

- current year 5,786 8,130 - -

- prior year (2,997) 497 - (7)

2,789 8,627 - (7)


(Cont’d)


20. Tax expense (Cont’d)

Major components of tax expense include: (Cont’d)

Group Company

2018RM’000

2017RM’000

2018RM’000

2017RM’000

Overseas

- current year 4,544 5,729 - -

- prior year (167) 244 - -

4,377 5,973 - -

Total income tax expense 7,166 14,600 - (7)

Deferred tax expense

- origination/(reversal) of temporary differences 3,536 1,012 (84) (167)

- prior year (659) 2 - -

- recognition of previously unrecognised deferred tax assets - (3,867) - -

2,877 (2,853) (84) (167)

Total tax expense 10,043 11,747 (84) (174)

Reconciliation of tax expense

Group Company

2018RM’000

2017RM’000

2018RM’000

2017RM’000

Profit for the year 63,144 43,607 30,627 70,077

Total income tax expense 10,043 11,747 (84) (174)

Profit excluding tax 73,187 55,354 30,543 69,903


20. Tax expense (Cont’d)

Reconciliation of tax expense (Cont’d)

Group Company

2018RM’000

2017RM’000

2018RM’000

2017RM’000

Income tax calculated using Malaysian tax rate at 24% (2017: 24%) 17,565 13,285 7,330 16,777

Effect of different tax rates in foreign jurisdictions (2,888) (2,321) - -

Non-deductible expenses 1,769 1,358 1,362 243

Tax exempt income (469) (70) (9,506) (17,207)

Effect of tax incentives (2,091) (357) - -

Effect of deferred tax assets not recognised 39 3,028 814 20

Recognition of previously unrecognised deferred tax assets - (3,867) - -

Other items (59) (52) (84) -

13,866 11,004 (84) (167)

(Over)/Under provided in prior years (3,823) 743 - (7)

10,043 11,747 (84) (174)

21. Earnings per ordinary share - Group

Basic earnings per ordinary share

The calculation of basic earnings per ordinary share is based on the profit attributable to ordinary shareholders of RM63,144,000 (2017: RM43,607,000) and the weighted average number of ordinary shares outstanding, calculated as follows:

Weighted average number of ordinary shares at 31 March

2018 2017

Issued ordinary shares at 1 April 125,890,276 86,322,548

Effect of ordinary shares issued during the year 4,937,314 33,710,088

Weighted average number of ordinary shares at 31 March 130,827,590 120,032,636

Basic earnings per ordinary share (sen) 48.26 36.33

Diluted earnings per ordinary share

The calculation of diluted earnings per ordinary share at 31 March was based on the profit attributable to ordinary shareholders (diluted) and the weighted average number of ordinary shares (diluted) after adjustment for the effects of all dilutive potential ordinary shares, calculated as follows:

(Cont’d)



(Cont’d)


21. Earnings per ordinary share - Group (Cont’d)

Basic earnings per ordinary share (Cont’d)

Profit attributable to ordinary shareholders (diluted)

2017RM’000

Profit attributable to ordinary shareholders (basic) 43,607

Interest income on convertible notes, net of tax 64

Profit attributable to ordinary shareholders (diluted) 43,671

Weighted average number of ordinary shares (diluted)

2017

Weighted average number of ordinary shares at 31 March (basic) 120,032,636

Effect of conversion of ICULS 15,134,395

Weighted average number of ordinary shares at 31 March (diluted) 135,167,031

Diluted earnings per ordinary share (sen) 32.31

Diluted earnings per ordinary share for the financial year ended 31 March 2018 is not presented as the ICULS of the Company matured on 25 September 2017 and there were no other outstanding instruments with potential dilutive effect as at 31 March 2018.

22. Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) - Group/Company

On 25 September 2012, the Company issued 135,000,000 units of 5-year 4% ICULS at RM135,000,000 as part of the purchase consideration for the acquisition of the entire equity interest in Avitron Private Limited from Singapore Aerospace Manufacturing Pte. Ltd. (“SAM Singapore”). Of the total RM135,000,000 ICULS issued, RM101,250,000 ICULS were issued to SAM Singapore while the remaining RM33,750,000 ICULS were issued to other eligible shareholders of the Company. The ICULS matured on 25 September 2017.

The main features of the ICULS were as follows:

i) The ICULS were constituted by a Trust Deed dated 25 September 2012 made between the Company and the Trustee for the holders of the ICULS;

ii) The ICULS were convertible into new ordinary shares in the Company at any time from the date of issue of the ICULS until the maturity date on 25 September 2017 on the basis of one ICULS for approximately 0.476 number of ordinary shares;

iii) The ICULS shall rank pari passu in all respects, without priority amongst the respective holders and with all other present and future unsecured and unsubordinated obligations of the Company from time to time outstanding but shall be subordinated to all other obligations and liabilities of the Company which are preferred solely by the laws of Malaysia; and

iv) The interest on the ICULS at the rate of 4% per annum was payable semi-annually in arrears.

The residual value, after deducting the liability component from the fair value of the instrument as a whole, is attributed to the equity component as follows:


(Cont’d)


22. Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) - Group/Company (Cont’d)

Equity component

of ICULSRM’000

Liability component

of ICULS(Note 12)

RM’000Total

RM’000

At the date of issuance of ICULS

- nominal value 113,325 21,675 135,000

- deferred tax liabilities (5,419) - (5,419)

107,906 21,675 129,581

At 1 April 2016 82,287 5,506 87,793

Conversion of ICULS into ordinary shares (66,659) (4,513) (71,172)

Interest expense (Note 18) - 84 84

Interest paid - (725) (725)

At 31 March 2017/1 April 2017 15,628 352 15,980

Conversion of ICULS into ordinary shares (15,628) 8 (15,620)

Interest expense (Note 18) - 28 28

Interest paid - (388) (388)

At 31 March 2018 - - -

The liability component at 31 March is further analysed as follows:

2018RM’000

2017RM’000

Within 1 year - 352

Interest expense on the ICULS is calculated on the effective yield basis by applying a coupon interest rate of 8.05% which is assumed to be equivalent to the prevailing market interest rate for convertible loan stocks at the date of issue.

23. Dividends - Company

2017

A first interim single tier dividend of 14.96 sen and a special single tier dividend of 25.35 sen per ordinary share totalling RM50,744,257 for the financial year ended 31 March 2016 was declared on 8 June 2016 and paid on 5 August 2016.

2018

A first interim single tier dividend of 10.28 sen and a special single tier dividend of 6.95 sen per ordinary share totalling RM21,694,713 for the financial year ended 31 March 2017 was declared on 9 June 2017 and paid on 15 August 2017.

Subsequent to the end of the financial year, the Company declared a first interim single tier dividend of 14.01 sen and a special single tier dividend of 9.35 sen per ordinary share in respect of the financial year ended 31 March 2018 to be paid on 10 August 2018.


(Cont’d)


24. Related parties

Identity of related parties

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

The Group has related party relationship with its holding companies and subsidiaries as disclosed in the financial statements.

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

Significant related party transactions

The significant related party transactions of the Group and the Company are shown below. The balances related to the below transactions are shown in Note 8 and Note 15.

i) Subsidiaries:

2018RM’000

2017RM’000

Company

Subscription of shares in a subsidiary 50,000 40,000

Dividend income 39,610 70,745

Management fee income 10,082 8,521

Interest income 446 160

ii) Immediate holding company:

2018RM’000

2017RM’000

Group

Sales of aerospace parts 115,677 221,743

Dividend paid 7,672 17,948

Provision of engineering services 579 568

Purchase of fabrication/machining services (136) (233)

Purchase of engineering services (3,821) (5,040)

Corporate management services (2,092) (1,932)

Rental of factory premises (3,803) (3,833)

Company

Corporate management services (1,091) (1,051)


(Cont’d)


24. Related parties (Cont’d)

Significant related party transactions (Cont’d)

iii) Related companies:

2018RM’000

2017RM’000

Group

Sales of fabrication/machining services 10 33Sales of aerospace parts 8,084 3,079Sales of spare parts - 13Dividends paid 7,539 17,637Provision of engineering services 14 33Purchase of components, spare parts, modular on

complete machine and equipment (75) (96)Purchase of engineering services (359) (934)Corporate management services (61) (131)Purchases of fabrication/machining services (23,882) (26,127)Rental of floor space (518) (185)Rental of machine (157) (42)Purchase of raw material (27) -

iv) There were no transactions with key management personnel other than the remuneration package paid to them in accordance with the terms and conditions of their appointment as disclosed in Note 19 to the financial statements.

25. Operating segment - Group

The Group has two reportable segments, as described below, which are the Group’s strategic business units. The strategic business units offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Chief Operating Decision Maker (“CODM”) (i.e. the Group’s Chief Executive Officer) reviews internal management reports at least on a quarterly basis. The following summary describes the operations in each of the Group’s reportable segments:

Aerospace Provides a dedicated end-to-end manufacturing solutions on critical engine parts and other related equipment parts

Equipment manufacturing Provides an array of equipment engineering and solutions for commercial, semiconductor and other industries

Performance is measured based on segment profit before tax as included in the internal management reports that are reviewed by the CODM. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

Segment assets

The total of segment asset is measured on all assets (including goodwill) of a segment, as included in the internal management reports that are reviewed by the CODM. Segment total asset is used to measure the return on assets of each segment.

Segment liabilities

Segment liabilities information is neither included in the internal management reports nor provided regularly to the CODM. Hence, no disclosure is made on segment liabilities.


(Cont’d)


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re o

f seg

men

t p

rofit

are

:

- Re

vers

al o

f inv

ento

ries

writ

ten

dow

n1,

440

758

-2,

198

- D

epre

ciat

ion

and

am

ortis

atio

n(1

1,56

4)(5

,356

)-

(16,

920)

- A

mor

tisat

ion

of g

over

nmen

t g

rant

11

8 -

-11

8

Seg

men

t as

sets

434,

258

146,

671

-58

0,92

9

Incl

uded

in t

he m

easu

re o

f seg

men

t as

sets

are

:

Ad

diti

ons

to n

on-c

urre

nt a

sset

s ot

her

than

fin

anci

al in

stru

men

ts a

nd d

efer

red

tax

ass

ets

- A

dd

ition

s to

pro

per

ty, p

lant

and

eq

uip

men

t54

,852

3,66

0-

58,5

12

- A

dd

ition

s to

inta

ngib

le a

sset

s 2,

709

100

-2,

809

(Cont’d)



(Cont’d)


25. Operating segment - Group (Cont’d)

Geographical segments

In presenting information on the basis of geographical segments, segment revenue is based on geographical location of the customers. Segment assets are based on the geographical location of the assets.

RevenueRM’000

Non-current assets

RM’000

Geographical information

2018

Malaysia 48,124 231,549

Asia (excluding Malaysia) 271,503 26,512

Europe 2,838 -

North America 266,677 -

Latin America 9,022 -

598,164 258,061

2017

Malaysia 41,158 142,120


Europe 4,042 -

North America 158,344 -

Latin America 5,067 -

537,397 155,277

Major customers

The following are major customers with revenue equal to or more than 10% of the Group’s total revenue:

Revenue

Customer2018

RM’0002017

RM’000 Segment

Customer A 174,615 80,905 Aerospace

Customer B 111,997 221,766 Aerospace

Customer C 88,006 74,850 Equipment manufacturing

374,618 377,521


(Cont’d)


26. Capital and other commitments

Group Company

2018RM’000

2017RM’000

2018RM’000

2017RM’000

Property, plant and equipment

Contracted but not provided for 57,357 39,746 - 12

Intangible assets

Contracted but not provided for 89 4 - 4

27. Financial instruments

27.1 Categories of financial instruments

The table below provides an analysis of financial instruments categorised as follows:

(a) Loans and receivables (“L&R”); (b) Fair value through profit or loss (“FVTPL”): - Held for trading (“HFT”); (c) Financial liabilities measured at amortised cost (“FL”); and(d) Derivatives used for hedging

Carrying amountRM’000

L&RRM’000

FVTPL - HFT

RM’000

Derivatives used for hedgingRM’000

Financial assets

2018

Group

Trade and other receivables (excluding prepayments) 151,097 151,097 - -

Cash and bank balances 21,556 21,556 - -

Derivative financial assets 3,435 - - 3,435

176,088 172,653 - 3,435

Company


Cash and bank balances 298 298 - -

9,601 9,601 - -


(Cont’d)


27. Financial instruments (Cont’d)

27.1 Categories of financial instruments (Cont’d)

The table below provides an analysis of financial instruments categorised as follows: (Cont’d)


L&RRM’000

FVTPL - HFT

RM’000


Financial assets

2017

Group



Derivative financial assets 480 - 179 301

237,590 237,110 179 301

Company



36,871 36,871 - -


FLRM’000



2018

Group

Loans and borrowings 18,412 18,412 -

Trade and other payables 163,990 163,990 -

Derivative financial liabilities 81 - 81

182,483 182,402 81

Company

Other payables 30,908 30,908 -


(Cont’d)



27.1 Categories of financial instruments (Cont’d)

The table below provides an analysis of financial instruments categorised as follows: (Cont’d)


FLRM’000


2017

Group

Loans and borrowings 352 352 -

Trade and other payables 103,214 103,214 -

Derivative financial liabilities 636 - 636

104,202 103,566 636

Company

Loans and borrowings 352 352 -

Other payables 21,267 21,267 -

21,619 21,619 -

27.2 Net gains and losses arising from financial instruments

Group Company

2018RM’000

2017RM’000

2018RM’000

2017RM’000

Net gains/(losses) on:

Loans and receivables 992 1,252 476 490

Fair value through profit or loss

- Held for trading - (719) - -


- Recognised in other comprehensive expense 1,991 (462) - -

Financial liabilities measured at amortised cost 208 (313) (28) (84)

3,191 (242) 448 406


(Cont’d)



27.3 Financial risk management

The Group has exposure to the following risks from its use of financial instruments:

• Credit risk• Liquidity risk• Market risk

27.4 Credit risk

Credit risk is the risk of a financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group’s exposure to credit risk arises principally from its receivables from customers. The Company’s exposure to credit risk arises principally from advances to subsidiaries and financial guarantees given to banks for facilities granted to subsidiaries.

Receivables

Risk management objectives, policies and processes for managing the risk

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Normally, credit evaluations are performed on customers requiring credit over a certain amount.

Exposure to credit risk, credit quality and collateral

As at the end of the reporting period, the maximum exposure to credit risk arising from receivables is represented by the carrying amounts in the statements of financial position.

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

The exposure to credit risk for trade receivables as at the end of the reporting period by geographical region was:

Group

2018RM’000

2017RM’000

Malaysia 4,732 8,262


North America and Canada 83,046 67,439

Others 1,483 916

135,905 133,258


(Cont’d)



27.4 Credit risk (Cont’d)

Receivables (Cont’d)

Impairment losses

The Group maintains an ageing analysis in respect of trade receivables only. The ageing of trade receivables as at the end of the reporting period was:

GrossRM’000

Individual impairment

RM’000

Cumulative impairment

RM’000Net

RM’000

Group

2018

Not past due 127,782 - - 127,782

Past due 1 - 30 days 7,146 - - 7,146

Past due 31 - 60 days 502 - - 502

Past due 61 - 90 days 271 - - 271

Past due 91 - 120 days 204 - - 204

135,905 - - 135,905

2017

Not past due 109,035 - - 109,035

Past due 1 - 30 days 18,211 - - 18,211

Past due 31 - 60 days 4,397 - - 4,397

Past due 61 - 90 days 528 - - 528

Past due 91 - 120 days 281 - - 281

Past due more than 120 days 1,135 (329) - 806

133,587 (329) - 133,258

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

Group

2018RM’000

2017RM’000

At 1 April 329 318

Impairment loss written off (320) -

Effect of movements in exchange rates (9) 11

At 31 March - 329


(Cont’d)



27.4 Credit risk (Cont’d)

Receivables (Cont’d)

Impairment losses (Cont’d)

The Group does not have any significant exposure to any individual customer or counterparty nor does it have any major concentration of credit risk other than the trade receivables due from 3 (2017: 3) customers which collectively amounted to 58% (2017: 79%) of the Group’s trade receivables.

The allowance account in respect of trade receivables is used to record impairment losses. Unless the Group is satisfied that recovery of the amount is possible, the amount considered irrecoverable is written off against the receivable directly.

Inter-company advances


The Company provides unsecured advances to subsidiaries. The Company monitors the results of the subsidiaries regularly.


As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position.

Impairment losses

During the financial year 2018, the Company made an impairment loss of RM10,000 (2017: Nil) for amount due from a subsidiary.

The Company does not specifically monitor the ageing of advances to the subsidiaries. These advances are not considered to be overdue and are repayable on demand.

Financial guarantees


The Company provides unsecured financial guarantees to banks in respect of banking facilities granted to certain subsidiaries. The Company monitors on an ongoing basis the results of the subsidiaries and repayments made by the subsidiaries.


The maximum exposure to credit risk amounted to RM18.4 million (2017: Nil) representing the outstanding banking facilities to certain subsidiaries as at the end of the reporting period.

As at the end of the reporting period, there was no indication that any subsidiary would default on repayment. The financial guarantees have not been recognised since the fair value on initial recognition was not material.

27.5 Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s exposure to liquidity risk arises principally from its various payables, loans and borrowings.

The Group maintains a level of cash and cash equivalents and bank facilities deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due.

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.


(Cont’d)


27. F

inan

cial

inst

rum

ents

(C

ont

’d)

27.5

Li

qui

dit

y ri

sk (

Co

nt’d

)

Mat

urity

ana

lysi

s

The

tab

le b

elow

sum

mar

ises

the

mat

urity

pro

file

of t

he G

roup

’s an

d t

he C

omp

any’

s fin

anci

al li

abili

ties

as a

t th

e en

d o

f th

e re

por

ting

per

iod

bas

ed o

n un

dis

coun

ted

con

trac

tual

pay

men

ts:

Car

ryin

g

amo

unt

RM

’000

Co

ntra

ctua

lin

tere

st r

ate/

coup

on %

Co

ntra

ctua

l ca

sh fl

ow

sR

M’0

00

Und

er1

year

RM

’000

1 - 2

year

sR

M’0

00

2 - 5

year

sR

M’0

00

Mo

re t

han

5 y

ears

RM

’000

2018

Gro

up

Non

-der

ivat

ive

finan

cial

liab

ilitie

s

Trad

e an

d o

ther

pay

able

s16

3,99

0-

163,

990

163,

990

--

-

Term

loan

– v

aria

ble

rat

e12

,120

3.6

13,4

2143

66,

902

6,08

3-

Ons

hore

fore

ign

curr

ency

loan

s6,

292

2.2

- 2.6

6,29

26,

292

--

-

182,

402

183,

703

170,

718

6,90

26,

083

-

Der

ivat

ive

finan

cial

ass

ets

Forw

ard

exc

hang

e co

ntra

cts

(gro

ss s

ettle

d):

Out

flow

--

115,

990

107,

412

8,57

8-

-

Inflo

w(3

,354

)-

(119

,344

)(1

10,3

25)

(9,0

19)

--

179,

048

180,

349

167,

805

6,46

1 6,

083

-


(Cont’d)


27. F

inan

cial

inst

rum

ents

(C

ont

’d)

27.5

Li

qui

dit

y ri

sk (

Co

nt’d

)

Mat

urity

ana

lysi

s (C

ont’d

)

Car

ryin

g

amo

unt

RM

’000

Co

ntra

ctua

lin

tere

st r

ate/

coup

on %

Co

ntra

ctua

l ca

sh fl

ow

sR

M’0

00

Und

er1

year

RM

’000

1 - 2

year

sR

M’0

00

2 - 5

year

sR

M’0

00

Mo

re t

han

5 y

ears

RM

’000

2018

Co

mp

any

Non

-der

ivat

ive

finan

cial

liab

ilitie

s

Oth

er p

ayab

les

30,9

08-

30,9

0830

,908

--

-

Fina

ncia

l gua

rant

ees

--

18,4

1218

,412

--

-

30,9

0849

,320

49,3

20-

--


27. F

inan

cial

inst

rum

ents

(C

ont

’d)

27.5

Li

qui

dit

y ri

sk (

Co

nt’d

)

Mat

urity

ana

lysi

s (C

ont’d

)

Car

ryin

g

amo

unt

RM

’000

Co

ntra

ctua

lin

tere

st r

ate/

coup

on %

Co

ntra

ctua

l ca

sh fl

ow

sR

M’0

00

Und

er1

year

RM

’000

1 - 2

year

sR

M’0

00

2 - 5

year

sR

M’0

00

Mo

re t

han

5 y

ears

RM

’000

2017

Gro

up

Non

-der

ivat

ive

finan

cial

liab

ilitie

s

Trad

e an

d o

ther

pay

able

s10

3,21

4-

103,

214

103,

214

--

-

ICU

LS (l

iab

ility

com

pon

ent)

352

4.00

390

390

--

-

103,

566

103,

604

103,

604

--

-

Der

ivat

ive

finan

cial

liab

ilitie

s

Forw

ard

exc

hang

e co

ntra

cts

(gro

ss s

ettle

d):

Out

flow

156

-71

,122

71,1

22-

--

Inflo

w-

-(7

0,96

6)(7

0,96

6)-

--

103,

722

103,

760

103,

760

--

-

(Cont’d)



(Cont’d)


27. F

inan

cial

inst

rum

ents

(C

ont

’d)

27.5

Li

qui

dit

y ri

sk (

Co

nt’d

)

Mat

urity

ana

lysi

s (C

ont’d

)

Car

ryin

g

amo

unt

RM

’000

Co

ntra

ctua

lin

tere

st r

ate/

coup

on %

Co

ntra

ctua

l ca

sh fl

ow

sR

M’0

00

Und

er1

year

RM

’000

1 - 2

year

sR

M’0

00

2 - 5

year

sR

M’0

00

Mo

re t

han

5 y

ears

RM

’000

2017

Co

mp

any

Non

-der

ivat

ive

finan

cial

liab

ilitie

s

ICU

LS (l

iab

ility

com

pon

ent)

352

4.00

390

390

--

-

Oth

er p

ayab

les

21,2

67-

21,2

6721

,267

--

-

21,6

1921

,657

21,6

57-

--


(Cont’d)



27.6 Market risk

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

27.6.1 Currency risk

The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the respective functional currencies of the Group entities. The currencies giving rise to this risk are primarily U.S. Dollar (“USD”), Singapore Dollar (“SGD”), Euro Dollar (“EURO”) and Ringgit Malaysia (“RM”).


The Group uses forward exchange contracts to hedge its foreign currency risk arising from sales and purchases denominated in foreign currency. Most of the forward exchange contracts have maturities of less than two years after the end of reporting period. Where necessary, the forward exchange contracts are rolled over at maturity.

Exposure to foreign currency risk

The Group’s exposure to foreign currency (a currency which is other than the functional currency of the Group entities) risk, based on carrying amounts as at the end of the reporting period was:

Denominated in

USDRM’000

SGDRM’000

EURORM’000

RMRM’000

Group

2018

Balances recognised in the statement of financial position

Trade and other receivables 26,997 316 - 1,061


Trade and other payables (41,494) (6,031) (9,188) (28,368)

Net exposure (10,242) (3,830) (9,145) (26,191)

2017

Balances recognised in the statement of financial position

Trade and other receivables 36,428 67 - 201


Trade and other payables (24,765) (5,965) (572) (5,056)

Net exposure 29,568 8,370 (514) (3,147)


(Cont’d)



27.6 Market risk (Cont’d)

27.6.1 Currency risk (Cont’d)

Currency risk sensitivity analysis

A 5% (2017: 5%) strengthening of the functional currency of Group entities against the following currencies at the end of the reporting period would have increased/(decreased) post-tax profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remained constant and ignores any impact on forecasted sales and purchases. There is no impact to equity arising from exposure to currency risk.

Profit or lossRM’000

Group

2018

USD 389

SGD 146

EURO 348

RM 995

2017

USD (1,124)

SGD (318)

EURO 20

RM 120

A 5% (2017: 5%) weakening of the functional currency of Group entities against the above currencies at the end of the reporting period would have had equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remained constant.

27.6.2 Interest rate risk

The Group’s fixed rate deposits and borrowings are exposed to a risk of change in their fair value due to changes in interest rates. Short term receivables and payables are not significantly exposed to interest rate risk.


Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The Group’s income and operating cash flows are substantially independent of changes in market interest rates.


(Cont’d)



27.6 Market risk (Cont’d)

27.6.2 Interest rate risk (Cont’d)

Exposure to interest rate risk

The interest rate profile of the Group’s significant interest earning and interest-bearing financial instruments, based on carrying amounts as at the end of the reporting period was:

Group Company

2018RM’000

2017RM’000

2018RM’000

2017RM’000

Fixed rate instruments

Financial asset

- Amount due from subsidiaries 273 30,934 - -

Financial liability

- ICULS (liability component) - 352 - 352

Floating rate instruments


- Term loan 12,120 - - -

- Onshore foreign currency loans 6,292 - - -

18,412 - - -

(a) Fair value sensitivity analysis for fixed rate instruments

The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group does not designate derivatives as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the end of the reporting period would not affect profit or loss.

(b) Sensitivity analysis for interest rate risk

At the reporting date, if interest rates had been 50 basis points lower/higher, with all other variables held constant, the Group’s post-tax profit or loss would have been RM69,966 (2017: Nil) higher/lower, arising mainly as a result of lower/higher interest expense on floating rate loans and borrowings. The assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment.

27.7 Fair value information

The carrying amounts of cash and bank balances, short term receivables and payables and short term borrowings reasonably approximate their fair values due to the relatively short term nature of these financial instruments.

The table below analyses financial instruments carried at fair value and those not carried at fair value for which fair value is disclosed, together with their fair values and carrying amounts shown in the statements of financial position.


(Cont’d)


27. F

inan

cial

inst

rum

ents

(C

ont

’d)

27.7

Fa

ir v

alue

info

rmat

ion

(Co

nt’d

) Fair

val

ue o

f fi

nanc

ial i

nstr

umen

ts c

arri

ed

at f

air

valu

eFa

ir v

alue

of

fina

ncia

l ins

trum

ents

no

t ca

rrie

d

at f

air

valu

eTo

tal

fair

va

lue

RM

’000

Car

ryin

g

amo

unt

RM

’000

Leve

l 1R

M’0

00Le

vel 2

RM

’000

Leve

l 3R

M’0

00To

tal

RM

’000

Leve

l 1R

M’0

00Le

vel 2

RM

’000

Leve

l 3R

M’0

00To

tal

RM

’000

2018

Gro

up

Fina

ncia

l ass

ets

Forw

ard

exc

hang

e co

ntra

cts

-3,

435

-3,

435

--

--

3,43

53,

435

Fina

ncia

l lia

bili

ties

Term

loan

- v

aria

ble

rat

e-

--

--

-(1

2,12

0)(1

2,12

0)(1

2,12

0)(1

2,12

0)

Forw

ard

exc

hang

e co

ntra

cts

-(8

1)-

(81)

--

--

(81)

(81)

-(8

1)-

(81)

--

(12,

120)

(12,

120)

(12,

201)

(12,

201)


(Cont’d)


27. F

inan

cial

inst

rum

ents

(C

ont

’d)

27.7

Fa

ir v

alue

info

rmat

ion

(Co

nt’d

) Fair

val

ue o

f fi

nanc

ial i

nstr

umen

ts c

arri

ed

at f

air

valu

eFa

ir v

alue

of

fina

ncia

l ins

trum

ents

no

t ca

rrie

d

at f

air

valu

eTo

tal

fair

va

lue

RM

’000

Car

ryin

g

amo

unt

RM

’000

Leve

l 1R

M’0

00Le

vel 2

RM

’000

Leve

l 3R

M’0

00To

tal

RM

’000

Leve

l 1R

M’0

00Le

vel 2

RM

’000

Leve

l 3R

M’0

00To

tal

RM

’000

2017

Gro

up

Fina

ncia

l ass

ets

Forw

ard

exc

hang

e co

ntra

cts

-48

0-

480

--

--

480

480

Fina

ncia

l lia

bili

ties

Forw

ard

exc

hang

e co

ntra

cts

-(6

36)

-(6

36)

--

--

(636

)(6

36)


(Cont’d)



27.7 Fair value information (Cont’d)

Policy on transfer between levels

The fair value of an asset to be transferred between levels is determined as of the date of the event or change in circumstances that caused the transfer.

There has been no transfer between the levels in fair value during the financial year (2017: no transfer in either direction).

Level 2 fair value

Level 2 fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for the financial assets or liabilities, either directly or indirectly.

Level 3 fair value

Level 3 fair value is estimated using unobservable inputs for the financial assets and liabilities.

Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the end of the reporting period. The carrying amount of floating rate loans and borrowings approximate fair value as their effective interest rates change accordingly to movements in the market interest rate.

28. Capital management

The Group’s objectives when managing capital is to maintain a strong capital base and safeguard the Group’s ability to continue as a going concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business.

There was no change in the Group’s approach to capital management during the financial year.

29. Operating leases

Leases as lessee

Non-cancellable operating lease rentals are payable as follows:

Group Company

2018RM’000

2017RM’000

2018RM’000

2017RM’000

Less than one year 6,952 3,071 14 14

Between one and five years 17,735 1,372 14 28

More than five years 12,476 - - -

37,163 4,443 28 42

The Group and the Company leased floor space, factory and office premises and equipment under operating leases. The leases typically run for a period of 1 to 5 years, with an option to renew the lease upon the expiry of the initial lease period.


(Cont’d)


30. Contingent liabilities, unsecured - Company

The Company has issued corporate guarantees to financial institutions for borrowings granted to certain subsidiaries for RM134,465,000 (2017: RM126,977,000) of which, RM18,412,000 (2017: Nil) were utilised at the end of the reporting period.

31. Subsequent events

31.1 SAM Technologies (M) Sdn. Bhd. (“SAMT”), a wholly-owned subsidiary of the Company, has ceased operation subsequent to the financial year ended 31 March 2018 and remained dormant. SAMT recognised impairment losses amounting to RM508,000 collectively on its plant and equipment and intangible assets during the current financial year.

31.2 On 4 June 2018, the Company announced that it proposed to establish and implement an employees’ share grant scheme of up to 5% of its total number of issued shares for eligible employees of the Company and its non-dormant subsidiaries (“Proposed ESGS”). The Proposed ESGS is subject to shareholders’ approval at an Extraordinary General Meeting to be convened.


S TAT E M E N T B Y D I R E C T O R SPursuant to Section 251(2) of the Companies Act 2016

In the opinion of the Directors, the financial statements set out on pages 72 to 145 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 March 2018 and of their financial performance and cash flows for the financial year then ended.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Tan Kai Hoe Goh Wee Keng

Director Director

Date: 25 June 2018

S TAT U T O RY D E C L A R AT I O NPursuant to Section 251(1)(b) of the Companies Act 2016

I, Teh Mun Ling, the officer primarily responsible for the financial management of SAM Engineering & Equipment (M) Berhad, do solemnly and sincerely declare that the financial statements set out on pages 72 to 145 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the declaration to be true, and by virtue of the Statutory Declarations Act 1960.

Subscribed and solemnly declared by the above named Teh Mun Ling, MIA CA16317, at George Town in the State of Penang on 25 June 2018.

Teh Mun Ling

Before me:


Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of SAM Engineering & Equipment (M) Berhad, which comprise the statements of financial position as at 31 March 2018 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 72 to 145.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 March 2018, and of their financial performance and their cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.

Basis for Opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our auditors’ report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence and Other Ethical Responsibilities

We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current financial year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Valuation of inventories-Group

Refer to the accounting policy in Note 2(h) - Inventories and Note 9 - Inventories to the financial statements.

The key audit matter How the matter was addressed in our audit

The Group’s inventories amounted to RM179 million as at 31 March 2018 in the statement of financial position which represented 27% of the Group’s total assets.

The inventories are measured at the lower of cost and net realisable value. Identifying and determining the appropriate write down of the inventories to net realisable value required judgement by the Group.

We have identified the valuation of inventories as a key audit matter because judgements made by the Group are affected by external and market considerations which are inherently uncertain.

We have performed the following audit procedures, among others:

• Attended the year end physical inventory counts to identify whether any inventories were damaged;

• Assessed whether items in the system generated inventory ageing reports were classified within the appropriate ageing bracket;

• Checked the inventory impairment calculations prepared by the Group that they appropriately took into account the ageing profile of the inventories;

• Compared the inventory provision made by the Group to the Materials Review Board reports; and

• Tested samples of inventories-in-progress and manufactured inventories to sales subsequent to the year end and checked that they were sold at higher than the carrying amount.

• Evaluated the historical accuracy of the Group’s inventories written down by comparing prior year’s estimate to actual results.

We have determined that there are no key audit matters to be communicated for the Company in our report.

I N D E P E N D E N T A U D I T O R S ’ R E P O R Tto the members of Sam Engineering & Equipment (M) Berhad

(Company No. 298188 - A) (Incorporated in Malaysia)


Information Other than the Financial Statements and Auditors’ Report Thereon

The Directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements of the Group and of the Company and our auditors’ report thereon.

Our opinion on the financial statements of the Group and of the Company does not cover the annual report and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the annual report and, in doing so, consider whether the annual report is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of the annual report, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Statements

The Directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements of the Group and of the Company, the Directors are responsible for assessing the ability of the Group and of the Company to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of the Group and of the Company.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.

• Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Group or of the Company to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern.



(Cont’d)


Auditors’ Responsibilities for the Audit of the Financial Statements (Cont’d)

• Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that gives a true and fair view.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditors’ report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act 2016 in Malaysia, we report that the subsidiaries of which we have not acted as auditors are disclosed in Note 5 to the financial statements.

Other Matter

This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

KPMG PLT Raymond Chong Chee MonLLP0010081-LCA & AF 0758 Approval Number: 03272/06/2020 JChartered Accountants Chartered Accountant

Date: 25 June 2018

Penang



(Cont’d)


A N A LY S I S O F S H A R E H O L D I N G Sas at 22 June 2018

Issued and fully paid-up capital : RM212,730,621 comprising 135,166,967 Ordinary SharesClass of shares : Ordinary sharesVoting rights : One vote for every ordinary share held

Distribution Schedule of Shareholdings as at 22 June 2018

No. of Holders Size of Holdings Total Holdings %

235 less than 100 shares 8,717 0.01

735 100 to 1,000 shares 536,743 0.40

1,289 1,001 to 10,000 shares 4,844,642 3.58

319 10,001 to 100,000 shares 9,702,582 7.18

54 100,001 to less than 5% of issued shares 23,118,757 17.10

1 5% and above of issued shares 96,955,526 71.73

2,633 135,166,967 100.00

Subsitantial Shareholders as at 22 June 2018

Direct Interest Indirect Interest

No. NameNo.

of Shares% of

Issued CapitalNo.

of Shares% of

Issued Capital

1. Singapore Aerospace Manufacturing Pte Ltd 96,955,526 71.73 - -

2. Accuron Tehnologies Limited - - (a) 96,955,526 71.73

3. Temasek Holdings (Private) Limited - - (b) 96,955,526 71.73

Notes:

(a) Deemed interested via Singapore Aerospace Manufacturing Pte Ltd pursuant to Section 8(4) of the Companies Act, 2016.(b) Deemed interested via Accuron Technologies Limited pursuant to Section 8(4) of the Companies Act, 2016.

Directors’ Shareholdings as at 22 June 2018

Direct Interest Indirect Interest

No. NameNo.

of Shares% of

Issued CapitalNo.

of Shares% of

Issued Capital

1. Tan Kai Hoe - - - -

2. Goh Wee Keng 1,702,523 1.26 - -

3. Shum Sze Keong - - - -

4. Dato’ Mohamed Salleh Bin Bajuri - - - -

5. Dato’ Wong Siew Hai - - 11,800 (a) 0.01

6. Dato’ Sri Lee Tuck Fook - - - -

7. Lee Hock Chye - - - -

8. Datuk Dr Wong Lai Sum - - - -

Notes:

(a) Deemed interested via children pursuant to Section 59(11)(c) of the Companies Act, 2016.


A N A LY S I S O F S H A R E H O L D I N G S (Cont’d)as at 22 June 2018

Thirty (30) Largest Securities Account Holders (Ordinary Shares) According to the Record of Depositors as at 22 June 2018

Name Shareholdings %

1 AFFIN HWANG NOMINEES (ASING) SDN. BHD.DBS VICKERS SECS (S) PTE LTD FOR SINGAPORE AEROSPACEMANUFACTURING PTE LTD

96,955,526 71.73

2 AMANAHRAYA TRUSTEES BERHADPB SMALLCAP GROWTH FUND

2,031,300 1.50

3 AMANAHRAYA TRUSTEES BERHADPUBLIC STRATEGIC SMALLCAP FUND

1,882,004 1.39

4 UOBM NOMINEES (ASING) SDN BHDUNITED OVERSEAS BANK NOMINEES (PTE) LTDFOR GOH WEE KENG

1,702,523 1.26

5 AMANAHRAYA TRUSTEES BERHAD PUBLIC SMALLCAP FUND

1,641,800 1.21

6 CITIGROUP NOMINEES (TEMPATAN) SDN BHDEMPLOYEES PROVIDENT FUND BOARD (RHBISLAMIC)

1,365,400 1.01

7 HSBC NOMINEES (TEMPATAN) SDN BHDHSBC (M) TRUSTEE BHD FOR MANULIFE INVESTMENT PROGRESS FUND (4082)

1,207,400 0.89

8 AMANAHRAYA TRUSTEES BERHADPUBLIC ISLAMIC OPPORTUNITIES FUND

895,900 0.66

9 CARTABAN NOMINEES (ASING) SDN BHDEXEMPT AN FOR LGT BANK AG (FOREIGN)

858,857 0.64

10 AFFIN HWANG NOMINEES (ASING) SDN. BHD.DBS VICKERS SECS (S) PTE LTD FOR TEO SIEW GEOK

781,333 0.58

11 MAYBANK NOMINEES (TEMPATAN) SDN BHDMAYBANK TRUSTEES BERHAD FOR PUBLIC INDUSTRY GROWTH FUND(N14011930270)

733,800 0.54

12 AMANAHRAYA TRUSTEES BERHADPB ISLAMIC SMALLCAP FUND

570,100 0.42

13 AMANAHRAYA TRUSTEES BERHADPUBLIC SELECT TREASURES EQUITY FUND

470,100 0.35

14 PUBLIC NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR LOW HENG NAM (E-TJJ)

398,500 0.29

15 MAYBANK NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR TAY ONG NGO @ TAY BOON FANG

365,000 0.27

16 AFFIN HWANG NOMINEES (ASING) SDN. BHD.EXEMPT AN FOR DBS VICKERS SECURITIES (SINGAPORE) PTE LTD (CLIENTS)

358,428 0.27

17 HLB NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR NG YONG YIN

351,400 0.26

18 MAYBANK NOMINEES (TEMPATAN) SDN BHDMAYBANK TRUSTEES BERHAD FOR PUBLIC BALANCED FUND (N14011950210)

331,900 0.25


A N A LY S I S O F S H A R E H O L D I N G S (Cont’d)

Thirty (30) Largest Securities Account Holders (Ordinary Shares) According to the Record of Depositors as at 22 June 2018 (Cont’d)

Name Shareholdings %

19 RICHARD TEH LIP HEONG 323,000 0.24

20 NG BOON KEAT 303,809 0.22

21 LIM GAIK BWAY @ LIM CHIEW AH 303,500 0.22

22 NAHOORAMMAH A/P SITHAMPARAM PILLAY 300,000 0.22

23 CITIGROUP NOMINEES (TEMPATAN) SDN BHDKUMPULAN WANG PERSARAAN (DIPERBADANKAN) (AMUNDI SC EQ)

270,200 0.20

24 UNIVERSAL TRUSTEE (MALAYSIA) BERHADKAF DANA ADIB

264,400 0.20

25 PUBLIC NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR TAM SENG @ TAM SENG SEN (E-PTS)

250,000 0.18

26 CITIGROUP NOMINEES (ASING) SDN BHDEXEMPT AN FOR UBS AG SINGAPORE (FOREIGN)

247,000 0.18

27 LIM AH CHOO 244,000 0.18

28 HSBC NOMINEES (TEMPATAN) SDN BHDHSBC (M) TRUSTEE BHD FOR MANULIFE INVESTMENT AL-FAID (4389)

243,800 0.18

29 AMANAHRAYA TRUSTEES BERHADPUBLIC MUTUAL PRS MODERATE FUND

226,500 0.17

30 CITIGROUP NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR TAN SIONG AN (470676)

223,000 0.16

as at 22 June 2018


NOTICE IS HEREBY GIVEN that the Twenty-Fourth (24th) Annual General Meeting (“AGM”) of SAM Engineering & Equipment (M) Berhad (“SAMEE” or the “Company”) will be held at First Floor, SAM Meerkat (M) Sdn. Bhd., Plot 103, Hilir Sungai Keluang Lima, Taman Perindustrian Bayan Lepas 4, 11900 Penang on Tuesday, 14 August 2018 at 10.00 a.m. for the following purposes:

AGENDA

AS ORDINARY BUSINESS:

1. To receive the Audited Financial Statements for the financial year ended 31 March 2018 together with the Reports of the Directors and Auditors thereon. (Please refer to Note 1)

2. To re-elect the following Directors who are retiring pursuant to Article 91 of the Company’s Constitution and being eligible, offer themselves for re-election:2.1 Dato’ Sri Lee Tuck Fook2.2 Dato’ Wong Siew Hai2.3 Mr. Lee Hock Chye

Resolution 1Resolution 2Resolution 3

3. To re-appoint Messrs. KPMG PLT as Auditors of the Company, to hold office until the conclusion of the next AGM, at a remuneration to be determined by the Directors. Resolution 4

AS SPECIAL BUSINESS:

To consider and if thought fit, to pass the following as resolutions, with or without any modifications:

4. Ordinary ResolutionProposed payment of Directors’ fee for the period from 15 August 2018 until the next AGM

“THAT the Directors’ fee as tabulated below payable to each Director, as applicable, for the period from 15 August 2018 until the next AGM of the Company pursuant to Section 230(1)(b) of the Companies Act, 2016 (“Act”), be and are hereby approved:

Fee for each Director RM50,000 per annum

Fee for Chairman of the Audit Committee RM10,000 per annum

Fee for Chairman of the following: RM7,500 per annum

- Nominating & Remuneration Committee- Risk & Sustainability Committee

Fee for each Member of Committee RM5,000 per annum Resolution 5

5. Ordinary ResolutionProposed payment of the following benefits to Directors for the period from 15 August 2018 until next AGM of the Company

“THAT the payment of the following benefits payable to each Director, as applicable, for the period from 15 August 2018 until the next AGM of the Company pursuant to Section 230(1)(b) of the Act, be and are hereby approved:

Meeting Allowance for each Non-Executive Director

RM2,000 per meeting

Benefits-In-Kind (for all Directors) RM30,000 per annum Resolution 6

N O T I C E O F A N N U A L G E N E R A L M E E T I N G


N O T I C E O F A N N U A L G E N E R A L M E E T I N G

AS SPECIAL BUSINESS: (Cont’d)

6. Ordinary ResolutionAuthority to issue and allot shares

“THAT subject always to the Act, the Constitution of the Company and approvals of the relevant governmental/regulatory authorities, if applicable, the Directors be and are hereby empowered to issue and allot shares in the Company, pursuant to Section 75 and Section 76 of the Act, at any time to such persons and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit, provided that the aggregate number of shares issued pursuant to this Resolution does not exceed ten per centum (10%) of the issued and paid-up share capital (excluding treasury shares) of the Company for the time being and the Directors be and are also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Malaysia Securities Berhad;

AND THAT such authority shall commence immediately upon the passing of this Resolution and continue to be in force until:

(a) the conclusion of the Company’s next AGM, at which time it will lapse, unless the authority is renewed by a resolution passed at the general meeting;

(b) the expiration of the period within which the next AGM after that date is required to be held pursuant to Section 340(2) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 340(4) of the Act); or

(c) revoked or varied by resolution passed by the Company’s shareholders in a general meeting,

whichever is earlier.” Resolution 7

7. Ordinary Resolution Proposed New and Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Transactions (“RRPT”)

“THAT subject to the provisions of the Listing Requirements of Bursa Malaysia Securities Berhad (“Listing Requirements”), approval be and is hereby given to the Company and/or its subsidiaries (“SAMEE Group”) to enter into recurrent related party transactions of a revenue or trading nature as specified in Section 2.5(a) and Section 2.5(b) of the Circular to Shareholders dated 16 July 2018 which transactions are necessary for the day-to-day operations in the ordinary course of business of SAMEE Group on terms not more favourable to the related parties than those generally available to the public or unrelated third parties and are not to the detriment of the minority shareholders of the Company and the shareholders mandate is subject to annual renewal and disclosure being made in the Annual Report of the aggregate value of transactions conducted pursuant to the shareholders’ mandate during the financial year and that such approval shall continue to be in force until:

(a) the conclusion of the Company’s next AGM, at which time it will lapse, unless the authority is renewed by a resolution passed at the general meeting;

(b) the expiration of the period within which the next AGM after that date is required to be held pursuant to Section 340(2) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 340(4) of the Act); or

(c) revoked or varied by resolution passed by the Company’s shareholders in a general meeting,

whichever is earlier.

AND THAT the Directors of the Company be and are hereby authorised to complete and do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the RRPT.” Resolution 8

(Cont’d)


AS SPECIAL BUSINESS: (Cont’d)

8. Ordinary ResolutionMandate for the Directors who have served as Independent Non-Executive Directors of the Company for a cumulative term of more than nine (9) years, to continue to act as an Independent Non-Executive Director of the Company

“THAT approval be and is hereby given to the following Directors who have served as Independent Non-Executive Directors of the Company for a cumulative term of more than nine (9) years to continue to act as Independent Non-Executive Directors of the Company in compliance with the Malaysian Code on Corporate Governance 2017 (“MCCG”): a) Dato’ Mohamed Salleh Bin Bajurib) Dato’ Wong Siew Haic) Dato’ Sri Lee Tuck Fookd) Mr. Lee Hock Chye

Resolution 9 Resolution 10Resolution 11Resolution 12

By Order of the Board,

CHIN LEE PHING (MAICSA 7057836)THUM SOOK FUN (MIA 24701)CHEW PECK KHENG (LS 0009559)Company Secretaries

Date: 16 July 2018Penang

Notes:

1. The first agenda of this meeting is meant for discussion only, as the provision of Section 340 (1) (a) of the Act does not require a formal approval for the audited financial statements from the shareholders. Hence, this Agenda is not put forward to shareholders for voting.

2. Resolution 4 – Re-appointment of Auditors

Pursuant to Section 271(3)(b) of the Act, shareholders shall appoint auditors who shall hold office until the conclusion of the next AGM in year 2019. The current auditors, Messrs. KPMG PLT has expressed their willingness to continue in office.

The Board of Directors and Audit Committee of the Company have considered the re-appointment of Messrs. KPMG PLT as auditors of the Company and collectively agreed that Messrs. KPMG PLT has met the relevant criteria prescribed by Paragraph 15.21 of Listing Requirements.

The Board of Directors wishes to seek shareholders’ approval for the re-appointment of Messrs. KPMG PLT as external auditors of the Company to hold the office until the conclusion of the next AGM.

3. Explanatory Notes to Special Business:

i) Resolution 5 and 6 – Proposed payment of Directors’ Remuneration

Section 230(1) of the Act provides amongst others, that the “fee” of the Directors and “any benefits” payable to the Directors of a listed company shall be approved at the general meeting. Pursuant thereto, shareholders’ approval is sought for the payment of fees and benefits payable to Directors, in two separate resolutions as follows:

Resolution 5 – On payment of Directors’ fees in respect of the period from 15 August 2018 until the next AGM; and

Resolution 6 – On payment of Benefit to Directors for the period from 15 August 2018 until the next AGM.

N O T I C E O F A N N U A L G E N E R A L M E E T I N G (Cont’d)


Notes: (Cont’d)

3. Explanatory Notes to Special Business: (Cont’d)

i) Resolution 5 and 6 – Proposed payment of Directors’ Remuneration (Cont’d)

The Board of Directors at its meeting held on 24 May 2018 approved the Nominating & Remuneration Committee’s (“NRC”) recommendation for the proposed Directors’ fees for the period from 15 August 2018 until the next AGM. The comparison between the current Directors’ fee as approved by the shareholders of the Company at the Twenty-Third AGM held on 17 August 2017 and the proposed fees are as follows:

Current Fee Proposed Fee

Fee for each Director RM50,000 per annum No change

Fee for Chairman of Audit Committee RM5,000 per annum RM10,000 per annum

Fee for Chairman of- Nominating & Remuneration Committee- Risk & Sustainability Committee

RM5,000 per annum RM7,500 per annum

Fee for each Member of Committee(except for the Chairman of Committee whose fees disclosed above)

RM5,000 per annum No change

The benefits payable to Directors pursuant to Section 230(1)(b) of the Act have been reviewed by the Board of Directors of the Company, which recognises that the benefits payable is in the best interest of the Company. As for the meeting allowance it will only be accorded based on the actual attendance of meetings by the Directors.

ii) Resolution 7 – Authority to issue and allot shares

The Ordinary Resolution proposed herein is primarily to seek for the renewal of the Previous Mandate (as defined herein) to give flexibility to the Board of Directors to issue and allot shares up to 10% of the total number of issued share (excluding treasury shares) of the Company for the time being, at any time in their absolute discretion for such purposes as the Board of Directors considers to be in the best interests of the Company (hereinafter referred to as the “General Mandate”). This General Mandate is sought to avoid any delays and costs involved with the convening of a general meeting. This General Mandate, unless revoked or varied by the Company in general meeting, will expire at the conclusion of the next AGM of the Company.

The Company had been granted a general mandate by its shareholders at the last AGM held on 17 August 2017, of which will lapse at the conclusion of the 24th AGM (hereinafter referred to as the “Previous Mandate”).

As at the date of this Notice, the Previous Mandate granted by the shareholders had not been utilised and hence, no proceeds were raised therefrom.

The General Mandate upon renewal will provide flexibility to the Company for any possible fund-raising activities, including but not limited to placing of shares for the purpose of funding future investment project(s), working capital and/or acquisitions.

iii) Resolution 8 – Proposed New and Renewal of Shareholders’ Mandate

The proposed Ordinary Resolution 8, if approved by shareholders, will authorise the Proposed New and Renewal of Existing Shareholders’ Mandate for RRPT of a revenue or trading nature and allow the Company and its subsidiaries to enter into RRPT of a revenue or trading nature as set out in Section 2.5 of the Circular to Shareholders dated 16 July 2018, with the related parties in the ordinary course of business which are necessary for the day-to-day operations based on terms which are not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders of the Company. This approval shall continue to be in force until the conclusion of the next AGM of the Company at which time it will lapse unless the authority is renewed by a resolution passed at the meeting; or the expiration of the period within which the next AGM after the date it is required to be held pursuant to Section 340(2) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 340(4) of the Act); or revoked/varied by resolutions passed by the shareholders of the Company in general meeting; whichever is the earlier. Further information on the Proposed New and Renewal of Existing Shareholders’ Mandate is set out in the Circular to Shareholders dated 16 July 2018.



Notes: (Cont’d)

3. Explanatory Notes to Special Business: (Cont’d)

iv) Resolution 9 to 12 – Mandate for the Directors who have served as Independent Non-Executive Directors of the Company for a cumulative term of more than nine (9) years, to continue to act as an Independent Non-Executive Director of the Company

Pursuant to MCCG, the Company is required to seek shareholders’ approval if intends to retain an independent director who has served the Company for a cumulative term of nine (9) years.

The proposed Ordinary Resolutions 9, 10, 11, and 12, if passed, will retain Dato’ Mohamed Salleh Bin Bajuri, Dato’ Wong Siew Hai, Dato’ Sri Lee Tuck Fook and Mr. Lee Hock Chye (“Independent Non- Executive Directors”) who will attain 9 years tenure at this AGM, to continue to act as Independent Non-Executive Directors of the Company.

Both the NRC and the Board have at the annual assessment assessed the independence of Independent Non-Executive Directors, and recommended them to continue to serve as an Independent Non-Executive Director of the Company based on the following justifications:

(a) They fulfilled the criteria for independence as stated in the Listing Requirements.(b) Their long tenure of service has allowed them to be thoroughly acquainted with the business operations of the

Group which in turn has enabled them to participate actively and contribute positively to deliberation at Board Committees and Board meetings.

(c) Their wide-ranging professional, corporate and commercial experience provide the Board with diverse set of expertise, skills and competencies.

(d) They are objective and impartial in expressing their views and opinions during meetings, have always exercised due care and carried out their duties in the best interest of the Company and shareholders.

(e) They have devoted their time and effort for an informed and balanced deliberation at Board and Board Committees meetings and their attendance record at these meetings reflect their commitment to the Group.

4. Appointment of Proxy

a) A Member may appoint up to two (2) proxies to attend on the same occasion. A proxy may but need not be a Member of the Company. If a Member appoints more than one (1) proxy, the appointments shall be invalid unless he/she specifies the proportions of his/her holdings to be represented by each proxy.

b) Where a Member of the Company is an authorised nominee as defined under the Securities Industry (Central Depository) Act, 1991 (“SICDA”), it may appoint up to two (2) proxies in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

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

d) The instrument appointing a proxy shall be in writing under the hand of the appointor or of his/her attorney duly authorised in writing or, if the appointor is a corporation, either under the corporation’s seal or under the hand of an officer or attorney duly authorised.

e) To be valid, the form of proxy must be deposited at the Company’s Registered Office at Suite 18.05, MWE Plaza, No. 8, Lebuh Farquhar, 10200 Georgetown, Pulau Pinang, Malaysia at least forty-eight (48) hours before the time appointed for holding the meeting or any adjournments thereof.

f) In respect of deposited securities, only members whose names appear on the Record of Depositors on 8 August 2018 (General Meeting Record of Depositors) shall be eligible to attend, speak and vote at the meeting or appoint proxy(ies) to attend, speak and vote on his/her behalf.



Notes: (Cont’d)

5. Poll Voting

Pursuant to Paragraph 8.29A(1) of the Listing Requirements, all resolutions set out in this notice will be put to vote by way of a poll.

Personal data privacy:

By submitting an instrument appointing a proxy(ies) and/or representative(s) to attend, speak and vote at the AGM and/or any adjournment thereof, a member of the Company (i) consents to the collection, use and disclosure of the member’s personal data by the Company (or its agents) for the purpose of the processing and administration by the Company (or its agents) of proxies and representatives appointed for the AGM (including any adjournment thereof) and the preparation and compilation of the attendance lists, minutes and other documents relating to the AGM (including any adjournment thereof), and in order for the Company (or its agents) to comply with any applicable laws, listing rules, regulations and/or guidelines (collectively, the “Purposes”), (ii) warrants that where the member discloses the personal data of the member’s proxy(ies) and/or representative(s) to the Company (or its agents), the member has obtained the prior consent of such proxy(ies) and/or representative(s) for the collection, use and disclosure by the Company (or its agents) of the personal data of such proxy(ies) and/or representative(s) for the Purposes, and (iii) agrees that the member will indemnify the Company in respect of any penalties, liabilities, claims, demands, losses and damages as a result of the member’s breach of warranty.

As at date of this notice, there are no individuals who are standing for election as Directors (excluding the above Directors who are standing for re-election or re-appointment) at this forthcoming 24th AGM.

S TAT E M E N T A C C O M PA N Y I N G N O T I C E O F A G M

(Pursuant to Paragraph 8.27(2) of the Listing Requirements)



Day and Date Tuesday, 14 August 2018

Time 10.00 am

Venue First Floor, SAM Meerkat (M) Sdn. Bhd., Plot 103, Hilir Sungai Keluang Lima, Taman Perindustrian Bayan Lepas 4,11900 Penang.

REGISTRATION

1. Registration will commence at 9:00 a.m. and will end at the time as may be determined by the Chairman of the meeting.2. Please present your original Identity Card (IC) or Passport to the registration staff for verification. Please make sure your

IC or Passport is returned to you after registration.3. Upon verification, you are required to write your name and sign on the Attendance List.4. You will be given a wristband with bar code (“Wristband”) together with a keypad voting device upon registration for

electronic voting (“e-voting”) purposes. 5. Registration must be done in person. No person will be allowed to register on behalf of another person even with the

original IC of that other person.6. You may proceed to attend the meeting after registration.

BUSINESS PRESENTATION

1. A business presentation will commence at 9.30 a.m. at the meeting venue and will end at 10.00 a.m. sharp.

PROXY

1. A member entitled to attend and vote in the meeting is allowed to appoint proxy. Please submit your Form of Proxy in accordance with the notes and instructions as stated in the proxy form.

2. The Form of Proxy is not required if you are attending the meeting. You are not allowed to attend the meeting together with a proxy appointed by you.

3. If you have submitted your Form of Proxy prior to the meeting and subsequently decided to attend the meeting in person, please proceed to the registration counter to revoke the appointment of your proxy.

4. Please ensure that the original Form of Proxy is deposited at the Company’s Registered Office at Suite 18.05, MWE Plaza, No. 8, Lebuh Farquhar, 10200 Georgetown, Penang not less than forty-eight (48) hours before the meeting time. No proof of despatch of Form of Proxy will be entertained.

CORPORATE MEMBER

1. Any corporate member who wishes to appoint a representative instead of a proxy to attend the AGM should submit the original certificate of appointment under the seal of the corporation to the office of the Company’s Registered Office before the AGM or to the registration staff on the AGM day for the Company’s records.

ENTITLEMENT TO ATTEND, SPEAK AND VOTE

1. Only Depositor whose name appears on the Record of Depositors as at 8 August 2018 or the appointed proxy holder/representative shall be entitled to attend the 24th AGM.

A D M I N I S T R AT I V E G U I D E24th Annual General Meeting (“AGM”)


A D M I N I S T R AT I V E G U I D E24th Annual General Meeting (“AGM”)

VOTING PROCEDURE

1. The voting at the 24th AGM will be conducted on a poll and the votes will be casted electronically. 2. The Company has appointed Securities Services (Holdings) Sdn Bhd as Poll Administrator to conduct the poll by way of

e-voting and Commercial Quest Sdn Bhd to verify the results of the poll. 3. The registration for attendance will be closed to facilitate the commencement of the poll. 4. The presentation slides to guide the shareholders/proxy to cast the votes electronically will be available prior to the

commencement of the poll. 5. The keypad voting device is not allowed to be brought out of the meeting hall and is required to be returned to the

Company at the conclusion of the 24th AGM. Shareholders/proxy holders who wish to leave the meeting hall during the meeting, are required to return the said device to the Company at the exit door of the meeting hall.

LUNCH

1. Lunch shall be served after the meeting.

ANNUAL REPORT 2018

1. The Company Annual Report 2018 is available on the Company website at www.sam-malaysia.com and Bursa Malaysia Securities Berhad’s website at www.bursamalaysia.com.

ENQUIRY

1. For any enquiry prior to the 24th AGM, please contact the following during office hours:

(a) SAM Engineering & Equipment (M) Bhd (Tel: 04-643 6789)(b) Securities Services (Holdings) Sdn Bhd (Tel: 04-263 1966; Fax: 04 262 8544)

(Cont’d)


http://www.bursamalaysia.com

This page has been intentionally left blank.

I/We (Full Name in Block Letters) ____________________________________________________ (Tel:) __________________________

NRIC No. / Passport No. / Company No. ___________________________________________ of _____________________________

_________________________________________________________________________________________________ being a member

/ members of SAM ENGINEERING & EQUIPMENT (M) BERHAD (“Company”), hereby appoint the following person(s):-

First Proxy

Name / NRIC No. AddressNo. of shares or % of

shares to be presented

Second Proxy

Name / NRIC No. AddressNo. of shares or % of

shares to be presented

or failing him/her, the Chairman of the meeting as *my/our proxy to vote in *my/our name(s) on my/our behalf at the Twenty-Fourth Annual General Meeting (“AGM”) of the Company to be held at First Floor, SAM Meerkat (M) Sdn. Bhd., Plot 103, Hilir Sungai Keluang Lima, Taman Perindustrian Bayan Lepas 4, 11900 Penang, Malaysia on Tuesday, 14 August 2018 at 10:00 a.m. and at any adjournment thereof.

*My/Our proxy is to vote on the resolution referred to in the Notice of AGM as indicated below:-

No. RESOLUTIONSFirst Proxy Second Proxy

For Against For AgainstORDINARY BUSINESS1. To re-elect Dato’ Sri Lee Tuck Fook as Director.2. To re-elect Dato’ Wong Siew Hai as Director.3. To re-elect Mr. Lee Hock Chye as Director.4. To re-appoint Messrs. KPMG PLT as auditors.SPECIAL BUSINESS5. Ordinary Resolution – Proposed payment of Directors’ fee for the period

from 15 August 2018 until the next AGM.6. Ordinary Resolution – Proposed payment of benefits to Directors for the

period from 15 August 2018 until the next AGM.7. Ordinary Resolution - Authority for Directors to issue and allot shares.8. Ordinary Resolution – Proposed new and renewal of shareholders’

mandate for recurrent related party transactions.9. Ordinary Resolution – Mandate to retain Dato’ Mohamad Salleh Bin Bajuri

as an Independent Non-Executive Director of the Company.10. Ordinary Resolution – Mandate to retain Dato’ Wong Siew Hai as an

Independent Non-Executive Director of the Company.11. Ordinary Resolution – Mandate to retain Dato’ Sri Lee Tuck Fook as an

Independent Non-Executive Director of the Company.12. Ordinary Resolution – Mandate to retain Mr. Lee Hock Chye as an

Independent Non-Executive Director of the Company.

(Please indicate with an “X” in the appropriate box how you wish your proxy to vote. If no instruction is given, the proxy will vote or abstain at his/her discretion).

* Strike out whichever not applicable.

Signed this______________day of _______________2018. _________________________________________Signature of Shareholder / Common Seal

SAM ENGINEERING & EQUIPMENT (M) BERHAD(Company No. 298188-A)(Incorporated in Malaysia)

Number of shares held

CDS account no.

F O R M O F P R O X Y

Notes:-1. A Member may appoint up to two (2) proxies to attend on the same occasion. A proxy may but need not be a Member of the Company. If a Member

appoints more than one (1) proxy, the appointments shall be invalid unless he/she specifies the proportions of his/her holdings to be represented by each proxy.

2. Where a Member of the Company is an authorised nominee as defined under the Securities Industry (Central Depository) Act, 1991 (“SICDA”), it may appoint up to two (2) proxies in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

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

4. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his/her attorney duly authorised in writing or, if the appointor is a corporation, either under the corporation’s seal or under the hand of an officer or attorney duly authorised.

5. To be valid, the form of proxy must be deposited at the Company’s Registered Office at Suite 18.05, MWE Plaza, No. 8, Lebuh Farquhar, 10200 Georgetown, Pulau Pinang, Malaysia at least forty-eight (48) hours before the time appointed for holding the meeting or any adjournments thereof.

6. In respect of deposited securities, only members whose names appear on the Record of Depositors on 8 August 2018 (General Meeting Record of Depositors) shall be eligible to attend, speak and vote at the meeting or appoint proxy(ies) to attend, speak and vote on his/her behalf.

7. Pursuant to Paragraph 8.29A(1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the resolution set out in the Notice of the AGM will be put to vote by way of poll.

Please fold across the line and close

STAMP

To,

The Company SecretariesSAM Engineering & Equipment (M) Berhad (Company No. 298188A)Suite 18-05, MWE Plaza, No. 8, Lebuh Farquhar, 10200 Georgetown, Penang

Please fold across the line and close

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