ANNUAL REPORT 2019 Excellence … · Bayan Lepas Free Industrial Zone, Phase 4, 11900 Penang. Tel: 604-643 6789 Fax: 604-644 7017 ANNUAL REPORT 2019 Excellence Together 10 Years of

www.sam-malaysia.com

SAM ENGINEERING & EQUIPMENT (M) BERHAD (298188-A)

Plot 17, Hilir Sungai Keluang 3, Bayan Lepas Free Industrial Zone, Phase 4, 11900 Penang.Tel: 604-643 6789 Fax: 604-644 7017

ANNUAL REPORT 2019

ExcellenceTogether

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ANNUAL REPORT 2019

ExcellenceTogether

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ANNUAL REPORT 2019

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ExcellenceTogether

10 Years of

2018

20142009

Continue to bear good fruits




ANNUAL REPORT 2019

ExcellenceTogether

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2019

002 SAM Engineering & Equipment (M) Berhad . Annual Report 2019

OUR SEVEN PILLARS

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

SERVING OTHERS

We will go the extra mile to achieve our objectives and strive

for higher standards in our endeavours.

COMMITMENT

Righteousness is characterised by accepted standards of morality,

justice, virtue or uprightness. Our every action will be consistent with these standards.

RIGHTEOUSNESS

We embrace a continuous

improvement culture and formulate solutions

through collective efforts to achieve

extraordinary results.

VALUE CREATION

We will accept change to take up

challenges and seize opportunities that

may arise.

COURAGE

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

COMPASSION

Our pillar of long-term success that encompasses

honesty, dedication and responsibility.

INTEGRITY

003

AS WE SOWWE REAP


OUR LEAVESARE ALWAYS GREEN

AND WE BEARGOOD FRUITS

005

TO THOSE WHO BELIEVE

ALL THINGS

POSSIBLEARE


CORPORATE GOVERNANCE

OVERVIEW STATEMENT

PARTICULAR OF PROPERTIES 037036

009STEWARDSHIP

CORPORATE INFORMATION

007OUR

MANAGEMENT TEAM

010MANAGEMENT

DISCUSSION AND ANALYSIS

018

AUDIT COMMITTEE

REPORT 052FINANCIAL

STATEMENTS

ANALYSIS OF SHAREHOLDINGS062

167STATEMENT

ACCOMPANYING NOTICE OF AGM

175PROXY FORM

ADMINISTRATIVE GUIDE

176ENCLOSED

OUR BOARD OFDIRECTORS

012

SUSTAINABILITY STATEMENT

023

STATEMENT ON RISK MANAGEMENT ANDINTERNAL CONTROL

056

008GROUP

STRUCTURE AND ACTIVITIES

GROUP FINANCIAL HIGHLIGHTS

016

OTHER INFORMATION

060

170 NOTICE OF ANNUAL GENERAL

MEETING

C O N T E N T S

007

CORPORATE INFORMATION

AChairman

Mr. Lee Hock Chye

Members

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

AUDIT COMMITTEE

BNon-Independent Non-Executive Chairman

Mr. Tan Kai HoeExecutive 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’ Seri Wong Siew HaiDato’ Sri Lee Tuck Fook Mr. Lee Hock ChyeDatuk Dr. Wong Lai Sum

BOARD OF DIRECTORS

RChairman

Datuk Dr. Wong Lai SumMembers

Dato’ Mohamed Salleh Bin BajuriDato’ Seri Wong Siew Hai

RISK & SUSTAINABILITY COMMITTEE

NChairman

Dato’ Seri Wong Siew HaiMembers

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

NOMINATING & REMUNERATION COMMITTEE

CMs. Thum Sook Fun (MIA 24701)Ms. Chew Peck Kheng (LS0009559)

COMPANY SECRETARIES

RSuite 18.05, MWE Plaza,No. 8, Lebuh Farquhar,10200 George Town,Penang.Tel: 604 - 263 1966Fax: 604 - 262 8544

REGISTERED OFFICE

RPlantation Agencies Sdn. Bhd. (2603-D)

3rd Floor, 2 Lebuh Pantai,10300 George Town,Penang.Tel: 604 - 262 5333Fax: 604 - 262 2018

REGISTRARS

Cwww.sam-malaysia.com

COMPANY WEBSITE

PCitibank BerhadAmBank (M) BerhadHong Leong Bank Berhad

PRINCIPAL BANKERS

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

AUDITORS

IRM 212,730,621

(As at 31 March 2019)

ISSUED AND PAID-UP CAPITAL

PPlot 17, Hilir Sungai Keluang 3,Bayan Lepas Free Industrial Zone, Phase IV, 11900 Bayan Lepas, Penang.Tel: 604 - 643 6789Fax: 604 - 644 1700

PRINCIPAL PLACE OF BUSINESS


GROUP STRUCTURE AND ACTIVITIES

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

Active

MEERKAT TECHNOLOGY PTE. LTD.

(200008724Z)Design, manufacture and

provide service support for semiconductor, electronics, disk drive, medical, solar, L.E.D. and other industrial

equipment

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

Active

SAM PRECISION (THAILAND) LIMITED

(0145543000048)Manufacture of die, jigs

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

industries

Active

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

Design and manufacture of engineering equipment and automation solutions ranging from process test

handlers, material handling systems, vision inspection

systems and factory automation

Dormant

LKT INTEGRATION SDN. BHD.

(455256-X) Development and

production of computer process control system for printed circuit board

handling system and component assembly line

Dormant

MEERKAT INTEGRATOR SDN. BHD.

(479992-T) Designing, manufacturing

and assembly of metal and non-metal ergonomic

workstations and electronic product

Dormant

AVITRON PRIVATE LIMITED

(201116715M)Manufacture of aircraft

components and precision engineering parts

Active

LKT TECHNOLOGY SDN. BHD.

(418108-T) Design and manufacture

of precision tools and machinery parts

Dormant

MEERKAT PRECISION SDN. BHD.

(265589-V)Manufacture of aircraft and

other related equipment parts, spares,

components and precision engineering parts

Active

LKT AUTOMATION SDN. BHD.

(75724-W)Designing and assembling of automation equipment complete with equipment

control software

Dormant

SAM MEERKAT (M) SDN. BHD.

(364889-X)Design and assembly

of modular or complete machine and equipment

Active

SAM ENGINEERING & EQUIPMENT (M) BERHAD

(298188-A)

009

STEWARDSHIP


OUR MANAGEMENT TEAM

GOH WEE KENGJEFFREYCEO & Executive Director

Details are disclosed inOur Board of Directors.

TAN GUAN THONG Chief Operating Officer, SAM Singapore Group

Age

Gender

Nationality

Date Joined

58

Male

Singaporean 15 Aug 2011

Academic / ProfessionalQualification(s)

•BachelorofEngineering,NanyangTechnology University of Singapore,

Singapore.

LIM HEE SENGPETERVice President – Aerospace, SAM Singapore Group

Age

Gender

Nationality

Date Joined

57

Male

Singaporean

1 Jan 2017


•BachelorofMechanicalEngineering(First Class Honours), The Queens’ University of Belfast, UK.

•MastersofBusinessAdministration,University of Leicester, UK.

TEO SIEW GEOKHELENChief Financial Officer, SAMEE Group

Age

Gender

Nationality

Date Joined

60

Female

Singaporean

15 Aug 2011


•BachelorofAccounting,NationalUniversity of Singapore, Singapore.

DECISIVENESS,

CONSISTENCY & MATURITYSTRENGTH,

011

OUR MANAGEMENT TEAM (Cont’d)

* Save as disclosed, the management team has no family relationship with any Director and/or major shareholder of SAM Engineering & Equipment (M) Berhad (“SAMEE”), has no conflict of interest with SAMEE, 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 31 March 2019.

NG BOON KEATChief Operating Officer, SAMEE Group

Age

Gender

Nationality

Date Joined

51

Male

Malaysian 17 Apr 2006


•MastersofScience(MechatronicsEngineering), De Montfort

University of Leicester, UK.

YAP HAN LINGeneral Manager, Meerkat Precision, SAM Precision & SAM Tooling

Age

Gender

Nationality

Date Joined

44

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

48

Female

Malaysian

21 Aug 2017


•BachelorofAccountancy(Honours),Northern University of Malaysia, Malaysia

•CharteredAccountant,MalaysiaInstitute of Accountants

LIM KEAN THYEGeneral Manager, SAM Meerkat

Age

Gender

Nationality

Date Joined

52

Male

Malaysian

28 Jun 2010


•BachelorofElectrical&ElectronicsEngineering, Imperial College of Science & Technology, University of London, England, UK.


OUR BOARD OF DIRECTORS

Non-Independent Non-Executive Chairman

TAN KAI HOE

GOH WEE KENG, JEFFREY

Executive Director & Chief Executive Officer

Academic / Professional Qualification(s)

Present Directorship(s) and/or Appointment(s)

•Chairman,SPRINGSEEDSCapitalPte.Ltd.•Director,EmploymentandEmployabilityInstitute•Director,GrowthEnterpriseFundPte.Ltd.•ChiefExecutive,SPRINGSingapore

Past Directorship(s) and/or Appointment(s)

•BachelorofArts(Physics)UniversityofCambridge,UK•MastersofScience(Management)StanfordUniversity,

USA

•BachelorofScience(FirstClassHonours)inAeronautical Engineering Science, Salford University, UK•MastersofScience(TurbineTechnology),Cranfield University, UK

•DeputyChairman&Director,SingaporeAerospace Manufacturing Pte. Ltd.•Member,BoardofGovernors,TemasekPolytechnic•President&ChiefExecutiveOfficer/Director,Accuron Technologies Limited•ViceChairman,SingaporeRedCrossCouncil•Director,AccuronIndustrialTechnologiesLimited•Deputy Chairman, Singapore Accreditation Council

•Director,AccuronIndustrialTechnologiesLimited•President&ChiefExecutiveOfficer/Directorof Singapore Aerospace Manufacturing Pte. Ltd.•Chairman&Director,SAM(Suzhou)Co.,Ltd.•Chairman&Director,Aviatron(M)Sdn.Bhd.•Director, J W Kane Precision Engineering Limited

Board Committee Membership(s)•NominatingandRemunerationCommittee

53

Male

Singaporean

26 August 2015

Age

Gender

Nationality

Date of Appointment

60

Male

Singaporean

4 March 2008

Age

Gender

Nationality

Date of Appointment

KNOWLEDGE AND UNDERSTANDINGWISDOMFROM COMES

013

OUR BOARD OF DIRECTORS (Cont’d)

Non-Independent Non-Executive Director

SHUM SZE KEONG

DATO’ SRI LEE TUCK FOOK

SSAP, DIMP, Independent Non-Executive Director


•BachelorofScienceinAeronauticalEngineering,Embry Riddle Aeronautical University, USA

•Member,MalaysianInstituteofAccountants(MIA)•Member,MalaysianInstituteofCertifiedPublic

Accountants•MastersinBusinessAdministration


•GeneralManager,ShumEnterprisesPte.Ltd.•Director,SingaporeAerospaceManufacturingPte.Ltd.

• IndependentNon-ExecutiveChairman,PesonaMetroHoldings Berhad

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


•HeadAerospace,IndustryDevelopmentDivision,Singapore Economic Development Board

•ExecutiveDirector,GrandeHoldingsLtd.•Consultant,GrandeGroupLimited• IndependentNon-ExecutiveDirector,LafeCorporation

Limited

•VicePresidentofSamlingGroupinSarawak•ManagingDirector,RenongOverseasCorporationSdn.

Bhd.•Chairman,ExecutiveCommitteeontheBoardof Peremba-Kentz Ltd•ManagingDirector,CementIndustriesofMalaysia

Berhad•ManagingDirector,ParacorpBerhad•ManagingDirector,MaltonBerhad•Director,LandmarksBerhad

Board Committee Membership(s)•AuditCommittee

Age

Gender

Nationality

Date of Appointment

57

Male

Singaporean

4 March 2008

Age

Gender

Nationality

Date of Appointment

65

Male

Malaysian

8 July 2008

Board Committee Membership(s)•AuditCommittee


DATO’ SERIWONG SIEW HAI

DSPN, DMPN, Independent Non-Executive Director

DATO’ MOHAMED SALLEH BIN BAJURI

DPTJ, Independent Non-Executive Director

•Director,PenangTechCentreBhd•Director,PenangScienceClusterBhd•Chairman,MalaysianAmericanElectronicsIndustry

(MAEI), AMCHAM•HonoraryGovernor,AmericanMalaysianChamberof Commerce (AMCHAM)•Member,PEMUDAH•Chairman,E&EProductivityNexusCouncil

•GroupDeputyChairman,CRSCHoldingsBerhad•Non-IndependentNon-ExecutiveDirector,Milux Corporation Berhad•SeniorIndependentNon-ExecutiveDirector,EdenIncBerhad• IndependentNon-ExecutiveDirector,AsianPacHoldings

Berhad• IndependentNon-ExecutiveDirector,InchKenneth

Kajang Rubber Public Ltd Co•Directorforseveralprivatelimitedcompanies•VicePresidentforTanSriMuhyiddinCharityGolf•TrusteeandTreasurerforTanSriMuhyiddinCharityGolf

Foundation


•VicePresident,TechnologyandManufacturingGroup(TMG), Intel

•GeneralManager,AssemblyandTestManufacturing(ATM), Intel

•VicePresidentandManagingDirector,AsiaPacific Customer Center, Dell•Director,MalaysiaExternalTradeDevelopment Corporation (MATRADE), Ministry of International Trade

and Industry (MITI)•Director,NationGateGroupBhd•Member,NationalProductivityCouncil

•Chairman,AgrobankBhd(formerlyknownasBankPertanian Malaysia)

•ManagingDirector,JBSecuritiesSdnBhd•GeneralManager,MalayanBankingBerhad•Trustee,TabungMelayuPontianBerhadandYayasan

Kebajikan SDARA• IndependentNon-ExecutiveDirector,HabourLink

Group Berhad



•BachelorofScienceinMechanicalEngineering, University of Leeds, UK•MastersofScienceinManagementScience,Imperial

College of Science & Technology, University of London, UK

•CharteredAccountant,Ireland•Member,MalaysianInstituteofAccountants(MIA)

68

Male

Malaysian

4 June 2007

Age

Gender

Nationality

Date of Appointment

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

68

Male

Malaysian

15 March 2004

Age

Gender

Nationality

Date of Appointment

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


KNOWLEDGE AND UNDERSTANDINGWISDOMFROM COMES

015

Independent Non-Executive Director

Independent Non-Executive Director

DATUK DR. WONG LAI SUM

LEE HOCK CHYE


•ChiefExecutiveOfficerofMalaysiaExternalTradeDevelopment Corporation (MATRADE)

•Director,MalaysiaPetroleumResourcesCouncil(MPRC)•Director&Trustee,MalaysiaFurniturePromotionCouncil

(MFPC)•Director,MyCEB(Tourism)•Co-Chairman,ProfessionalServicesDevelopmentCouncil,

Malaysia (PSDC)•Adviser,NationalExportCouncil(MATRADE)•Director,PortKlangAuthority•EconomicAdviser,MinisterofTransport,Ministryof

Transport Malaysia•ConjointProfessor(Practice),FacultyofBusiness,University

of Newcastle, Australia•AssociateProfessor,FacultyofBusiness,TARUniversity

College•SingaporeBusinessAdvisoryGroup,UniversityofNewcastle•ResearchFellow,TARUniversityCollege


•PhDBusiness,UniversityMalaya•MastersinPublicAdministration(MPA),UniversityMalaya•BachelorofScience(Hons)Biochemistry,University Malaya

•BachelorofLaws(Hons),NationalUniversityof Singapore, Singapore

•Director,PRGHoldingsBerhad•Director, Tasco Berhad•Adviser,FacultyofBusinessandAccountancy,

University Malaya

Age

Gender

Nationality

Date of Appointment

64

Female

Malaysian

1 October 2016

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

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

59

Male

Malaysian

8 July 2008

Age

Gender

Nationality

Date of Appointment

* “Save as disclosed, the above Directors have no family relationship with any Director and/or majorshareholder of SAM Engineering & Equipment (M) Berhad (“SAMEE”), have no conflict of interest with SAMEE, 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 2019.

Details of the Directors’ attendance at Board Meetings for the financial year ended 31 March 2019 are set out in the Corporate Governance Overview Statement on page 039 of this Annual Report.”




GROUP FINANCIAL HIGHLIGHTS

Financial Year Ended

2015 2016 2017 2018 2019

REVENUE (RM’ 000) 451,520 620,054 537,397 618,959 754,966

PROFIT BEFORE TAX (RM’ 000) 39,474 68,672 55,354 72,550 94,797

PROFIT AFTER TAX (RM’ 000) 34,634 63,094 43,607 62,916 78,513

EARNINGS PER SHARE (Sen) 42.42 73.55 36.33 48.09 58.09

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

for the financial year ended 31 March 2019

58.09(Sen)EARNINGS PER SHARE

10

30

50

20

40

60

80

70

(Sen)

00

10,000

30,000

50,000

20,000

40,000

60,000

80,000

70,000

(RM’ 000)

78,513(RM’ 000)PROFIT AFTER TAX

754,966(RM’ 000)REVENUE

0

100,000

300,000

500,000

200,000

400,000

600,000

700,000

800,000

(RM’ 000)

2018 2019201720162015

94,797(RM’ 000)PROFIT BEFORE TAX

10,000

30,000

50,000

20,000

40,000

60,000

100,000

90,000

80,000

70,000

(RM’ 000)

0

20192018201720162015

201920182017201620152018 2019201720162015

017

GROUP FINANCIAL HIGHLIGHTS (Cont’d)

Financial Year Ended

2015 2016 2017 2018 2019

DIVIDEND (Sen) 32.20 40.31 17.23 23.36 29.05

CASH AND CASH EQUIVALENTS (RM’ 000) 103,585 173,644 99,001 21,556 23,992

NET ASSETS PER SHARE (RM) 4.46 5.08 3.61 3.49 3.96

RETURNONEQUITY(%) 9.2 14.4 9.6 13.3 14.6

for the financial year ended 31 March 2019

20192018201720162015

14.6

2

6

10

4

8

12

16

14

(%)

0

(%)RETURN ON EQUITY

20192018201720162015

3.96(RM)NET ASSETS PER SHARE

1

3

5

2

4

6

(RM)

0

2018 2019201720162015

0

50,000

150,000

100,000

200,000

(RM’ 000)

23,992(RM’ 000)CASH AND CASH EQUIVALENTS

2018 2019201720162015

29.05(Sen)DIVIDEND

10

30

20

40

50

(Sen)

0


MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL REVIEW

The SAMEE Group (“Group”) maintained positive growth momentum, in both the Aerospace and Equipment businesses. The Group recorded a total revenue of RM755m and Profit Before Tax (PBT) of RM94.8m (including net gain fromdisposaloflandandbuildingsofRM7.3m)inFY2019.

Aerospace

Revenue for the Aerospace business increased by 24.0%from the last financial year, to RM459.6m. The increase was due to a ramp-up in production for the Airbus A320neo and A350 aerostructure parts as well as Airbus A320neo and Boeing 737max aircraft engine cases. With the higher revenue, PBT improved 18.3% to RM46.5m compared toprevious year.

Equipment

TheEquipmentbusinessalsoachieved19.0%higherrevenuethan the last financial year, to RM295.4m. The increase was mainly due to stronger demand in the semiconductor and data storage device industries. In tandem with the higher sales,PBTfortheEquipmentbusinessincreasedby45.0%to RM48.3m compared to previous year.

Group

The Group’s total revenue of RM755m is 22.0% higherthan the previous year. PBT grew 30.7% year-on-year toRM 94.8m while Profit After Tax (PAT) grew by 24.8% toRM78.5m. Excluding the one-off gain from disposal of land andbuildings,PBTandPATstillachieved20.6%and13.2%growth respectively.

TheGroupinvestedRM102.6minFY2019,ofwhichRM93.1mwas for capacity expansion in the Aerospace business.

The Group ended the year with a healthy projected order book of RM2.8 billion.

The Company has announced a first interim single-tier dividend of 17.43 sen per ordinary share and a special single-tier dividend of 11.62 sen per ordinary share in May 2019.

REVENUE

(RM’ m)

0100.0

300.0

500.0

200.0

400.0

600.0700.0800.0

FY2018 FY2019

Aerospace Equipment Total

370.6

459.6

295.4

755.0

248.4

619.0

PROFIT BEFORE TAX (PBT)

39.346.5 48.3

94.8

33.3

72.6

(RM’ m)

0

40.0

80.0

20.0

60.0

100.0

FY2018 FY2019

Aerospace Equipment Total

FINANCIAL POSITION

TOTAL ASSETS EMPLOYED

Asat31March2019, theGroup’s totalassets increasedRM115.1mor17.0%toRM790.7m.The increase in totalassetswas mainly to support an increase in the on-going operations, in the areas of property, plant & equipment, trade & other receivables, inventories and contract assets.

TOTAL ASSETS EMPLOYED

Cash & Cash Equivalents

Intangibles & Other Assets

Contract Assets

Inventories

Trade Receivables & Other Receivables

Property, Plant and Equipment

FY2018

FY2019

0 200 400 600 800

675.6

790.7

019

MANAGEMENT DISCUSSION AND ANALYSIS (Cont’d)

AVERAGE CAPITAL EMPLOYED

Share Capital

Retained Earnings

Reserves

Loans & borrowingsFY2018

FY2019

0 100 200 300 400 500 600

213 240 51 27 530.6

203 198 68 11 480.7

FINANCIAL POSITION (Cont’d)

CAPITAL EMPLOYED

TheaveragecapitalemployedforFY2019wasRM530.6m,anincreaseofRM49.9mfromRM480.7mforFY2018.Theincreasecame mainly from the increase in retained earnings from current year profit.

CAPITAL EXPENDITURE

TheGroupcontinuedtoinvestforitslong-termgrowth,withcapitalexpenditureofRM102.6mforFY2019.

BANKING FACILITIES

Asat31March2019,RM106.7mor32.7%offacilitieshadbeenutilized.

DEBT RATIO

Interest Cover and Net Debt/Equity Ratios

TheGroup’sinterestcoverratiowas35timesinFY2019andnetdebt/equityratioof0.14times.TheGroup’stotalborrowingsincreased to RM99.8m as at 31 March 2019 (Borrowings as at 31 March 2018: RM18.4m). The increase in borrowings was mainlyusedtofinancecapitalexpenditure,workingcapitalrequirementanddividendpaymentinFY2019.

CASH FLOWS

Operating Activities

The Group generated net cash from operating activities of RM32.6m as compared to RM64.8m in the previous financial year. The decrease in net cash from operating activities was due to an increase in the working capital requirements for the Group’s on-going operations.

Operating Activities(RM’m) FY2018 FY2019

Operating Activities before changes in Working Capital 92 125

Changes in Working Capital -15 -82

Income Tax -12 -10

Net Cash from Operating Activities 65 33



FINANCIAL POSITION (Cont’d)

Investing Activities

Net cash used in investing activities of RM88.2m was due primarily to the investment in plant and equipment for the Aerospace business, partially offset by proceeds from sales of land and building of RM14.3m.

Financing Activities

Net cash from financing activities of RM47.1m was mainly attributed to drawdown of foreign currency revolving credits and termloanstotallingRM81.4m,offsetmainlybypaymentofFY2018interimdividendsofRM31.6m.

TheGroupendedtheyearwithcashandcashequivalentsofRM24.0m,anincreaseofRM2.4mfromFY2018.

CASH FLOWS

FY2019

FY2018

(RM’ m)

0-20-40-60-80-100-120 20 40 60 80

Investing Activities

Financing Activities

Net Cash from OperatingActivities

DIVIDEND

A total dividend of 29.05 sen per ordinary share (interim single-tier dividend of 17.43 sen per ordinary share and special single-tierdividendof11.62senperordinaryshare)wasdeclaredinMay2019,representing50%ofournetprofit.Basedonthe average share price for the month of June 2019 of RM8.09, the dividend per share of 29.05 sen translates to a dividend yieldof3.59%.

DIVIDEND PER SHARE

(Sen)

0

15.00

5.00

25.00

35.00

20.00

10.00

30.00

40.00

45.00

2019

29.05

2018

23.36

2017

17.23

2016

40.31

2015

32.20

021

HIGHLIGHTS

CUSTOMERS AND PROGRAMS

Aerospace

Production for the new Airbus A320neo and Boeing 737max aircraft engine cases commenced in FY2017.Wehave successfully industrialised these products and entered seriesproductioninFY2019.DemandsforthesenewcasingproductswereexceptionallystronginFY2019,contributingto increased sales in the aerospace segment.

Demands for the Boeing 787 and business aircraft engine cases remained strong. In February 2019, Airbus announced the shutdown of its A380 aircraft production line, but it will have insignificant impact to our Aerospace business.

We invested in a new facility at the Penang Science Park in FY2017 to expand our product range offerings to theAerospace business. The state-of-the-art facility was officially opened on 21st February 2019 by Malaysia’s Minister of International Trade and Industry, Yang Berhormat DatukIgnatius Darell Leiking. The facility is fully operational and is currently employed in the series production of the Airbus A320neo and A350 aerostructure parts.

Equipment

Our Equipment business benefited due to stronger demand in the semiconductor and data storage device industries in FY2019,achievinghighersalesthanpreviousfinancialyear.

Our Equipment business has also secured contracts to make several new products from our semiconductor and data storage device customers. We have successfully launched the prototypes and pilot production of these products, and we expect the new products will contribute to the equipment sales in the coming years.


OPERATION INITIATIVES

Aerospace

Keeping abreast with Industry 4.0, we have begun our digitalisation journey in our Singapore facilities since FY2018. To date, all our equipment are fitted with thenecessary sensors to replicate the physical manufacturing operations into digital data. This data will be used for analysis to improve our operations and efficiencies.

We will continue with our efforts of implementing automation with flexible manufacturing systems in Penang and in Singapore. We will also implement robotic system to achieve consistency in producing quality aerospace products. These initiatives are part of our continuous improvement process to increase productivity and to remain lean.

Our second facility in Singapore is taking shape as scheduled and has begun to supply machined parts with more equipment being installed there. All the new equipment on order are expected to be commissioned by October 2019.

Equipment

We upgraded our Enterprise Resource Planning system (ERP) inFY2018andthedevelopmentcontinuedinFY2019.OurManufacturing Execution System (MES) was enhanced and the upgraded system was implemented in all our operations planning and execution.

With strong demand for our Equipment business, we invested in new equipment and automation system. These investments have enabled us to increase production capacity to meet our customers’ requirements.



OUTLOOK

Aerospace

The Aerospace industry outlook is projected to be resilient from short to long term. Traffic growth is driving demand of new aircraft. *IATA December 2018 reported that the commercial airlines took delivery of over 1,780 new aircraft, an investment of around $80 billion. Airbus GMF 2018 projected that the aerospace industry will generate demands of 37,400 new passenger and freight aircraft over the next 20years.70%ofthedemandsresultedfromtrafficgrowthwhile the remaining are due to replacement of old aircrafts.

In near term, the combined order backlog of both Airbus and Boeing commercial aircraft remains healthy with approximate 13,300 units as of February 2019. This translates to backlog of 9.2 years for Airbus and 7.3 years for Boeing based on 2018 production rates.

The only uncertainty in the industry is the grounding of Boeing 737max in March 2019 by the Federal Aviation Administration. In the following month, Boeing announced a 20% reduction of B737max production rate to 42 permonth. The impact of the grounding remains uncertain, as the period of grounding, the costs of recovery action and the impact to future demand are all still unknown. At the time of writing this report, there is no change and impact to the delivery schedule of our engine case product for this aircraft.

*IATA (International Air Transport Association) represents some 290 airlines comprising 82% of global air traffic.

Equipment

According to Semiconductor Equipment and Material International (SEMI, April 2019), 2018 was an incredible year for semiconductor manufacturing equipment, with a reportedglobalsalesof$64.5billion,anincreaseof14%overthe previous year. The robust demand was driven by many factors: wider applications of smart devices, automotive, big data, Artificial Intelligence, Internet of Things and 3D NAND technologies.

However, the demand is expected to soften with a reduction of14%is forecastedin2019,beforethemarketreboundsin 2020.

According to the Forbes’ report in December 2018, the Solid-State Drive (SSD) will gradually replace Hard Disk Drive (HDD) for many current storage applications. While this may be the case, the demand for HDD will remain strong because it is still the more cost-effective device for large capacity storage.

Our storage device business is well balanced as we supply equipment for both SSD and HDD applications. Regardless of whether SSD will overtake HDD as the future storage technology, we are confident of riding the wave of the industry.

Our Group’s businesses are anchored on the Aerospace and the Equipment industries and both businesses are dependent on the prospect of global economy. The economy outlook remains uncertain amidst the cloud of trade tension between US and China. Against this backdrop, we are confident in our strong business structure and we will be able to ride through the clouds and storms ahead.

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About this Statement

This statement provides a clear commitment of responsible corporate conduct across all aspects of our business operations in meeting the expectations of our stakeholders. It outlines details of actions taken to balance our economic imperatives with environmental practices and social obligations, and elaborates on the value creation activities in raising standards across our businessoperationsforthefinancialyearended31March,2019(“FY2019”).

Our aim is to provide a more balanced, comparable and meaningful account outlining the material risks and opportunities facing the Group and should be read along with our Annual Report 2019 in order to obtain a comprehensive view of the Group’s holistic performance.

In producing this statement, we are guided by Bursa Malaysia’s Sustainability Framework and we also support the following United Nations global initiative of Sustainable Development Goals, as a responsible corporate citizen working towards a better world for all in 2030.

United Nations Sustainable Development Goals

Reporting Scope

Disclosure in the statement encompasses business operations of SAM Engineering & Equipment (M) Berhad (“SAMEE”) and its group of companies in Malaysia and Singapore (“Group”), specifically:

Operating Location Business Units

Malaysian Operations SAM Meerkat (M) Sdn. Bhd. SAM Tooling Technology Sdn. Bhd.SAM Precision (M) Sdn. Bhd. Meerkat Precision Sdn. Bhd.

Singapore Operations Avitron Private Limited

Sustainability Governance Structure

During the financial year, we enhanced our efforts to improve our sustainability disclosures using the outcome of the gap assessment to address areas for improvements. Our materiality assessment for sustainability disclosures have been developed and aligned to all aspects of our business operations. The Board Risk and Sustainability Committee is tasked by the Board to oversee the implementation and management of sustainable policies and practices in the Group and supported by the Management.

The Board has the ultimate responsibility for the Company’s Sustainability Statement in partnership with Management and other stakeholders to deliver on our strategic goals.

SUSTAINABILITY STATEMENT

Board of Directors

Board of Risk & SustainabilityCommittee

Sustainability Committee/Working Group

Business Units

Investor Relations

Health &Safety

HumanResources

InformationTechnology Facilities Finance

GOOD HEALTH & WELL-BEING

3 4 5 6 7 8 12 13 15 17QUALITYEDUCATION

GENDEREQUALITY

CLEAN WATER & SANITARY

DECENT WORK & ECONOMIC GROWTH

AFFORDABLE & CLEAN ENERGY

RESPONSIBLECONSUMPTION& PRODUCTION

CLIMATE ACTION

LIFE ON LAND PARTNERSHIPSFOR THE GOALS


Stakeholder Engagement

In order to have a clear understanding of our stakeholder’s needs and interest, we have undertaken a stakeholder engagement survey according to their individual influence and organisational relevance in order to strengthen our brand positioning for sustainable business growth and in ensuring our social license to operate. The survey is also linked to the material matters for our sustainability themes, crucial for our continuous sustainable development and to generate positive long-term value to meet our stakeholder expectations. We also reviewed and enhanced our engagement channels to focus on the primary concerns of the company’s stakeholders and allows the management to respond to them.

Stakeholder Groups Engagement Channels

Employees Workshop discussionsInduction trainingLearning and development programmesCorporate volunteering programmesEmployee performance appraisalCorporate Memo & LettersStaff Meetings Activities organised by the Sports and Recreation CommitteeSAM eHub App on the Smartphone

Management AnnualManagementRetreat/ConferenceQuarterly management meetingMonthly operation meeting Weekly coordinating meetingOngoing meetings and interactions

SUSTAINABILITY STATEMENT (Cont’d)

OUR STAKEHOLDER Customers

Inverstors and Shareholders

Employees

Management

Community

Directors

Vendors/Suppliers Media

025

Stakeholder Groups Engagement Channels

Customers Feedback surveySatisfaction assessmentsFace-to-face interaction

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

Sustainability Themes

This year, the top 15 principal risks remain the same as previously-identified material matters, based on the comprehensive materiality assessment conducted in 2018. They were further categorised into four core sustainability themes as follows:

Our Business Performance

OurEnvironmental Management

Our People

Our Outreach

Product and Service Quality

Technology, Innovation and Development

Economic Performance

Customer Satisfaction and Relationship

Cybersecurity and IT Resource Management

Ethics and Compliance

Supply Chain Management

Waste and Hazardous Material Management

Energy Management

Employee Learning and Development

Employee Well-Being, Health and Safety

Labour Practices

Diversity and inclusion

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 upon not only meeting the highest product quality and reliable service 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 industries, 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 customer satisfaction and continuously improving the quality of our products and services. We are also looking for ways to effectively manage our entire supply chain and develop together with our suppliers and contractors, to stay relevant and bring about positive economic impact extending to local communities.

Product and Service Quality

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 technical skills, gaining from the in-depth and acute understanding of our customers’ needs.

As a demonstration of our commitment to upholding cutting edge quality, our operations are certified under internationally-recognised standards. Our Equipment operations are certified under the ISO 9001:2015 and ISO 13485:2016 with zero Non-Conformity (NC). Our aerospace operations are certified under the AS9100 Rev.D. and holds NADCAP Certification on Non Destructive Testing, Chemical Processes, Laboratory, Welding, Heat Treatment, Coating, 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 embossing “Quality” as the hallmark of the SAM brand, through our commitment to reliability and pursuance of continuous improvement.

Technology, Innovation and Development

Equipment Segment

In April 2018, our metal engineering shop invested and commissioned an Automated Polishing machine for more precise and quality production. We have also embarked on a journey to go robotic.

Aerospace Segment

We continued to invest in advanced technologies aimed at improving our performance. Our Bukit Minyak plant has initiated Flexible Machining System (FMS) on all 12 machining centers. Likewise, our plant in Singapore has invested in 14 machines with Flexible Machining System, to be fully commissioned by October 2019.

Economic Performance

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

The Group recorded a full-year revenue of RM755 million in FY2019, with a group-level revenue growth of 22%compared to last financial year. Our Aerospace business has seenagrowthof 24% this financial year, a significantimprovement against last year’s performance. This growth was supported by the production ramp-up for new products introduced. Our Equipment business recorded revenue growthof19%inFY2019,largelyduetothenewcustomersand programmes secured related to the semiconductor industry.

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


CUSTOMER BASE BY REGION – FY2019

Asia7%

EU12%

North America81%

027


Our economic footprints

Our Aerospace business, that manufactures aircraft components, and our Equipment business, that serves the semiconductor and data storage industry, cater to international customers. Our customers are primarily based intheNorthAmericanregion,whichmakesup81%ofourcustomers, followed by customers based in the European regionat12%.TherestofourcustomersarebasedinAsia.

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.

Customer Satisfaction and Relationship

Included in our Mission is 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, covering the North American region, the European region and Asia. Therefore, we frequently engage via platforms such as annual customer surveys, quarterly business reviews, regular conference calls, and monthly and annual 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 timely 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.

Equipment Segment

In the course of the year, our Equipment segment has hit a highof97/100intheQBRscoreofakeycustomer.

Our drive for excellence is instrumental in our achievement on the dimensions of on-time delivery, product quality, responsiveness and overall customer satisfaction.

Cybersecurity and IT Resource Management

Penetration Test

During the last financial year, we had engaged SysArmy to conduct an assessment on the Company’s IT control environment to ascertain our situation against cyber risk in accordance to the Guidelines on Management of Cyber Risk (SC-GL/2-2016)fromSecuritiesCommission(“SC”)Malaysia.Three Penetration Tests were conducted as follows:

• InternalPenetrationTest• ExternalPenetrationTest• WebPenetrationTest

Final results show that the Group is on par with SC Malaysia’s GuidelinesonManagementofCyberRisk(SC-GL/2-2016).In addition, we have also taken proactive cybersecurity initiatives to elevate the standards of the IT environment to new heights and slightly beyond Malaysian Security Commission’s guidelines. A similar assessment project will be conducted at our Singapore operations to ensure its IT environment meet the requirements to minimise cybersecurity risks.

Disaster Recovery Mock Runs

We have conducted a series of Disaster Recovery mock runs that tested different sub-functions of our Company’s IT department to ensure the continuity of business processes under various disaster scenarios. The results show that our IT team is able to backup information, resume connectivity between plants, restore systems during the disaster and return to normal operations within the stipulated time.

We have continued to invest in IT hardware including the renewal or trading-up of our software license to ensure continued updates and IT Data Center upgrade to be more robust.

Ethics and Compliance

All our employees are expected to maintain the highest standards of integrity and conduct in all their business relationships. Employees are encouraged to report and speak-up on any malpractices without fear or favour and to address any concerns regarding non-compliance with the Code of Conduct. We have also established a Whistle Blowing Policy to provide a channel through which staff 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.

http://www.sam-malaysia.com

mailto:[email protected]



Supply Chain Management

Collaborating with our key suppliers is integral to manage our supply chain and promote good sourcing practices. Our actions also assist in fostering meaningful long-term 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 procurement 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.

Our Aerospace segment has developed 3 major local Aerospace suppliers specialised in the machining of 5 axis complex parts and hard metal, which must be AS9100 certified. We have continued to provide skills development training to potential suppliers to meet and achieve the standard we require for total productivity.

The on-going commitment to develop a stable domestic supply chain network is part of the Company’s initiative to contribute towards nation building in skill enhancement of industry expertise.

OUR ENVIRONMENTAL MANAGEMENT

We take great care in managing our impact on the environment. We are continuously working to improve our understanding of how our activities affect the environment both directly and indirectly, by actively protecting the environment by embracing greener and more eco-friendly practices to reduce as much as possible our environmental footprint.

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 operate sustainably and live harmoniously 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. All of the waste chemical produced during manufacturing are processed by our waste water treatment plant or recycled through licensed recycling companies in Malaysia in accordance with scheduled wasted regulatory requirements. During the financial year, we have extended our waste water treatment plant to ensure sufficient capacity to convert all waste chemical into an effluent that can be returned to the water cycle with minimum impact on the environment.

This year, we saw an increasing amount of toxic and hazardous waste being disposed compared to the previous years. This increase was attributable mainly to the increasing production in those sites that require a special process and chemical treatment, particularly the aerospace segment as well as additional machines that have a higher usage of Coolant & Spent Hydraulic Oil. 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 & HAZARDOUS WASTE DISPOSED(TONNERS/MILLION RM REVENUE)

(Ton

ners/M

illionRM

Rev

enue

)

0

0.3

0.1

0.5

0.7

0.4

0.2

0.6

FY2017

0.47

FY2018

0.57

FY2019

0.60

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Reducing Wooden Crates & Pallets

We have continued to replace the conventional wooden crates and pallets with recyclable corrugated boxes for finished goods packing purposes. The boxes are configured to 1 piece packing and 2 pieces packing, estimated at about 600 to 700 tri-wall boxes per annum.

Reducing Carbon Emissions We have continued to propagate the use of battery operated forklifts to replace conventional fuel for forklifts in our sites which produce zero emissions during operation and reduce noise pollution in our workplace. During the financial year, we replaced one unit of conventional fuel forklifts with a battery operated forklift. A total of 5 conventional forklifts have been replaced so far.

Energy Management

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 contributing to climate change.

Our operations consume energy in various forms. 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.


ELECTRICITY CONSUMPTION(MWH/MILLION RM REVENUE)

(Mwh/MillionRM

Rev

enue

)

0

15

5

25

40

35

50

20

10

30

45

FY2017

43.1

FY2018

39.2

FY2019

39.2

Like others in the industry, we consume energy to operate its business. We consciously monitor our electricity consumption per million RM with intent to be more effective on our electricity usage and set the stage for on-going energy saving efforts. We also continue to explore options to be less dependent on the use of non-renewable energy sources.

This year we have completed the implementation of our energy-saving initiative in all Malaysian and Singapore sites, where the conventional High Bay lighting system was replaced with LED lighting.

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

OUR PEOPLE

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

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 unfair 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.



Raising awareness

Internal policies which govern our practices are our Employment Policy, Leave Policy, Grievance 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.

Foreign workforce

We employ 100 foreigners in our 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, we have gone on board the Responsible Business Alliance (RBA) with emphasis on treating migrant workers with respect and dignity. We provide the workforce 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.

Diversity and Inclusion

Thisyear,wesawaslightimprovementintheratioofwomenbyabout1%(from17%to18%).However,atthemanagementlevel,weshowmuchgreatergenderdiversityinthatabout29%ofourManagersarewomen.Thetotalnumberofcontractworkershasreducedby10%(from18%to8%)fromthelastfinancialyear.Employeesbelow30yearsofageremainthesameat45%.Itisacommonpatternfortheheavymachineryequipmentmanufacturingindustrytohaveapredominantlymale workforce, and this applies to the Group. Nonetheless, this does not reflect a culture of bias or discrimination at the Group. 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. Below, we highlight our employment statistics.

Employees by gender FY2018 FY2019

Male (All Levels) 83% 82%

Female (All Levels) 17% 18%

Male (Management Level) 70% 71%

Female (Management Level) 30% 29%

Employees by age group FY2018 FY2019

Over 50 9% 9%

30 to 50 46% 46%

Below 30 45% 45%

Employees by contract FY2018 FY2019

Permanent 82% 92%

Contract 18% 8%

Employee Learning & Development

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 and development efforts are relevant and of high quality.


031


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, we perform our Training Needs 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.

During the financial year, we had incurred a total of RM1,082,579 in technical and soft skill trainings to ensure our employees are equipped with the latest knowledge and adequate skillset for their job scope.

Annual Training Expenditure by Country FY2019

Malaysia 866,008

Singapore 216,571

Total (RM) 1,082,579 Our employees are offered various types of training to ensure career development. Our trainings include structured on-the-job training (“OJT”), quality, safety and team building activities.

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

Amount/Types of Training Provided

FY2017 FY2018 FY2019

Structured OJTSoftskills/

Quality/Safety/Team Training





Total Training Hours 12,667 18,652 34,324 27,768 39,337 33,926

We also support our employees to study subjects which are relevant to the Company’s business including those under the Penang Skills Development Centre (“PSDC”) Meister Programme. This year, the total sponsorship of our own employees, including those under the Meister Programme, amounts to RM77,220.

Educational Sponsorships to SAM Employees FY2018 FY2019

Total Amount Spent (RM) 22,488 77,220



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

Our Occupational Safety & Health Policy underlines our safety commitments, which guide the safety culture and practices at the workplace. In addition to our policy, our Group 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.InFY2019,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. Our operations are assessed by external regulators, which includes the Chemicals Health Risk Assessment (“CHRA”).

We provide safety briefings to all employees in our Employee Orientation Programme. In addition, specific safety trainings and programmes are rolled out to targeted employees with certain scopes of work. These include a 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. Below, we highlight some of our key training activities during the year.

• Roles&ResponsibilitiesofEHSCommittee&Supervisors/Acc.Investigation&reporting• SAM-AnnualEHS-Contractors&Sub.Contractorstraining• LEADAwareness• HearingConservationProgram• SafeStorage,Handling&UseofCompressedGases• ForkliftSafetyHandlingCertification• ChemicalSpillTraining(ERT)• HazardsIdentification,RiskAnalysis&DetermineControl(HIRADC)• ShapingHumanBehaviorthroughMindsetAlignmentinAchievingSafetyGoals• ERT-BOMBA(FireCertificationTraining)• Roles&ResponsibilitiesofEHSCommittee&Supervisor/Acc.Investigation&Reporting• ForkliftSafetyHandlingCertification• ChemicalSafetyHandling• OverheadCraneSafetyHandling/Operation• EmergencyResponseTeamRefresher&CertificationTraining

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. Our factory employees also undergo our annual medical surveillance programme. As such, our safety practices are consistently reviewed and reported, as we commit ourselves to upholding a safe and healthy workplace.

033


Employee well being

Each year, we review our benefit schemes and employee engagement initiatives to better meet our employees’ needs. Some of our employee welfare provisions include medical and life insurance coverage for all employees, transport allowances, parental leave and special gifts for pivotal life events, like marriage and the birth of a child. Additionally, one of our gestures of appreciation to our employees, is our provision of Long Service Awards to our longservingemployees.InFY2019,80employeesreceivedthis award.

Our SAM Sports & Recreation Committee organises annual activities for employees to encourage a balanced lifestyle and social time with colleagues. This year, we hosted activities such as badminton and futsal matches, a movie dayandabowlingcompetition.Onagranderscale,aYearEnd Appreciation lunch and other festive lunches were also organised. Additionally, we also held health and safety talks for employees, and hosted a Blood Donation drive.

Management Retreat

Futsal Tourament

Movie Day

Peace Run

3-legged RaceTug of War


OUR OUTREACH

We believe in giving back to the community and investing in future generations. With the resources available to us as the business grows, we are better able to support the communities in which we operate. We do this by facilitating access to education and providing youth with skills that will improve their career opportunities.

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 SAM Malaysia employees and students in the PSDC. As part of Titian Harapan, SAM provides school necessities, including payment for tuition fees and for purchasing school books, uniforms and shoes.

To date, we have sponsored approximately 967 students, amounting to RM668,068 since the initiation of the sponsorship programme in 2011. As for the PSDC students going through the Malaysian Skills Certification System, we have sponsored 21 students and a total of RM201,530 thus far.

Malaysian Skills Certification System FY2017 FY2018 FY2019

No. of new students 3 14 2

Total no. of students still in programme 5 18 14

Total sponsorship amount (RM) 13,500 116,720 65,910


Children Protection Society 23rd February 2019

035

Workforce Training and Development

Our training and development programmes are integral to our commitment to support our employees realise their full potential and progress their career capabilities.

Internships

InFY2019,wealsohiredatotalof226internsundertheGroup.

Hiring of Interns FY2018 FY2019

Total Interns hired 227 226

Total Permanent staff hired who were formerly interning with SAM 33 44

The strategic objectives for the internship recruitment are as follows:

• To increase awareness of our brand in the market.• To provide both the company and candidates with an opportunity to get to know one another better before making a

career/employmentdecisionforthelongterm.Thisincreasestheprobabilityofabetterfitandalsoreducestheriskofapoor hire.

Hiring interns also helps the Group cover sudden spikes in workload where a permanent hire would be inappropriate. It also gives students an opportunity to experience actual workplace challenges. As can be seen from the table above, a good number of our interns do eventually join us as employees which suggests that our internships are indeed fulfilling one of its objectives of being a good pipeline for potential employees.

MOVING FORWARD IN SUSTAINABILITY

Managing sustainability will continue to be an integral part of our business activities and decision making framework. We recognise the benefits of managing sustainability matters related to our business. It will provide greater value not only for the Group, but also the communities in which we operate. While we expect the coming years to be challenging for our business, our commitment to sustainability can only be strengthened as we are mindful of the need to balance our economic, environmental and social responsibilities. We fully understand that such an approach is vital in maintaining a competitive edge while driving us closer towards realising our vision of becoming a strong and dynamic global player.

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.


FOCUS AREAS

PROTECTINGWATER RESOURCES

REDUCINGCO2EMISSIONS

SOURCINGSUSTAINABLY

VALUEANDBEHAVIOURS

GROWINGWITHCOMMUNITIES


held as at 31 March 2019PARTICULAR OF PROPERTIES

Location Tenure Area(sq. ft.)

Build-uparea

(sq. ft.)

Description Approximateage of

building

Expirydate

Date of revaluation

Net BookValue at

31 Mar 2019(RM’000)

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

Leasehold60 years

54,013 33,500 Office &Factory

35 years 22 November

2041

14 August2009

2,575

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

Leasehold60 years


19 years 16 June 2057

14 August2009

7,661

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

Leasehold60 years


23 years 14 May 2051

14 August2009

12,533

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

SAM MEERKAT (M) SDN. BHD. Plot 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

13 years

12 years

18 December

2074

23 April 2068

17 August2009

17 August2009

9,918

10,403

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

1

23

4

1SAM PRECISION (M) SDN. BHD. SAM PRECISION (M) SDN. BHD.

/SAMTOOLINGTECHNOLOGYSDN. BHD.

2 3MEERKATPRECISIONSDN.BHD./CORPORATE OFFICE

4SAM MEERKAT (M) SDN. BHD.

037

CORPORATE GOVERNANCE OVERVIEW STATEMENT

The Board of Directors of SAM Engineering & Equipment (M) Berhad (“Company” or “SAMEE”) is committed to ensure 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 31 March 2019 (“FY2019”), 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 Group. 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.

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

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


CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d)

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 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 executive 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;

039




1.4 Qualified and Competent Company Secretaries (Cont’d)

In performing their duties, the Company Secretaries carry out, amongst others, the following tasks:- (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 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 Group’s 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 on related topics being deliberated, and the services of the Company Secretaries 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 Group.

All deliberations and decisions made at the Board meetings are recorded by the Company Secretaries including whether any Director 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.

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 FY2019, the Board met on four (4) occasions where it deliberated upon and considered various matters. The attendance record of the Directors for FY2019 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 below table:-

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’ Seri Wong Siew Hai 4/4

Dato’ Sri Lee Tuck Fook 3/4

Lee Hock Chye 4/4

Datuk Dr Wong Lai Sum 4/4





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

All the Directors have complied with the minimum 50% attendance requirement in respect of Board Meetings 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 their 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.


• 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 last reviewed by the Board on 24 May 2018 for the purpose of re-alignment of the existing governance practices in the Company with the Code and Listing Requirements, where possible or relevant.


• 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.

041

PRINCIPLE A: PART 2 – BOARD COMPOSITION


• 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 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’ Seri 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 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.

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 Group.

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.




PRINCIPLE A: PART 2 – BOARD COMPOSITION (Cont’d)

4.2 Tenure of Independent Non-Executive Directors (Cont’d)

The Board is mindful of the recommendation in Code, whereby the tenure of an independent director is subject to a cumulative term limit of nine (9) years. Upon completion of the nine (9) 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 (9) 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 (12th) 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’ Seri 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 nine (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 the above Independent Directors remain objective and independent in expressing their views and in participating in deliberation and decision making of the Board and Board Committees. Their length of service on the Board does not in any way interfere with their exercise of independent judgement and ability to act in the best interests of the Company. In addition, they have also confirmed and declared in writing that they are Independent Directors and have satisfied all the criteria of an Independent Director set out in Paragraph 1.01 of the Listing Requirements.

The Board has accepted the foregoing rationale and has agreed for the re-appointment of Dato’ Mohamed Salleh Bin Bajuri, Dato’ Seri 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 targets 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 role of the NRC, the NRC also evaluates the suitability of potential candidates for appointment to the Board based on, amongst 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.

043


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’ Seri Wong Siew Hai 1/1

Members Mr. Tan Kai Hoe 1/1

Mr. Lee Hock Chye 1/1

Datuk Dr. Wong Lai Sum 1/1

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 Committees and Board as a whole.

(b) Reviewed the Board Evaluation Report for financial year ended 31 March 2018.(c) 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.(d) Reviewed the Directors’ retirement by rotation and recommended to the Board, Directors who are due for retirement

at the Annual General Meeting (“AGM”).(e) Reviewed the independence status of the Independent Non-Executive Directors.(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) Review the term of office and performance of Audit Committee.(h) Reviewed and recommended the Directors’ fees and benefit payable to the Directors.(i) Reviewed list of trainings attended by the Directors during the financial year.(j) Reviewed the proposed Employees’ Share Grant Scheme (“ESGS”).

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 • Handling Press Conferences, Media Interviews & Media Questions• Formnex 2018, International Exhibition On The Next Generation of Manufacturing

Technologies

Goh Wee Keng • Handling Press Conferences, Media Interviews & Media Questions

Shum Sze Keong • Handling Press Conferences, Media Interviews & Media Questions

Dato’ Mohamed Salleh Bin Bajuri

• Handling Press Conferences, Media Interviews & Media Questions





4.6 Nominating and Remuneration Committee (Cont’d)

Some of the training programmes attended by the Directors during the financial year under review included the following: (Cont’d)

Directors Trainings

Dato’ Seri Wong Siew Hai • Handling Press Conferences, Media Interviews & Media Questions • Guest Speaker for Penang International Business and Investment Summit (PIBIS)

2019• Guest Speaker for NEX Leadership Conference• Keynote Speaker for MECON 2019 (MMU International Engineering Conference)• Invest Malaysia Conference 2019

Dato’ Sri Lee Tuck Fook • Sustainability Awareness Briefing Workshop• Affin Hwang Capital Conference Series 2018 – Rebuilding A New Malaysia• Invest Malaysia Conference 2019

Lee Hock Chye • Speaker, Ngee Ann Polytechnic Travel & Learn Laos 2018

Datuk Dr. Wong Lai Sum • Handling Press Conference, Media Interviews & Media Questions• Breakfast Talk on Digital Ethics & Sustainability in a New Economy of Privacy

Upon review, the Board concluded that the Directors’ Trainings for the FY2019 were adequate.


• 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 and 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 FY2019, 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 recommended and supported the re-election of the relevant Directors to be tabled at the AGM for shareholders’ approval.

045



• 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

Each Director is paid a Director’s fee of RM50,000 per annum for serving as a member of the Board.

The Director serving as the Chairman of the relevant Board Committee receives an additional annual remuneration as set out below:

Board Committee Chairman’s Annual Remuneration

AC RM10,000

NRC RM7,500

RSC RM7,500

The rest of the Directors who serve as ordinary members to the relevant Board Committee receives an additional annual remuneration of RM5,000.

The Directors’ fees and remuneration are appropriate to their contribution, taking into consideration effort, commitment and time spent as well as the responsibilities involved.

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 FY2019, the NRC had performed its duty to assess the remuneration package of its Executive Director.

In addition, the NRC had also deliberated on the Directors’ fees for the financial year ending 31 March 2020 (“FY2020”) which is subject to the shareholders’ approval at the forthcoming AGM. Further to the deliberations, the NRC had reported to the Board its recommendation.


• 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 FY2020 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 FY2019 is set out as follows:-

Amount in Ringgit Malaysia (RM)

NameDirectors

FeesMeeting

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 12,000 -

Shum Sze Keong 55,000 18,000 -

Dato’ Mohamed Salleh Bin Bajuri 60,000 22,000 -

Dato’ Seri Wong Siew Hai 61,563 16,000 -

Dato’ Sri Lee Tuck Fook 55,000 16,000 -

Lee Hock Chye 63,125 20,000 -

Datuk Dr. Wong Lai Sum 61,563 16,000 -

1 Paid directly to SAM Singapore where he is employed as at the date of this Report.2 Paid directly to Accuron where he is employed as at the date of this Report.

7.2 Remuneration of Senior Management

The Company considers the remuneration of the Senior Management personnel 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 has been 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


• 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 AC is not the Chairman of the Board.

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.

047

PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT (Cont’d)

PART 1 – AUDIT COMMITTEE (Cont’d)

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

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 statements 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 are 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 AC.

The Terms of Reference of the AC had been updated accordingly.

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 Group’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 AC Report in this Annual Report includes, amongst others, an assessment on the suitability, objectivity and independence of the External Auditors. 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 Group’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 AC Report in this Annual Report.

8.4 Qualification of the Audit Committee

All AC members are financially literate and two of the AC members are members of the 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 members acknowledge the need for continuous education and trainings. For the year under review, the Company’s External Auditors briefed the AC members on the developments in accounting and auditing standards, practices and rules.




PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT (Cont’d)

PART 1 – AUDIT COMMITTEE (Cont’d)

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.

PRINCIPLE B: PART 2 – RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK


• 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 & Sustainability Committee (“RSC”)

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 Datuk Dr. Wong Lai Sum 2/2

Members Dato’ Seri Wong Siew Hai 2/2

Dato’ Mohamed Salleh Bin Bajuri 2/2

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 RSC is tasked pursuant to its Terms of Reference to assist the Board with risk management (i.e., reviewing and recommending the risk management policies and strategies for the Group in managing overall risk exposure of the Group); and sustainability (i.e., reviewing and recommending sustainability strategies and performance in advancing the Group’s sustainability ambition and direction).

049

PRINCIPLE B: PART 2 – RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK (Cont’d)

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

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

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


• 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 feature s 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 AC 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


• 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.




PRINCIPLE C: INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS (Cont’d)

PART 1 – COMMUNICATION WITH STAKEHOLDER (Cont’d)

11.1 Effective, transparent and regular communication with its stakeholders (Cont’d)

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].

PRINCIPLE C: PART 2 – CONDUCT OF GENERAL MEETINGS


• Shareholders are able to participate, engage the Board and senior management effectively and make informed voting decisions at General Meetings.

12.1 Notice of 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 Group’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.

Before the commencement of AGM, the management will give a presentation which include detail of performance, key developments and financial results for the reporting year. The Board is satisfied with the current programme at AGM and there have been no major contentious issues noted with shareholders.

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 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.

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 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. All the Directors attended the 24th AGM of the Company held on 14 August 2018. 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.


051

PRINCIPLE C: PART 2 – CONDUCT OF GENERAL MEETINGS (Cont’d)

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 proxy(ies) to attend, participate, speak and vote in his/her stead at a general meeting.

The Board has adopted electronic voting to facilitate greater shareholder participation at general meetings.

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 Code as well as the relevant Listing Requirements for the FY2019 except for the departures set out in the Corporate Gorvernance Report. 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 is approved by the Board of Directors on 21 May 2019.



The Audit Committee (“AC”) is an independent Board Committee which assists the Board 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 SAM Engineering & Equipment (M) Berhad (“Company” or “SAMEE”) and its subsidiaries (“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 will review the Terms of Reference (“TOR”) of the AC from time to time (if so required) to ensure that the AC continues to carry out its functions effectively. The last review of the TOR by the Board was conducted on 21 May 2019. 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)

4/4

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 Institute 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 20 May 2019 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.

AUDIT COMMITTEE REPORT


053

AUDIT COMMITTEE REPORT (Cont’d)

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

(a) Reviewed the External Auditors’ scope of work, proposed audit fee and audit plan for the year under review.(b) Approved and adopted policies and procedures to assess the suitability and independence of External Auditors.(c) 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.

(d) Reviewed and assessed the performance of the existing External Auditors for the Group.(e) Reviewed with External Auditors any significant findings in relation to audit.(f) Discussed reservation arising from audit and any other matters the External Auditors had wished to discuss.(g) Reviewed the assistance provided by the Group to the External Auditors and the overall conduct of the audit.(h) 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

(a) 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.

(b) Reviewed the internal audit plan adopted by the Internal Audit function.(c) 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.

(d) Reviewed the implementation of these recommendations through follow up audit reports from the Internal Auditors.(e) Reported to the Board on its activities and significant findings and results.(f) Reviewed any appraisal or assessment of the performance of the Internal Audit Manager and outsourced service

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

nature.(h) Reviewed related party transactions (“RPT”) entered into by the Group.(i) Reviewed the RRPT and ensured that these RRPT comply with approved procedures and policies and the mandate from

the shareholders.(j) 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.

RPT and 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.


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 is 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) Production Planning and Controls Management (b) Group Human Resource Management(c) Inventory Management(d) Procurement Process

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 RM253,037.

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 assist 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.


055


ACCOUNTABILITY AND AUDIT (Cont’d)

Relationship with external auditors

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 RM80,000 and RM254,000 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 RM20,000.

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

Details RM

Review of audit work papers done by third party auditor 15,000

Review of Statement on Risk Management and Internal Control 5,000

Total 20,000

The Internal Auditors co-ordinate with the External Auditors to ensure the completeness of the audit coverage of the Group activities. 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 Company and of the Group 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 was approved by the Board of Directors on 21 May 2019.


BOARD RESPONSIBILITY

The Board of Directors (“Board”) of SAM Engineering & Equipment (M) Berhad (“Company” or “SAMEE”) affirms its overall responsibility for the system of internal control and risk management of the Company and its subsidiaries (“Group”) and for reviewing the adequacy and integrity of the said 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 its 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 independence 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 risks 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 risk 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 led by the head of each such unit.

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.

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.

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

057

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (Cont’d)

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)

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 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 and Sustainability 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 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 statements.

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 Audit Manager and outsourced service providers report directly to the AC to assist the AC in discharging their duties and responsibilities.

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


INTERNAL CONTROL SYSTEM (Cont’d)

KEY INTERNAL CONTROL PROCESSES (Cont’d)

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 throughout the Group. In addition, Business Continuity Plans are established for critical business functions and critical application systems. These plans were reviewed and updated and table top mock runs were also conducted. In addition, a disaster recovery mock run was also carried out on the core information technology systems to ascertain the preparedness in response to business disruption situations. Findings and feedbacks were gathered and analysed for continual improvement.

* Note: Sam Precision (Thailand) Limited was excluded from the BCM.

7. Information Technology Security and Cyber Resilience

The security and resiliency of the Group’s information and technology infrastructure is crucial to maintaining its business operations to meet customers’ and stakeholders’ expectations and in safeguarding its reputation. The Information Technology Cybersecurity and Incident Response Policy together with Information Technology Disaster Recovery Procedure were established to ensure that the Group’s information systems and data are properly safeguarded and adequately protected from major threats such as errors, frauds, privacy violations, service disruptions and natural disasters.

Continuous and systematic reviews are conducted by Group Information Technology Department to identify potential threats including cyber threats and to enhance the technology infrastructure, processes and controls to strengthen the Group’s ability to prevent, detect and respond to any potential business disruptions and systems failures. In addition, external consultants are engaged to carry out targeted assessments on IT core risks such as cyber security and resilience assessments to benchmark the existing IT capabilities against international standards and best practices.


059


REVIEW OF THIS STATEMENT

Audit Committee

While the AC has reviewed this Statement and addressed individual lapses in internal controls 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 31 March 2019 (“FY2019”), 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 Issuers, or

b) is factually inaccurate.

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’s 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.

The Statement on Risk Management and Internal Control was approved by the Board of Directors on 21 May 2019.


Recurrent Related Party Transactions (RRPT) of revenue or trading nature for the year ended 31 March 2019

Details of RRPT made during the financial year ended 31 March 2019 pursuant to the shareholders’ mandate obtained by the Company at the Annual General Meeting held on 14 August 2018 are as follows:-

Related Party with whom the Group is transacting

Nature of transactions

Companies within the Group involved in RRPT

Amount in

RM’000Interested Related Party Relationship

SAM SingaporeGroup

Sales of aerospace parts and other precision tools

SAMEE Group 98,782 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.

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 SAM Suzhou. She resigned as a Director of JEP Precision Engineering Pte Ltd on 20 December 2018.

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

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.

Sales of fabrication/ machining services/special process

15,331

Provision of engineering and administrative services

700

Provision of corporate management services

204

Purchase of fabrication/ machining services/special process

(15,717)

Purchase of engineering and administrative services/fitting and quality assurance services

(1,021)

Purchase of corporate management services

(1,247)

Rental of office, factory premises and machines

(5,858)

OTHER INFORMATION

061

OTHER INFORMATION (Cont’d)

Recurrent Related Party Transactions (RRPT) of revenue or trading nature for the year ended 31 March 2019 (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

SAM Suzhou : SAM (Suzhou) Co. Ltd., a subsidiary of SAM Singapore

JEP Precision Engineering Pte Ltd

: 15% owned by SAM Singapore (ceased to be associated company of SAM Singapore on 20 December 2018)

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.


FINANCIAL STATEMENTS

063. Directors’ Report

068. Statements of Financial Position

071. Statements of Profit or Loss and Other Comprehensive Income

073. Consolidated Statement of changes in Equity

075. Statement of Changes in Equity

076. Statements of Cash Flows

080. Notes to the Financial Statements

162. Statement by Directors

162. Statutory Declaration

163. Independent Auditors’ Report

SOW THE SEED, REAP THE HARVEST

063

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 2019.

Principal activities

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

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 78,513 46,353

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 declared and paid by the Company were as follows:

i) In respect of the financial year ended 31 March 2018 as reported in the Directors’ Report of that year:

• a first interim single tier dividend of 14.01 sen per ordinary share totalling RM18,936,893 was declared on 7 June 2018 and paid on 10 August 2018; and

• a special single tier dividend of 9.35 sen per ordinary share totalling RM12,638,112 was declared on 7 June 2018 and paid on 10 August 2018.

ii) In respect of the financial year ended 31 March 2019:

• a first interim single tier dividend of 17.43 sen per ordinary share was declared on 28 May 2019 and to be paid on 13 August 2019; and

• a special single tier dividend of 11.62 sen per ordinary share was declared on 28 May 2019 and to be paid on 13 August 2019.

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

DIRECTORS’ REPORTfor the year ended 31 March 2019


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’ Seri Wong Siew HaiDato’ Sri Lee Tuck FookLee Hock ChyeDatuk Dr Wong Lai Sum

Directors of subsidiaries

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

Goh Wee KengNg Boon KeatTan Guan ThongTeo Siew GeokLim Kean Thye (Appointed on 18 March 2019)

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 1.4.2018

Bought/(Sold)

Balance at 31.3.2019

Interests in the Company:

Goh Wee Keng

Direct interests:

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

Dato’ Seri Wong Siew Hai

Indirect interests:

- 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 2019 had any interest in the ordinary shares of the Company and of its related corporations during the financial year.

DIRECTORS’ REPORT (Cont’d)for the year ended 31 March 2019

065


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

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.

Employees’ Share Grant Scheme

At an extraordinary general meeting held on 14 August 2018, the Company’s shareholders approved the establishment of the Employees’ Share Grant Scheme (“ESGS”) of up to 5% of the total number of issued shares of the Company to eligible employees of the Group. The ESGS will be administered by the ESGS Committee in accordance with the By-Laws of the ESGS.

The salient features of the scheme are, inter alia, as follows:

(a) The ESGS shall be in force for a period of 5 years from 30 November 2018 (“ESGS Period”) and may be extended at the discretion of the Board upon the recommendation of the ESGS Committee provided that the ESGS Period shall not in aggregate exceed the duration of 10 years from 30 November 2018 or such longer duration as may from time to time be permitted by the relevant authorities.

(b) The total number of shares which may be made available under the ESGS shall not exceed in aggregate 5% of the total number of issued shares of the Company (excluding treasury shares, if any) at any point in time during the ESGS Period.

(c) Eligible employees are employees employed by and are on the payroll of any company in the Group (excluding dormant subsidiaries) and his/her employment has been confirmed by the company who are at least 18 years of age and is not undischarged bankrupt. The Directors and senior management of the Group will not participate in the ESGS;

(d) Not more than 10% of the aggregate number of shares to be issued under the ESGS shall be allocated to any individual eligible employee who, either singly or collectively through persons connected with the eligible employee, holds 20% or more of the total number of issued shares of the Company (excluding treasury shares, if any); and

(e) The shares issued pursuant to the ESGS shall rank pari passu in all respects with the existing shares of the Company.

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 and officers 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 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.

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 and gain on disposal of property, plant and equipment as disclosed in Note 19 to the financial statements, the financial performance of the Group and of the Company for the financial year ended 31 March 2019 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.

Significant events during the financial year

The details of such events are disclosed in Note 32 to the financial statements.

Subsequent event

The details of such event is disclosed in Note 33 to the financial statements.


067


Auditors

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

The auditors’ remuneration is disclosed in Note 19 to the financial statements.

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

Tan Kai Hoe

Director

Goh Wee Keng

Director

Penang,

Date: 18 June 2019


Group

Note31.3.2019

RM’00031.3.2018

RM’000Restated

1.4.2017RM’000

Restated

Assets

Property, plant and equipment 3 277,080 240,654 148,688

Intangible assets 4 15,094 14,640 3,706

Deferred tax assets 6 2,504 2,326 2,883

Derivative financial assets 7 - 441 -

Trade and other receivables 8 25,517 22,257 -

Total non-current assets 320,195 280,318 155,277

Inventories 9 116,622 92,463 67,543

Contract assets 10 126,430 107,557 89,837

Trade and other receivables 8 199,788 167,292 182,811

Derivative financial assets 7 506 2,994 480

Current tax assets 3,187 3,387 1,489

Cash and bank balances 23,992 21,556 99,001

Total current assets 470,525 395,249 441,161

Total assets 790,720 675,567 596,438

Equity

Share capital 11 212,731 212,731 193,250

Reserves 12 322,899 259,145 273,809

Equity attributable to owners of the Company 535,630 471,876 467,059

STATEMENTS OF FINANCIAL POSITIONas at 31 March 2019

069

STATEMENTS OF FINANCIAL POSITION (Cont’d)as at 31 March 2019

Group

Note31.3.2019

RM’00031.3.2018

RM’000Restated

1.4.2017RM’000

Restated

Liabilities

Loans and borrowings 13 25,958 12,120 -

Deferred income 14 1,342 892 778

Provisions 15 671 719 -

Deferred tax liabilities 6 6,970 5,083 2,791

Total non-current liabilities 34,941 18,814 3,569

Loans and borrowings 13 73,850 6,292 352

Deferred income 14 188 87 98

Trade and other payables 16 126,731 163,222 104,002

Contract liabilities 10 462 2,169 -

Derivative financial liabilities 7 1,365 81 636

Provisions 15 6,900 6,186 8,789

Current tax liabilities 10,653 6,840 11,933

Total current liabilities 220,149 184,877 125,810

Total liabilities 255,090 203,691 129,379

Total equity and liabilities 790,720 675,567 596,438

The notes on pages 080 to 161 are an integral part of these financial statements.


Company

Note2019

RM’0002018

RM’000

Assets

Property, plant and equipment 3 606 639

Intangible assets 4 310 27

Investments in subsidiaries 5 266,692 272,929

Total non-current assets 267,608 273,595

Other receivables 8 15,520 9,754

Current tax assets 47 62

Cash and bank balances 613 298

Total current assets 16,180 10,114

Total assets 283,788 283,709

Equity

Share capital 11 212,731 212,731

Reserves 12 54,848 40,070

Equity attributable to owners of the Company 267,579 252,801

Liabilities

Other payables 16 16,209 30,908

Total current liabilities 16,209 30,908

Total liabilities 16,209 30,908

Total equity and liabilities 283,788 283,709

STATEMENTS OF FINANCIAL POSITION (Cont’d)as at 31 March 2019


071

Group Company

Note2019

RM’0002018

RM’000Restated

2019RM’000

2018RM’000

Revenue 17 754,966 618,959 67,510 50,149

Cost of sales (640,384) (516,330) - -

Gross profit 114,582 102,629 67,510 50,149

Other operating income 19,282 12,168 29 95

Distribution expenses (2,367) (2,786) (127) (9)

Administrative expenses (28,966) (30,874) (12,925) (13,441)

Other operating expenses (5,077) (8,681) (8,134) (6,223)

Results from operating activities 97,454 72,456 46,353 30,571

Interest income 97 164 - -

Finance costs 18 (2,754) (70) - (28)

Net finance (cost)/income (2,657) 94 - (28)

Profit before tax 19 94,797 72,550 46,353 30,543

Tax expense 21 (16,284) (9,634) - 84

Profit for the year 78,513 62,916 46,353 30,627

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEfor the year ended 31 March 2019


Group Company

Note2019

RM’0002018

RM’000Restated

2019RM’000

2018RM’000

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

Cash flow hedge (3,965) 4,348 - -

Foreign currency translation differences for foreign operations 22,114 (40,753) - -

Total other comprehensive income/(expense) for the year, net of tax 18,149 (36,405) 46,353 30,627

Total comprehensive income for the year 96,662 26,511 46,353 30,627

Profit for the year attributable to:

Owners of the Company 78,513 62,916 46,353 30,627

Total comprehensive income for the year attributable to:

Owners of the Company 96,662 26,511 46,353 30,627

Basic earnings per ordinary share (sen) 22 58.09 48.09

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (Cont’d)for the year ended 31 March 2019


073

for the year ended 31 March 2019

Attributable to owners of the Company

Non-distributable Distributable

Share capital

RM’000

Capital reserveRM’000

Hedging reserve RM’000

TranslationreserveRM’000

RetainedearningsRM’000

Total equity

RM’000

At 1 April 2017, as previously reported 193,250 15,628 (1,776) 80,168 167,762 455,032

Adjustment on initial application of MFRS 15, net of tax (Note 34.1) - - - 62 11,965 12,027

At 1 April 2017, restated 193,250 15,628 (1,776) 80,230 179,727 467,059

Other comprehensive income/(expense) for the year

- Cash flow hedge - - 4,348 - - 4,348

- Foreign currency translation differences for foreign operations - - - (40,753) - (40,753)

Total other comprehensive income/(expense) for the year - - 4,348 (40,753) - (36,405)

Profit for the year - - - - 62,916 62,916

Total comprehensive income/(expense) for the year - - 4,348 (40,753) 62,916 26,511

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

Dividends to owners of the Company (Note 24) - - - - (21,694) (21,694)

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

At 31 March 2018, restated 212,731 - 2,572 39,477 217,096 471,876

Note 11 Note 12

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY




Share capital

RM’000

Hedging reserve RM’000

TranslationreserveRM’000

RetainedearningsRM’000

Total equity

RM’000

At 1 April 2018, as previously reported 212,731 2,572 40,411 205,359 461,073

Adjustment on initial application of MFRS 15, net of tax (Note 34.1) - - (934) 11,737 10,803

Adjustment on initial application of MFRS 9, net of tax (Note 34.1) - - - (1,333) (1,333)

At 1 April 2018, restated 212,731 2,572 39,477 215,763 470,543

Other comprehensive (expense)/income for the year

- Cash flow hedge - (3,965) - - (3,965)

- Foreign currency translation differences for foreign operations - - 22,114 - 22,114

Total other comprehensive (expense)/income for the year - (3,965) 22,114 - 18,149

Profit for the year - - - 78,513 78,513

Total comprehensive (expense)/income for the year - (3,965) 22,114 78,513 96,662

Transaction with owners of the Company

- Dividends to owners of the Company (Note 24) - - - (31,575) (31,575)

At 31 March 2019 212,731 (1,393) 61,591 262,701 535,630

Note 11 Note 12

for the year ended 31 March 2019CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Cont’d)


075




Sharecapital

RM’000

Capital reserveRM’000

Retained earningsRM’000

Total equity

RM’000

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 19,481 (15,628) (3,853) -

Dividends to owners of the Company (Note 24) - - (21,694) (21,694)

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

At 31 March 2018/1 April 2018 212,731 - 40,070 252,801

Profit for the year representing total comprehensive income for the year - - 46,353 46,353

Transaction with owners of the Company

- Dividends to owners of the Company (Note 24) - - (31,575) (31,575)

At 31 March 2019 212,731 - 54,848 267,579

Note 11 Note 12

STATEMENT OF CHANGES IN EQUITYfor the year ended 31 March 2019


Group Company

Note2019

RM’0002018

RM’000Restated

2019RM’000

2018RM’000

Cash flows from operating activities

Profit before tax 94,797 72,550 46,353 30,543

Adjustments for:

Property, plant and equipment

- depreciation 3 34,212 20,571 240 299

- gain on disposal 19 (9,060) - - -

- written off (8) - - -

Intangible assets

- amortisation 4 2,322 2,013 25 6

- written off 12 - - -

Amortisation of government grant 14 (180) (92) - -

Fair value loss/(gain) on derivatives 19 248 (1,991) - -

Interest income (97) (164) (24) (457)

Interest expense 18 2,754 70 - 28

Dividend income 17 - - (55,870) (39,610)

Impairment loss on

- amount due from a subsidiary - - 15 10

- investments in subsidiaries 19 - - 6,237 4,630

- plant and equipment 3 - 254 - -

- intangible assets 4 - 254 - -

Provision for

- warranties 15 2,416 2,349 - -

- onerous contract 15 45 961 - -

- warranty written off 15 (168) - - -

Reversal of provision for warranties 15 (1,964) (4,273) - -

Operating profit/(loss) before changes in working capital 125,329 92,502 (3,024) (4,551)

STATEMENTS OF CASH FLOWSfor the year ended 31 March 2019

077

STATEMENTS OF CASH FLOWS (Cont’d)for the year ended 31 March 2019

Group Company

Note2019

RM’0002018

RM’000Restated

2019RM’000

2018RM’000

Changes in working capital:

Trade and other receivables A (32,508) (6,978) (5,781) (25,392)

Inventories (25,928) (23,305) - -

Contract assets (18,873) (17,720) - -

Trade and other payables (3,709) 30,502 2,301 9,649

Contract liabilities (1,707) 2,169 - -

Provisions (3) 127 - -

Cash generated from operations 42,601 77,297 (6,504) (20,294)

Dividends received B - - 38,870 39,610

Income tax (paid)/refunded (10,009) (12,474) 15 (33)

Net cash from operating activities 32,592 64,823 32,381 19,283

Cash flows from investing activities

Purchase of plant and equipment C (91,303) (98,482) (207) (69)

Purchase of intangible assets D (11,285) (2,851) (308) (22)

Interest received 97 164 24 457

Proceeds from disposal of plant and equipment 14,302 - - -

Net cash (used in)/from investing activities (88,189) (101,169) (491) 366

Cash flows from financing activities

Dividends paid (31,575) (21,694) (31,575) (21,694)

Interest paid (2,754) (388) - (388)

Drawdown of term loans 19,785 12,120 - -

(Repayment)/Drawdown of foreign currency loan (6,292) 6,292 - -

Drawdown of revolving credit 67,903 - - -

Net cash from/(used in) financing activities 47,067 (3,670) (31,575) (22,082)


Group Company

Note2019

RM’0002018

RM’000Restated

2019RM’000

2018RM’000

Net (decrease)/increase in cash and cash equivalents (8,530) (40,016) 315 (2,433)

Cash and cash equivalents at beginning of year 21,556 99,001 298 2,731

Effect of exchange rate fluctuations on cash and cash equivalents 10,966 (37,429) - -

Cash and cash equivalents at end of year E 23,992 21,556 613 298

NOTES

A. During the previous financial year, amount due from subsidiaries of RM50,000,000 was capitalised into equity via the issuance of 50,000,000 new ordinary shares to the Company.

B. Dividends received - Company

During the financial year, the Company received dividends by way of the following:

2019RM’000

2018RM’000

Via cash received 38,870 39,610

Contra with amount due to a subsidiary 17,000 -

55,870 39,610

C. Purchase of plant and equipment

During the financial year, the Group and the Company acquired plant and equipment by way of the following:

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Via cash payment 91,303 98,482 207 69

Change in prepayments and amount due to vendors of property, plant and equipment (26,700) 22,068 - -

64,603 120,550 207 69


079


NOTES (Cont’d)

D. During the financial year, the Group and the Company acquired intangible assets with an aggregate amount of RM2,091,000 and RM308,000 (2018 : RM13,218,000 and RM22,000) respectively by way of the following:

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Via cash payment 11,285 2,851 308 22

Changes in prepayments and amounts due to vendors of intangible assets (9,194) 10,367 - -

2,091 13,218 308 22

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.



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 2019 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. and 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 18 June 2019.

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 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 2020• Amendments to MFRS 3, Business Combinations – Definition of a Business• Amendments to MFRS 101, Presentation of Financial Statements and MFRS 108, Accounting Policies, Changes

in Accounting Estimates and Errors – Definition of Material

NOTES TO THE FINANCIAL STATEMENTS

081

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)

1. Basis of preparation (Cont’d)

(a) Statement of compliance (Cont’d)

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: (Cont’d)

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.

The initial application of the accounting standards, amendments and interpretations are not expected to have any material financial impacts to the current period and prior period financial statements of the Group and the Company except as mentioned below:

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 has performed a preliminary impact assessment of MFRS 16. The 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 financial year ending 31 March 2020 when the Group will adopt MFRS 16. Overall, the Group expects to recognise an estimated lease liabilities of RM29 million with a corresponding right-of-use assets of RM28 million, with the difference to be recognised in retained earnings as at 1 April 2019 in the year of adoption of MFRS 16.

(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.


1. Basis of preparation (Cont’d)

(d) Use of estimates and judgements (Cont’d)

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 the following notes:

• Note 6 - Deferred tax assets• Note 9 - Inventories• Note 15 - 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.

Arising from the adoption of MFRS 15, Revenue from Contracts with Customers and MFRS 9, Financial Instruments, there are changes to the accounting policies of:

i) financial instruments;ii) revenue recognition; andiii) impairment losses of financial instruments

as compared to those adopted in previous financial statements. The impacts arising from the changes are disclosed in Note 34.

(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.


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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) 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.

(v) 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.

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.




(b) Foreign currency (Cont’d)

(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

Unless specifically disclosed below, the Group and the Company generally applied the following accounting policies retrospectively. Nevertheless, as permitted by MFRS 9, Financial Instruments, the Group and the Company have elected not to restate the comparatives.

(i) Recognition and initial 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.

Current financial year

A financial asset (unless it is a trade receivable without significant financing component) or a financial liability is initially measured at fair value plus or minus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issuance. A trade receivable without a significant financing component is initially measured at the transaction price.

An embedded derivative is recognised separately from the host contract where the host contract is not a financial asset, and accounted for separately if, and only if, the derivative is not closely related to the economic characteristics and risks of the host contract and the host contract is not measured at 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.

Previous financial year

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

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

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(c) Financial instruments (Cont’d)

(ii) Financial instrument categories and subsequent measurement

Financial assets


Categories of financial assets are determined on initial recognition and are not reclassified subsequent to their initial recognition unless the Group or the Company changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change of the business model.

(a) Amortised cost

Amortised cost category comprises financial assets that are held within a business model whose objective is to hold assets to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The financial assets are not designated as fair value through profit or loss. Subsequent to initial recognition, these financial assets are measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.

Interest income is recognised by applying effective interest rate to the gross carrying amount except for credit impaired financial assets (see Note 2(g)(i)) where the effective interest rate is applied to the amortised cost.

(b) Fair value through profit or loss

All financial assets not measured at amortised cost or fair value through other comprehensive income as described above are measured at fair value through profit or loss. This includes derivative financial assets (except for a derivative that is a designated and effective hedging instrument). On initial recognition, the Group or the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at fair value through other comprehensive income as at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets categorised as fair value through profit or loss are subsequently measured at their fair value. Net gains or losses, including any interest or dividend income, are recognised in the profit or loss.

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


In the previous financial year, financial assets of the Group and the Company were classified and measured under MFRS 139, Financial Instruments: Recognition and Measurement as follows:

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

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

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

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





(ii) Financial instrument categories and subsequent measurement (Cont’d)

Financial assets (Cont’d)

Previous financial year (Cont’d)

(b) Loans and receivables

Loans and receivables category comprised debt instruments that were not quoted in an active market, trade and other receivables and cash and cash equivalents.

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

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

Financial liabilities


The categories of financial liabilities at initial recognition are as follows:

Amortised cost

Other financial liabilities not categorised as fair value through profit or loss are subsequently measured at amortised cost using the effective interest method.

Interest expense and foreign exchange gains and losses are recognised in the profit or loss. Any gains or losses on derecognition are also recognised in the profit or loss.


In the previous financial year, financial liabilities of the Group and the Company were subsequently measured at amortised cost other than those categorised as fair value through profit or loss.

Fair value through profit or loss category comprised financial liabilities that were derivatives or financial liabilities that were specifically designated into this category upon initial recognition.

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

Financial liabilities categorised as fair value through profit or loss were 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.

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(iii) Financial guarantee contracts (Cont’d)


Financial guarantees issued are initially measured at fair value. Subsequently, they are measured at higher of:

• the amount of the loss allowance; and• the amount initially recognised less, when appropriate, the cumulative amount of income recognised in

accordance to the principles of MFRS 15, Revenue from Contracts with Customers.

Liabilities arising from financial guarantees are presented together with other provisions.


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

(iv) Hedge accounting

At inception of a designated hedging relationship, the Group and the Company document the risk management objective and strategy for undertaking the hedge. The Group and the Company also document the economic relationship between the hedged item and the hedging instrument, including whether the changes in cash flows of the hedged item and hedging instrument are expected to offset each other.

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 all, or a component of, 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 accumulated in equity and the ineffective portion is recognised in profit or loss. The effective portion of changes in the fair value of the derivative that is recognised in other comprehensive income is limited to the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge.

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 immediately.

The Group designates only the change in fair value of the spot element of forward contracts as the hedging instrument in cash flow hedging relationships. The change in fair value of the forward element of forward exchange contracts (“forward points”) and/or the foreign currency basis spread are separately accounted for as cost of hedging and recognised in a cost of hedging reserve within equity.




(iv) Hedge accounting (Cont’d)

Cash flow hedge (Cont’d)

Current financial year (Cont’d)

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 hedge accounting for cash flow hedges is discontinued, the amount that has been accumulated in the hedging reserve and the cost of hedging reserve remains in equity until, for a hedge of a transaction resulting in recognition of a non-financial item, it is included in the non-financial item’s cost on its initial recognition or, for other cash flow hedges, it is reclassified to profit or loss in the same period or periods as the hedged expected future cash flows affect profit or loss.

If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in the hedging reserve and the cost of hedging reserve are immediately reclassified to profit or loss.


In the previous financial year, cost of hedging was expensed to 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 transferred, 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 of the financial asset and the sum of consideration received (including any new asset obtained less any new liability assumed) 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. A financial liability is also derecognised when its terms are modified and the cash flows of the modified liability are substantially different, in which case, a new financial liability based on modified terms is recognised at fair value. 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.

(vi) Offsetting

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group or the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and liability simultaneously.

(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.


089



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

(i) Recognition and measurement (Cont’d)

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

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 3 - 50

Factory equipment 5 - 10

Motor vehicles 5

Office equipment, furniture and fittings 3 - 10

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.


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(g) Impairment

(i) Financial assets

Unless specifically disclosed below, the Group and the Company generally applied the following accounting policies retrospectively. Nevertheless, as permitted by MFRS 9, Financial Instruments, the Group and the Company elected not to restate the comparatives.


The Group and the Company recognise loss allowances for expected credit losses on financial assets measured at amortised cost, contract assets and lease receivables. Expected credit losses are a probability-weighted estimate of credit losses.

The Group and the Company measure loss allowances at an amount equal to lifetime expected credit loss, except for cash and bank balance for which credit risk has not increased significantly since initial recognition, which are measured at 12-month expected credit loss. Loss allowances for trade receivables, contract assets and lease receivables are always measured at an amount equal to lifetime expected credit loss.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit loss, the Group and the Company consider reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information, where available.

Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of the asset, while 12-month expected credit losses are the portion of expected credit losses that result from default events that are possible within the 12 months after the reporting date. The maximum period considered when estimating expected credit losses is the maximum contractual period over which the Group and the Company are exposed to credit risk.

The Group and the Company estimate the expected credit losses on trade receivables using a provision matrix with reference to historical credit loss experience.

An impairment loss in respect of financial assets measured at amortised cost is recognised in profit or loss and the carrying amount of the asset is reduced through the use of an allowance account.

At each reporting date, the Group and the Company assess whether financial assets carried at amortised cost are credit-impaired. A financial asset is credit impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

The gross carrying amount of a financial asset is written off (either partially or full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group or the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s or the Company’s procedures for recovery amounts due.


All financial assets (except for financial assets categorised as fair value through profit or loss and investments in subsidiaries) were assessed at each reporting date whether there was 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, were not recognised.

An impairment loss in respect of loans and receivables was recognised in profit or loss and was 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 was reduced through the use of an allowance account.




(g) Impairment (Cont’d)

(i) Financial assets (Cont’d)

Previous financial year (Cont’d)

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

(ii) Other assets

The carrying amounts of other assets (except for inventories, contract assets 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.

093



(i) Contract asset/Contract liability

A contract asset is recognised when the Group’s or the Company’s right to consideration is conditional on something other than the passage of time. A contract asset is subject to impairment in accordance to MFRS 9, Financial Instruments (see Note 2(g)(i)).

A contract liability is stated at cost and represents the obligation of the Group or the Company to transfer goods or services to a customer for which consideration has been received (or the amount is due) from the customers.

(j) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, balances 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.

(k) 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.

(l) Revenue and other income

(i) Revenue

Revenue is measured based on the consideration specified in a contract with a customer in exchange for transferring goods or services to a customer, excluding amounts collected on behalf of third parties. The Group or the Company recognises revenue when (or as) it transfers control over a product or service to customer. An asset is transferred when (or as) the customer obtains control of the asset.

The Group or the Company transfers control of a good or service at a point in time unless one of the following over time criteria is met:

(a) the customer simultaneously receives and consumes the benefits provided as the Group or the Company performs;

(b) the Group’s or the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or

(c) the Group’s or the Company’s performance does not create an asset with an alternative use and the Group or the Company has an enforceable right to payment for performance completed to date.




(l) Revenue and other income (Cont’d)

(ii) 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.

(iii) Interest income

Interest income is recognised as it accrues using the effective interest method in profit or loss.

(iv) 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.

(m) 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.

(n) 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.

095



(n) Income tax (Cont’d)

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.

(o) 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.

(p) 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.

(q) 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.

(r) 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.



(s) 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.

(t) 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.

(u) 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.


097

NOTES TO THE FINANCIAL STATEMENTS (Cont’d)3.

P

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erty

, pla

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(794

)(5

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s 24

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ital e

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ss32

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582

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)-

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1258

5,16

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(Co

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(5,1

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(203

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(1,6

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or v

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s 28

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t an

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Leas

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(801

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101


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

At 31 March

2019RM’000

At 31 March

2018RM’000

At 1 April

2017RM’000

Group

Carrying amounts

Leasehold land 10,925 12,757 14,140

Buildings 32,165 35,625 41,284

Electrical installation and fittings 2,623 2,253 2,834

Factory equipment 9,866 11,265 9,138

Motor vehicles 312 397 210

Office equipment, furniture and fittings 4,489 4,134 3,363

Plant and machinery 197,293 141,644 41,091

Capital expenditure-in-progress 19,407 32,579 36,628

277,080 240,654 148,688

At 1 April

RM’000Additions

RM’000Written off

RM’000

At 31 March

RM’000

Company

Cost

2019

Motor vehicles 523 - - 523

Office equipment, furniture and fittings 2,159 207 (20) 2,346

Electrical installation and fittings 1,002 - - 1,002

Factory equipment 13 - - 13

3,697 207 (20) 3,884

2018

Motor vehicles 523 - - 523


Electrical installation and fittings 1,002 - - 1,002


3,885 69 (257) 3,697


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

At 1 April

RM’000

Depreciation for the year

RM’000Written off

RM’000

At 31 March

RM’000

Company

Depreciation

2019

Motor vehicles 413 70 - 483


Electrical installation and fittings 753 8 - 761


3,058 240 (20) 3,278

2018

Motor vehicles 344 69 - 413


Electrical installation and fittings 724 29 - 753


3,016 299 (257) 3,058

At 31 March

2019RM’000

At 31 March

2018RM’000

At 1 April

2017RM’000

Carrying amounts

Motor vehicles 40 110 179

Office equipment, furniture and fittings 324 279 411

Electrical installation and fittings 241 249 278

Factory equipment 1 1 1

606 639 869


103


4. Intangible assets

Group

At 1 April

2018RM’000

Additions RM’000

Written off RM’000

Effect of movements in exchange

rates RM’000

At 31 March

2019 RM’000

2019

Cost

Development expenditure 13,506 581 - 656 14,743

Computer software 8,870 1,510 (1,006) 326 9,700

22,376 2,091 (1,006) 982 24,443

At 1 April

2017RM’000

Additions RM’000

Written off RM’000

Effect of movements in exchange

rates RM’000

At 31 March

2018 RM’000

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



In

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(Co

nt’d

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(396

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482

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7,73

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105


4. Intangible assets (Cont’d)

At 31 March

2019RM’000

At 31 March

2018RM’000

At 1 April

2017RM’000

Group

Carrying amounts

Development expenditure 11,907 12,238 2,382

Computer software 3,187 2,402 1,324

15,094 14,640 3,706

Company

Computer softwareRM’000

Cost

At 1 April 2017 2,559

Additions 22

Written off (68)

At 31 March 2018/1 April 2018 2,513

Additions 308

At 31 March 2019 2,821

Amortisation

At 1 April 2017 2,548

Amortisation for the year 6

Written off (68)

At 31 March 2018/1 April 2018 2,486

Amortisation for the year 25

At 31 March 2019 2,511

Carrying amount

At 1 April 2017 11

At 31 March 2018 27

At 31 March 2019 310



5. Investments in subsidiaries - Company

2019RM’000

2018RM’000

At cost

Unquoted shares 305,560 305,560

Less: Impairment loss (38,868) (32,631)

266,692 272,929

During the current financial year, the Company recorded an impairment loss of RM6,237,000 (2018 : RM4,630,000) on its investment cost on certain subsidiaries after having assessed the recoverable amount of the said subsidiaries.

During the previous financial year, the Company subscribed for 50,000,000 ordinary shares in a subsidiary for RM50,000,000 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

2019%

2018%

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.

Malaysia 100 100 Dormant

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

107


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

2019%

2018%

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 dies, jigs and parts and cutting tools for disk drives, electronics, semiconductor 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.



D

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(liab

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def

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rofi

t o

r lo

ss(N

ote

21)

RM

’000

Exc

hang

e d

iffe

renc

e R

M’0

00

At

31 M

arch

20

19R

M’0

00

Gro

up

Def

erre

d t

ax a

sset

s/(li

abili

ties

)

Prop

erty

, pla

nt a

nd e

qui

pm

ent

- ca

pita

l allo

wan

ce

(5,9

07)

(1,2

60)

765

(6,4

02)

(1,1

11)

(30)

(7,5

43)

ICU

LS (e

qui

ty c

omp

onen

t)(8

4)84

--

--

-

Prov

isio

ns2,

121

(1,6

16)

500

1,00

552

71,

124

2,65

6

Tax

loss

car

ry-f

orw

ard

s3,

584

(608

)(6

36)

2,34

0(1

,430

)(2

)90

8

Oth

er it

ems

378

523

(601

)30

0-

(787

)(4

87)

92(2

,877

)28

(2,7

57)

(2,0

14)

305

(4,4

66)

Co

mp

any

Def

erre

d t

ax li

abili

ties

ICU

LS (e

qui

ty c

omp

onen

t)(8

4)84

--

--

-


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):

2019RM’000

2018RM’000

Group

Tax loss carry-forward 50,406 49,005

Capital allowance carry-forward 8,632 8,705

Provisions and others 3,446 3,925

62,484 61,635

Company

Tax loss carry-forward 4,585 2,807

Capital allowance carry-forward 1,933 1,633

Provisions and others 3,446 3,144

9,964 7,584

Following the enactment of the Finance Bill 2018, tax loss carry-forward up to year of assessment 2018 shall be deductible against aggregate of statutory income until year of assessment 2025. Any amount not deducted at the end of year of assessment 2025 shall be disregarded. The capital allowance carry-forward and provisions and others 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 entities 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

2019

Derivatives used for hedging

- Forward exchange contracts 101,107 - 506 (1,365)

2018


- Forward exchange contracts 119,344 441 2,994 (81)

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.


111


8. Trade and other receivables

Note2019

RM’0002018

RM’000

Group

Non-current

Prepayments 8.1 25,517 22,257

Current

Trade

Amount due from:

- immediate holding company 8.2 16,861 13,630

- related companies 8.2 2,946 1,075

External parties 159,421 119,250

179,228 133,955

Non-trade

Amount due from:

- immediate holding company 8.2 - 2,824

- related companies 8.2 34 8

Other receivables 3,337 7,165

Deposits 1,390 451

Prepayments 15,799 22,889

20,560 33,337

199,788 167,292

225,305 189,549

Company

Non-trade

Amount due from:

- subsidiaries 8.2 15,214 9,172

- related companies 8.2 187 -

Other receivables 38 89

Deposits 10 42

Prepayments 71 451

15,520 9,754



8. Trade and other receivables (Cont’d)

8.1 Prepayments

Included in prepayments of the Group is RM25,517,000 (2018: RM22,257,000) paid for the purchase of plant and machinery and intangible assets.

8.2 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 other than an amount due from subsidiaries of Nil (2018: RM273,000) which carries interest at Nil (2018: 2.745%) per annum.

9. Inventories - Group

31.3.2019RM’000

31.3.2018RM’000

Restated

1.4.2017RM’000

Restated

Raw materials 88,614 70,679 55,408

Work-in-progress 24,437 19,325 12,135

Manufactured inventories 3,571 2,459 -

116,622 92,463 67,543

Recognised in profit or loss:

Inventories recognised as cost of sales 625,063 499,577 520,264

Reversal/(Write down) of inventories included in cost of sales 41 (2,098) (2,198)

9.1 Significant judgements and assumptions

In determining the amount of inventories to be written down or reversed, the Directors took into consideration the age of the inventories, likelihood of future consumption, rework and customer acceptance.

10. Contract assets/(liabilities)

31.3.2019RM’000

31.3.2018RM’000

Restated

1.4.2017RM’000

Restated

Group

Contract assets 126,430 107,557 89,837

Contract liabilities (462) (2,169) -

The contract assets primarily relate to the Group’s rights to consideration for work completed mainly for manufacture of aircraft components, design and assembly of modular or complete machine and equipment and related components, spares and precision engineering parts but not yet billed at the reporting date.

113


10. Contract assets/(liabilities) (Cont’d)

The contract liabilities primarily relate to advance consideration received from a customer, which revenue is recognised over time.

Significant changes to contract assets and contract liabilities balances during the year are as follows:

2019RM’000

2018RM’000

Restated

Group

Contract liabilities at the beginning of the period recognised as revenue 2,169 -

11. Share capital - Group/Company

Issued and paid up

AmountRM’000

Number of shares(’000)

At 1 April 2017 193,250 125,890

Conversion of ICULS to ordinary shares ^ 19,481 9,277

As at 31 March 2018/31 March 2019 212,731 135,167

^ conversion of 19,481,184 units of 5-year 4% Irredeemable Convertible Unsecured Loans Stocks (“ICULS”) into 9,276,691 ordinary shares on the basis of one ICULS for approximately 0.476 ordinary shares in the Company.

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.



12. Reserves

Note31.3.2019

RM’00031.3.2018

RM’000Restated

1.4.2017RM’000

Restated

Group

Non-distributable

Capital reserve

- ICULS (equity component) 12.1 - - 15,628

Hedging reserve 12.2 (1,393) 2,572 (1,776)

Translation reserve 12.3 61,591 39,477 80,230

60,198 42,049 94,082

Distributable

Retained earnings 12.4 262,701 217,096 179,727

322,899 259,145 273,809

Note 2019

RM’0002018

RM’000

Company

Distributable

Retained earnings 12.4 54,848 40,070

The movements in the reserves are disclosed in the statements of changes in equity.

12.1 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.

12.2 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.

12.3 Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

12.4 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.

115


13. Loans and borrowings - Group

2019RM’000

2018RM’000

Current

Unsecured

Term loans - variable rate 5,947 -

Onshore foreign currency loans - 6,292

Revolving credit 67,903 -

73,850 6,292

Non-current

Unsecured

Term loans - variable rate 25,958 12,120

99,808 18,412

The loans and borrowings are granted to certain subsidiaries with corporate guarantee given by the Company.

13.1 Reconciliation of movements of liabilities to cash flows arising from financing activities

At 1 April

2017RM’000

Drawdown RM’000

At 31 March

2018RM’000

Drawdown/(Repayment)

RM’000

At 31 March

2019RM’000

Revolving credit - - - 67,903 67,903

Onshore foreign currency loans - 6,292 6,292 (6,292) -

Term loans - 12,120 12,120 19,785 31,905

- 18,412 18,412 81,396 99,808


14. Deferred income - Group

2019RM’000

2018RM’000

Non-current

Government grant 1,342 892

Current

Government grant 188 87

1,530 979

Government grant

The Group received a government grant for the purchase of plant and machinery. The grant is amortised on a systematic basis over the useful life of the plant and machinery. During the financial year, RM179,960 (2018: RM91,712) was amortised and recognised as other income in profit or loss.

15. Provisions - Group

Provision for warranty

RM’000Restated

Provision for onerous

contract RM’000

Total RM’000

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 2018/1 April 2018 5,944 961 6,905

Provisions made during the year 2,416 45 2,461

Amounts written off (168) - (168)

Reversed to profit or loss (1,964) - (1,964)

Effect of movements in exchange rates 292 45 337

At 31 March 2019 6,520 1,051 7,571


117


15. Provisions - Group (Cont’d)

Provision for warranty

RM’000Restated

Provision for onerous

contract RM’000

Total RM’000

Presented as:

Current 8,789 - 8,789

At 1 April 2017 8,789 - 8,789

Non-current - 719 719

Current 5,944 242 6,186

At 31 March 2018 5,944 961 6,905

Non-current - 671 671

Current 6,520 380 6,900

At 31 March 2019 6,520 1,051 7,571

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.



16. Trade and other payables

Note31.3.2019

RM’00031.3.2018

RM’000Restated

1.4.2017RM’000

Restated

Group

Trade

Amount due to:

- immediate holding company 16.1 - 2,600 2,575

- related companies 16.1 1,350 2,439 270

External parties 45,048 47,205 23,754

Trade accruals 17,574 21,138 26,362

63,972 73,382 52,961

Non-trade

Amount due to:

- immediate holding company 16.1 653 11,823 5,648

- related companies 16.1 115 4,320 2,863

Other payables 2,776 25,048 2,392

Accrued expenses 59,215 48,649 40,138

62,759 89,840 51,041

126,731 163,222 104,002

Note2019

RM’0002018

RM’000

Company

Non-trade

Amount due to:

- immediate holding company 16.1 515 2,948

- subsidiaries 16.1 10,989 23,439

Other payables 101 101

Accrued expenses 4,604 4,420

16,209 30,908

16.1 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.

119


17. Revenue

2019RM’000

2018RM’000

Restated

Group

Revenue from contracts with customers 754,966 618,959

2019RM’000

2018RM’000

Company

Revenue from contracts with customers - management fee 11,616 10,082

Other revenue

- Dividend income from subsidiaries 55,870 39,610

- Interest income 24 457

67,510 50,149


NOTES TO THE FINANCIAL STATEMENTS (Cont’d)17

. R

even

ue (

Co

nt’d

)

17.1

D

isag

gre

gat

ion

of

reve

nue

Rep

ort

able

seg

men

ts

Aer

osp

ace

Eq

uip

men

t m

anuf

actu

ring

Tota

l

2019

RM

’000

2018

RM

’000

2019

RM

’000

2018

RM

’000

2019

RM

’000

2018

RM

’000

Gro

up

Pri

mar

y g

eog

rap

hica

l mar

kets

Mal

aysi

a12

,488

9,11

029

,302

39,0

1541

,790

48,1

25

Asi

a (e

xclu

din

g M

alay

sia)

61,5

0811

4,44

922

3,96

815

7,04

128

5,47

627

1,49

0

Euro

pe

11,2

474,

978

4,27

897

015

,525

5,94

8

Nor

th A

mer

ica

343,

761

236,

288

37,7

8948

,086

381,

550

284,

374

Latin

Am

eric

a30

,564

5,80

161

3,22

130

,625

9,02

2

459,

568

370,

626

295,

398

248,

333

754,

966

618,

959

Maj

or

pro

duc

ts a

nd s

ervi

ces

lines

Man

ufac

ture

of a

ircra

ft c

omp

onen

ts,

othe

r ai

rcra

ft re

late

d e

qui

pm

ent

par

ts,

spar

es a

nd p

reci

sion

eng

inee

ring

par

ts45

9,35

037

0,62

0-

-45

9,35

037

0,62

0

Des

ign

and

ass

emb

ly o

f mod

ular

or

com

ple

te m

achi

ne a

nd e

qui

pm

ent;

m

anuf

actu

re o

f com

pon

ents

and

pre

cisi

on

eng

inee

ring

par

ts fo

r m

odul

ar o

r co

mp

lete

m

achi

ne a

nd e

qui

pm

ent

--

223,

200

175,

921

223,

200

175,

921

Man

ufac

ture

of c

omp

onen

ts, s

par

es a

nd

pre

cisi

on e

ngin

eerin

g p

arts

, des

ign

and

as

sem

bly

of m

odul

ar o

r co

mp

lete

mac

hine

an

d e

qui

pm

ent,

trim

and

form

die

s, ji

gs

and

su

spen

sion

too

ling

--

72,0

5872

,408

72,0

5872

,408

Sup

por

t se

rvic

es21

86

140

435

810

459,

568

370,

626

295,

398

248,

333

754,

966

618,

959

121


. R

even

ue (

Co

nt’d

)

17.1

D

isag

gre

gat

ion

of

reve

nue

(Co

nt’d

)

Rep

ort

able

seg

men

ts

Aer

osp

ace

Eq

uip

men

t m

anuf

actu

ring

Tota

l

2019

RM

’000

2018

RM

’000

2019

RM

’000

2018

RM

’000

2019

RM

’000

2018

RM

’000

Gro

up

Tim

ing

and

rec

og

niti

on

At

a p

oint

in t

ime

--

192,

979

143,

628

192,

979

143,

628

Ove

r tim

e45

9,56

837

0,62

610

2,41

910

4,70

556

1,98

747

5,33

1

Tota

l rev

enue

fro

m c

ont

ract

s w

ith

cust

om

ers

459,

568

370,

626

295,

398

248,

333

754,

966

618,

959

2019

RM

’000

2018

RM

’000

Co

mp

any

Pri

mar

y g

eog

rap

hica

l mar

kets

Mal

aysi

a11

,517

9,99

2

Asi

a (e

xclu

din

g M

alay

sia)

9990

11,6

1610

,082

Maj

or

serv

ice

line

Man

agem

ent

fee

11,6

1610

,082

Tim

ing

and

rec

og

niti

on

At

a p

oint

in t

ime

11,6

1610

,082



. R

even

ue (

Co

nt’d

)

17.2

N

atur

e o

f g

oo

ds

and

ser

vice

s

The

follo

win

g in

form

atio

n re

flect

s th

e ty

pic

al t

rans

actio

ns o

f the

Gro

up:

Nat

ure

of

go

od

s o

r se

rvic

es

Tim

ing

of

reco

gni

tio

n o

r m

etho

d u

sed

to

rec

og

nise

d

reve

nue

Sig

nifi

cant

p

aym

ent

term

sV

aria

ble

ele

men

t in

co

nsid

erat

ion

Ob

ligat

ion

for

retu

rns

or

refu

nds

War

rant

y

Man

ufac

ture

of a

ircra

ft

com

pon

ents

and

oth

er

airc

raft

rela

ted

eq

uip

men

t p

arts

, sp

ares

and

pre

cisi

on

eng

inee

ring

par

ts

Reve

nue

is re

cog

nise

d

over

tim

e as

cos

ts a

re

incu

rred

. Con

trol

of g

ood

s ar

e tr

ansf

erre

d o

ver

time

as t

he g

ood

s ha

ve n

o al

tern

ativ

e us

e an

d t

here

is a

n en

forc

eab

le r

ight

to

pay

men

t fo

r p

erfo

rman

ce c

omp

lete

d

to d

ate.

Cre

dit

per

iod

w

ithin

the

in

dus

try

stan

dar

d

Dis

coun

ts m

ay

be

offe

red

for

cert

ain

cont

ract

s d

eter

min

ed o

n a

case

to

case

bas

is.

Retu

rns

only

ap

plic

able

for

pro

duc

ts t

hat

do

not

mee

t cu

stom

er’s

spec

ifica

tions

.

Prod

uct

war

rant

ies

are

assu

ranc

e ty

pe

war

rant

y an

d d

o no

t fo

rm a

se

par

ate

per

form

ance

ob

ligat

ion.

Des

ign

and

ass

emb

ly o

f m

odul

ar o

r co

mp

lete

m

achi

ne a

nd e

qui

pm

ent;

m

anuf

actu

re o

f com

pon

ents

an

d p

reci

sion

eng

inee

ring

p

arts

for

mod

ular

or

com

ple

te

mac

hine

and

eq

uip

men

t

Reve

nue

is re

cog

nise

d o

ver

time

as c

osts

are

incu

rred

. Th

ese

cont

ract

s w

ould

mee

t th

e no

alte

rnat

ive

use

and

the

G

roup

has

rig

hts

to p

aym

ent

for

wor

k p

erfo

rmed

.

Cre

dit

per

iod

w

ithin

the

in

dus

try

stan

dar

d

Not

ap

plic

able

.Re

turn

s on

ly

app

licab

le fo

r p

rod

ucts

tha

t d

o no

t m

eet

cust

omer

’s sp

ecifi

catio

ns.

Prod

uct

war

rant

ies

are

assu

ranc

e ty

pe

war

rant

y an

d d

o no

t fo

rm a

se

par

ate

per

form

ance

ob

ligat

ion.

Man

ufac

ture

of c

omp

onen

ts,

spar

es a

nd p

reci

sion

en

gin

eerin

g p

arts

, des

ign

and

ass

emb

ly o

f mod

ular

or

com

ple

te m

achi

ne a

nd

equi

pm

ent,

man

ufac

ture

of

trim

and

form

die

s an

d

susp

ensi

on t

oolin

g

Reve

nue

is re

cog

nise

d a

t a

poi

nt in

tim

e w

hen

the

par

ts

or m

achi

ne a

re d

eliv

ered

and

ac

cep

ted

by

the

cust

omer

s.

Cre

dit

per

iod

w

ithin

the

in

dus

try

stan

dar

d

Not

ap

plic

able

.Re

turn

s on

ly

app

licab

le fo

r p

rod

ucts

tha

t d

o no

t m

eet

cust

omer

’s sp

ecifi

catio

ns.

Prod

uct

war

rant

ies

are

assu

ranc

e ty

pe

war

rant

y an

d d

oes

not

form

a

sep

arat

e p

erfo

rman

ce

oblig

atio

n.

Sup

por

t se

rvic

es a

nd

man

agem

ent

serv

ices

Reve

nue

is re

cog

nise

d a

t a

poi

nt in

tim

e w

hen

the

serv

ice

is re

nder

ed.

Cre

dit

per

iod

w

ithin

the

in

dus

try

stan

dar

d

Not

ap

plic

able

.N

ot a

pp

licab

le.

Not

ap

plic

able

.

123


17. Revenue (Cont’d)

17.3 Transaction price allocated to the remaining performance obligations

The following table shows revenue from performance obligations that are unsatisfied (or partially unsatisfied) at the reporting date. The disclosure is only providing information for contracts that have excepted durations of more than one year.

2020RM’000

2021RM’000

2022RM’000

2023RM’000

2024RM’000

TotalRM’000

Group

Manufacture of aircraft components and other aircraft related equipment parts, spares and precision engineering parts 161,173 172,868 167,161 85,331 72,044 658,577

The above revenue does not have variable consideration.

The Group applies the following practical expedients:

• exemption on disclosure of information on remaining performance obligations that have original expected durations of one year or less.

18. Finance costs

2019RM’000

2018RM’000

Group

Interest expense of financial liabilities that are not at fair value through profit or loss 2,754 42

Interest expense on ICULS (Note 23) - 28

2,754 70

Company

Interest expense on ICULS (Note 23) - 28


19. Profit before tax

Group Company

Note2019

RM’0002018

RM’0002019

RM’0002018

RM’000

Profit before tax is arrived at after charging/(crediting):

Auditors’ remuneration

- Audit fees

- KPMG PLT 254 218 80 49

- Other auditors 217 198 - -

- Non-audit fees

- KPMG PLT 5 17 5 17

- Affiliate of KPMG PLT 15 40 15 40

Material expenses/(income)

Impairment loss on investments in subsidiaries 5 - - 6,237 4,630

Inventories written off - 1,147 - -

Realised loss on foreign exchange, net - 2,049 - 66

Fair value loss on derivatives 248 - - -

Personnel expenses

- Wages, salaries and others (including Directors’ emoluments) 105,766 95,241 8,981 9,682

- Employees’ Provident Fund contributions 10,575 9,872 825 933

- Termination benefits 286 2,786 257 -

Rental expense 9,709 7,049 76 38

Gain on disposal of property, plant and equipment (9,060) - - -

Foreign exchange gain, net:

- Unrealised (834) (2,835) (24) (95)

- Realised (126) - (5) -

Fair value gain on derivatives - (1,991) - -


125


20. Key management personnel compensation

Key management personnel compensation are as follows:

Group Company

2019 2018 2019 2018

Directors of the Company

- Fees 461 472 461 472

- Other emoluments 120 132 120 132

581 604 581 604

Other Directors:

- Remuneration 1,634 2,176 - -

- Employees’ Provident Fund contributions 188 158 - -

1,822 2,334 - -

2,403 2,938 581 604

The estimated monetary value of benefits-in-kind receivable by Directors of the Group and of the Company amounted to Nil (2018 : RM8,000).

21. Tax expense

Major components of tax expense include:

Group Company

2019RM’000

2018RM’000

Restated

2019RM’000

2018RM’000

Income tax expense

Malaysia

- current year 8,774 5,377 - -

- prior year 824 (2,997) - -

9,598 2,380 - -

Overseas

- current year 5,206 4,544 - -

- prior year (534) (167) - -

4,672 4,377 - -

Total income tax expense 14,270 6,757 - -



21. Tax expense (Cont’d)

Major components of tax expense include: (Cont’d)

Group Company

2019RM’000

2018RM’000

Restated

2019RM’000

2018RM’000

Deferred tax expense

- origination/(reversal) of temporary differences 1,832 3,536 - (84)

- prior year 182 (659) - -

2,014 2,877 - (84)

Total tax expense 16,284 9,634 - (84)

Reconciliation of tax expense

Group Company

2019RM’000

2018RM’000

Restated

2019RM’000

2018RM’000

Profit for the year 78,513 62,916 46,353 30,627

Total income tax expense 16,284 9,634 - (84)

Profit excluding tax 94,797 72,550 46,353 30,543

Income tax calculated using Malaysian tax rate at 24% (2018 : 24%) 22,751 17,412 11,125 7,330

Effect of different tax rates in foreign jurisdictions (2,493) (2,888) - -

Non-deductible expenses 1,675 1,769 1,713 1,362

Tax exempt income (2,193) (469) (13,409) (9,506)

Effect of tax incentives (3,896) (2,091) - -

Effect of deferred tax assets not recognised 203 39 571 814

Other items (235) (315) - (84)

15,812 13,457 - (84)

Under/(Over) provided in prior years 472 (3,823) - -

16,284 9,634 - (84)

127


22. 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 RM78,513,000 (2018 : RM62,916,000) and the weighted average number of ordinary shares outstanding, calculated as follows:

Weighted average number of ordinary shares at 31 March

2019 2018Restated

Issued ordinary shares at beginning of year 135,166,967 125,890,276

Effect of ordinary shares issued during the year - 4,937,314

Weighted average number of ordinary shares at end of year 135,166,967 130,827,590

Basic earnings per ordinary share (sen) 58.09 48.09

23. 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, was attributed to the equity component as follows:

Equity component

of ICULS RM’000

Liability component

of ICULSRM’000

TotalRM’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



23. Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) - Group/Company (Cont’d)

Equity component

of ICULS RM’000

Liability component

of ICULS(Note 12)

RM’000Total

RM’000

At 1 April 2017 15,628 352 15,980

Conversion of ICULS into ordinary shares (15,628) 8 (15,620)

Interest expense - 28 28

Interest paid - (388) (388)

At 31 March 2018 - - -

24. Dividends - Company

2019

A first interim single tier dividend of 14.01 sen and a special single tier dividend of 9.35 sen per ordinary share totalling RM31,575,005 for the financial year ended 31 March 2018 was declared on 7 June 2018 and paid on 10 August 2018.

Subsequent to the end of the financial year, the Company declared a first interim single tier dividend of 17.43 sen and a special single tier dividend of 11.62 sen per ordinary share in respect of the financial year ended 31 March 2019 to be paid on 13 August 2019.

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.

25. 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 and the subsidiaries and associates of the holding companies.

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.

129


25. Related parties (Cont’d)

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 16.

i) Subsidiaries:

2019RM’000

2018RM’000

Company

Subscription of shares in a subsidiary - 50,000

Dividend income 55,870 39,610

Management fee income 11,616 10,082

Interest income 1 446

ii) Immediate holding company:

2019RM’000

2018RM’000

Group

Sales of aerospace parts 92,469 115,677

Dividend paid 22,649 7,672

Provision of engineering services 568 579

Purchase of fabrication/machining services - (136)

Purchase of engineering services (1,021) (3,821)

Corporate management services (689) (2,092)

Rental of factory premises (3,718) (3,803)

Company

Dividend paid 22,649 7,672

Purchase of engineering services (296) -

Corporate management services (1,487) (1,091)


25. Related parties (Cont’d)

Significant related party transactions (Cont’d)

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 16. (Cont’d)

iii) Related companies:

2019RM’000

2018RM’000

Group

Sales of fabrication/machining services 15,331 10

Sales of aerospace parts 6,313 8,084

Dividends paid - (7,539)

Provision of engineering services 132 14

Purchase of components, spare parts, modular on complete machine and equipment - (75)

Purchase of engineering services - (359)

Corporate management services (558) (61)

Purchases of fabrication/machining services (15,717) (23,882)

Rental of floor space (1,988) (518)

Rental of machine (152) (157)

Purchase of raw materials - (27)

Provision of corporate services 204 -

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 20 to the financial statements.

26. 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.

Other non-reportable segment comprise investment holding activities and provision of intra-group management services which did not meet the quantitative thresholds for reportable segments.


131


26. Operating segment - Group (Cont’d)

Segment assets

The total of segment asset is measured on all assets 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.

AerospaceRM’000

Equipment manufacturing

RM’000Elimination

RM’000Total

RM’000

2019

Revenue from external customers 459,568 295,398 - 754,966

Inter-segment revenue 2,510 11 (2,521) -

Total revenue 462,078 295,409 (2,521) 754,966

Profit before tax (segment profit) 46,489 48,308 - 94,797

Included in the measure of segment profit are:

- Reversal/(write-down) of inventories 758 (799) - (41)

- Depreciation and amortisation (29,986) (6,548) - (36,534)

- Amortisation of government grant 180 - - 180

- Gain on disposal of property, plant and equipment - 9,060 - 9,060

Segment assets 595,471 195,249 - 790,720

Included in the measure of segment assets are:

Additions to non-current assets other than financial instruments and deferred tax assets

- Additions to property, plant and equipment 53,000 11,603 - 64,603

- Additions to intangible assets 1,549 542 - 2,091




Aerospace RM’000

Restated

Equipment manufacturing

RM’000Restated

EliminationRM’000

TotalRM’000

Restated

2018 (Restated)

Revenue from external customers 370,640 248,319 - 618,959

Inter-segment revenue 271 89 (360) -

Total revenue 370,911 248,408 (360) 618,959

Profit before tax (segment profit) 39,253 33,297 - 72,550

Included in the measure of segment profit are:

- Reversal of inventories written down (459) 2,557 - 2,098

- Depreciation and amortisation (17,426) (5,158) - (22,584)

- Amortisation of government grant 92 - - 92

Segment assets 491,281 184,286 - 675,567

Included in the measure of segment assets are:

Additions to non-current assets other than financial instruments and deferred tax assets

- Additions to property, plant and equipment 104,306 16,244 - 120,550

- Additions to intangible assets 11,399 1,819 - 13,218

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

2019

Malaysia 41,790 229,231

Asia (excluding Malaysia) 285,476 90,964

Europe 15,525 -

North America 381,550 -

Latin America 30,625 -

754,966 320,195

133



Geographical segments (Cont’d)

RevenueRM’000

Restated

Non-current assets

RM’000Restated

2018

Malaysia 48,125 236,404


Europe 5,948 -

North America 284,374 -

Latin America 9,022 -

618,959 280,318

Major customers

The following are major customers with revenue equal to or more than 10% of the Group’s total revenue:

Revenue

Customer 2019RM’000

2018RM’000

Restated Segment

Customer A 232,748 185,646 Aerospace

Customer B 93,606 104,537 Aerospace

Customer C 88,055 100,003 Equipment manufacturing

414,409 390,186

27. Capital and other commitments - Group

2019RM’000

2018RM’000

Property, plant and equipment

Contracted but not provided for 31,255 57,357



28. Financial instruments

28.1 Categories of financial instruments

The table below provides an analysis of financial instruments as at 31 March 2019 categorised as amortised cost (“AC”).

Carrying amountRM’000

ACRM’000

Derivatives used for hedgingRM’000

Financial assets

2019

Group

Trade and other receivables (excluding prepayments) 183,989 183,989 -

Cash and bank balances 23,992 23,992 -

Derivative financial assets 506 - 506

208,487 207,981 506


ACRM’000

Company

Other receivables (excluding prepayments) 15,449 15,449


16,062 16,062


ACRM’000



2019

Group

Loans and borrowings 99,808 99,808 -

Trade and other payables 126,731 126,731 -

Derivative financial liabilities 1,365 - 1,365

227,904 226,539 1,365

135


28. Financial instruments (Cont’d)

28.1 Categories of financial instruments (Cont’d)


ACRM’000

Company

Other payables 16,209 16,209

The table below provides an analysis of financial instruments as at 31 March 2018 categorised as follows:

(a) Loans and receivables (“L&R”); and (b) Financial liabilities measured at amortised cost (“FL”).


L&RRM’000


Financial assets

2018

Group

Trade and other receivables (excluding prepayments) 144,403 144,403 -

Cash and bank balances 21,556 21,556 -

Derivative financial assets 3,435 - 3,435

169,394 165,959 3,435


L&RRM’000

Financial assets

2018

Company

Other receivables (excluding prepayments) 9,303 9,303


9,601 9,601




28.1 Categories of financial instruments (Cont’d)

The table below provides an analysis of financial instruments as at 31 March 2018 categorised as follows: (Cont’d)


Restated

FLRM’000

Restated



2018

Group

Loans and borrowings 18,412 18,412 -

Trade and other payables 163,222 163,222 -

Derivative financial liabilities 81 - 81

181,715 181,634 81


FLRM’000

Company

Other payables 30,908 30,908

28.2 Net gains and losses arising from financial instruments

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Net gains/(losses) on:

Financial assets at amortised cost (503) - (17) -

Financial liabilities measured at amortised cost (2,051) 208 55 (28)

Derivatives used for hedging:

- Recognised in other comprehensive expense (248) 1,991 - -

Loans and receivables - 992 - 476

(2,802) 3,191 38 448

137



28.3 Financial risk management

The Group has exposure to the following risks from its use of financial instruments:

• Credit risk• Liquidity risk• Market risk

28.4 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 the individual characteristics of each customer. The Company’s exposure to credit risk arises principally from advances to subsidiaries and financial guarantees given to banks for credit facilities granted to subsidiaries.

Trade receivables and contract assets

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.

At each reporting date, the Group or the Company assesses whether any of the trade receivables and contract assets are credit impaired.

The gross carrying amounts of credit impaired trade receivables and contract assets are written off (either partially or full) when there is no realistic prospect of recovery. This is generally the case when the Group or the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. Nevertheless, trade receivables and contract assets that are written off could still be subject to enforcement activities.

There are no significant changes as compared to previous year.

Exposure to credit risk, credit quality and collateral

As at the end of the reporting period, the maximum exposure to credit risk arising from trade receivables and contract assets are represented by the carrying amounts in the statements of financial position.

Concentration of credit risk

The exposure to credit risk for trade receivables and contract assets as at the end of the reporting period by geographical region was:

Group

2019RM’000

2018RM’000

Restated

Malaysia 5,843 4,861


North America and Canada 221,263 156,442

Others 3,495 7,030

305,658 241,512




28.4 Credit risk (Cont’d)

Trade receivables and contract assets (Cont’d)

Recognition and measurement of impairment losses

Loss rates are based on actual credit loss experience over the past three years. The Group also considers differences between (a) economic conditions during the period over which the historic data has been collected, (b) current conditions and (c) the Group’s view of economic conditions over the expected lives of the receivables.

The following table provides information about the exposure to credit risk and ECLs for trade receivables and contract assets as at 31 March 2019 which are grouped together as they are expected to have similar risk nature.

GrossRM’000

Loss allowance

RM’000

Net balance RM’000

Group

2019

Current (Not past due) 291,970 2,332 289,638

1 - 30 days past due 12,942 122 12,820

31 - 60 days past due 2,124 46 2,078

61 - 90 days past due 1,084 24 1,060

308,120 2,524 305,596

Credit impaired

More than 90 days past due 62 - 62

308,182 2,524 305,658

The movements in the allowance for impairment in respect of trade receivables and contract assets during the year are shown below.

Trade receivables

Lifetime ECLRM’000

Contract assets

RM’000Total

RM’000

Group

2019

Balance at beginning of year as per MFRS 139 - - -

Adjustments on initial application of MFRS 9 866 570 1,436

Balance at beginning of year as per MFRS 9 866 570 1,436

Net remeasurement of loss allowance 857 231 1,088

Balance at end of year 1,723 801 2,524

139




Trade receivables and contract assets (Cont’d)

Comparative information under MFRS 139, Financial Instruments: Recognition and Measurement

The aging of trade receivables as at 31 March 2018 was as follows:

GrossRM’000

IndividualImpairment

RM’000

Collectiveimpairment

RM’000Net

RM’000

Group

2018 (Restated)

Not past due 233,389 - - 233,389

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

241,512 - - 241,512

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

Group2018

RM’000

At beginning of year 329

Impairment loss reversed (320)

Effect of movements in exchange rates (9)

At end of year -

Cash and bank balances

The cash and bank balances are held with banks and financial institutions. 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.

These banks and financial institutions have low credit risks.

Other receivables

Credit risk on other receivables is mainly arising from indirect tax due from local authorities.

As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statements of financial position.

As at the end of the reporting period, the Company did not recognise any allowance for impairment losses.





Inter-company advances


The Company provides unsecured advances mainly to subsidiaries. The Company monitors the ability of the subsidiaries to repay the advances on an individual basis.


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.

Advances provided are not secured by any collateral or supported by any other credit enhancements.

Recognition and measurement of impairment loss

Generally, the Company considers advances to subsidiaries and related companies have low credit risk. The Company assumes that there is a significant increase in credit risk when a subsidiary’s or a related company’s financial position deteriorates significantly. As the Company is able to determine the timing of payments of the subsidiaries’ advances when they are payable, the Company considers the advances to be in default when the subsidiaries are not able to pay when demanded. The Company considers a subsidiary’s advance to be credit impaired when:

• The subsidiary or related company is unlikely to repay its advance to the Company in full; or• The subsidiary or related company is continuously loss making and is having a deficit shareholders’ fund.

The Company determines the probability of default for these advances individually using internal information available.

The following table provides information about the exposure to credit risk and ECLs for subsidiaries’ advances as at 31 March 2019.

Gross carrying amountRM’000

Impairment loss allowance

RM’000Net balance

RM’000

Company

2019

Low credit risk 15,401 - 15,401

Credit impaired 25 (25) -

15,426 (25) 15,401

141




Inter-company advances (Cont’d)

Recognition and measurement of impairment loss (Cont’d)

The movements in the allowance for impairment in respect of subsidiaries’ advances during the year are as follows:

Lifetime ECLRM’000

Company

Balance at 1 April 2018 as per MFRS139/MFRS 9 10

Net remeasurement of loss allowance 15

Balance at 31 March 2019 25

Comparative information under MFRS 139, Financial Instruments: Recognition and Measurement

The movements in the allowance for impairment losses of inter-company advances during the financial year were:

RM’000

Company

At 1 April 2017 -

Impairment loss recognised 10

At 31 March 2018 10

Financial guarantees


The Company provides unsecured financial guarantees to banks in respect of banking facilities granted to certain subsidiaries. The Company monitors the ability of the subsidiaries to service their loans on an individual basis.


The maximum exposure to credit risk amounts to RM84.7 million (2018: RM18.4 million) representing the outstanding banking facilities of the subsidiaries as at the end of the reporting period.

The financial guarantees are provided as credit enhancements to the subsidiaries’ loans and borrowings.





Financial guarantees (Cont’d)

Recognition and measurement of impairment loss

The Company assumes that there is a significant increase in credit risk when a subsidiary’s financial position deteriorates significantly. The Company considers a financial guarantee to be credit impaired when:

• The subsidiary is unlikely to repay its credit obligation to the bank in full; or• The subsidiary is continuously loss making and is having a deficit shareholders’ fund.

The Company determines the probability of default of the guaranteed loans and borrowings individually using internal information available.

As the end of the reporting period, the Company did not recognise any allowance for impairment in respect of financial guarantees.

28.5 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 bank balances 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.

143


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147



28.6 Market risk

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

28.6.1 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 the 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 are as follows:

Denominated in

USDRM’000

SGDRM’000

EURORM’000

RMRM’000

Group

2019

Balances recognised in the statement of financial position

Trade and other receivables 4,417 352 - 6,420

Cash and bank balances 423 1,596 6,214 2,912

Trade and other payables (524) (13,433) (1,126) (30,028)

Net exposure 4,316 (11,485) 5,088 (20,696)

2018

Balances recognised in the statement of financial position

Trade and other receivables 26,997 316 - 1,061

Cash and bank balances 4,255 1,885 43 1,116

Trade and other payables (41,434) (6,031) (9,188) (28,368)

Net exposure (10,182) (3,830) (9,145) (26,191)




28.6 Market risk (Cont’d)

28.6.1 Currency risk (Cont’d)

Currency risk sensitivity analysis

A 5% (2018 : 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 loss

2019RM’000

2018RM’000

Restated

Group

USD (164) 387

SGD 436 146

EURO (193) 348

RM 786 995

865 1,876

A 5% (2018 : 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.

28.6.2 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.

149



28.6 Market risk (Cont’d)

28.6.2 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 are as follows:

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Fixed rate instruments

Financial asset

- Amount due from subsidiaries - - - 273

Floating rate instruments


- Term loan 31,905 12,120 - -

- Revolving credit 67,903 - - -

- Onshore foreign currency loans - 6,292 - -

99,808 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 RM379,270 (2018 : RM69,966) 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.



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151


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28.7 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 (2018 : no transfer in either direction).

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.

Level 3 fair value

Level 3 fair value is estimated using unobservable inputs for the financial assets and liabilities.

29. 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.

30. Operating leases

Leases as lessee

Non-cancellable operating lease rentals are payable as follows:

Group Company

2019RM’000

2018RM’000

2019RM’000

2018RM’000

Less than one year 8,150 6,952 14 14

Between one and five years 19,381 17,735 - 14

More than 5 years 12,631 12,476 - -

40,162 37,163 14 28

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.

153


31. Contingent liabilities, unsecured - Company

The Company has issued corporate guarantees to financial institutions for borrowings granted to certain subsidiaries for RM243,211,000 (2018: RM134,465,000) of which, RM84,673,000 (2018 : RM18,412,000) were utilised at the end of the reporting period.

32. Significant events during the financial year

32.1 At an extraordinary general meeting held on 14 August 2018, the Company’s shareholders approved the establishment of the Employees’ Share Grant Scheme (“ESGS”) of up to 5% of the total number of issued shares of the Company to eligible employees of the Group.

32.2 LKT Automation Sdn. Bhd., a wholly owned subsidiary of the Company has entered into a Sale and Purchase Agreement to dispose of a land and industrial building for a total consideration of RM14.3 million. The Group recorded a gain of RM9 million arising from the said disposal.

33. Subsequent event

Subsequent to year end, SAM Precision (M) Sdn. Bhd., a wholly owned subsidiary of the Company has issued and allotted 10,000,000 new ordinary shares to the Company for a total consideration of RM10,000,000 by way of capitalisation of the amount due from SAM Precision (M) Sdn. Bhd..

34. Significant changes in accounting policies

During the year, the Group and the Company adopted MFRS 15, Revenue from Contracts with Customers and MFRS 9, Financial Instruments on their financial statements. The Group and the Company generally applied the requirements of these accounting standards retrospectively with practical expedients and transitional exemptions as allowed by the standards. Nevertheless, as permitted by MFRS 9, the Group and the Company have elected not to restate the comparatives.

34.1 Impacts of financial statements

The following tables summarise the impacts arising from the adoption of MFRS 15 and MFRS 9 on the Group’s financial statements.


34. Significant changes in accounting policies (Cont’d)

34.1 Impacts of financial statements (Cont’d)

a. Statement of financial position

Group

As previously reportedRM’000

MFRS 15 adjustments

RM’000

As restatedRM’000

1 April 2017

Inventories 141,871 (74,328) 67,543

Contract assets - 89,837 89,837

Others 439,058 - 439,058

Total assets 580,929 15,509 596,438

Equity and liabilities

Share capital 193,250 - 193,250

Reserves 94,020 62 94,082

Retained earnings 167,762 11,965 179,727

Total equity 455,032 12,027 467,059

Trade and other payables 103,214 788 104,002

Provisions 8,789 - 8,789

Current tax liabilities 9,239 2,694 11,933

Others 4,655 - 4,655

Total liabilities 125,897 3,482 129,379

Total equity and liabilities 580,929 15,509 596,438


155




a. Statement of financial position (Cont’d)

Group

31 March 2018 1 April 2018

As previously

reported RM’000

MFRS 15 adjustments

RM’000

As restated RM’000

MFRS 9 adjustments

RM’000


Assets

Inventories 178,959 (86,496) 92,463 - 92,463

Contract assets - 107,557 107,557 (570) 106,987

Trade and other receivables 196,243 (6,694) 189,549 (866) 188,683

Others 285,998 - 285,998 - 285,998

Total assets 661,200 14,367 675,567 (1,436) 674,131

Equity and liabilities

Share capital 212,731 - 212,731 - 212,731

Reserves 42,983 (934) 42,049 - 42,049

Retained earnings 205,359 11,737 217,096 (1,333) 215,763

Total equity 461,073 10,803 471,876 (1,333) 470,543

Trade and other payables 163,990 (768) 163,222 - 163,222

Contract liabilities - 2,169 2,169 - 2,169

Provisions 6,905 - 6,905 - 6,905

Current tax liabilities 4,677 2,163 6,840 (103) 6,737

Others 24,555 - 24,555 - 24,555

Total liabilities 200,127 3,564 203,691 (103) 203,588

Total equity and liabilities 661,200 14,367 675,567 (1,436) 674,131





b. Statement of profit or loss and other comprehensive income

Group

As previously reported RM’000

MFRS 15 adjustments

RM’000


For the year ended 31 March 2018

Revenue 598,164 20,795 618,959

Cost of sales (494,898) (21,432) (516,330)

Gross profit 103,266 (637) 102,629

Other operating income 12,168 - 12,168

Distribution expenses (2,786) - (2,786)

Administrative expenses (30,874) - (30,874)

Other operating expenses (8,681) - (8,681)

Results from operating activities 73,093 (637) 72,456

Interest income 164 - 164

Finance costs (70) - (70)

Net finance costs 94 - 94

Profit before tax 73,187 (637) 72,550

Tax expense (10,043) 409 (9,634)

Profit for the year 63,144 (228) 62,916

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

Cash flow hedge 4,348 - 4,348

Foreign currency translation differences for foreign operations (39,757) (996) (40,753)

Total other comprehensive expense for the year, net of tax (35,409) (996) (36,405)

Total comprehensive income for the year 27,735 (1,224) 26,511

157




b. Statement of profit or loss and other comprehensive income (Cont’d)

Group


MFRS 15 adjustments

RM’000


Profit for the year attributable to:

Owners of the Company 63,144 (228) 62,916

Total comprehensive income for the year attributable to:

Owners of the Company 27,735 (1,224) 26,511

Basic earnings per ordinary share (sen) 48.26 48.09

c. Statement of cash flows

Group


MFRS 15 adjustments

RM’000


For the year ended 31 March 2018

Profit before tax 73,187 (637) 72,550

Change in trade and other receivables (16,844) 9,866 (6,978)

Change in inventories (35,469) 12,164 (23,305)

Change in contract assets - (17,720) (17,720)

Change in trade and other payables 35,931 (5,429) 30,502

Change in contract liabilities - 2,169 2,169

Change in others 7,605 - 7,605

Net cash from operating activities 64,410 413 64,823

Effect of exchange rate fluctuations on cash and cash equivalents (37,016) (413) (37,429)

The adoption of MFRS 15 did not have any material financial impacts to the Company’s financial statements.




34.2 Accounting for financial instruments

a. Transition

In the adoption of MFRS 9, the following transitional exemptions as permitted by the standard have been adopted:

i) The Group and the Company have not restated comparative information for prior periods with respect to classification and measurement (including impairment) requirements. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of MFRS 9 are recognised in retained earnings and reserves as at 1 April 2018. Accordingly, the information presented for 2018 does not generally reflect the requirements of MFRS 9, but rather those of MFRS 139, Financial Instruments: Recognition and Measurement.

ii) The following assessments have been made based on the facts and circumstances that existed at the date of initial application:

- the determination of the business model within which a financial asset is held;- the designation and revocation of previous designations of certain financial assets and financial

liabilities as measured at FVTPL; if any.

iii) Loss allowance for receivables (other than trade receivables) is recognised at an amount equal to lifetime expected credit losses until the receivable is derecognised.

b. Classification of financial assets and financial liabilities on the date of initial application of MFRS 9:

The following table shows the measurement categories under MFRS 139 and the new measurement categories under MFRS 9 for each class of the Group’s and the Company’s financial assets and financial liabilities as at 1 April 2018:

1 April 2018

Reclassification to newMFRS 9 category

Category under MFRS 139

31 March 2018

RM’000Remeasurement

RM’000

Amortised cost (“AC”)

RM’000

Derivatives used for hedging RM’000 Note

Group

Financial assets

Loans and receivables

Trade and other receivables (excluding prepayments) 144,403 (866) 143,537 - 34.2(b)(i)

Cash and bank balances 21,556 - 21,556 -


Derivative financial assets 3,435 - - 3,435

169,394 (866) 165,093 3,435

159



34.2 Accounting for financial instruments (Cont’d)

b. Classification of financial assets and financial liabilities on the date of initial application of MFRS 9: (Cont’d)

1 April 2018

Reclassification to new MFRS 9 category


31 March 2018


RM’000


RM’000 Note

Company

Financial assets

Loans and receivables

Trade and other receivables (excluding prepayments) 9,303 - 9,303 34.2(b)(i)

Cash and bank balances 298 - 298

9,601 - 9,601

1 April 2018



31 March 2018


RM’000


RM’000

Derivatives used for hedging RM’000

Group


Other financial liabilities measured at amortised cost

Loans and borrowings 18,412 - 18,412 -

Trade and other payables 163,222 - 163,222 -


Derivative financial liabilities 81 - - 81

181,715 - 181,634 81



34.2 Accounting for financial instruments (Cont’d)

b. Classification of financial assets and financial liabilities on the date of initial application of MFRS 9: (Cont’d)

1 April 2018


31 March 2018


RM’000


RM’000

Company


Other financial liabilities measured at amortised cost

Other payables 30,908 - 30,908

1 April 2018

31 March 2018


RM’000Carrying amount

RM’000

Others

Financial guarantees 18,412 - 18,412

(i) Reclassification from loans and receivables to amortised cost

Trade and other receivables and cash and bank balances that were classified as loans and receivables under MFRS 139 are now reclassified at amortised cost. An increase of RM866,000 and Nil in allowance for impairment was recognised in opening retained earnings of the Group and of the Company at 1 April 2018 respectively on transition to MFRS 9.

34.3 Accounting for revenue

In the adoption of MFRS 15, the following practical expedients as permitted by the standard have been adopted:

(a) for completed contracts, the Group does not restate contracts that:

(i) begin and end within the same annual reporting period; or

(ii) are completed contracts at the beginning of the earliest period presented.

(b) for comparatives, the Group does not disclose the amount of consideration allocated to the remaining performance obligations and an explanation of when the Group expects to recognise revenue.


161



34.3 Accounting for revenue (Cont’d)

The following are the changes in revenue recognition from the adoption of MFRS 15:

Type of revenue Previous year’s revenue recognitionCurrent year’s revenue recognition

Manufacture of aircraft components and other aircraft related equipment parts, spares and precision engineering parts

The Group previously recognised revenue when the goods were delivered to the customer’s premises, which was taken to be the point in time at which the customer accepted the goods and the related risks and rewards of ownership transferred. Revenue was recognised at the point provided that the revenue and costs could be measured reliably, the recovery of the consideration was probable and there was no continuing managerial involvement with the goods.

Revenue is recognised sooner under MFRS 15 because it is recognised over time.

Design and assembly of modular or complete machine and equipment; manufacture of components and precision engineering parts for modular or complete machine and equipment

The Group previously recognised revenue when the goods were delivered to the customer’s premises, which was taken to be the point in time at which the customer accepted the goods and the related risks and rewards of ownership transferred. Revenue was recognised at the point provided that the revenue and costs could be measured reliably, the recovery of the consideration was probable and there was no continuing managerial involvement with the goods.

Revenue is recognised sooner under MFRS 15 because it is recognised over time.


In the opinion of the Directors, the financial statements set out on pages 068 to 161 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 2019 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

Director

Goh Wee Keng

Director

Penang,

Date: 18 June 2019

STATUTORY DECLARATIONpursuant 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 068 to 161 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 18 June 2019.

Teh Mun Ling

Before me:

Goh Suan Bee(No. P125)Commissioner for OathsPenang

STATEMENT BY DIRECTORSpursuant to Section 251(2) of the Companies Act 2016

163

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 2019 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 068 to 161.

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 2019, 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, Note 1(d) – Use of estimates and judgements 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 RM117 million as at 31 March 2019 in the statement of financial position which represented 15% 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 to the Group’s Materials Review Board reports;

• Tested samples of inventories-in-progress and manufactured inventories to sales subsequent to the year end and checked that they were sold at prices higher than the carrying amount; and

• Evaluated the historical accuracy of the Group’s inventories written down by comparing prior year’s estimate to actual results.

INDEPENDENT AUDITORS’ REPORTto the members of SAM ENGINEERING & EQUIPMENT (M) BERHAD (Company No. 298188 - A) (Incorporated in Malaysia)


Key Audit Matters (Cont’d)

Adoption of MFRS 15, Revenue from Contracts with CustomersRefer to accounting policy in Note 2(l) – Revenue and other income and Note 17 – Revenue to the financial statements.

The key audit matter How the matter was addressed in our audit

MFRS 15, Revenue from Contracts with Customers became effective on 1 April 2018. Arising from the adoption of MFRS 15, the Group was required to revise its accounting policy on revenue recognition.

Judgements were required to evaluate contracts with customers, identify the number of performance obligations, the allocation of transaction price to each performance obligation and to determine whether revenue for each contract is to be recognised over time or at a point in time. MFRS 15 also brought about new disclosures that were made in the financial statements.

The accounting policy changes arising from the adoption of MFRS 15 is a key audit matter because it:• required involvement of our more senior personnel

to assess the evaluation of customer contracts performed by the Group; and

• required us to exercise judgement to assess the allocation of transaction price to each performance obligation and the timing of revenue recognition.

We performed the following audit procedures, among others:• Compared the accounting policies adopted with the

requirements of MFRS 15;• Reviewed and gained an understanding of the Group’s processes,

systems and controls implemented over the adoption of MFRS 15;

• Obtained an understanding of the key judgements made by the Group over revenue recognition and compared them with the requirements of the accounting standard;

• Tested the inputs (for example, selling price and the percentage of completion of inventories) used by the Group in the calculation of revenue recognised over time to customer contracts and inventory records; and

• Assessed the completeness, accuracy and appropriateness of disclosures required by MFRS 15.

We have determined that there are no key audit matters to be communicated for the Company in our report.

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.

INDEPENDENT AUDITORS’ REPORT (Cont’d)to the members of SAM ENGINEERING & EQUIPMENT (M) BERHAD (Company No. 298188 - A) (Incorporated in Malaysia)

165


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.

• 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: 18 June 2019

Penang


167

ANALYSIS OF SHAREHOLDINGSas at 1 July 2019

Distribution Schedule of Shareholdings as at 1 July 2019

No. of Holders Size of Holdings Total Holdings %

236 less than 100 shares 8,695 0.01

642 100 to 1,000 shares 442,949 0.33

1,160 1,001 to 10,000 shares 4,345,569 3.21

288 10,001 to 100,000 shares 8,736,671 6.46

57 100,001 to less than 5% of issued shares 24,723,557 18.29

1 5% and above of issued shares 96,909,526 71.70

2,384 135,166,967 100.00

Substantial Shareholders as at 1 July 2019

No. Name

Direct Interest Indirect Interest

No. of Shares

% of Issued Capital

No. of Shares

% of Issued Capital

1. Singapore Aerospace Manufacturing Pte Ltd 96,909,526 71.70

2. Accuron Technologies Limited - - (a) 96,909,526 71.70

3. Temasek Holdings (Private) Limited - - (b) 96,909,526 71.70

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 1 July 2019

No. Name

Direct Interest Indirect Interest

No. of Shares

% of Issued Capital

No. of Shares

% of Issued Capital

1. Tan Kai Hoe - - - -

2. Goh Wee Keng 1,702,523 1.2596 - -

3. Shum Sze Keong - - - -

4. Dato’ Mohamed Salleh Bin Bajuri - - - -

5. Dato’ Seri 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 interest via children pursuant to Section 59(11)(c) of the Companies Act, 2016.


ANALYSIS OF SHAREHOLDINGS (Cont’d)

Thirty (30) Largest Securities Account Holders (Ordinary Shares) According to the Record of Depositors as at 1 July 2019

Name Shareholdings %

1 AFFIN HWANG NOMINEES (ASING) SDN. BHD.DBS VICKERS SECS (S) PTE LTD FOR SINGAPORE AEROSPACEMANUFACTURING PTE LTD

96,909,526 71.70

2 CARTABAN NOMINEES (TEMPATAN) SDN BHDICAPITAL.BIZ BERHAD

2,653,700 1.96

3 AMANAHRAYA TRUSTEES BERHADPB SMALLCAP GROWTH FUND

2,003,500 1.48

4 AMANAHRAYA TRUSTEES BERHADPUBLIC STRATEGIC SMALLCAP FUND

1,882,004 1.39

5 UOBM NOMINEES (ASING) SDN BHDUNITED OVERSEAS BANK NOMINEES (PTE) LTD FOR GOH WEE KENG

1,702,523 1.26

6 AMANAHRAYA TRUSTEES BERHADPUBLIC SMALLCAP FUND

1,645,800 1.22

7 HSBC NOMINEES (TEMPATAN) SDN BHDHSBC (M) TRUSTEE BHD FOR MANULIFE INVESTMENT PROGRESS FUND (4082)

1,014,000 0.75

8 AMANAHRAYA TRUSTEES BERHADPUBLIC ISLAMIC OPPORTUNITIES FUND

940,400 0.70

9 AMANAHRAYA TRUSTEES BERHADPB ISLAMIC SMALLCAP FUND

863,200 0.64

10 CARTABAN NOMINEES (ASING) SDN BHDEXEMPT AN FOR LGT BANK AG (FOREIGN)

858,857 0.64

11 AFFIN HWANG NOMINEES (ASING) SDN. BHD.DBS VICKERS SECS (S) PTE LTD FOR TEO SIEW GEOK

781,333 0.58

12 MAYBANK NOMINEES (TEMPATAN) SDN BHDMAYBANK TRUSTEES BERHAD FOR PUBLIC INDUSTRY GROWTH FUND (N14011930270)

733,800 0.54

13 AMANAHRAYA TRUSTEES BERHADPUBLIC SELECT TREASURES EQUITY FUND

470,100 0.35

14 MAYBANK NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR TAY ONG NGO @ TAY BOON FANG

360,000 0.27

15 HLB NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR NG YONG YIN

351,400 0.26

16 HSBC NOMINEES (TEMPATAN) SDN BHDHSBC (M) TRUSTEE BHD FOR PERTUBUHAN KESELAMATAN SOSIAL (UOB AMM6939-406)

339,800 0.25

17 MAYBANK NOMINEES (TEMPATAN) SDN BHDMAYBANK TRUSTEES BERHAD FOR PUBLIC BALANCED FUND (N14011950210)

331,900 0.25

18 RICHARD TEH LIP HEONG 323,000 0.24

19 LIM GAIK BWAY @ LIM CHIEW AH 313,900 0.23

20 NG BOON KEAT 303,809 0.22

169

ANALYSIS OF SHAREHOLDINGS (Cont’d)

Thirty (30) Largest Securities Account Holders (Ordinary Shares) According to the Record of Depositors as at 1 July 2019 (Cont’d)

Name Shareholdings %

21 NAHOORAMMAH A/P SITHAMPARAM PILLAY 300,000 0.22

22 MAYBANK SECURITIES NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR SHIN KONG KEW @ CHIN KONG KEW (R25 MARGIN)

290,000 0.21

23 AFFIN HWANG NOMINEES (ASING) SDN. BHD.EXEMPT AN FOR DBS VICKERS SECURITIES (SINGAPORE) PTE LTD (CLIENTS)

268,428 0.20

24 CITIGROUP NOMINEES (ASING) SDN BHDEXEMPT AN FOR UBS AG SINGAPORE (FOREIGN)

257,000 0.19

25 MAYBANK NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR YOONG KAH YIN

252,000 0.19

26 PUBLIC NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR TAM SENG @ TAM SENG SEN (E-PTS)

250,000 0.18

27 RHB NOMINEES (TEMPATAN) SDN BHDOSK TECHNOLOGY VENTURES SDN. BHD.

250,000 0.18

28 LIM CHIAN PENG 243,500 0.18

29 HSBC NOMINEES (TEMPATAN) SDN BHDHSBC (M) TRUSTEE BHD FOR MANULIFE INVESTMENT AL-FAID (4389)

242,600 0.18

30 CITIGROUP NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR TAN SIONG AN (470676

223,000 0.16

117,359,080 86.82


NOTICE IS HEREBY GIVEN that the Twenty-Fifth (25th) 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 Wednesday, 28 August 2019 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 2019 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:-

(i) Mr. Goh Wee Keng(ii) Mr. Tan Kai Hoe(iii) Mr. Shum Sze Keong

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. Special ResolutionProposed adoption of the New Constitution of the Company

“THAT approval be and is hereby given to revoke the existing Constitution of the Company and in place thereof, the proposed new Constitution, as set out in the Appendix I of the Circular dated 29 July 2019 dispatched together with the Company’s Annual Report be and is hereby adopted as the Constitution of the Company (“Proposed Adoption”).

THAT the adoption of new Constitution shall be effective from 1 September 2019.

AND THAT the Directors of the Company be and are hereby authorised to assent to any modification, variation and/or amendment in any manner as may be required or imposed by the relevant authorities (if any) and to take all steps and do all acts and things as may be considered necessary or expedient in order to implement, finalise and give full effect to the Proposed Adoption.” Resolution 5

5. Ordinary ResolutionProposed payment of Directors’ fee for the period from 29 August 2019 until the next AGM

“THAT the Directors’ fee as tabulated below payable to each Director, as applicable, for the period from 29 August 2019 until the next AGM of the Company pursuant to Section 230(1)(b) of the Companies Act, 2016, be and are hereby approved:-

Fee for each Director RM50,000

Fee for the Chairman of the Audit Committee RM10,000

Fee for the Chairman of the following Board Committees:-- Nominating & Remuneration Committee- Risk & Sustainability Committee

RM7,500

Fee for each Member of Board Committees RM5,000 Resolution 6

NOTICE OF ANNUAL GENERAL MEETING

171

NOTICE OF ANNUAL GENERAL MEETING (Cont’d)

AS SPECIAL BUSINESS:- (Cont’d)

6. Ordinary ResolutionProposed payment of the following benefits to Directors for the period from 29 August 2019 until next AGM of the Company

“THAT the following benefits payable to each Director, as applicable, for the period from 29 August 2019 until the next AGM of the Company pursuant to Section 230(1)(b) of the Companies Act, 2016, be and are hereby approved:-

Meeting Allowance for each Director RM2,000 per meeting

Benefits-In-Kind (for all Directors) RM50,000 Resolution 7

7. Ordinary ResolutionAuthority to issue and allot shares

“THAT subject always to the Companies Act, 2016 (“Act”), the Constitution of the Company and approvals of the relevant governmental and/or 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 8

8. Ordinary Resolution Proposed New and Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Transactions (“RRPT”)

“THAT subject to the provisions of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, 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 29 July 2019 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


AS SPECIAL BUSINESS:- (Cont’d)

8. Ordinary Resolution (Cont’d)Proposed New and Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Transactions (“RRPT”) (Cont’d)

(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 9

9. Ordinary ResolutionMandate for the Directors who has 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:-

(i) Dato’ Mohamed Salleh Bin Bajuri(ii) Dato’ Seri Wong Siew Hai(iii) Dato’ Sri Lee Tuck Fook(iv) Mr. Lee Hock Chye”

Resolution 10Resolution 11Resolution 12Resolution 13

By Order of the Board,

THUM SOOK FUN (MIA 24701)CHEW PECK KHENG (LS 0009559)Company Secretaries

Date: 29 July 2019Penang

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 2020. The current auditors, Messrs. KPMG PLT has expressed their willingness to continue in office.

The Board 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 Main Market Listing Requirements of Bursa Securities (“Listing Requirements”).

The Board of Directors recommends the re-appointment of Messrs. KPMG PLT as External Auditors of the Company to hold the office until the conclusion of the next AGM.


173


Notes:- (Cont’d)

3. Explanatory Notes to Special Business:-

i) Resolution 5 – Proposed Adoption of the new Constitution of the Company (“Proposed Adoption”)

The Resolution 5, if passed, will streamline the Company’s Constitution with the new provisions of the Act, amendments made to Listing Requirements and to enhance administrative efficiency. The proposed adoption of new Company’s Constitution is set out in the Part B of the Circular dated 29 July 2019, which is dispatched together with the Company’s Annual Report 2019. The Proposed Adoption shall take effect once it has been passed by a majority of not less than 75% of such members who are entitled to vote and do vote in person or by proxy at the 25th AGM of the Company.

ii) Resolution 6 and 7 – Proposed payment of Directors’ Remuneration and other benefits

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 6 – On payment of Directors’ fees in respect of the period from 29 August 2019 until the next AGM; and

Resolution 7 – On payment of Benefit to Directors for the period from 29 August 2019 until the next AGM.

The Board of Directors at its meeting held on 21 May 2019 approved the Nominating & Remuneration Committee’s (“NRC”) recommendation for the proposed Directors’ fees for the period from 29 August 2019 until the next AGM. There is no revision to the proposed Directors’ fees as compared to the previous 24th AGM of the Company.

The benefits payable to each Director pursuant to Section 230(1)(b) of the Act have been reviewed by the Board of Directors of the Company based on the current Board size, all of whom have recognised that the benefits payable are in the best interest of the Company. As for the meeting allowance it will be accorded based on the attendance of the Director at meetings.

In the event, the proposed amount is insufficient, e.g. due to enlarged Board size, approval will be sought at the next AGM for the shortfall.

iii) Resolution 8 – 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 a 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 14 August 2018 of which will lapse at the conclusion of the 25th 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.


Notes:- (Cont’d)

3. Explanatory Notes to Special Business:- (Cont’d)

iv) Resolution 9 – Proposed New and Renewal of Shareholders’ Mandate

The proposed Ordinary Resolution 9, 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 dated 29 July 2019, 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 dated 29 July 2019.

v) Resolution 10 to 13 – Mandate for the Directors who has 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 Malaysian Code on Corporate Governance 2017 (“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 10, 11, 12, and 13, if passed, will retain Dato’ Mohamed Salleh Bin Bajuri, Dato’ Seri Wong Siew Hai, Dato’ Sri Lee Tuck Fook and Mr. Lee Hock Chye (“Independent Non- Executive Directors”) who have served as an Independent Non-Executive Director 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.

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 justifications that the above Independent Directors remain objective and independent in expressing their views and in participating in deliberation and decision making of the Board and Board Committees. Their length of service on the Board does not in any way interfere with their exercise of independent judgement and ability to act in the best interests of the company. In addition, they have also confirmed and declared in writing that they are Independent Directors and have satisfied all the criteria of an Independent Director set out in Paragraph 1.01 of the Listing Requirements.

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.


175


Notes:- (Cont’d)

4. Appointment of Proxy (Cont’d)

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 George Town, 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 21 August 2019 (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.

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.

STATEMENT ACCOMPANYING NOTICE OF AGM(Pursuant to Paragraph 8.27(2) of the Listing Requirements)

1. Details of individuals who are standing for election as Directors

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 25th AGM.

2. General mandate for issue of securities in accordance with Paragraph 6.03(3) of the Listing Requirements

Details of the general mandate to issue securities in the Company pursuant to Section 75 and Section 76 of the Act are set out in Explanatory Note (iii) of the Notice of the 25th AGM.


Day and Date Wednesday, 28 August 2019

Time 10.00 a.m.

Venue First Floor, SAM Meerkat (M) Sdn. Bhd., Plot 103, Hilir Sungai Keluang Lima, Taman Perindustrian Bayan Lepas 4,11900 Bayan Lepas, 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 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.7. The registration counter will handle only verification of identity, registration and revocation of proxy/proxies.

BUSINESS PRESENTATION

8. A business presentation will commence at 9.30 a.m. at the meeting venue and will end at 10.00 a.m. sharp.

PROXY

9. A member entitled to attend and vote in the meeting is allowed to appoint proxy. Please submit your Proxy Form in accordance with the notes and instructions as stated in the Proxy Form.

10. If you wish to attend the meeting yourself, please do not submit any Proxy Form. You will not be allowed to attend the meeting together with a proxy appointed by you.

11. If you have submitted your Proxy Form 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.

12. Please ensure that the original Proxy Form is deposited at the Company’s Registered Office at Suite 18.05, MWE Plaza, No. 8, Lebuh Farquhar, 10200 George Town, Penang not less than forty-eight (48) hours before the meeting time. No proof of despatch of Proxy Form will be entertained.

CORPORATE MEMBER

13. 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 Company’s Registered Office before the AGM or to the registration staff on the AGM day for the Company’s records.

ENTITLEMENTS TO ATTEND, SPEAK AND VOTE

14. Only Depositor whose name appears on the Record of Depositors as at 21 August 2019 or the appointed proxy holder/representative shall be entitled to attend, speak and vote at the 25th AGM.

ADMINISTRATIVE GUIDE25th Annual General Meeting (“AGM”)

177

ADMINISTRATIVE GUIDE (Cont’d)25th Annual General Meeting (“AGM”)

VOTING PROCEDURE

15. The voting at the 25th AGM will be conducted on a poll in accordance with Paragraph 8.29A of Bursa Malaysia Securities Berhad Main Market Listing Requirements.

16. 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 as Scrutineer to verify the poll results.

17. The presentation slides to guide the shareholders/proxy to cast the votes electronically will be available prior to the commencement of the poll.

18. 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 25th 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

19. Lunch shall be served after the meeting.

ANNUAL REPORT 2019

20. The Company Annual Report 2019 is available on the Company website at www.sam-malaysia.com and Bursa Malaysia Securities Berhad’ website at www.bursamalaysia.com.

ENQUIRY

21. For any enquiry prior to the 25th 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)


http://www.bursamalaysia.com

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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-Fifth 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 Wednesday, 28 August 2019 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. RESOLUTIONS For AgainstORDINARY BUSINESS1. To re-elect Mr. Goh Wee Keng as Director.2. To re-elect Mr. Tan Kai Hoe as Director.3. To re-elect Mr. Shum Sze Keong as Director.4. To re-appoint Messrs. KPMG PLT as auditors.SPECIAL BUSINESS5. Special Resolution – Proposed adoption of new Constitution of the Company.6. Ordinary Resolution – Proposed payment of Directors’ fee.7. Ordinary Resolution – Proposed payment of benefits to Directors.8. Ordinary Resolution – Authority for Directors to issue and allot shares.9. Ordinary Resolution – Proposed new and renewal of shareholders’ mandate for RRPT.10. Ordinary Resolution – Mandate to retain Dato’ Mohamed Salleh Bin Bajuri as an Independent

Non-Executive Director of the Company.11. Ordinary Resolution – Mandate to retain Dato’ Seri Wong Siew Hai as an Independent

Non-Executive Director of the Company.12. Ordinary Resolution – Mandate to retain Dato’ Sri Lee Tuck Fook as an Independent

Non-Executive Director of the Company.13. 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 _______________ 2019. Signature of Shareholder/Common Seal

SAM ENGINEERING & EQUIPMENT (M) BERHAD(Company No. 298188-A) (Incorporated in Malaysia)

FORM OF PROXY NUMBER OF SHARES HELD

CDS ACCOUNT NO.

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 George Town, 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 21 August 2019 (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.

Please fold across the line and close

Please fold across the line and close

To,

The Company SecretariesSAM Engineering & Equipment (M) Berhad

(Company No. 298188A)Suite 18-05, MWE Plaza, No. 8, Lebuh Farquhar,

10200 George Town, Penang

STAMP

ExcellenceTogether

10 Years of

Courageous To Enter Into New Frontier

Our Journey Into The Aerospace ArenaThe most powerful weapon on earth is the human soul on fire

2018

2015

2016

20132011

2017

2012


Plot 17, Hilir Sungai Keluang 3, Bayan Lepas Free Industrial Zone, Phase 4, 11900 Penang.

Tel: 604-643 6789 Fax: 604-644 7017


Never BeneathAlways Above,

1 3 1 1 8 1 1 4 1 2 0 8 1

Annual R

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CROSSOVER

CROSSOVEROUR JOURNEY CONTINUES ….


Annual Report 2014

United in spirit and battling as a team

with a single aim to CROSS OVERWe believe nothing is impossible. We have the will to win and, more importantly, the will to prepare to win. We will fight the good fight and come out top. This is our spirit – the SAM

Malaysia spirit – and we are proud of it.

2014

2010

2009

Continue to bear good fruits OURCORNERSTONE




ANNUAL REPORT 2019

ExcellenceTogether

10 Years of


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