Build-up area (sq. ft.) 111,988 18,472 26, ,013 33,500 Office & Factory. 131,104 67,500 Office & Factory. 131,406 92,000 Office & Factory 92,500

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4 Location Tenure Area (sq. ft.) Build-up area (sq. ft.) Description Approximate age of building Expiry date Date of revaluation Carrying amount as at 31 Mar 2016 (RM 000) ESMO AUTOMATION (M) SDN BHD / LKT AUTOMATION SDN BHD PE2/4 Plot 7 Hilir Sungai Keluang 4, Bayan Lepas Free Industrial Zone Phase 4, Penang. Leasehold 60 years 111,988 18,472 26,000 Office & Factory Office & Factory 25 years 18 years 9 September August ,810 SAM PRECISION (M) SDN BHD PE1 Plots Lengkok Kampung Jawa 2, Bayan Lepas Non-Free Industrial Zone Phase 3, Penang. Leasehold 60 years 54,013 33,500 Office & Factory 32 years 22 November August ,877 SAM PRECISION (M) SDN BHD / SAM TOOLING TECHNOLOGY SDN BHD PE5 Plot 77 Lintang Bayan Lepas, Bayan Lepas Non-Free Industrial Zone Phase 4, Penang. Leasehold 60 years 131,104 67,500 Office & Factory 16 years 16 June August ,442 MEERKAT PRECISION SDN BHD / CORPORATE OFFICE PE3 Plot 17 Hilir Sungai Keluang 3, Bayan Lepas Free Industrial Zone Phase 4, Penang. Leasehold 60 years 131,406 92,000 Office & Factory 20 years 14 May August ,338 SAM MEERKAT (M) SDN BHD PE6 Plot 103, Hilir Sungai Keluang Lima, Taman Perindustrian Bayan Lepas 4, Penang, Malaysia. Leasehold 60 years 176,629 92,500 Office & Factory 10 years 18 December August ,312 SAM MEERKAT (M) SDN BHD PE7 Plot 104, Hilir Sungai Keluang Lima, Taman Perindustrian Bayan Lepas 4, Penang, Malaysia. Leasehold 60 years 148, ,000 Office & Factory 9 years 23 April August ,919 Note: 1. The land area disclosed herein based on the survey conducted by Jabatan Ukur dan Pemetaan Pulau Pinang.

5 Corporate Governance Statement SAM Malaysia is committed to meeting sound standards of corporate governance and it is our steadfast belief that such standards are essential to uphold business integrity and performance of the Company and its subsidiaries ( Group ). The Board of Directors ( Board ) and each individual Director is directly accountable to the shareholders and stakeholders for ensuring that good governance is practiced at every level of the Group s operations, in compliance with Malaysian Code on Corporate Governance 2012 ( Code ). The main focus is to adopt the substance behind good corporate governance practices with the ultimate aim to ensure effectiveness and efficacy towards enhancing shareholder value. The Group s corporate governance practices are also guided by its Core Values which balance commercial and financial success with the interests of all stakeholders. The set of core values guides the Board, management and employees at all levels in the conduct and management of the business and affairs of the Group. The Board is pleased to provide the following statement, which outlines the main corporate governance practices that were in place throughout the financial year and are currently still in place, unless otherwise stated. Principle 1: Establish clear goals and responsibilities 1.1 Clear functions of the Board and Management The Group acknowledges the pivotal role played by the Board in the stewardship of its direction and operations, and ultimately the enhancement of long-term shareholder value. In addition, the Board has established clear functions reserved for the Board and those delegated to the Chairman, Board Committees, the Executive Director and management as part of initiative to enhance accountability. The Board has a formal schedule of matters reserved for its decisions to ensure that direction and control are within purview of the Board. Principal matters reserved for the Board include 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 Board Committees refer to the Audit Committee ( AC ), Risk Management Committee ( RMC ), Investment & Divestment Committee ( IDC ) and the Nominating & Remuneration Committee ( NRC ). These Committees operate within specific terms of reference that were drawn up in accordance with best practices in the Code and function principally to assist the Board in the execution of its duties and responsibilities. The authority and terms of reference of the Board Committees are reviewed from time to time with the aim to ensure its relevance and enhance its efficacy. The clear demarcation of roles established in the Board Charter is the reference point for Board activities and reinforces the supervisory role of the Board going forward. The Board Charter provides reference for Directors in relation to the Directors and the Board s role, powers, duties and functions. Notwithstanding the delegation of specific powers, the Board retains full responsibility for the direction and control of the Company and the Group. The ultimate responsibility for decision-making on all matters lies with the Board. The Chairman performs a leadership role in the conduct of the Board and its relations with the shareholders and other stakeholders. The Chairman is primarily responsible for the following, among others: (a) (b) (c) (d) (e) leading the Board in the oversight of management; representing the Board to shareholders and chairing general meeting of shareholders; ensuring the adequacy and integrity of the governance process and issues; maintaining regular dialogue with the Group Chief Executive Officer ( CEO ) over all operational matters and consulting with the remainder of the Board promptly over any matters that gives him/her cause for major concern to optimise the effectiveness of the Board and its Committees; functioning as a facilitator at meetings of the Board to ensure that no member, whether executive or non-executive, dominates discussion, that appropriate discussions takes place and that relevant opinions among members is forthcoming. The Chairman will ensure that discussions result in logical and understandable outcomes; 032

6 Corporate Governance Statement (Cont d) Principle 1: Establish clear goals and responsibilities (CONT D) 1.1 Clear functions of the Board and Management (Cont d) (f) (g) (h) ensuring that all Directors are enabled and encouraged to participate in its activities. This includes ensuring that all relevant issues are on the agenda and that all Directors receive timely, relevant information tailored to their needs and that they are properly briefed on issues arising at Board meetings; ensuring that the Executive Director looks beyond his executive function and accepts his full share of responsibilities for governance and provides regular updates on all issues pertinent to the welfare and future of the Group to the Board; and guiding and mediating Board actions with respect to organisational priorities and governance concerns. The CEO is responsible for the day-to-day supervision of management and operations and leads the senior management team to ensure high level of work efficiency and optimum production activity. Other key roles assumed by the CEO includes the following: (a) (b) (c) (d) (e) (f) (g) (h) leads executive management of the Group s business covering, inter alia, the development of a strategic plan; an annual operating plan and budget; performance benchmarks to gauge management performance against and the analysis of management reports; develops long-term strategic and short-term profit plans, designed to ensure that the Group s requirements for growth, profitability and return on capital are achieved; effectively oversees the human resources of the Group with respect to key positions in the Group s hierarchy, makes recommendations to the Board for recruitment of senior management staff, determination of remuneration as well as terms and conditions of employment for senior management and issues pertaining to discipline; assures the Group s corporate identity, products and services are of high standards and are reflective of the market environment; acts as the official spokesman for the Company and takes responsibility for regulatory, governmental and business relationships; maintains and facilitates a positive working environment and good employee relations; assists in the selection and evaluation of Board members through the NRC; and assists the Chairman in organising information necessary for the Board to deal with the agenda and for providing this information to Directors on a timely basis. On the other hand, management is responsible for the execution of activities to meet corporate plans as well as instituting various measures to ensure due compliance with various governing legislations. 1.2 Clear roles and responsibilities The Board is responsible for the effective control of the Group. To that end, the Board has assumed and established the following responsibilities aimed at effective discharge of its functions: (a) Review and formalisation of strategic direction for business sustainability The management has established an annual strategy planning process aimed at developing business strategies and plans. These recommendations are then presented to the Board for deliberation and approval. The Board also reviews and approves annual budgets including major capital commitment and expenditure. Generally, the annual budget and strategies are presented to the Board before the start of the new financial year. (b) Identify principal risks and ensuring implementation of systems to manage risks There is in place a dynamic risk management and internal control framework which is applied consistently throughout the year to identify, assess and manage significant risks faced by the Group. Details of the framework are more particularly spelt out in the Statement on Risk Management and Internal Control. 033

7 Corporate Governance Statement (Cont d) Principle 1: Establish clear goals and responsibilities (CONT D) 1.2 Clear roles and responsibilities (Cont d) (c) Succession planning The Board acknowledges that succession planning is a key responsibility and believes that a properly implemented succession plan will support operations and provide continuity following a change in CEO, senior management talent or key business leaders. The Board oversees the identification and development of key senior management talent through mentoring, training and job rotation. Separately, the NRC and the Human Resource division assist the Board to oversee Board succession planning by identifying suitable candidates for Board seats. (d) Developing and managing investor relations program The Group has set-up an Investor Relation ( IR ) structure and is in the process of developing its IR program and strategy. The CEO together with the Chief Operating Officer and the Chief Financial Officer ( CFO ) are the main persons leading the communication with all stakeholders and respond to all queries in relation to Group activities, business and operations, financial results and prospects. The IR employed key channels of communication such as the general meeting, electronic bulletin as provided by Bursa Malaysia Securities Berhad ( Bursa Securities ), press releases, corporate website and analyst briefings as means to reach its audiences. (e) Review adequacy and integrity of the Group s internal control and management information systems The Group has an in-house Internal Audit ( IA ) function which reports directly to the AC and assists the AC in the discharge of its duties and responsibilities. The IA function s key role is to review the integrity, effectiveness and adequacy of the Group s system of risk management and internal controls. The IA worked with outsourced governance and IA service providers to establish the risk management framework upon which the IA plan is based upon. Field audits are carried out by the IA service providers regularly in identified areas of concern. These reports are issued quarterly and the in-house IA function will scrutinise and coordinate management response before forwarding to the AC for review. The AC conducts annual review of the IA function focusing on its resources and scope of work, among others. The AC reports to the Board, on quarterly basis, is part of scheduled matters which enabled the Board to be updated and maintains effective supervisory control in the Group. (f) Establishing goals for management and monitoring the achievement of these goals Management goals are defined in the strategies and annual budgets approved by the Board. Progress reports comparing actual to budget are presented to the Board quarterly for their understanding and decision-making as needed. 1.3 Formalise ethical standards through a Code of Ethics There is in place a Standard Code of Conduct, Business Ethics, Conflicts of Interest (collectively referred to as Code of Ethics ) and Whistle Blowing Policy ( WBP ) within the Group. The Code of Ethics spells out the standards of ethics and conduct expected from both the Board and employees. The implementation of both the Code of Ethics and WBP reflects the Board s commitment and sets the tone for proper ethical behaviour expected from all. The Board will take the necessary measures to ensure compliance by all with the Code of Ethics. 034

8 Corporate Governance Statement (Cont d) Principle 1: Establish clear goals and responsibilities (CONT D) 1.3 Formalise ethical standards through a Code of Ethics (Cont d) 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. All concerns reported by the whistle blower are directed to the Chairman of the AC in accordance with the conditions prescribed under the WBP. The contact address is: independent@sam-malaysia.com. The Management will make available the WBP and Code of Ethics on the corporate website soon. 1.4 Strategies promoting sustainability The Board is mindful of the need for business sustainability over the long term within the environmental, governance and social context. Strategic development and operational progress are reviewed on a quarterly basis taking into consideration changing business environment and risk factors such as competition, consumer demand, raw material pricing, fluctuations in foreign exchange and changes to governmental policies. With due recognition towards business sustainability, the Board has in place a Sustainability Policy which embeds elements of environment, social and governance in the Group s corporate strategies. On a separate note, details of the Group s corporate social responsibilities activities are also disclosed in this annual report. 1.5 Access to information and advice The Board recognises that the decision-making process is highly contingent on the quality of information furnished. Following from this, all Directors have unrestricted access to any information pertaining to the Company and the Group. The Board receives documents on matters requiring its consideration prior to and in advance of each meeting (including Board Committee meetings) and vide circular resolutions. The Board papers and papers accompanying circular resolutions are comprehensive and encompass both quantitative and qualitative factors so that informed decisions are made. The Chairman ensures that all Directors have full and timely access to information with Board papers distributed at least 7 days in advance of meetings or a shorter time period when unavoidable. This allows the Directors to have sufficient time to appreciate issues to be deliberated at the meetings and expedites the decision making process. Verbal explanations are provided by the Executive Director, management personnel and or external consultants, as applicable, to further the Directors understanding of operational management and or other matters tabled for Board s deliberation. The Board has unhindered access to the advice and services of the Company Secretaries who are responsible for ensuring that all Board procedures are followed and that applicable rules and regulations are complied with. The Company Secretaries also act as the Secretaries for the Board Committees. The Directors may seek the advice of Management on matters under discussion or request further information on the Group s business activities. The Board will review, consider and authorise the release of all major corporate announcements to Bursa Securities. The Directors, whether as full Board or in their individual capacity, may upon approval from Chairman, seek independent professional advice if required, in furtherance of their duty, at the Group s expense. 035

9 Corporate Governance Statement (Cont d) Principle 1: Establish clear goals and responsibilities (CONT D) 1.6 Qualified and competent Company Secretaries The current Company Secretaries are competent, qualified and capable of providing the needful support to the Board in discharging its fiduciary duties. They have attended regular trainings and seminars to keep abreast of relevant statutory and regulatory requirements under the Main Market Listing Requirements ( MMLR ) of Bursa Securities, the Companies Act 1965, Capital Market Services Act 2012 and the Code. 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 discharging their duties and responsibilities, the Company Secretaries are present at all meetings to record the deliberations and decisions taken. The duties of the Company Secretaries include, among others, the following: (a) (b) (c) (d) (e) preparing agendas and coordinating the preparation of the Board papers; ensuring that Board procedures and applicable rules are observed; maintaining records of the Board and ensure effective management of the Group s records; preparing comprehensive minutes to document Board proceedings and ensuring conclusions are accurately recorded; and timely dissemination of information relevant to Directors roles and functions and keeping them updated on new or evolving regulatory requirements. 1.7 Board Charter The Board Charter, approved in late 2014, took into account various recommendations of the Code and the changes to the MMLR of Bursa Securities. The Board Charter will be reviewed from time to time. The Management will make available salient features of the Board Charter on the corporate website soon. Principle 2: Strengthen composition As at the date of this statement, the Board comprises eight (8) members as set out below: Directors Tan Kai Hoe Goh Wee Keng, Jeffrey Shum Sze Keong Dato Mohamed Salleh Bin Bajuri Dato Seo Eng Lin, Robin Dato Wong Siew Hai Dato Sri Lee Tuck Fook Lee Hock Chye Designation Non-Independent Non-Executive Chairman Executive Director & CEO Non Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director On 26 August 2015, the Board announced the retirement of the Non-Independent Non-Executive Chairman, Mr Loh Chuk Yam and the vacancy was filled by Mr Tan Kai Hoe on even date. Mr Tan is the Non-Independent Non-Executive Chairman of the Board in keeping with his position as nominee director of the penultimate holding company. A brief profile of each Director is presented in the corresponding section of this Annual Report. 036

10 Corporate Governance Statement (Cont d) Principle 2: Strengthen composition (CONT D) 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 of 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. 2.1 Nominating & Remuneration Committee The NRC, which comprises solely of Non-Executive Directors with a majority being Independent, was established on 3 June 2015, amalgamating the Nomination Committee and Remuneration Committee. Members of the NRC and their attendance at the only meeting held during financial year under review are as set out below. Designation Directors Attendance Chairman Dato Wong Siew Hai 1/1 Members Mr. Tan Kai Hoe Dato Seo Eng Lin, Robin Mr. Lee Hock Chye 1/1 1/1 1/1 The NRC was established with specific terms of reference to recommend to the Board, candidates for Directorships, oversee assessment of Directors, appoint Board Committee members as well as review Board succession planning and training programs. The Board is satisfied that the current Board size and composition has the right mix of skills, core competencies and balance for the Board to discharge its duties effectively. 2.2 Develop, maintain and review criteria for recruitment and annual assessment of Directors The NRC conducts an annual Board evaluation, through a questionnaire, for Directors to assess the effectiveness of the Board as a whole, the Board Committees and contribution of each Director, required mix of skills and experiences to enhance Board efficacy. The assessment and comments from the Directors are collated, distilled, summarised and reported to the Board by the NRC Chairman with an aim towards continuous improvement of the Board, Directors and Board Committees. The NRC will look into the development of a set of criteria for use in the recruitment process. The current criteria for annual assessment of Directors is as set out in the assessment form. The effectiveness of the Board is assessed in the areas of 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. In the case of individual Directors, the assessment involved a self review where Directors assessed their own performance on their contribution and competencies such as ability to give constructive suggestions, demonstrate objectivity and a high level of professionalism and integrity in decision-making process and provide realistic advice to the Board and Board Committees. The suitability of candidates will be considered and evaluated by the NRC based on, among others, experience, commitment (including time commitment), competency, contribution and integrity of candidates including, where appropriate, criteria for assessing the independence for any appointment as Independent Non-Executive Directors. The NRC will then recommend the candidates to be approved and appointed by the Board. The Company Secretaries will ensure that all appointments are properly made, and that legal and regulatory obligations are met. 037

11 Corporate Governance Statement (Cont d) Principle 2: Strengthen composition (CONT D) 2.2 Develop, maintain and review criteria for recruitment and annual assessment of Directors (Cont d) During the year, the NRC carried out the following activities: (a) Reviewed and assessed the mix of skills, expertise, composition, size and experience of the Board, contribution of each Director, the effectiveness of the Board as a whole, Board Committees and the re-election of Directors who retire by rotation. (b) Established and recommended the Terms of Reference for the Committee to the Board for adoption. (c) Reviewed and adopted Board Evaluation Report for financial year ended 31 March (d) Discussed the character, experience, integrity and competency of the Directors and the CFO and ensure all of them have the time to discharge their roles. (e) Reviewed the Directors retirement by rotation and recommended to the Board, Directors who are due for retirement at the Annual General Meeting ( AGM ). (f) Reviewed and recommended the retention of Independent Non-Executive Directors who have served a cumulative term of more than nine (9) years to the Board for endorsement and to seek shareholders approval at the AGM. (g) Reviewed and recommended the Directors Fees for the Non-Executive Directors. (h) Reviewed the Committee s Report for inclusion in the Annual Report. (i) Accepted the retirement of the Non-Independent Non-Executive Chairman and reviewed the suitability of candidate to the position as recommended by the penultimate holding company, Accuron Technologies Limited ( Accuron ). During the year, the NRC reviewed the candidacy of Mr Tan Kai Hoe as the Non-Independent Non-Executive Chairman. In assessing his candidacy, the NRC reviewed his resume and considered the following facts: (a) (b) (c) Nomination was by Accuron to represent the interest of the major shareholder. His professional experience and current role as President and CEO of Accuron, a major player in the aerospace supply chain industry. His broad-based leadership roles in several entities including Accuron. The Articles of Association provide that all Directors shall retire from office once at least in each three years, but shall be eligible for re-election. An election of Director(s) shall take place each year. A retiring Director shall retain office until the close of the annual general meeting at which he retires. In any case of a Director appointed during the year, he shall hold office only until the next AGM and shall be eligible for reelection. This provides an opportunity for shareholders to grant or renew mandates for the Directors. The election of each Director is voted on separately. To assist shareholders in their decision, sufficient information such as personal profile, meeting attendance and the shareholdings in the Company of each Director standing for election are disclosed in various sections of this Annual Report. Directors over seventy (70) years of age are required to submit themselves for re-appointment annually in accordance with Section 129(6) of the Companies Act Following any appointment of Directors, the Board will ensure that a formal induction process be conducted to allow them to have a good understanding of the Group s operations and business, present issues (if any), corporate strategies and direction and structure and management of the Group. In its 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. In this regard, the NRC will continue to take steps to ensure that suitable women candidates are sought as part of its recruitment exercise when the opportunity arises. 038

12 Corporate Governance Statement (Cont d) Principle 2: Strengthen composition (CONT D) 2.2 Develop, maintain and review criteria for recruitment and annual assessment of Directors (Cont d) Remuneration Policy The NRC also makes recommendations to the Board on the remuneration of the Executive Director and Non-Executive Directors of the Company. The aim is to provide remuneration package sufficient to attract, retain and motivate Directors of calibre to oversee the affairs of the Group and ensuring compliance with the requirements of relevant authorities and best practices to meet the interests of both the shareholders and Group. The aggregate remuneration, with categorisation into appropriate components and distinguishing between Executive and Non- Executive Directors, paid or payable to all Directors of the Company from the Group for the financial year ended 31 March 2016 was as follows: Directorship Fees Salaries & Bonuses Benefits in kind Allowance Total RM Executive 40,833 40,833 Non-Executive 356, , ,667 Total 397, , ,500 Note: The Directors fees for Loh Chuk Yam, Tan Kai Hoe and Goh Wee Keng, Jeffrey shall be paid to Accuron and SAM Singapore respectively where they are employed as at 31 March, The Directors fees for Loh Chuk Yam and Tan Kai Hoe are apportioned for the period that they had served during the financial year. The number of Directors whose total remuneration paid/payable falls within the following bands of RM100,000 is tabulated below. Remuneration band Number of Directors Executive Non-Executive Below RM 50, RM 50,001 to RM 100,000 5 Note: Mr Loh Chuk Yam retired from the Board on 26 August Mr Tan Kai Hoe was appointed Chairman of the Board on 26 August The Board chose to disclose the remuneration bands pursuant to the MMLR of Bursa Securities and is of the opinion that detailed disclosure of individual Directors remuneration will not add significantly to the understanding and evaluation of the Group s governance. 039

13 Corporate Governance Statement (Cont d) Principle 3: Reinforce Independence The Board also complies with paragraph of the Listing Requirements, which requires that at least two Directors or one-third of the Board of Directors of the Company, whichever is the higher, are Independent Directors. The five Independent Non-Executive Directors form the majority on this Board. 3.1 Annual assessment of Independent Non-Executive Directors The NRC assesses the independence of 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. 3.2 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 13/2002 of the MMLR of Bursa Securities. An Independent Director is not a member of management and is free from any business or other relationship which could interfere with the exercise of independent judgment or the ability to act in the best interests of the Company. Recommendation 3.2 of the Code states that the tenure of an Independent Director should not exceed a cumulative term of nine years. Recommendation 3.3 of the Code further states that the Board must justify and seek shareholders approval in the event it retains as an Independent Director, a person who has served in that capacity for more than nine years. These Recommendations are intended to ensure the independence of Directors for the protection of the minority shareholders. The Securities Commission accepts that compliance with Code is voluntary as there can be no one size fits all rules for all companies. The controlling shareholders of the Company changed on 26 September 2007 when Singapore Precision Engineering Limited and Singapore Aerospace Manufacturing Pte Ltd, collectively, acquired % of the entire issued share capital of the Company. Thus, for the purposes of Recommendations 3.2 and 3.3 respectively, the NRC and the Board had determined that the nine years shall commence from 26 September 2007 or the date of appointment of each Independent Director, whichever shall be the later. Having so determined, the NRC and the Board will be vigilant to ensure that each of the Directors, including Independent Directors, shall continue to carry out their duties and discharge their obligations to the Company as required by law. 3.3 Shareholders Approval for retaining Independent Non-Executive Directors In the event that the Board intends to retain the Independent Non-Executive Director as such after he has served a cumulative term of more than nine (9) years, the Board shall justify the decision and seek shareholders approval at the annual general meeting. The NRC and the Board recognised that independence should not be determined only by tenure of service. 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 Bajuri, Dato Wong Siew Hai and Dato Seo Eng Lin, Robin have all served the Company as Independent Non-Executive Directors for a cumulative term of more than 9 years from

14 Corporate Governance Statement (Cont d) Principle 3: Reinforce Independence (CONT D) 3.3 Shareholders Approval for retaining Independent Non-Executive Directors (Cont d) The Board, through the NRC, had conducted annual performance evaluation and assessment on these Independent Non- Executive Directors and is of the opinion that they remain independent premised upon the following rationale: (a) (b) (c) (d) They fulfilled the criteria for independence as stated in the MMLR of Bursa Securities. Their long tenure of service has allowed them to be thoroughly acquainted with the business operations of the Group which in turn has enabled them to participate actively and contribute positively to deliberation at Board Committees and Board meetings. Their wide-ranging professional, corporate and commercial experience provide the Board with diverse set of expertise, skills and competencies. They are objective and impartial in expressing their views and opinions during meetings, have always exercised due care and carried out their duties in the best interest of the Company and shareholders. e) They had contributed time and efforts for an informed and balanced deliberation at Board and Board Committees meetings and their attendance record at these meetings reflect their commitment to the Group. The Board will be seeking shareholders approval at the forthcoming AGM for the retention of Dato Salleh bin Bajuri, Dato Wong Siew Hai and Dato Seo Eng Lin, Robin to continue as Independent Non-Executive Directors of the Company. 3.4 Separation of position of Chairman and CEO There is a clear division of responsibilities at the Board level to ensure a balance of authority and power so that no one individual has unfettered powers over decision-making. The Board is led by the Non Independent Non-Executive Chairman while the executive management is helmed by the Executive Director & CEO. The roles and responsibilities of both the Chairman and the sole Executive Director & CEO are more particularly stated under section 1.1 above. Such delineation of roles sets out the practices and processes in the discharge of responsibilities, the matters that are reserved for consideration and decision making, the authority that has been delegated to the Executive Director & CEO and provides guidance on the division of responsibilities. 3.5 Composition of the Board The present Board composition reflects compliance with Recommendation 3.5 of the Code in that the Independent Directors form a majority when the Chairman is not an Independent Non-Executive Director. The high proportion of Independent Non- Executive Directors also provides for effective check and balance in the functioning of the Board. Principle 4: Fostering Commitment 4.1 Time Commitment The Board ordinarily meets at least four (4) times a year with additional meetings convened when urgent and important decisions needed to be taken between the scheduled meetings. During the financial year ended 31 March 2016, the Board met on four (4) occasions where it deliberated upon and considered various matters. 041

15 Corporate Governance Statement (Cont d) Principle 4: Fostering Commitment (CONt D) 4.1 Time Commitment (Cont d) Details of each Director s attendance at Board meetings held during the financial year are as follows: Directors Attendance Tan Kai Hoe (a) 2/2 Loh Chuk Yam (b) 2/2 Goh Wee Keng, Jeffrey 4/4 Shum Sze Keong 4/4 Dato Mohamed Salleh Bin Bajuri 4/4 Dato Seo Eng Lin, Robin 4/4 Dato Wong Siew Hai 4/4 Dato Sri Lee Tuck Fook 3/4 Lee Hock Chye 4/4 (a) Mr Tan Kai Hoe s attendance is counted with effect from his appointment to the Board on 26 August (b) Mr Loh Chuk Yam s attendance is counted until his retirement from the Board on 26 August All deliberations and decisions reached at Board Committees are recorded and Chairman of the respective Committees will report to the Board on the outcome of the Committees meetings. Minutes of the AC meetings are circulated to the Board whilst minutes for the other Board Committees, namely, the IDC, NRC and RMC, are circulated upon request by the Directors. It is a policy for Directors to devote sufficient time and efforts to carry out their responsibility. This commitment is given to the Board at the time of appointment as Directors. In addition, Board policy dictates that Directors are to notify the Chairman before accepting any new directorships notwithstanding that the MMLR allows a Director to sit on the Board of not more than five (5) listed companies. This notification is expected to include an indication of time to be spent on the new appointment. Risk Management Committee ( RMC ) The RMC, which comprises wholly of Independent Non-Executive Directors, was established on 12 August Members of the RMC and their attendance at the RMC meetings held during financial year under review are as tabulated below. Designation Directors Attendance Chairman Dato Wong Siew Hai 2/2 Members Dato Mohamed Salleh Bajuri Dato Seo Eng Lin, Robin 2/2 2/2 Dato Mohamed Salleh Bajuri is the representative of the AC to the RMC 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. The formation of the RMC arose from the Board s decision to have a dedicated committee focused on the identification, monitoring and prioritisation of risks that affect the Group followed by coordinated efforts and resources to minimise their potential impact to the Group s operations whilst maximising realisation of opportunities. The risk management function was previously under the purview of the Audit & Risk Management Committee. 042

16 Corporate Governance Statement (Cont d) Principle 4: Fostering Commitment (CONt D) 4.1 Time Commitment (Cont d) Risk Management Committee ( RMC ) (Cont d) Established with specific terms of reference, the RMC is tasked to review the Group s risk management framework and policy; and to provide assurance to the Board that a sound risk management and internal control system is in place and in accordance with the requirements of regulatory bodies. During the year under review, the Risk Management Committee carried out the following activities: (a) (b) (c) Identified and monitored the top 5 risks of respective business units and the Group. Reviewed the Key Risk Indicator ( KRI ) and worked with management to minimise its impact to the Group. Reviewed and endorsed the Statement on Risk Management and Internal Control. Investment & Divestment Committee ( IDC ) The IDC, which comprises wholly of Independent Non-Executive Directors, was established on 12 August Members of the Committee and their attendance at the IDC meetings held during financial year under review are as tabulated below. Designation Directors Attendance Chairman Dato Mohamed Salleh Bajuri 1/1 Members Dato Sri Lee Tuck Fook Lee Hock Chye 1/1 1/1 The IDC focuses on the identification and evaluation of investments of a capital nature. During the year, the IDC considered and recommended capital investment totalling about USD21 million to increase capacity to manufacture equipment, beams and brackets for the aerospace industry. 4.2 Directors Training The Directors are fully aware of the importance of keeping abreast with the latest changes and developments in the industries in which the Company 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 Tan Kai Hoe Goh Wee Keng Shum Sze Keong Trainings MAP Investor Relations for Directors Trade shows and plant visits to suppliers and customers Investor Relations for Directors The effect of changes in foreign exchange rates Bursa Malaysia CG Breakfast Series with Directors - Bringing the Best out in Boardrooms 043

17 Corporate Governance Statement (Cont d) Principle 4: Fostering Commitment (CONt D) 4.2 Directors Training (Cont d) Directors Dato Mohamed Salleh Bin Bajuri Dato Seo Eng Lin Dato Wong Siew Hai Dato Sri Lee Tuck Fook Lee Hock Chye Trainings The effect of changes in foreign exchange rates Risk Management & Internal Control for Audit Committees - Post Workshop Discussion Bursa Malaysia CG Breakfast Series with Directors - Bringing the Best out in Boardrooms Investor Relations for Directors Investor Relations for Directors Asean Conference Cross Boarder e-conference - Driving Export Business Through The Online Marketplace The effect of changes in foreign exchange rates Capital Market Director Programme for Fund Management (Modules 1, 2B, 3 & 4) The effect of changes in foreign exchange rates The Board continues to encourage participation of Directors in various training programmes and ensures that the Directors training needs are met. The NRC, through management, has circulated appropriate trainings, briefings, seminars and conferences, covering topics on governance, risk management, accounting, general management and investor relations, for consideration by Board members to keep themselves updated on changes to the legislations and regulations affecting the Group. In addition, the Directors are regularly updated by the Company Secretaries on any changes to the statutory, corporate and regulatory requirements relating to Directors duties and responsibilities or the discharge of their duties as Directors. The external auditors also have briefed the Board on changes to the Malaysian Financial Reporting Standards that affect the Group s financial statements. Principle 5: Uphold Integrity in Financial Reporting 5.1 Compliance with Applicable Financial Reporting Standards The Board aims to provide and present a balanced and meaningful assessment of the Group s financial performance and prospects at the end of the financial year, primarily through the annual financial statements and quarterly announcements of results to shareholders as well as the Chairman s Statement in 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. Composition of the AC together with its roles and responsibilities are outlined under the Audit Committee Report. 5.2 Assessment of Suitability and Independence of External Auditors by the Audit Committee 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 Company. The External Auditors have an obligation to bring to the attention of the Board, the AC and the Company management any significant defects in the Company s systems of reporting, internal control and compliance with approved accounting standards as well as legal and regulatory requirements. The External Auditors of the Company are invited to attend at least two meetings of the AC a year without the presence of the Executive Directors and management. During the year, the fees incurred by the Group for services rendered by the External Auditors of the Company and its affiliated firms were approximately RM220,000 inclusive of RM20,000 for non-audit services. 044

18 Corporate Governance Statement (Cont d) Principle 5: Uphold Integrity in Financial Reporting (CONT D) 5.2 Assessment of Suitability and Independence of External Auditors by the Audit Committee (Cont d) The Internal Audit function of the Company is coordinated with the findings of the External Auditors to ensure as complete an audit coverage of Group activities as possible. Thus, the Company has established a transparent arrangement to meet the professional requirements of the External Auditors. The key features underlying the relationship of the AC with the External Auditors are included in the AC s terms of reference as detailed in this Annual Report. A summary of the activities of the AC during the financial year is set out under the Audit Committee Report in this Annual Report. Recently, the Board, via the AC, assessed and affirmed the independence and suitability of the External Auditors to continue in office. The AC evaluated the External Auditors based on review of performance and assurances from the External Auditors as well as discussion with management and reported to the Board on the independence of the External Auditors. In compliance with Malaysian Institute of Accountants by-laws, the Audit Partners are rotated every five (5) years to ensure objectivity, independence and integrity of the audit opinions. Such assurance was given by the External Auditors in the Audit Planning Memorandum and Audit Finding Report presented to the AC. Moving on, the Board will develop a policy on assessment of the independence and suitability of External Auditors as well as to govern circumstances and thresholds under which contracts for provision of non-audit services could be entered into between the Group and the External Auditors. Principle 6: Recognise and Manage Risks 6.1 Sound Framework to Manage Risks 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. The RMC was established on 12 August 2013 to review and recommend 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. 6.2 Internal Audit Function The key features and state of internal control and risk management of the Group are furnished in the Statement on Risk Management and Internal Control in this Annual Report. An independent Internal Audit function, which reports directly to the AC, was established in line with the Code and the MMLR of Bursa Securities. Detailed information on the internal audit function is outlined in the Audit Committee Report. 045

19 Corporate Governance Statement (Cont d) Principle 7: Ensure Timely and High Quality Disclosure 7.1 Corporate Disclosure Policy The Board has formalised policies and procedures on corporate disclosure and communication with shareholders and stakeholders to facilitate effective communications with the intention of providing a clear and complete overview of the Group s performance and operations. These policies and procedures comply with disclosure requirements as set out in the MMLR of Bursa Securities and also define the key personnel authorised to approve and disclose material information with regard to the Group. The Board is also guided by best practices and policies in use in the market. The Board is further mindful that information deemed material must be announced immediately. 7.2 Leverage on Information Technology for Effective Dissemination of Information As part of its efforts to be transparent and accountable to the investing community, the Board has an active and constructive disclosure and communication policy that enables the Board and management to have effective communications with the shareholders, investing community and the public. The Company s website, provides a comprehensive avenue for information dissemination, such as dedicated sections on corporate information including financial information, announcements to Bursa Securities, press releases and company news. Shareholders are able to submit questions to the Board through the website or via to investorrelations@sam-malaysia.com. Principle 8: Strengthen Relationship between Company and Shareholders 8.1 Shareholder s Participation at General Meetings 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, when applicable. 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. Every notice convening general meeting specifying the place, the day and the hour of the meeting are given to all members at least 14 days before the meeting or at least 21 days before the meeting where any special resolution is to be proposed or where it is an annual general meeting. The Board will contemplate adopting electronic voting to facilitate greater shareholders participation at general meetings, if deemed warranted. 8.2 Encourage Poll-Voting It is noted that Chairman does inform the shareholders of their rights to demand for polls prior to the commencement of each general meeting. Going forward, the Board will conduct poll-voting for all resolutions in line with the provision of MMLR of Bursa Securities. 046

20 Corporate Governance Statement (Cont d) Principle 8: Strengthen Relationship between Company and Shareholders (CONT D) 8.3 Effective Communication and Proactive Engagement 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 pricesensitive information are not released unless it has been duly announced or made public through the proper channels. The Board recognises that the Independent Directors are vital towards protecting the interests of shareholders. Shareholders and stakeholders could communicate their concern to the Independent Directors through mail to the Company s registered address or via to independent@sam-malaysia.com. The Corporate Governance Statement is issued in accordance with a resolution of the Board of Directors dated 17 June

21 Audit Committee Report The Audit Committee ( AC ) is an independent 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 Group s activities: (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. COMPOSITION The AC is comprised solely of Non-Executive Directors with a majority being Independent and their attendance at the 5 Committee meetings held during the financial year under review is tabulated below. Designation Directors Attendance Chairman Lee Hock Chye 5/5 Members Dato Mohamed Salleh Bin Bajuri Dato Sri Lee Tuck Fook Shum Sze Keong 5/5 5/5 5/5 Summary of activities during the financial year In line with the terms of reference, the AC conducted five (5) 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 ). External auditors (b) (c) (d) (e) (f) Reviewed the external auditors scope of work, proposed audit fee and audit plan for the year under review. Reviewed with the external auditors, in the absence of management, the adequacy and effectiveness of the system of internal control and any other area of concern arising from their interim and final audit. Reviewed the performance of the existing external auditors for the Group. Reviewed with external auditors any significant findings in relation to audit. Reviewed and evaluated factors relating to the independence of the external auditors and recommend the reappointment of the Group s external auditors. 048

22 Audit Committee Report (Cont d) Summary of activities during the financial year (CONT D) Internal auditors (g) (h) (i) (j) (k) (l) (m) (n) (o) (p) (q) 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. Reviewed the internal audit plan adopted by the internal audit function. Reviewed the internal audit reports, audit recommendations made and Management s response 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 processes based on the internal auditors recommendations and suggestions for improvement. Review of implementation of these recommendations through follow up audit reports. Reported to the Board on its activities and significant findings and results. Reviewed any appraisal or assessment of the performance of the Internal Audit Manager. Reviewed the circular to shareholders on recurrent related party transactions ( RRPT ) of a revenue nature. Reviewed significant related party transactions entered into by the Group. Reviewed the RRPT and ensured that these RRPT complies with approved procedures and policies and the mandate from the shareholders. Reviewed the Statement on Risk Management and Internal Control which provides an overview of the state of internal controls within the Group prior to the Board s approval for inclusion in the Annual Report. Carried out two (2) discussion sessions with External Auditors without the presence of the Executive members of the Board and employees. Internal audit function The Group s Internal Audit function reports directly to the AC and assists it to discharge its duties and responsibilities. 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, the audit work is conducted by outsourced internal audit service providers. As part of the audit work, Internal Audit reviews the adequacy and effectiveness of the internal control system, compliance with rules, regulations, policies and procedures and also evaluates efficiency of key business processes. During the financial year, internal audit was conducted in the following areas:- (a) (b) (c) (d) Inventory Management Facilities Management Procurement Management Sales and Collection The AC is pleased to confirm that the results of each of the audits was satisfactory. The Risk Management Committee ( RMC ) 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 RMC, propose to AC that an audit be conducted on the relevant area. During the financial year, the estimated total cost incurred for the Internal Audit Function was RM220,

23 Audit Committee Report (Cont d) TERMS OF REFERENCE Composition of AC 1. The AC shall be appointed by the Board from amongst its members and shall consist of not less than three (3) members of whom a majority are independent and the members shall not: (a) be Executive Directors of the Company or any related corporations; (b) comprise a spouse, parent, brother, sister, son or adopted son, daughter and adopted daughter of an Executive Director of the Company or any related corporations; or (c) comprise persons having a relationship which in the opinion of the Board would interfere with the exercise of independent judgment in carrying out the function of the AC. 2. At least one (1) member of the Committee: (a) must be a member of the Malaysian Institute of Accountants; or (b) if he is not a member of the Malaysian Institute of Accountants, he must have at least three (3) years working experience; and (i) he must have passed the examinations specified in Part 1 of the First Schedule of the Accountants Act 1967; or (ii) he must be a member of one (1) of the associations of accountants specified in Part II of the First Schedule of the Accountants Act 1967; and (c) fulfill such other requirements prescribed or approved by the Exchange. 3. The AC shall elect a Chairman from among its members who is an Independent Director. All the members should be financially literate. 4. No alternate director should be appointed as a member of the AC. 5. All members of AC, including the Chairman, will hold office only so long as they serve as Directors of the Company and have not been removed from the AC by the Board. 6. In the event that a member of the AC resigns, dies or for any reason ceases to be a member with the result that the number is reduced below three (3) or resulting in the non-compliance of the Listing Requirements of the Exchange pertaining to composition of AC, the Board shall, within three (3) months of that event, fill the vacancy. 7. The terms of office and performance of the AC and each of its members must be reviewed by the Board of Directors at least once every three (3) years to determine whether the AC and its members have carried out their duties in accordance with their terms of reference. Secretary to AC The Company Secretary shall be the secretary of the AC or in her absence, another person authorised by the Chairman of the AC. The Secretary of the AC shall be responsible for drawing up the agenda in consultation with the Chairman of the AC. The agenda together with relevant explanatory papers and documents shall be circulated to the AC members prior to each meeting. The Secretary shall be responsible for keeping the minutes of the meeting of the AC, circulating them to all members of the Board. Meetings 1. The AC shall meet at least four (4) times a year. The Chairman of the AC will highlight any major issues and any items requiring resolution by the Board. 2. In addition, the Chairman shall convene a meeting of the AC if requested to do so by any member of the AC, or the internal or external auditors to consider any matters within the scope and responsibilities of the AC. 3. The Chairman of the AC should engage on a continuous basis with senior management, such as the Chairman of the Board, CEO, Chief Financial Officer ( CFO ), the Internal Audit Manager and the External Auditors in order to be kept informed of matters affecting the Company. Meeting Procedure The AC shall regulate its own procedures, in particular: (a) the calling of meetings; (b) the notice to be given of such meetings; (c) the voting and proceedings of such meetings; (d) the keeping of minutes; and (e) the custody, production and inspection of such minutes. 050

24 Audit Committee Report (Cont d) TERMS OF REFERENCE (CONT D) Quorum A quorum shall consist of 2 AC members made up of a majority of independent Directors. Attendance by Invitation The CEO and CFO, the Internal Audit Manager and the representative of the External Auditors should normally be invited to attend meetings. The AC may invite any person to be in attendance to assist in its deliberations in any particular meeting. However, the AC should meet with the External Auditors without the presence of Executive Board members and management at least twice a year. Rights of the External Auditors The External Auditors have the right to appear and be heard at any meeting of the AC and their representative shall appear before the AC when required to do so by the AC. Authority of the AC The AC should: (a) Have authority to investigate any activity within its terms of reference; (b) Have the resources which are required to perform its duties; (c) Have full and unrestricted access to all information, documents and officers of the Company and the Group for the purpose of discharging its functions and responsibilities; (d) Have direct communications channels with the External Auditors and person(s) carrying out the internal audit function or activity; (e) Be able to obtain outside legal or other independent professional advice as it considers necessary at the expense of the Company; and (f) Be able to convene meetings with the External Auditors, Internal Auditors or both, without the presence of Executive Directors and employees of the Group, whenever deemed necessary. Duties and Responsibilities The duties and responsibilities of the AC shall be: (a) (b) (c) (d) To review the Company s and the Group s quarterly results and annual financial statement before submission to the Board, focusing on: (i) Any changes in or implementation of accounting policies and practices; (ii) Major judgment areas; (iii) Significant adjustments proposed by the External Auditors; (iv) Going concern assumption; (v) Compliance with accounting standards; (vi) Compliance with stock exchange and legal requirements; and (vii) Significant and unusual events To review with the External Auditors their audit plan, scope and nature of audit for the Company and the Group, their evaluation of the system of internal control, their audit report, and the assistance given by the Company s employees to the external auditors; To assess the adequacy and effectiveness of the system of internal control and accounting control procedures of the Company and the Group; To discuss problems and reservations arising from the interim and final audits, and any matters the external auditors may wish to discuss (in the absence of management where necessary); 051

25 Audit Committee Report (Cont d) TERMS OF REFERENCE (CONT D) Duties and Responsibilities (Cont d) (e) (f) (g) (h) (i) (j) (k) (l) To perform the following, in relation to the Internal Audit function: (i) Review the adequacy of the scope, functions, competency and resources of the internal audit function, and that it has the necessary authority to carry out its work (ii) Review the internal audit programme and results of the internal audit programme, processes or investigation undertaken and, where necessary, ensure that appropriate actions are taken on the recommendations of Internal Audit function; (iii) Review the internal audit plan, consider the major findings of the internal audits, internal or fraud investigations and actions and steps taken by management in response to audit findings; (iv) Review any appraisal or assessment of the performance of the Internal Audit Manager; (v) Approve any appointment or termination of senior staff members of the Internal Audit function; and (vi) Take cognisance of resignations/transfer of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning. To review any related party transactions and conflict of interest situation that may arise within the Company and the Group including any transaction, procedure or course of conduct that raises questions of management integrity; To consider the appointment of the external auditors and to review whether there is reason (supported by grounds) to believe that the external auditors are not suitable for re-appointment, to consider the nomination of a person or persons as external auditors and the audit fees, the terms of reference of their appointment and any question of resignation or dismissal; To verify the allocation of options granted pursuant to Employee Share Option Scheme; To report to the Board its activities, significant results and findings; To promptly report such matter to the Bursa Securities if the AC is of the view that the matter reported by it to the Board of Directors has not been satisfactorily resolved resulting in a breach of the Listing Requirements; To discuss the contracts for the provision of non-audit services which can be entered into and procedures that must be followed by the external auditors. The contracts which cannot be entered into should include management consulting, strategic decision, internal audit and standard operating policies and procedures documentation; and To undertake any such responsibilities as may be agreed by the AC and the Board. Review The terms of reference shall be reviewed by the AC as and when required. All amendments to the Terms of Reference must be approved by the Board. 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 Chairman s Statement and CEO s Statement in 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. Composition of the AC together with its roles and responsibilities are outlined under the AC sub-heading in this statement. 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 RMC was established on 12 August 2013 to review and recommend 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. 052

26 Audit Committee Report (Cont d) ACCOUNTABILITY AND AUDIT (CONT D) Internal control & risk management (Cont d) 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. An independent internal audit function, which reports directly to the AC, has been established in line with the Code and the Listing Requirements of Bursa Securities. Detailed information on the internal audit function is outlined in the Statement on Risk Management and Internal Control. Relationship with external auditors The External Auditors of the Company fulfill 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 Company. The External Auditors have an obligation to bring to the attention of the Board of Directors, the AC and Company management any significant defects in the Company s systems of reporting, deficiencies in internal control and failure to comply with approved accounting standards, 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 the Executive Directors and management. During the year, the fees incurred by the Group for services rendered by the External Auditors of the Company and its affiliated firms were approximately RM220,000 inclusive of RM20,000 for non-audit services. The internal audit function of the Company works with the External Auditors to ensure as complete an audit coverage of Company activities as possible. Thus, the Company has established a seamless arrangement to meet the professional requirements of the External Auditors. The key features underlying the relationship of the AC with the External Auditors are included in the AC s terms of reference as detailed in this Annual Report. A summary of the activities of the AC during the financial year, are set out in the AC sub-heading in this statement. Recently, the Board, through the AC, assessed and affirmed the independence and suitability of the External Auditors to continue in office. Moving on, the Board has formalized criteria on assessment on the independence and suitability of external auditors as well as to govern circumstances and threshold under which contracts for provision of non-audit services could be entered into by the external auditors. DIRECTORS RESPONSIBILITY STATEMENT IN RESPECT OF THE PREPARATION OF THE AUDITED FINANCIAL STATEMENTS The Board is responsible for ensuring that the financial statements give a true and fair view of the state of affairs of the Group and of the Company as at the end of the financial year and of their profit or loss and cash flows for the year then ended. In preparing the financial statements, the Directors have ensured that applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965 have been applied. 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 statement is issued in accordance with a resolution of the Directors dated 17 June

27 Statement on Risk Management and Internal Control BOARD RESPONSIBILITY The Board affirms its overall responsibility for the Group s system of internal control and risk management and for reviewing the adequacy and integrity of the system. The system of internal control covers governance, risk management, financial strategy and organisational, operational, regulatory and compliance control. However, the Board recognises that this system is designed to manage, rather than eliminate, the risk of not adhering to the Group s policies and achieving goals and objectives. Therefore, the system provides reasonable, but not absolute, assurance against the occurrence of any material misstatement, loss or fraud. The adequacy and effectiveness of risk management and internal controls are reviewed by the Audit Committee ( AC ) through internal audits conducted. The internal audits are mainly outsourced to external service providers. Audit 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 or functional group has implemented its own control processes under the leadership of the Chief Executive Officer ( CEO ), who is responsible for business and regulatory governance. RISK MANAGEMENT Risk management is embedded in the Group s management systems. In order to manage risk in our activities and ensure they are aligned with the Group s strategic objectives and regulatory requirements, we implemented a risk management framework to identify, measure, assess and manage risks faced by the Group. The Board has delegated authority to the Risk Management Committee ( RMC ) to undertake the review of the existing risk management framework and risks dashboards, which detail the likelihood and impact of the significant risks and their corresponding action plans. The functioning of the RMC is supported by the Chief Risk Officer, key management staff and the risk management section of the business units or functional groups led by the head of each such unit or group. Risk Management Framework Group s overall risk management framework is as illustrated in the diagram below: Internal Environment Management sets a philosophy regarding risk & establishes risk appetite. Set organisational tone at the top for risk management. Objective Setting Set objectives that support and align with the entity s mission consistent with its risk appetite. SAM Management identified 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. 054

28 Statement on Risk Management and Internal Control (Cont d) RISK MANAGEMENT (CONT D) Risk Management Framework (Cont d) Risk Assessment, Response and Control Activities Risks are associated with objectives that may be affected and are assessed on both an inherent and a residual basis considering both likelihood and impact. Evaluate possible responses including avoid, accept, reduce and sharing risk. Align response with risk tolerances and appetite. Policies and procedures are established and executed to help enable risk response. Discussions to scrutinise and validate preliminary risks identified as well as new potential risks. Information and Communication Relevant information for decision-making is captured and timely communicated to help enable people to execute within their respective role 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 risk identified and shortlisted principal risks will be presented to SAM Management. Report and tracking the outcome of Enterprise Risk Management through risk register dashboard to SAM Management and Risk Management Committee. The framework is reviewed and revised as and when necessary to ensure it remains relevant and adequate to manage SAM Group s risks, which continue to evolve along with the changing business environment. KEY INTERNAL CONTROL PROCESSES 1. Authority and Responsibility (a) (b) (c) Responsibilities are delegated to Board Committees through clearly defined Terms of Reference which are reviewed and revised when necessary. The Group has a clear organisation structure with well-defined lines of reporting and appropriate levels of responsibility. The Authority Limits Document is reviewed and revised when necessary to reflect the authority and authorisation limits of Management. 2. Planning, Monitoring and Reporting (a) (b) (c) An annual planning and budgetary exercise is undertaken and are deliberated and approved by the Board before implementation. Updates on the Group s business and operations are provided to the Board at every meeting together with the financial performance variances. 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 statements close process in the preparation of each quarterly consolidated financial statement. 055

29 Statement on Risk Management and Internal Control (Cont d) KEY INTERNAL CONTROL PROCESSES (CONT D) 3. Policies and Procedures Clear, formalised and documented internal policies, standards and procedures are in place to ensure compliance with internal controls and relevant laws and regulations. Reviews are performed to ensure that documentations 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 function reports directly to the AC with the main role to assist the AC in discharging their duties and responsibilities. The details of activities carried out by the AC are reported in the Audit Committee Report of the Annual Report. 5. Conduct of Staff (a) (b) (c) (d) 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. 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. A Document and Data Control 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. Segregation of duties is practised whereby conflicting tasks are apportioned amongst different employees to reduce the possibility of error and fraud. REVIEW OF THIS STATEMENT Audit Committee While the AC has reviewed this Statement and addressed individual lapses in internal control and risk management via the Internal Audit Manager during the course of internal audits carried throughout the year, it has not identified any circumstances which suggest any fundamental deficiencies in the Group s internal control system and risk management. External Auditor The external auditors have reviewed this Statement on Risk Management and Internal Control pursuant to the scope set out in Recommended Practice Guide ( RPG ) 5 (Revised), 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 year ended 31 March 2016, and reported to the Board that nothing has come to their attention that cause them to believe that the statement intended to be included in the annual report of the Group, in all material respects: a) has not been prepared in accordance with the disclosures required by paragraphs 41 and 42 of the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issues, or b) is factually inaccurate RPG 5 (Revised) 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. 056

30 Statement on Risk Management and Internal Control (Cont d) CONCLUSION Notwithstanding the fact that the Group system of risk management and internal controls do not eliminate the possibility of collusion or deliberate circumvention of procedures by employees or 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, based on the risk management and internal control system of the Group. The Board is of the view that the system of internal control and risk management which are in place for the year under review, and up to the date of approval of this Statement, is sound and sufficient to safeguard shareholders investment, the interest of customers, regulators, employees and other stakeholders, and the Group s assets. This statement was approved by the Board on 19 May

31 Other Information Recurrent Related Party Transactions (RRPT) of revenue or trading nature for the year ended 31 March 2016 Details of RRPT made during the financial year ended 31 March 2016 pursuant to the shareholders mandate obtained by the company at the Annual General Meeting held on 25 August 2015 are as follows: Related Party with whom the Group is transacting Nature of transactions Companies within the Group involved in RRPT Amount in RM 000 Interested Related Party Relationship SAM Singapore SAM Singapore Group SAM Singapore Sales of aerospace parts Sale of modular or complete machine, equipment and spare parts Sales of fabrication/ machining services Provision of engineering and administrative services Provision of corporate management services Purchase of fabrication/ machining services Purchase of modular or complete machine, equipment, component and spare parts Purchase of engineering and administrative services Purchase of corporate management services Sales commission expense Rental of office and factory premises Avitron Pte Ltd 332,021 Tan Kai Hoe# Loh Chuk SAM Malaysia Group SAM Malaysia Group Avitron Pte Ltd (28,476) Esmo Automation (M) Sdn Bhd SAM Malaysia Group Esmo Automation (M) Sdn Bhd 2 (401) (1,594) (2,347) (30) Avitron Pte Ltd (3,685) Goh Wee Keng * SPE Accuron Temasek SAM Singapore Ng Boon Keat* Ho Pon Chow* Teo Siew Geok* Shum Sze Keong* Tan Kai Hoe is the Non-Independent Non-Executive Chairman of SAM Malaysia, Director of SAM Singapore and Director and President & CEO of Accuron. Loh Chuk Yam is the Non-Independent Non-Executive Chairman of SAM Malaysia, Director of SAM Singapore and Director and President & CEO of Accuron. Goh Wee Keng, Jeffrey is the Executive Director and CEO of SAM Malaysia, the Director/President and CEO of SAM Singapore. He is also a Board member of certain subsidiaries of SAM Malaysia and SAM Singapore, including SPE and Aviatron. SAM Singapore, Accuron and Temasek are related corporations to SPE, a Major Shareholder of the Company. Ng Boon Keat and Ho Pon Chow are Directors of certain subsidiaries of SAM Malaysia and are also Directors of Aviatron. Teo Siew Geok is a Director of Esmo Automation (M) Sdn Bhd, a subsidiary of SAM Malaysia and also a Director of JEP Precision Engineering Pte Ltd. Shum Sze Keong, is a Non- Independent Non-Executive Director of SAM Malaysia and a Director of SAM Singapore. * The relationship of the interested related parties is as at 31 March Mr Loh Chuk Yam retired as a Non Independent and Non-Executive Chairman of SAM Engineering & Equipment (M) Berhad w.e.f. 26 August # Mr Tan Kai Hoe was appointed as a Non Independent and Non-Executive Chairman of SAM Engineering & Equipment (M) Berhad w.e.f. 26 August

32 Other Information (Cont d) Recurrent Related Party Transactions (RRPT) of revenue or trading nature for the year ended 31 March 2016 (CONT D) Notes: SAM Malaysia : SAM Engineering & Equipment (M) Berhad SAM Malaysia Group : SAM Engineering & Equipment (M) Berhad and its subsidiaries Aviatron : Aviatron (M) Sdn Bhd, a subsidiary of SAM Singapore SPE : Singapore Precision Engineering Limited, the immediate holding company of SAM Malaysia SAM Singapore : Singapore Aerospace Manufacturing Pte Ltd, the immediate holding company of SPE SAM Singapore Group : SAM Singapore and its subsidiaries/associates excluding SAM Malaysia Group Accuron : Accuron Technologies Limited, the immediate holding company of SAM Singapore Temasek : Temasek Holdings (Private) Limited, the immediate holding company of Accuron JEP Precision Engineering Pte Ltd : 15% owned by SAM Singapore MATERIAL CONTRACTS INVOLVING INTERESTS OF DIRECTORS AND MAJOR SHAREHOLDERS There were no material contracts of the Company and its subsidiaries involving interests of Directors and major shareholders for the financial year under review. 059

33 61 Directors Report 65 Statements of Financial Position 67 Statements of Profit or Loss and Other Comprehensive Income FINANCIAL STATEMENT Consolidated Statement of Changes in Equity Statement of Changes in Equity Statements of Cash Flows Financial Statements Statement by Directors Statutory Declaration 144. Report of the Auditors

34 Directors Report For the year ended 31 MARCH 2016 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 Principal activities The principal activities of the Company are investment holding and provision of corporate management services. The principal activities of its subsidiaries are as stated in Note 5 to the financial statements. There has been no significant change in the nature of these activities during the financial year. Results Group RM 000 Company RM 000 Profit for the year attributable to owners of the Company 63,094 19,399 Reserves and provisions There were no material transfers to or from reserves and provisions during the financial year except as disclosed in the financial statements. Dividends Since the end of the previous financial year, the Company paid a single tier first interim dividend of sen per ordinary share and a single tier special dividend of sen per ordinary share totalling RM27,778,594 in respect of the financial year ended 31 March 2015 on 28 August Subsequent to the end of the financial year, the Company declared a single tier first interim dividend of sen and a single tier special dividend of sen per ordinary share in respect of the financial year ended 31 March 2016 to be paid on 5 August The Directors did not propose any final dividend to be paid for the current financial year. Directors of the Company Directors who served since the date of the last report are : Tan Kai Hoe (Appointed on 26 August 2015) Loh Chuk Yam (Retired on 26 August 2015) Goh Wee Keng Shum Sze Keong Dato Mohamed Salleh Bin Bajuri Dato Wong Siew Hai Dato Sri Lee Tuck Fook Dato Robin Seo Eng Lin Lee Hock Chye 061

35 Directors Report (Cont d) For the year ended 31 MARCH 2016 Directors interests in shares The interests and deemed interests in the ordinary shares and Irredeemable Convertible Unsecured Loan Stocks ( ICULS ) 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 : Balance at Number of ordinary shares of RM1.00 each Bought/ (Sold) Balance at Interest in the Company : Goh Wee Keng Direct interest : - own 1,702,523 1,702,523 None of the other Directors holding office at 31 March 2016 had any interest in the ordinary shares and ICULS of the Company and of its related corporations during the financial year. 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 a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements or the fixed salary of a full time employee of related corporations) 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 apart from via the ICULS of the Company. Issue of shares and debentures During the financial year, the Company increased its issued and paid-up share capital from RM84,290,790 comprising 84,290,790 ordinary shares of RM1.00 each to RM86,322,548 comprising 86,322,548 ordinary shares of RM1.00 each as a result of the conversion of 4,266,729 RM1.00 nominal value of 5-year 4% ICULS into 2,031,758 ordinary shares of RM1.00 each on the basis of one RM1.00 nominal value of ICULS for approximately ordinary shares of RM1.00 each. There were no other changes in the authorised, 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. 062

36 Directors Report (Cont d) For the year ended 31 MARCH 2016 Irredeemable convertible unsecured loan stocks ( ICULS ) On 25 September 2012, the Company issued 135,000,000 RM1.00 nominal value of 5-year 4% ICULS at 100% of its nominal value as part of the purchase consideration for the acquisition of the entire equity interest in Avitron Private Limited from Singapore Aerospace Manufacturing Pte. Ltd.. The salient features of the ICULS are disclosed in Note 22 to the financial statements. At the end of the financial year, the Company has the following outstanding number of ICULS : Expiry date Number of ICULS outstanding as at year 4% ICULS 25 September ,573,420 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) iii) iv) that would render the value attributed to the current assets in the financial statements of the Group and of the Company misleading, or 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 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, the financial performance of the Group and of the Company for the year ended 31 March 2016 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. 063

37 Directors Report (Cont d) For the year ended 31 MARCH 2016 Subsequent event The detail of such event is disclosed in Note 31 to the financial statements. Auditors The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment. Signed on behalf of the Board of Directors in accordance with a resolution of the Directors : Tan Kai Hoe Goh Wee Keng Date : 17 June

38 Statements of Financial Position As at 31 MARCH 2016 Group Company Note RM 000 RM 000 RM 000 RM 000 Assets Property, plant and equipment 3 103,518 92,665 1, Intangible assets 4 1, Investments in subsidiaries 5 187, ,559 Deferred tax assets Total non-current assets 105,405 93, , ,469 Trade and other receivables 7 148, ,326 28,990 57,732 Inventories 8 124, ,606 Derivative financial assets 9 3, Current tax assets Cash and cash equivalents , ,585 15, Total current assets 450, ,819 44,820 58,140 Total assets 555, , , ,609 Equity Share capital 11 86,322 84,291 86,322 84,291 Reserves , , , ,612 Equity attributable to owners of the Company 438, , , ,

39 Statements of Financial Position (Cont d) As at 31 MARCH 2016 Group Company Note RM 000 RM 000 RM 000 RM 000 Liabilities Loans and borrowings 13 1,709 5,310 1,709 5,310 Deferred tax liabilities 6 4,357 5,416 1,322 2,223 Total non-current liabilities 6,066 10,726 3,031 7,533 Loans and borrowings 13 3,797 3,955 3,797 3,955 Trade and other payables 14 91,093 72,052 7,633 4,218 Derivative financial liabilities Provisions 15 9,282 6,679 Current tax liabilities 6,742 4,649 Total current liabilities 110,947 87,859 11,430 8,173 Total liabilities 117,013 98,585 14,461 15,706 Total equity and liabilities 555, , , ,609 The notes on pages 74 to 142 are an integral part of these financial statements. 066

40 Statements of Profit or Loss and Other Comprehensive Income For the year ended 31 MARCH 2016 Group Company Note RM 000 RM 000 RM 000 RM 000 Revenue , ,520 27,973 36,367 Cost of sales (536,527) (400,366) Gross profit 83,527 51,154 27,973 36,367 Other operating income 21,384 11, ,426 Distribution expenses (2,350) (2,188) (23) (13) Administrative expenses (23,677) (19,152) (8,919) (7,110) Other operating expenses (9,806) (1,360) Results from operating activities 69,078 40,128 19,287 31,670 Interest income Finance costs 18 (700) (895) (700) (888) Net finance costs (406) (654) (700) (888) Profit before tax 17 68,672 39,474 18,587 30,782 Tax expense 20 (5,578) (4,840) Profit for the year 63,094 34,634 19,399 31,

41 Statements of Profit or Loss and Other Comprehensive Income (Cont d) For the year ended 31 MARCH 2016 Group Company Note RM 000 RM 000 RM 000 RM 000 Other comprehensive income, net of tax Items that are or may be reclassified subsequently to profit or loss Cash flow hedge 670 Foreign currency translation differences for foreign operations 25,966 23,897 Total other comprehensive income for the year, net of tax 26,636 23,897 Total comprehensive income for the year 89,730 58,531 19,399 31,551 Profit for the year attributable to : Owners of the Company 63,094 34,634 19,399 31,551 Total comprehensive income for the year attributable to : Owners of the Company 89,730 58,531 19,399 31,551 Basic earnings per ordinary share (sen) Diluted earnings per ordinary share (sen) The notes on pages 74 to 142 are an integral part of these financial statements. 068

42 Consolidated Statement of Changes in Equity For the year ended 31 MARCH 2016 Share capital Share premium Attributable to owners of the Company Non-distributable Distributable Capital reserve Hedging reserve Translation reserve Retained earnings Total equity RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 1 April ,403 9, ,673 9, , ,790 Other comprehensive income for the year - Foreign currency translation differences for foreign operations 23,897 23,897 Profit for the year 34,634 34,634 Total comprehensive income for the year 23,897 34,634 58,531 Conversion of ICULS (Note 22) 10,888 11,977 (17,964) (1,477) 3,424 Dividends to owners of the Company (Note 23) (14,540) (14,540) Total transactions with owners of the Company 10,888 11,977 (17,964) (16,017) (11,116) At 31 March ,291 21,600 85,709 33, , ,205 Note 11 Note

43 Consolidated Statement of Changes in Equity (Cont d) For the year ended 31 MARCH 2016 Share capital Share premium Attributable to owners of the Company Non-distributable Distributable Capital reserve Hedging reserve Translation reserve Retained earnings Total equity RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 1 April ,291 21,600 85,709 33, , ,205 Other comprehensive income for the year - Cash flow hedge Foreign currency translation differences for foreign operations 25,966 25,966 Total other comprehensive income for the year ,966 26,636 Profit for the year 63,094 63,094 Total comprehensive income for the year ,966 63,094 89,730 Conversion of ICULS (Note 22) 2,031 2,235 (3,422) (416) 428 Dividends to owners of the Company (Note 23) (27,779) (27,779) Total transactions with owners of the Company 2,031 2,235 (3,422) (28,195) (27,351) At 31 March ,322 23,835 82, , , ,584 Note 11 Note 12 The notes on pages 74 to 142 are an integral part of these financial statements. 070

44 Statement of Changes in Equity For the year ended 31 MARCH 2016 Share capital Attributable to owners of the Company Non-distributable Share premium Capital reserve Distributable Retained earnings Total equity RM 000 RM 000 RM 000 RM 000 RM 000 At 1 April ,403 9, ,673 19, ,468 Profit for the year representing total comprehensive income for the year 31,551 31,551 Conversion of ICULS (Note 22) 10,888 11,977 (17,964) (1,477) 3,424 Dividends to owners of the Company (Note 23) (14,540) (14,540) Total transactions with owners of the Company 10,888 11,977 (17,964) (16,017) (11,116) At 31 March ,291 21,600 85,709 35, ,903 Note 11 Note 12 At 1 April ,291 21,600 85,709 35, ,903 Profit for the year representing total comprehensive income for the year 19,399 19,399 Conversion of ICULS (Note 22) 2,031 2,235 (3,422) (416) 428 Dividends to owners of the Company (Note 23) (27,779) (27,779) Total transactions with owners of the Company 2,031 2,235 (3,422) (28,195) (27,351) At 31 March ,322 23,835 82,287 26, ,951 Note 11 Note 12 The notes on pages 74 to 142 are an integral part of these financial statements. 071

45 Statements of Cash Flows For the year ended 31 MARCH 2016 Group Company Note RM 000 RM 000 RM 000 RM 000 Cash flows from operating activities Profit before tax 68,672 39,474 18,587 30,782 Adjustments for : Depreciation of property, plant and equipment 3 15,325 16, Amortisation of intangible assets Net fair value (gain)/loss on derivatives 17 (2,551) 888 Gain on disposal of plant and equipment 17 (138) (100) Interest income (294) (241) (30) (13) Plant and equipment written off Reversal of impairment loss on investment in a subsidiary 17 (2,210) Interest expense Dividend income (20,000) (30,487) Operating profit/(loss) before changes in working capital 82,158 57,721 (338) (653) Changes in working capital : Trade and other receivables A (14,153) (30,732) 24,746 (12,622) Inventories 15,079 (23,792) Trade and other payables 19,159 5,742 23,414 32,672 Provisions 1,885 (211) Cash generated from operations 104,128 8,728 47,822 19,397 Income tax paid (5,246) (5,438) (3) Net cash from operating activities 98,882 3,290 47,819 19,

46 Statements of Cash Flows (Cont d) For the year ended 31 MARCH 2016 Group Company Note RM 000 RM 000 RM 000 RM 000 Cash flows from investing activities Purchase of plant and equipment 3 (19,006) (5,276) (528) (499) Purchase of intangible assets 4 (893) (234) (24) Interest received Proceeds from disposal of plant and equipment Subscription of shares in subsidiaries (150) Net cash used in investing activities (19,467) (5,160) (498) (660) Cash flows from financing activities Dividends paid (27,779) (14,540) (27,779) (14,540) Interest paid (4,116) (4,273) (4,116) (4,273) Net cash used in financing activities (31,895) (18,813) (31,895) (18,813) Net increase/(decrease) in cash and cash equivalents 47,520 (20,683) 15,426 (76) Cash and cash equivalents at 1 April 103,585 97, Effect of exchange rate fluctuations on cash and cash equivalents 22,539 26,307 Cash and cash equivalents at 31 March , ,585 15, NOTE A. During the financial year, amount due from subsidiaries of RM4,000,000 (2015 : Nil) were capitalised into equity by a subsidiary via the issuance of ordinary shares to the Company. The notes on pages 74 to 142 are an integral part of these financial statements. 073

47 Financial Statements SAM Engineering & Equipment (M) Berhad is a public limited liability company, incorporated and domiciled in Malaysia and is 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 Tiga Bayan Lepas Free Industrial Zone Phase Penang Registered office Suite 16-1 (Penthouse Upper) Menara Penang Garden 42A, Jalan Sultan Ahmad Shah Penang The consolidated financial statements of the Company as at and for the financial year ended 31 March 2016 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 Precision Engineering Limited while the penultimate holding companies are Singapore Aerospace Manufacturing Pte. Ltd. and 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 17 June Basis of preparation (a) Statement of compliance The financial statements of the Group and the Company have been prepared in accordance with Malaysian Financial Reporting Standards ( MFRSs ), International Financial Reporting Standards and the requirements of the Companies Act, 1965 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 2016 MFRS 14, Regulatory Deferral Accounts* Amendments to MFRS 5, Non-current Assets Held for Sale and Discontinued Operations (Annual Improvements Cycle)* Amendments to MFRS 7, Financial Instruments: Disclosures (Annual Improvements Cycle) Amendments to MFRS 10, Consolidated Financial Statements, MFRS 12, Disclosure of Interests in Other Entities and MFRS 128, Investments in Associates and Joint Ventures Investment Entities: Applying the Consolidation Exception* Amendments to MFRS 11, Joint Arrangements Accounting for Acquisitions of Interests in Joint Operations* Amendments to MFRS 101, Presentation of Financial Statements Disclosure Initiative Amendments to MFRS 116, Property, Plant and Equipment and MFRS 138, Intangible Assets Clarification of Acceptable Methods of Depreciation and Amortisation Amendments to MFRS 116, Property, Plant and Equipment and MFRS 141, Agriculture Agriculture: Bearer Plants* Amendments to MFRS 119, Employee Benefits (Annual Improvements Cycle) Amendments to MFRS 127, Separate Financial Statements Equity Method in Separate Financial Statements* Amendments to MFRS 134, Interim Financial Reporting (Annual Improvements Cycle) 074

48 1. Basis of preparation (CONT d) (a) Statement of compliance (Cont d) MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2017 Amendments to MFRS 107, Statement of Cash Flows Disclosure Initiative Amendments to MFRS 112, Income Taxes Recognition of Deferred Tax Assets for Unrealised Losses MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2018 MFRS 9, Financial Instruments (2014) MFRS 15, Revenue from Contracts with Customers Clarifications to MFRS 15, Revenue from Contracts with Customers MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2019 MFRS 16, Leases MFRSs, Interpretations and amendments effective for 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 : from the annual period beginning on 1 April 2016 for those accounting standards, amendments or interpretations that are effective for annual periods beginning on or after 1 January 2016, except for those marked with * which are not applicable to the Group and the Company. from the annual period beginning on 1 April 2017 for those amendments that are effective for annual periods beginning on or after 1 January from the annual period beginning on 1 April 2018 for those accounting standards that are effective for annual periods beginning on or after 1 January from the annual period beginning on 1 April 2019 for those accounting standard that is effective for annual periods beginning on or after 1 January The initial application of the accounting standards, amendments or 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 : (i) MFRS 15, Revenue from Contracts with Customers and Clarifications to MFRS 15, Revenue from Contracts with Customers MFRS 15 replaces the guidance in MFRS 111, Construction Contracts, MFRS 118, Revenue, IC Interpretation 13, Customer Loyalty Programmes, IC Interpretation 15, Agreements for Construction of Real Estate, IC Interpretation 18, Transfers of Assets from Customers and IC Interpretation 131, Revenue Barter Transactions Involving Advertising Services. The Group is currently assessing the financial impact that may arise from the adoption of MFRS 15 and Clarifications to MFRS 15. (ii) MFRS 9, Financial Instruments MFRS 9 replaces the guidance in MFRS 139, Financial Instruments: Recognition and Measurement on the classification and measurement of financial assets and financial liabilities, and on hedge accounting. The Group is currently assessing the financial impact that may arise from the adoption of MFRS 9. (iii) 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. The Group is currently assessing the financial impact that may arise from the adoption of MFRS

49 1. Basis of preparation (CONT d) (b) Basis of measurement The financial statements have been prepared on the historical cost basis other than as disclosed in the financial statements. (c) Functional and presentation currency These financial statements are presented in Ringgit Malaysia ( RM ), which is the Company s functional currency. All financial information is presented in RM and has been rounded to the nearest thousand, unless otherwise stated. (d) Use of estimates and judgements The preparation of financial statements in conformity with MFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements other than those disclosed in Note 6 Deferred tax assets and 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. (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. 076

50 2. Significant accounting policies (cont d) (a) Basis of consolidation (Cont d) (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. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. For each business combination, the Group elects whether it measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree s identifiable net assets at the acquisition date. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. (iii) Acquisitions of non-controlling interests The Group accounts for all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions between the Group and its non-controlling interest holders. Any difference between the Group s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves. (iv) Acquisitions from entities under common controls Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established; for this purpose, comparatives are restated. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group controlling shareholder s consolidated financial statements. The components of equity of the acquired entities are added to the same components within Group equity and any resulting gain/loss is recognised directly in equity. (v) Loss of control Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former subsidiary, any non-controlling interests and the other components of equity related to the former subsidiary from the consolidated statement of financial position. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity accounted investee or as an available-for-sale financial asset depending on the level of influence retained. (vi) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. 077

51 2. Significant accounting policies (cont d) (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 date 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 available-for-sale equity instruments or a financial instrument designated as a hedge of currency risk, which are recognised in other comprehensive income. In the consolidated financial statements, when settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented in the foreign currency translation reserve ( FCTR ) in equity. (ii) Operations denominated in functional currencies other than Ringgit Malaysia The assets and liabilities of operations denominated in functional currencies other than RM, including goodwill and fair value adjustments arising on acquisition, are translated to RM at exchange rates at the end of the reporting period. The income and expenses of foreign operations are translated to RM at exchange rates at the dates of the transactions. Foreign currency differences are recognised in other comprehensive income and accumulated in the FCTR in equity. However, if the operation is a non-wholly owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the FCTR related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. (c) Financial instruments (i) Initial recognition and measurement A financial asset or a financial liability is recognised in the statement of financial position when, and only when, the Group or the Company becomes a party to the contractual provisions of the instrument. A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrument not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument. An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised as fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract. 078

52 2. Significant accounting policies (cont d) (c) Financial instruments (Cont d) (ii) Financial instrument categories and subsequent measurement The Group and the Company categorise financial instruments as follows : Financial assets (a) Financial assets at fair value through profit or loss Fair value through profit or loss category comprises financial assets that are held for trading, including derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial assets that are specifically designated into this category upon initial recognition. Derivatives that are linked to and must be settled by delivery of unquoted equity instruments whose fair values cannot be reliably measured are measured at cost. Other financial assets categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss. (b) Loans and receivables Loans and receivables category comprises debt instruments that are not quoted in an active market. Financial assets categorised as loans and receivables are subsequently measured at amortised cost using the effective interest method. All financial assets, except for those measured at fair value through profit or loss, are subject to review for impairment (see Note 2(g)(i)). Financial liabilities All financial liabilities are subsequently measured at amortised cost other than those categorised as fair value through profit or loss. Fair value through profit or loss category comprises financial liabilities that are derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial liabilities that are specifically designated into this category upon initial recognition. Derivatives that are linked to and must be settled by delivery of equity instruments that do not have a quoted price in an active market for identical instruments whose fair values otherwise cannot be reliably measured are measured at cost. Other financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss. (iii) Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. 079

53 2. Significant accounting policies (cont d) (c) Financial instruments (Cont d) (iii) Financial guarantee contracts (Cont d) Fair value arising from financial guarantee contracts are classified as deferred income and is amortised to profit or loss using a straight-line method over the contractual period or, when there is no specified contractual period, recognised in profit or loss upon discharge of the guarantee. When settlement of a financial guarantee contract becomes probable, an estimate of the obligation is made. If the carrying value of the financial guarantee contract is lower than the obligation, the carrying value is adjusted to the obligation amount and accounted for as a provision. (iv) Hedge accounting Cash flow hedge A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction and could affect the profit or loss. In a cash flow hedge, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income and the ineffective portion is recognised in profit or loss. Subsequently, the cumulative gain or loss recognised in other comprehensive income is reclassified from equity into profit or loss in the same period or periods during which the hedged forecast cash flows affect profit or loss. If the hedge item is a non-financial asset or liability, the associated gain or loss recognised in other comprehensive income is removed from equity and included in the initial amount of the asset or liability. However, loss recognised in other comprehensive income that will not be recovered in one or more future periods is reclassified from equity into profit or loss. Cash flow hedge accounting is discontinued prospectively when the hedging instrument expires or is sold, terminated or exercised, the hedge is no longer highly effective, the forecast transaction is no longer expected to occur or the hedge designation is revoked. If the hedge is for a forecast transaction, the cumulative gain or loss on the hedging instrument remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, any related cumulative gain or loss recognised in other comprehensive income on the hedging instrument is reclassified from equity into profit or loss. (v) Derecognition A financial asset or part of it is derecognised when, and only when the contractual rights to the cash flows from the financial asset expire or control of the asset is not retained or substantially all of the risks and rewards of ownership of the financial asset are transferred to another party. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in the profit or loss. A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged, cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in the profit or loss. 080

54 2. Significant accounting policies (cont d) (d) Property, plant and equipment (i) Recognition and measurement Items of property, plant and equipment are measured at cost less any accumulated depreciation and any accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets also includes the cost of materials and direct labour. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs. Costs also may include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. 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 straight line method is used to write off the cost of the assets over the term of their estimated useful lives at the following principal annual rates : % Buildings 3.33 Electrical installation and fittings 2-25 Factory equipment Motor vehicles 20 Office equipment, furniture and fittings Plant and machinery

55 2. Significant accounting policies (cont d) (d) Property, plant and equipment (Cont d) (iii) Depreciation (Cont d) 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 on 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 Intangible assets represent computer software that are acquired separately by the Group which has finite useful lives. Following initial recognition, computer software are measured at cost less any accumulated amortisation and any accumulated impairment losses. Computer software are amortised from the date they are available for use. Amortisation is based on the cost of an asset less its residual value. Computer software are amortised and recognised in profit or loss on a straight-line basis over a period of 3 to 6 years. Amortisation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted, if appropriate. (g) Impairment (i) Financial assets All financial assets (except for financial assets categorised as fair value through profit or loss and investments in subsidiaries) are assessed at each reporting date whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset. Losses expected as a result of future events, no matter how likely, are not recognised. An impairment loss in respect of loans and receivables is recognised in profit or loss and is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the asset s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, to the extent that the asset s carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss. 082

56 2. Significant accounting policies (cont d) (g) Impairment (Cont d) (ii) Other assets The carrying amounts of other assets (except for inventories and deferred tax assets) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset s recoverable amount is estimated. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (group of cash-generating units) and then to reduce the carrying amounts of the other 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. (i) Cash and cash equivalents Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in fair value with original maturities of three months or less, and are used by the Group and the Company in the management of their short term commitments. 083

57 2. Significant accounting policies (cont d) (j) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. 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. (k) Revenue and other income (i) Goods sold Revenue from the sale of goods in the course of ordinary activities is measured at fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised. (ii) Services Revenue from services rendered is recognised when the services have been performed and invoiced. (iii) Dividend income Dividend income is recognised in profit or loss on the date that the Group s or the Company s right to receive payment is established, which in the case of quoted securities is the ex-dividend date. (iv) Interest income Interest income is recognised as it accrues using the effective interest method in profit or loss except for interest income arising from temporary investment of borrowings taken specifically for the purpose of obtaining a qualifying asset which is accounted for in accordance with the accounting policy on borrowing costs. (l) Borrowing costs Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed. 084

58 2. Significant accounting policies (cont d) (l) Borrowing costs (Cont d) Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. (m) Income tax Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income. Current tax is the expected tax payable on the taxable income 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 following temporary differences: the initial recognition of goodwill, 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. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax assets and liabilities on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Unutilised reinvestment allowance, being a tax incentive that is not a tax base of an asset, is recognised as a deferred tax asset to the extent that it is probable that the future taxable profits will be available against the unutilised tax incentive can be utilised. (n) Employee benefits (i) Short-term employee benefits Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. (ii) State plans The Group s contributions to statutory pension funds are charged to profit or loss in the financial year to which they relate. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. 085

59 2. Significant accounting policies (cont d) (o) Earnings per ordinary share The Group presents basic and diluted earnings per share data for its ordinary shares ( EPS ). Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes. (p) Operating segments An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group s other components. Operating segment results are reviewed regularly by the chief operating decision maker, which in this case is the Chief Executive Officer of the Group, to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available. (q) Equity instruments Instruments classified as equity are measured at cost on initial recognition and are not remeasured subsequently. (i) Issue expenses Costs directly attributable to the issue of instruments classified as equity are recognised as a deduction from equity. (ii) Ordinary shares Ordinary shares are classified as equity. (r) Compound financial instruments A compound financial instrument is a non-derivative financial instrument that contains both a liability and an equity component. Compound financial instruments issued by the Company comprise Irredeemable Convertible Unsecured Loan Stocks that can be converted to share capital at the option of the holder, when the number of shares to be issued does not vary with changes in their fair value. The proceeds are first allocated to the liability component, determined based on the fair value of a similar liability that does not have a conversion feature or similar associated equity component. The residual amount is allocated as the equity component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition. Interest and losses and gains relating to the financial liability are recognised in profit or loss. On conversion, the financial liability is reclassified to equity; no gain or loss is recognised on conversion. 086

60 2. Significant accounting policies (cont d) (s) Contingent liabilities Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is not recognised in the statements of financial position and is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote. (t) Fair value measurements Fair value of an asset or a liability, except for lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market. For non-financial asset, the fair value measurement takes into account a market participant s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair value are categorised into different levels in a fair value hierarchy based on the input used in the valuation technique as follows : Level 1: Level 2: Level 3: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date. inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. 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. 087

61 3. Property, plant and equipment At 1 April 2015 Additions Written off Disposals Effect of movements in exchange rates At 31 March 2016 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Group Cost 2016 Leasehold land 17, ,872 Buildings 53,364 2,683 56,047 Electrical installation and fittings 12,295 1, ,965 Factory equipment 15,077 4,400 (15) 1,494 20,956 Motor vehicles 2, ,171 Office equipment, furniture and fittings 26,254 1,836 (362) (4) ,277 Plant and machinery 195,202 11,455 (1,172) 19, , ,676 19,006 (377) (1,176) 25, ,

62 3. Property, plant and equipment (CONT D) At 1 April 2014 Additions Written off Disposals Reclassification Effect of movement in exchange rates At 31 March 2015 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Group Cost 2015 Leasehold land 17,433 17,433 Buildings 53,364 53,364 Electrical installation and fittings 11, ,295 Factory equipment 14, (3) (31) 55 15,077 Motor vehicles 1, (5) 63 2,051 Office equipment, furniture and fittings 25, (91) (252) (89) ,254 Plant and machinery 179,933 3,237 (1,409) 13, , ,207 5,276 (94) (1,697) 13, ,

63 3. Property, plant and equipment (CONT D) At 1 April 2015 Depreciation for the year Written off Disposals Effect of movements in exchange rates At 31 March 2016 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Group Depreciation 2016 Leasehold land 3, ,626 Buildings 11,078 1, ,595 Electrical installation and fittings 9,440 1, ,709 Factory equipment 10,633 1,240 (15) 1,023 12,881 Motor vehicles 1, ,803 Office equipment, furniture and fittings 23,102 1,692 (356) (4) ,894 Plant and machinery 169,994 8,890 (1,172) 15, , ,011 15,325 (371) (1,176) 18, ,

64 3. Property, plant and equipment (CONT D) At 1 April 2014 Depreciation for the year Written off Disposals Effect of movement in exchange rates At 31 March 2015 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Group Depreciation 2015 Leasehold land 2, ,224 Buildings 9,123 1,955 11,078 Electrical installation and fittings 8, ,440 Factory equipment 9,310 1,295 (3) (22) 53 10,633 Motor vehicles 1, (5) 62 1,540 Office equipment, furniture and fittings 21,482 1,674 (90) (252) ,102 Plant and machinery 148,755 10,299 (1,409) 12, , ,404 16,526 (93) (1,688) 12, ,

65 3. Property, plant and equipment (CONT D) At 31 March 2016 At 31 March 2015 At 1 April 2014 RM 000 RM 000 RM 000 Group Carrying amounts Leasehold land 14,246 14,209 14,542 Buildings 42,452 42,286 44,241 Electrical installation and fittings 3,256 2,855 3,007 Factory equipment 8,075 4,444 5,392 Motor vehicles Office equipment, furniture and fittings 3,383 3,152 4,135 Plant and machinery 31,738 25,208 31, ,518 92, ,803 At 1 April Additions Written off At 31 March RM 000 RM 000 RM 000 RM 000 Company Cost 2016 Motor vehicles Office equipment, furniture and fittings 3, (204) 3,205 Electrical installation and fittings ,002 Factory equipment , (204) 4,

66 3. Property, plant and equipment (CONT D) At 1 April Additions Written off At 31 March RM 000 RM 000 RM 000 RM 000 Company Cost 2015 Motor vehicles Office equipment, furniture and fittings 2, (21) 3,128 Electrical installation and fittings Factory equipment , (21) 4,419 At 1 April Depreciation for the year Written off At 31 March RM 000 RM 000 RM 000 RM 000 Company Depreciation 2016 Motor vehicles Office equipment, furniture and fittings 2, (204) 2,764 Electrical installation and fittings Factory equipment , (204) 3,

67 3. Property, plant and equipment (CONT D) Depreciation At 1 April for the year Written off At 31 March RM 000 RM 000 RM 000 RM 000 Company Depreciation 2015 Motor vehicles Office equipment, furniture and fittings 2, (21) 2,725 Electrical installation and fittings Factory equipment , (21) 3,540 At 31 March 2016 At 31 March 2015 At 1 April 2014 RM 000 RM 000 RM 000 Carrying amounts Motor vehicles Office equipment, furniture and fittings Electrical installation and fittings Factory equipment Security Group 1, Certain leasehold land and buildings with a carrying amount of RM12,918,000 (2015 : RM13,454,000) are charged to a bank as securities for bank facilities granted to a subsidiary. 094

68 3. Property, plant and equipment (CONT D) 3.2 Leasehold land Included in the total carrying amount of leasehold land are : Group RM 000 RM 000 Unexpired lease period of more than 50 years 5,550 5,658 Unexpired lease period of less than 50 years 8,696 8,551 14,246 14, Intangible assets RM 000 RM 000 Computer software Group Cost At 1 April 5,393 4,955 Additions Effect of movements in exchange rates At 31 March 6,605 5,393 Amortisation At 1 April 4,548 4,136 Amortisation for the year (Note 17) Effect of movements in exchange rates At 31 March 5,217 4,548 Carrying amount At 31 March 1,

69 4. Intangible assets (cont d) RM 000 RM 000 Company Cost At 1 April 2,559 2,535 Additions 24 At 31 March 2,559 2,559 Amortisation At 1 April 2,528 2,511 Amortisation for the year (Note 17) At 31 March 2,542 2,528 Carrying amount At 31 March Investments in subsidiaries Company RM 000 RM 000 Unquoted shares, at cost At 1 April 212, ,994 Additions 4, Repayment from a subsidiary (2,210) At 31 March 216, ,

70 5. Investments in subsidiaries Company (cont d) RM 000 RM 000 Accumulated impairment At 1 April 29,375 31,585 Impairment written back for the year (2,210) At 31 March 29,375 29,375 Unquoted shares, net 187, ,559 During the current financial year, the Company subscribed for additional 4,000,000 ordinary shares of RM1.00 each in ESMO Automation (M) Sdn. Bhd. for RM4,000,000 through the capitalisation of an equivalent amount due from the subsidiary. In the previous year, the Company wrote back part of the impairment previously provided for its investment in LKT Technology Sdn. Bhd. amounting to RM2,210,000 due to repayment from the 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 SAM Meerkat (M) Sdn. Bhd. Malaysia Design and assembly of modular or complete machine and equipment SAM Tooling Technology Sdn. Bhd. ( SAMTT ) Malaysia Design, development and manufacture of trim and form dies and suspension tooling for hard disk drive parts Avitron Private Limited ( Avitron )* Republic of Singapore Manufacture of aircraft components and precision engineering parts Esmo Automation (M) Sdn. Bhd. Malaysia Design and manufacture of engineering equipment and automation solution ranging from process test handlers, material handling systems, vision inspection systems and factory automation 097

71 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 SAM Precision (M) Sdn. Bhd. ( SAMPM ) Malaysia Manufacture of aircraft structures and other related equipment parts, component, spares and precision engineering parts Meerkat Integrator Sdn. Bhd. Malaysia Dormant Meerkat Precision Sdn. Bhd. Malaysia Manufacture of aircraft and other related equipment parts, spares, components and precision engineering parts LKT Automation Sdn. Bhd. Malaysia Design and assembly of automation equipment complete with equipment control software (temporarily ceased operation) LKT Integration Sdn. Bhd. Malaysia Development and production of computer process control system for printed circuit board handling system and component assembly line (temporarily ceased operation) LKT Technology Sdn. Bhd. Malaysia Design and manufacture of precision tools and machinery parts (temporarily ceased operation) SAM Meerkat (Suzhou) Co., Ltd ( SMS )* ^ People s Republic of China Design, manufacture, assembly, integration and sales of test system for hard disk drive (temporarily ceased operation, under members voluntarily winding up) 098

72 5. Investments in subsidiaries Company (cont d) 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 Held by SAMTT SAM Precision (Thailand) Limited* Thailand Manufacture of die, jig and parts and cutting tools for disk drives, electronics, semi-conductor and other industries LKT Technology Sdn. Bhd. Malaysia Design and manufacture of precision tools and machinery parts (temporarily ceased operation) Held by SAMPM Meerkat Technology Pte. Ltd. * Republic of Singapore 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. ^ In the process of Members Voluntary Winding-Up under the laws of the People s Republic of China. 099

73 6. Deferred tax assets/(liabilities) Recognised deferred tax assets/(liabilities) Deferred tax assets and liabilities are attributable to the following : Assets Liabilities Net RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Group Property, plant and equipment (192) (363) (3,774) (3,256) (3,966) (3,619) ICULS (equity component) (1,322) (2,223) (1,322) (2,223) Provisions 995 1, ,120 1,317 Other items (304) (304) 614 (126) 310 (430) Net tax assets/(liabilities) (4,357) (5,416) (3,858) (4,955) Company ICULS (equity component) (1,322) (2,223) (1,322) (2,223) Deferred tax assets and liabilities are offset when the entity has a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same authority. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the Group can utilise the benefits therefrom. 100

74 6. Deferred tax assets/(liabilities) (cont d) Movements in temporary differences during the year At 1 April 2014 Recognised in profit or loss (Note 20) Recognised directly in equity Exchange difference At 1 April 2015/ 31 March 2015 Recognised in profit or loss (Note 20) Recognised directly in equity Exchange difference At 31 March 2016 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Group Deferred tax assets Property, plant and equipment (1,306) 943 (363) 171 (192) Provisions 1,866 (789) 51 1,128 (175) Other items (304) (304) (304) (4) Deferred tax liabilities Property, plant and equipment (2,880) (183) (193) (3,256) (323) (195) (3,774) ICULS (equity component) (3,822) (2,223) (1,322) Provisions (64) 125 Other items 7 (133) (126) (6,529) (193) (5,416) 1, (195) (4,357) Company ICULS (equity component) (3,822) (2,223) (1,322) 101

75 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) : RM 000 RM 000 Group Unutilised tax losses 62,222 63,662 Unabsorbed capital allowances 9,155 7,816 71,377 71,478 Company Unutilised tax losses 1,782 1,783 Unabsorbed capital allowances 601 1,054 Provisions ,005 3,062 The unutilised tax losses, unabsorbed capital allowances and other temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profits will be available against which the Group entities can utilise the benefits therefrom. 7. Trade and other receivables Note RM 000 RM 000 Group Trade Amount due from : - penultimate holding company ,823 95,991 - related companies 7.1 1, External parties 43,370 30, , ,

76 7. Trade and other receivables (cont d) Note RM 000 RM 000 Group Non-trade Amount due from : - penultimate holding company related company Other receivables 3,071 1,472 Deposits 1,115 1,096 Prepayments ,527 6,743 21,935 9, , ,326 Company Non-trade Amount due from : - subsidiaries ,642 57,281 - related company Other receivables 59 Deposits Prepayments Amounts due from penultimate holding company, subsidiaries and related company 28,990 57,732 The trade amounts due from penultimate holding company and related company are subject to normal trade terms. The non-trade amounts due from penultimate holding company, subsidiaries and related company are unsecured, interest-free and repayable on demand. 7.2 Prepayments Included in prepayments of the Group is RM3,993,000 (2015: Nil) paid for the purchase of plant and machinery. 103

77 8. Inventories Group RM 000 RM 000 Raw materials 48,680 56,941 Work-in-progress 70,497 71,040 Manufactured inventories 5,195 12,625 Recognised in profit or loss : 124, , RM 000 RM 000 Inventories recognised as cost of sales 526, ,193 Write-down to net realisable value included in cost of sales 1, Derivative financial assets/(liabilities) Group Nominal value Assets Liabilities RM 000 RM 000 RM Derivatives held for trading at fair value through profit or loss - Forward exchange contracts 77,095 3,011 (33) 2015 Derivatives held for trading at fair value through profit or loss - Forward exchange contracts 25, (524) 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. Most of the forward exchange contracts have maturities of less than one year after the end of the reporting period. When necessary, the forward contracts are rolled over at maturity. 104

78 10. Cash and cash equivalents RM 000 RM 000 Group Short term deposits with licensed banks 18,312 22,925 Cash and bank balances 155,332 80, , ,585 Company Cash and bank balances 15, Share capital Group/Company Amount RM 000 Authorised Ordinary shares of RM1.00 each Number of shares ( 000) Issued and paid up Amount RM 000 Number of shares ( 000) At 1 April , ,000 73,403 73,403 Conversion of ICULS to ordinary shares ^ 10,888 10,888 At 31 March 2015/1 April , ,000 84,291 84,291 Conversion of ICULS to ordinary shares ^ 2,031 2,031 At 31 March , ,000 86,322 86,322 ^ conversion of 4,266,729 (2015 : 22,863,966) RM1.00 nominal value of 5-year 4% Irredeemable Convertible Unsecured Loans Stocks ( ICULS ) into 2,031,758 (2015: 10,887,584) ordinary shares of RM1.00 each on the basis of one RM1.00 nominal value of ICULS for approximately ordinary shares of RM1.00 each. 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. 105

79 12. Reserves Note RM 000 RM 000 Group Non-distributable Capital reserve - ICULS (equity component) ,287 85,709 Hedging reserve Share premium ,835 21,600 Translation reserve ,721 33, , ,064 Distributable Retained earnings 185, , , ,914 Company Non-distributable Capital reserve - ICULS (equity component) ,287 85,709 Share premium ,835 21, , ,309 Distributable Retained earnings ,507 35,303 The movements in the reserves are disclosed in the statements of changes in equity. 132, ,

80 12. Reserves (cont d) 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 (Note 22) 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 Share premium Share premium comprises the premium paid on subscription of shares and conversion of ICULS into ordinary shares in the Company over and above the par value of the shares Translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations 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, Loans and borrowings Group/Company RM 000 RM 000 Current Unsecured ICULS (liability component) 3,797 3,955 Non-current Unsecured ICULS (liability component) 1,709 5,

81 14. Trade and other payables Note RM 000 RM 000 Group Trade Amount due to : - penultimate holding company related companies External parties 36,965 30,098 38,082 30,764 Non-trade Amounts due to : - penultimate holding company related company Other payables 692 1,329 Accrued expenses 51,950 39,854 53,011 41,288 91,093 72,052 Company Non-trade Amounts due to : - penultimate holding company related company subsidiaries ,537 2,335 Other payables Accrued expenses 1,731 1,666 7,633 4,

82 14. Trade and other payables (cont d) 14.1 Amounts due to penultimate holding company, subsidiaries and related companies The trade amounts due to penultimate holding company and related companies are subject to normal trade terms. The non-trade amounts due to penultimate holding company, related company and subsidiaries are unsecured, interestfree and payable on demand. 15. Provisions Group Warranties RM 000 At 1 April ,190 Provisions made during the year 747 Reversed to profit or loss (958) Effect of movement in exchange rates 700 At 31 March 2015/1 April ,679 Provisions made during the year 2,666 Reversed to profit or loss (781) Effect of movement in exchange rates 718 At 31 March ,282 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. 16. Revenue RM 000 RM 000 Group Invoiced value of goods sold less discounts and returns 619, ,983 Support services rendered , ,

83 16. Revenue (Cont d) RM 000 RM 000 Company Dividend income from unquoted subsidiaries 20,000 30,487 Interest income Management fee 7,943 5,867 27,973 36, Profit before tax Profit before tax is arrived at after charging : Group Company Note RM 000 RM 000 RM 000 RM 000 Amortisation of intangible assets Auditor s remuneration Audit fees (statutory audit) - Auditors of the Company - current year prior year (17) 1 (16) - Other auditors - current year prior year (60) Non-audit fees - Auditors of the Company - current year prior year Other auditors - current year Bad debts written off 6 Depreciation on property, plant and equipment 3 15,325 16, Impairment loss on trade receivables 137 Inventories written down 1,

84 17. Profit before tax (cont d) Profit before tax is arrived at after charging (Cont d) : Group Company Note RM 000 RM 000 RM 000 RM 000 Loss on foreign exchange - unrealised, net 7,395 Net fair value loss on derivatives 888 Personnel expenses - Wages, salaries and others (including Directors emoluments) 78,317 59,938 5,309 4,152 - Employees Provident Fund contributions 7,734 6, Plant and equipment written off 6 1 Provision for warranties 15 2, Rental of : - premises 4,007 3,307 - machinery and equipment motor vehicles and after crediting : Dividend income from unquoted subsidiaries 20,000 30,487 Gain on disposal of plant and equipment Gain on foreign exchange - realised, net 12,183 3, unrealised, net 2, Impairment loss written back on - trade receivables 8 - investment in a subsidiary 2,210 Interest income Net fair value gain on derivatives 2,551 Reversal of provision for warranties

85 18. Finance costs Group Company RM 000 RM 000 RM 000 RM 000 Interest expense on : ICULS (Note 22) Others Key management personnel compensation Key management personnel compensation are as follows : Group Company RM 000 RM 000 RM 000 RM 000 Directors of the Company - Fees Other emoluments Other Directors - Remuneration 1,448 1,858 - Employees Provident Fund contributions The estimated monetary value of Directors benefits-in-kind is Nil (2015 : RM53,500). 2,143 2, Tax expense Recognised in profit or loss Group Company RM 000 RM 000 RM 000 RM 000 Tax expense on continuing operations 5,578 4,840 (812) (769) 112

86 20. Tax expense (cont d) Major components of tax expense include : Group Company RM 000 RM 000 RM 000 RM 000 Income tax expense Malaysian - current year 2,084 1, prior year (113) (22) 1,971 1,639 7 Overseas - current year 5,741 4,865 - prior year (966) (1,034) 4,775 3,831 Total income tax recognised in profit or loss 6,746 5,470 7 Deferred tax expense - reversal of temporary differences (1,148) (1,445) (819) (769) - prior year (20) 815 (1,168) (630) (819) (769) Total tax expense 5,578 4,840 (812) (769) 113

87 20. Tax expense (cont d) Reconciliation of tax expense Group Company RM 000 RM 000 RM 000 RM 000 Profit for the year 63,094 34,634 19,399 31,551 Total income tax expense 5,578 4,840 (812) (769) Profit excluding tax 68,672 39,474 18,587 30,782 Income tax calculated using Malaysian tax rate at 24% (2015 : 25%) 16,481 9,869 4,461 7,696 Effect of different tax rates in foreign jurisdictions (2,904) (2,189) Non-deductible expenses 1,223 1, Tax exempt income (1,334) (655) (5,619) (8,943) Effect of tax incentives* (6,834) (3,461) Effect of change in tax rate # Effect of deferred tax assets not recognised/(recognised) 24 (306) (13) 79 Other items 21 (4) 6,677 5,081 (812) (769) Over provided in prior years (1,099) (241) 5,578 4,840 (812) (769) * Certain subsidiaries were granted 100% tax exemption ranging from five to ten years under the Promotion of Investment Act, 1986 (as amended) and Section 127 (3)(b) of the Income Tax Act, The tax exemption periods for these subsidiaries expired on 31 December 2014 and 31 December 2015 respectively. # The Malaysian Budget 2014 announced the reduction of corporate tax to 24% with effect from year of assessment Consequently, the deferred tax assets and liabilities which are expected to reverse in 2016 and beyond are measured using the tax rate of 24%. 114

88 21. Earnings per ordinary share Group Basic earnings per ordinary share The calculation of basic earnings per ordinary share is based on the profit attributable to ordinary shareholders of RM63,094,000 (2015 : RM34,634,000) and the weighted average number of ordinary shares outstanding, calculated as follows : Weighted average number of ordinary shares at 31 March Issued ordinary shares at 1 April 84,290,790 73,403,206 Effect of ordinary shares issued during the year 1,494,362 8,243,740 Weighted average number of ordinary shares at 31 March 85,785,152 81,646,946 Basic earnings per ordinary share (sen) Diluted earnings per ordinary share The calculation of diluted earnings per ordinary share at 31 March was based on the profit attributable to ordinary shareholders (diluted) and the weighted average number of ordinary shares (diluted) after adjustment for the effects of all dilutive potential ordinary shares, calculated as follows : Profit attributable to ordinary shareholders (diluted) RM 000 RM 000 Profit attributable to ordinary shareholders (basic) 63,094 34,634 Interest income on convertible notes, net of tax Profit attributable to ordinary shareholders (diluted) 63,626 35,300 Weighted average number of ordinary shares (diluted) Weighted average number of ordinary shares at 31 March (basic) 85,785,152 81,646,946 Effect of conversion of ICULS 49,381,887 53,520,111 Weighted average number of ordinary shares at 31 March (diluted) 135,167, ,167,057 Diluted earnings per ordinary share (sen)

89 22. Irredeemable Convertible Unsecured Loan Stocks ( ICULS ) Group/Company On 25 September 2012, the Company issued 135,000,000 RM1.00 nominal value of 5-year 4% ICULS at 100% of its nominal value 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. At the end of the financial year, the Company has the following outstanding number of ICULS : Expiry date Number of ICULS outstanding as at year 4% ICULS 25 September ,573,420 The main features of the ICULS are 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) iii) iv) The ICULS are convertible into new ordinary shares of RM1.00 each 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 RM1.00 nominal value ICULS for approximately number of ordinary shares of RM1.00 each; 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 The interest on the ICULS at the rate of 4% per annum is payable semi-annually in arrears. The residual value, after deducting the liability component from the fair value of the instrument as a whole, is attributed to the equity component as follows : Equity component of ICULS Liability component of ICULS Total RM 000 RM 000 RM 000 At the date of issuance of ICULS - nominal value 113,325 21, ,000 - deferred tax liabilities (5,419) (5,419) 107,906 21, ,581 At 1 April ,673 15, ,962 Conversion of ICULS into ordinary shares (17,964) (2,590) (20,554) Interest expense (Note 18) Interest paid (4,322) (4,322) At 31 March/1 April ,709 9,265 94,

90 22. Irredeemable Convertible Unsecured Loan Stocks ( ICULS ) Group/Company (cont d) Equity component of ICULS Liability component of ICULS Total RM 000 RM 000 RM 000 Conversion of ICULS into ordinary shares (3,422) (345) (3,767) Interest expense (Note 18) Interest paid (4,114) (4,114) At 31 March ,287 5,506 87,793 The liability component at 31 March is further analysed as follows : RM 000 RM 000 Within 1 year 3,797 3,955 Within 1 to 5 years 1,709 5,310 5,506 9,265 Interest expense on the ICULS is calculated on the effective yield basis by applying a coupon interest rate of 8.05% which is assumed to be equivalent to the prevailing market interest rate for convertible loan stocks at the date of issue. 23. Dividends Company A single tier first interim dividend of sen per ordinary share and a single tier special dividend of 7.05 sen per ordinary share totalling RM14,540,160 for the financial year ended 31 March 2014 was paid on 28 August A single tier first interim dividend of sen and a single tier special dividend of sen per ordinary share totalling RM27,778,594 for the financial year ended 31 March 2015 was paid on 28 August Subsequent to the end of the financial year, the Company declared a single tier first interim dividend of sen and a single tier special dividend of sen per ordinary share in respect of the financial year ended 31 March 2016 to be paid on 5 August The Directors did not propose any final dividend to be paid for the current financial year. 117

91 24. Related parties Identity of related parties For the purposes of these financial statements, parties are considered to be related to the Group if the Group or the Company has the ability, directly or indirectly, to control or jointly control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or the Company and the party are subject to common control. Related parties may be individuals or other entities. The Group has related party relationship with its holding companies and subsidiaries as disclosed in the financial statements. Related parties also include key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel include all the Directors of the Group. Significant related party transactions Related party transactions have been entered into in the normal course of business under normal trade terms. 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 7 and Note 14. i) Subsidiaries : RM 000 RM 000 Company Subscription of shares in a subsidiary 4,000 Dividend income 20,000 30,487 Management fee 7,943 5,867 Corporate management services (589) ii) Immediate holding company : RM 000 RM 000 Group Dividends paid 17,019 9,

92 24. Related parties Significant related party transactions iii) Penultimate holding company : RM 000 RM 000 Group Sales 332, ,789 Dividend paid 1, Provision of engineering services Purchase of fabrication/machining services (133) Purchase of engineering services (981) Corporate management services (1,002) Rental of factory premises (3,685) (3,026) iv) Related companies : RM 000 RM 000 Group Sales of fabrication/machining services 841 Sales of equipment Provision of engineering services Provision of corporate management services 38 Sales commission expense (32) Purchase of components, spare parts, modular on complete machine and equipment (401) (93) Purchase of engineering services (621) (314) Corporate management services (1,433) (659) Purchases of fabrication/machining services (28,343) (28,720) v) There were no transactions with key management personnel other than the remuneration package paid to them in accordance with the terms and conditions of their appointment as disclosed in Note 19 to the financial statements. 119

93 25. Operating segment Group The Group has three 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 Precision engineering Provides a dedicated end-to-end precision manufacturing solutions on engineering and high precision tooling including large format CNC machining parts Performance is measured based on segment profit before tax as included in the internal management reports that are reviewed by the CODM. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Segment assets The total of segment asset is measured on all assets (including goodwill) of a segment, as included in the internal management reports that are reviewed by the CODM. Segment total asset is used to measure the return on assets of each segment. Segment liabilities Segment liabilities information is neither included in the internal management reports nor provided regularly to the CODM. Hence, no disclosure is made on segment liabilities. 120

94 25. Operating segment Group (cont d) Equipment manufacturing Precision engineering Elimination Total Aerospace RM 000 RM 000 RM 000 RM 000 RM Revenue from external customers 333, ,849 35, ,054 Inter-segment revenue ,030 (11,336) Total revenue 333, ,155 47,005 (11,336) 620,054 Profit before tax (segment profit) 36,900 21,346 10,426 68,672 Included in the measure of segment profit are : - Inventories written down 13,709 1, ,483 - Reversal of inventories written down (12,565) (1,421) (304) (14,290) - Impairment loss on trade receivables Depreciation and amortisation 9,892 4,190 1,681 15,763 Segment assets 329, ,764 67, ,597 Included in the measure of segment assets are : - Additions to property, plant and equipment 16,471 1, ,

95 25. Operating segment Group (cont d) Equipment manufacturing Precision engineering Elimination Total Aerospace RM 000 RM 000 RM 000 RM 000 RM Revenue from external customers 311, ,642 32, ,520 Inter-segment revenue 630 9,702 (10,332) Total revenue 311, ,272 41,810 (10,332) 451,520 Profit before tax (segment profit) 26,067 6,540 6,867 39,474 Included in the measure of segment profit are : - Inventories written down 11, ,190 - Reversal of inventories written down (10,859) (916) (1,015) (12,790) - Impairment loss on trade receivables written back (7) (1) (8) - Depreciation and amortisation 9,043 5,843 1,918 16,804 Segment assets 304, ,041 43, ,790 Included in the measure of segment assets are : - Additions to property, plant and equipment 3,364 1, ,

96 25. Operating segment Group (cont d) Geographical segments In presenting information on the basis of geographical segments, segment revenue is based on geographical location of the customers. Segment assets are based on the geographical location of the assets. Revenue RM 000 Non-current assets RM 000 Geographical information 2016 Malaysia 24,471 89,419 Asia (excluding Malaysia) 421,837 15,986 Europe 371 North America 173, , ,405 Malaysia 21,962 81,599 Asia (excluding Malaysia) 386,391 12,372 Europe 33 North America 43,037 Latin America 97 Major customers 451,520 93,971 The following are the sales to major customers with revenue equal or more than 10% of the Group s total revenue : Revenue RM 000 RM 000 Segment Aerospace 332, ,538 Equipment manufacturing 149,916 22, , ,

97 26. Capital and other commitments Group Company RM 000 RM 000 RM 000 RM 000 Property, plant and equipment Contracted but not provided for 43,678 5, Intangible assets Contracted but not provided for Financial instruments 27.1 Categories of financial instruments The table below provides an analysis of financial instruments categorised as follows : (a) Loans and receivables ( L&R ); (b) Fair value through profit or loss ( FVTPL ) : - Held for trading ( HFT ); and (c) Financial liabilities measured at amortised cost ( FL ). Carrying amount L&R FVTPL - HFT RM 000 RM 000 RM 000 Financial assets 2016 Group Trade and other receivables (excluding prepayments) 131, ,291 Cash and cash equivalents 173, ,644 Derivative financial assets 3,011 3, , ,935 3,

98 27. Financial instruments (cont d) 27.1 Categories of financial instruments (Cont d) Carrying amount L&R FVTPL - HFT RM 000 RM 000 RM 000 Financial assets 2016 Company Trade and other receivables (excluding prepayments) 28,742 28,742 Cash and cash equivalents 15,830 15,830 44,572 44, Group Trade and other receivables (excluding prepayments) 129, ,583 Cash and cash equivalents 103, ,585 Derivative financial assets , , Company Trade and other receivables (excluding prepayments) 57,455 57,455 Cash and cash equivalents ,859 57,

99 27. Financial instruments (cont d) 27.1 Categories of financial instruments (Cont d) Carrying amount FL FVTPL - HFT RM 000 RM 000 RM 000 Financial liabilities 2016 Group Loans and borrowings 5,506 5,506 Trade and other payables 91,093 91,093 Derivative financial liabilities ,632 96, Company Loans and borrowings 5,506 5,506 Other payables 7,633 7,633 13,139 13, Group Loans and borrowings 9,265 9,265 Trade and other payables 72,052 72,052 Derivative financial liabilities ,841 81, Company Loans and borrowings 9,265 9,265 Other payables 4,218 4,218 13,483 13,

100 27. Financial instruments (cont d) 27.2 Net gains and losses arising from financial instruments Group Company RM 000 RM 000 RM 000 RM 000 Net gains/(losses) on : Loans and receivables (7,856) 3, Fair value through profit or loss - Held for trading 2,551 (888) Financial liabilities measured at amortised cost (82) (1,483) (700) (889) 27.3 Financial risk management The Group has exposure to the following risks from its use of financial instruments : Credit risk Liquidity risk Market risk 27.4 Credit risk (5,387) 941 (593) (659) Credit risk is the risk of a financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group s exposure to credit risk arises principally from its receivables from customers. The Company s exposure to credit risk arises principally from advances to subsidiaries and financial guarantees given to banks for credit facilities granted to subsidiaries. Receivables Risk management objectives, policies and processes for managing the risk Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Normally, credit evaluations are performed on customers requiring credit over a certain amount. Exposure to credit risk, credit quality and collateral As at the end of the reporting period, the maximum exposure to credit risk arising from receivables is represented by the carrying amounts in the statements of financial position. Management has taken reasonable steps to ensure that receivables that are neither past due nor impaired are stated at their realisable values. A significant portion of these receivables are regular customers that have been transacting with the Group. The Group uses ageing analysis to monitor the credit quality of the receivables. Any receivables having significant balances past due more than 120 days, which are deemed to have higher credit risk, are monitored individually. 127

101 27. Financial instruments (cont d) 27.4 Credit risk (Cont d) Receivables (Cont d) Exposure to credit risk, credit quality and collateral (Cont d) The exposure of credit risk for trade receivables as at the end of the reporting period by geographic region was : Group RM 000 RM 000 Malaysia 1,262 4,907 Asia (excluding Malaysia) 101, ,057 North America 23,808 15,980 Others Impairment losses 126, ,946 The Group maintains an ageing analysis in respect of trade receivables only. The ageing of trade receivables as at the end of the reporting period was : Group Individual Cumulative Gross impairment impairment Net RM 000 RM 000 RM 000 RM Not past due 114, ,359 Past due 0-30 days 8,236 8,236 Past due days 2,589 2,589 Past due days Past due days Past due more than 120 days 1,154 (318) ,201 (318) 126,

102 27. Financial instruments (cont d) 27.4 Credit risk (Cont d) Receivables (Cont d) Impairment losses (Cont d) Group Individual Cumulative Gross impairment impairment Net RM 000 RM 000 RM 000 RM Not past due 113, ,642 Past due 0-30 days 11,947 11,947 Past due days Past due days Past due days Past due more than 120 days 404 (178) ,124 (178) 126,946 The movements in the allowance for impairment losses of trade receivables during the financial year were : Group RM 000 RM 000 At 1 April Impairment loss recognised 137 Impairment loss reversed (8) Impairment loss written off (1) Effect of movement in exchange rates 3 At 31 March The Group does not have any significant exposure to any individual customer or counterparty nor does it have any major concentration of credit risk other than the trade amount from the penultimate holding company as disclosed in Note 7 to the financial statements. The allowance account in respect of trade receivables is used to record impairment losses. Unless the Group is satisfied that recovery of the amount is possible, the amount considered irrecoverable is written off against the receivable directly. 129

103 27. Financial instruments (cont d) 27.4 Credit risk (Cont d) Inter-company advances Risk management objectives, policies and processes for managing the risk The Company provides unsecured advances to subsidiaries. The Company monitors the results of the subsidiaries regularly. Exposure to credit risk, credit quality and collateral 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 are only provided to subsidiaries which are wholly owned by the Company. Impairment losses As at the end of the reporting period, there was no indication that the advances to the subsidiaries are not recoverable. The Company does not specifically monitor the ageing of current advances to the subsidiaries. These advances are not considered overdue and are repayable on demand Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group s exposure to liquidity risk arises principally from its various payables, loans and borrowings. The Group maintains a level of cash and cash equivalents and bank facilities deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due. It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts. 130

104 27. Financial instruments (cont d) 27.5 Liquidity risk (Cont d) Maturity analysis The table below summarises the maturity profile of the Group s and the Company s financial liabilities as at the end of the reporting period based on undiscounted contractual payments : 2016 Carrying amount Contractual interest rate/ coupon Contractual cash flows Under 1 year 1-2 years 2-5 years More than 5 years RM 000 % RM 000 RM 000 RM 000 RM 000 RM 000 Group Non-derivative financial liabilities Trade and other payables 91,093 91,093 91,093 ICULS (liability component) 5, ,154 4,103 2,051 96,599 97,247 95,196 2,051 Derivative financial liabilities Forward exchange contracts (gross settled) : Outflow 74,117 74,117 Inflow (2,978) (77,095) (77,095) 93,621 94,269 92,218 2,

105 27. Financial instruments (cont d) 27.5 Liquidity risk (Cont d) Maturity analysis (Cont d) Carrying amount Contractual interest rate/ coupon Contractual cash flows Under 1 year 1-2 years 2-5 years More than 5 years RM 000 % RM 000 RM 000 RM 000 RM 000 RM Company Non-derivative financial liabilities Financial guarantees 4,115 4,115 ICULS (liability component) 5, ,154 4,103 2,051 Other payables 7,633 7,633 7,633 13,139 17,902 15,851 2,

106 27. Financial instruments (cont d) 27.5 Liquidity risk (Cont d) Maturity analysis (Cont d) Carrying amount Contractual interest rate/ coupon Contractual cash flows Under 1 year 1-2 years 2-5 years More than 5 years RM 000 % RM 000 RM 000 RM 000 RM 000 RM Group Non-derivative financial liabilities Trade and other payables 72,052 72,052 72,052 ICULS (liability component) 9, ,685 4,274 4,274 2,137 81,317 82,737 76,326 4,274 2,137 Derivative financial liabilities Forward exchange contracts (gross settled) : Outflow ,903 25,903 Inflow (25,403) (25,403) 81,817 83,237 76,826 4,274 2,

107 27. Financial instruments (cont d) 27.5 Liquidity risk (Cont d) Maturity analysis (Cont d) Carrying amount Contractual interest rate/ coupon Contractual cash flows Under 1 year 1-2 years 2-5 years More than 5 years RM 000 % RM 000 RM 000 RM 000 RM 000 RM Company Non-derivative financial liabilities Financial guarantees 3,697 3,697 ICULS (liability component) 9, ,685 4,274 4,274 2,137 Other payables 4,218 4,218 4,218 13,483 18,600 12,189 4,274 2,

108 27. Financial instruments (cont d) 27.6 Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group s financial position or cash flows 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 and Ringgit Malaysia ( RM ). Exposure to foreign currency risk The Group s exposure to foreign currency (a currency which is other than the functional currency of the Group entities) risk, based on carrying amounts as at the end of the reporting period was : Denominated in USD SGD EURO RM RM 000 RM 000 RM 000 RM 000 Group 2016 Balances recognised in the statement of financial position Trade and other receivables 35, Cash and bank balances 40,915 9, ,300 Derivative financial assets ,373 Trade and other payables (19,261) (7,041) (1,174) (4,517) Net exposure 57,524 3, (1,828) 2015 Balances recognised in the statement of financial position Trade and other receivables 18, Cash and bank balances 38,335 3, ,356 Derivative financial liabilities (92) (54) Trade and other payables (11,404) (6,103) (104) (787) Net exposure 45,085 (3,030) 575 3,

109 27. Financial instruments (cont d) 27.6 Market risk (Cont d) Currency risk (Cont d) Currency risk sensitivity analysis A 5% (2015 : 5%) strengthening of the functional currency of Group entities against the following currencies at the end of the reporting period would have increased/(decreased) equity and 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 RM 000 Group 2016 USD (2,186) SGD (126) EURO (7) RM USD (1,691) SGD 114 EURO (22) RM (132) A 5% (2015 : 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 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. Risk management objectives, policies and processes for managing the 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 risks 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. The Group s interest-earning financial assets are mainly short term in nature and are mostly placed in short term deposits. 136

110 27. Financial instruments (cont d) 27.6 Market risk (Cont d) Interest rate risk (Cont d) Exposure to interest rate risk The interest rate profile of the Group s significant interest-earning and interest-bearing financial instruments, based on carrying amounts as at the end of the reporting period was : Group Company RM 000 RM 000 RM 000 RM 000 Fixed rate instruments Financial asset - Short term deposits with licensed banks 18,312 22,925 - Cash and bank balances 14,100 14,100 32,412 22,925 14,100 Financial liability - ICULS (liability component) 5,506 9,265 5,506 9,265 (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 Fair value information The carrying amounts of cash and cash equivalents, short term receivables and payables and short term borrowings reasonably approximate their fair values due to the relatively short term nature of these financial instruments. The table below analyses financial instruments carried at fair value and those not carried at fair value for which fair value is disclosed, together with their fair values and carrying amounts shown in the statement of financial position. 137

111 27. Financial instruments (cont d) 27.7 Fair value information (Cont d) Fair value of financial instruments carried at fair value Fair value of financial instruments not carried at fair value Total fair value Carrying amount Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM Group Financial assets Forward exchange contracts 3,011 3,011 3,011 3,011 Financial liabilities ICULS (liability component) (5,506) (5,506) (5,506) (5,506) Forward exchange contracts (33) (33) (33) (33) (33) (33) (5,506) (5,506) (5,539) (5,539) Company ICULS (liability component) (5,506) (5,506) (5,506) (5,506) 138

112 27. Financial instruments (cont d) 27.7 Fair value information (Cont d) Fair value of financial instruments carried at fair value Fair value of financial instruments not carried at fair value Total fair value Carrying amount Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM Group Financial assets Forward exchange contracts Financial liabilities ICULS (liability component) (9,265) (9,265) (9,265) (9,265) Forward exchange contracts (524) (524) (524) (524) (524) (524) (9,265) (9,265) (9,789) (9,789) Company ICULS (liability component) (9,265) (9,265) (9,265) (9,265) 139

113 27. Financial instruments (cont d) 27.7 Fair value information (Cont d) Policy on transfer between levels The fair value of an asset to be transferred between levels is determined as of the date of the event or change in circumstances that caused the transfer. There has been no transfer between the levels in fair value during the financial year (2015 : no transfer in either direction). Level 2 fair value Level 2 fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for the financial assets or liabilities, either directly or indirectly. Level 3 fair value Level 3 fair value is estimated using unobservable inputs for the financial assets and liabilities. Non-derivative financial liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the end of the reporting period. In respect of the liability component of convertible notes, the market rate of interest is determined by reference to similar liabilities that do not have a conversion option. The Directors, after having considered the financial position of the Company, are of the view that the rate for such liabilities, approximates the interest paid on the ICULS of 4% (2015 : 4%). 28. Capital management The Group s objectives when managing capital is to maintain a strong capital base and safeguard the Group s ability to continue as a going concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business. There was no change in the Group s approach to capital management during the financial year. 140

114 29. Operating leases Leases as lessee Non-cancellable operating lease rentals are payable as follows : Group Company RM 000 RM 000 RM 000 RM 000 Less than one year 3,994 1, Between one and five years 5, ,904 2, The Group and the Company lease a number of factory and office premises and office 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. 30. Contingent liabilities, unsecured Company The Company has issued corporate guarantees to a financial institution for borrowings granted to certain subsidiaries for RM4,115,000 (2015: RM3,697,000) of which, Nil (2015: Nil) were utilised at the end of the reporting period. 31. Subsequent event On 25 May 2016, the ultimate holding company of the Company, Temasek Holdings (Private) Limited ( Temasek ) has converted 83,025,000 RM1.00 nominal value of ICULS into 39,535,714 ordinary shares of RM1.00 each. Pursuant to the said conversion, the interest of Temasek in the Company was increased to %. 141

115 32. Supplementary financial information on the breakdown of realised and unrealised profits or losses The breakdown of the retained earnings of the Group and of the Company as at 31 March, into realised and unrealised profits, pursuant to Paragraphs 2.06 and 2.23 of Bursa Malaysia Main Market Listing Requirements, are as follows : Group Company RM 000 RM 000 RM 000 RM 000 Total retained earnings of the Company and its subsidiaries : - realised 195, ,540 26,507 35,303 - unrealised (8,555) (4,384) 186, ,156 26,507 35,303 Less : Consolidation adjustments (963) (1,306) Total retained earnings at 31 March 185, ,850 26,507 35,303 The determination of realised and unrealised profits is based on the Guidance of Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants on 20 December

116 Statement by Directors Pursuant to Section 169(15) of the Companies Act, 1965 In the opinion of the Directors, the financial statements set out on pages 65 to 141 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 March 2016 and of their financial performance and cash flows for the financial year then ended. In the opinion of the Directors, the information set out in Note 32 on page 142 to the financial statements has been compiled in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad. Signed on behalf of the Board of Directors in accordance with a resolution of the Directors : Tan Kai Hoe Goh Wee Keng Date : 17 June 2016 Statutory Declaration Pursuant to Section 169(16) of the Companies Act, 1965 I, Yeoh Lip Keong, 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 65 to 142 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, Subscribed and solemnly declared by the abovenamed at Georgetown in the State of Penang on 17 June Yeoh Lip Keong Before me : Goh Suan Bee (No. P125) Commissioner for Oaths Penang 143

117 Report of the Auditors To the members of SAM Engineering & Equipment (M) Berhad (Company No A) (Incorporated in Malaysia) Report on the Financial Statements We have audited the financial statements of SAM Engineering & Equipment (M) Berhad, which comprise the statements of financial position as at 31 March 2016 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 65 to 141. Directors Responsibility for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as of 31 March 2016 and of their financial performance and 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, 1965 in Malaysia. Report on Other Legal and Regulatory Requirements In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following: a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. b) We have considered the accounts and the auditors reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 5 to the financial statements. c) We are satisfied that the accounts of the subsidiaries that have been consolidated with the Company s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes. d) The audit reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act. 144

118 Report of the Auditors (Cont d) To the Members of SAM Engineering & Equipment (M) Berhad (Company No A) (Incorporated in Malaysia) Other Reporting Responsibilities Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The information set out in Note 32 on page 142 to the financial statements has been compiled by the Company as required by the Bursa Malaysia Securities Berhad Listing Requirements and is not required by the Malaysian Financial Reporting Standards or International Financial Reporting Standards. We have extended our audit procedures to report on the process of compilation of such information. In our opinion, the information has been properly compiled, in all material respects, in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants and presented based on the format prescribed by Bursa Malaysia Securities Berhad. Other Matters This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. KPMG Firm Number : AF 0758 Chartered Accountants chong Dee Shiang Approval Number : 2782/09/16 (J) Chartered Accountant Date : 17 June 2016 Petaling Jaya 145

119 Analysis of Shareholdings As at 30 June 2016 AUTHORISED SHARE CAPITAL : RM200,000,000 ISSUED AND FULLY PAID-UP CAPITAL : RM125,881,425 CLASS OF SHARE : Ordinary shares of RM1 each fully paid VOTING RIGHTS : On a poll - one vote for every ordinary share held On a show of hands - one vote for every shareholder DISTRIBUTION OF SHAREHOLDINGS Size of Shareholdings No of Shareholders % of Shareholders Total Holdings % of Total Holdings Less than , , , ,001-10,000 1, ,686, , , ,848, ,001 to less than 5% of issued shares ,424, % and above of issued shares ,276, TOTAL 2, ,881, SUBSTANTIAL SHAREHOLDERS AS AT 30 JUNE 2016 No. Name Direct Interest % of Issued No. of shares Capital Indirect Interest % of Issued No. of shares Capital 1 Singapore Precision Engineering Limited 43,752, Singapore Aerospace Manufacturing Pte Ltd 44,524, ,752,641 (a) Accuron Technologies Limited 88,276,955 (b) Temasek Holdings (Private) Limited 88,276,955 (c) Note: (a) Deemed interested via Singapore Precision Engineering Limited pursuant to Section 6A of the Companies Act, (b) Deemed interested via Singapore Aerospace Manufacturing Pte Ltd pursuant to Section 6A of the Companies Act, (c) Deemed interested via Accuron Technologies Limited Ltd pursuant to Section 6A of the Companies Act, DIRECTORS SHAREHOLDINGS AS AT 30 JUNE 2016 No. Name Direct Interest % of Issued No. of shares Capital Indirect Interest % of Issued No. of shares Capital 1 Tan Kai Hoe 2 Goh Wee Keng 1,702, Shum Sze Keong 4 Dato Mohamed Salleh Bin Bajuri 5 Dato Robin Seo Eng Lin 6 Dato Wong Siew Hai 7 Dato Sri Lee Tuck Fook 8 Lee Hock Chye 146

120 Analysis of Shareholdings (Cont d) As at 30 June 2016 LIST OF 30 LARGEST SHAREHOLDERS AS AT 30 JUNE 2016 No. Name No. shares % of Total Issued Capital 1 AFFIN HWANG NOMINEES (ASING) SDN. BHD. 44,524, DBS VICKERS SECS (S) PTE LTD FOR SINGAPORE AEROSPACE MANUFACTURING PTE LTD 2 AFFIN HWANG NOMINEES (ASING) SDN. BHD. 43,752, DBS VICKERS SECS (S) PTE LTD FOR SINGAPORE PRECISION ENGINEERING LIMITED 3 UOBM NOMINEES (ASING) SDN BHD 1,702, UNITED OVERSEAS BANK NOMINEES (PTE) LTD FOR GOH WEE KENG 4 AMANAHRAYA TRUSTEES BERHAD 1,573, PUBLIC STRATEGIC SMALLCAP FUND 5 HSBC NOMINEES (TEMPATAN) SDN BHD 1,235, HSBC (M) TRUSTEE BHD FOR MANULIFE INVESTMENT PROGRESS FUND (4082) 6 AMANAHRAYA TRUSTEES BERHAD 900, PB SMALLCAP GROWTH FUND 7 AFFIN HWANG NOMINEES (ASING) SDN. BHD. 858, DBS VICKERS SECS (S) PTE LTD FOR TAN GUAN THONG 8 HSBC NOMINEES (ASING) SDN BHD 838, TNTC FOR APS FUND 9 AFFIN HWANG NOMINEES (ASING) SDN. BHD. 781, DBS VICKERS SECS (S) PTE LTD FOR TEO SIEW GEOK 10 AMANAHRAYA TRUSTEES BERHAD 706, PUBLIC SMALLCAP FUND 11 AFFIN HWANG NOMINEES (ASING) SDN. BHD. 671, DBS VICKERS SECS (S) PTE LTD FOR OH CHONG HO 12 UOB KAY HIAN NOMINEES (ASING) SDN BHD 635, EXEMPT AN FOR UOB KAY HIAN PTE LTD ( A/C CLIENTS ) 13 PUBLIC NOMINEES (TEMPATAN) SDN BHD 420, PLEDGED SECURITIES ACCOUNT FOR TAM TAM SENG SEN (E-PPG) 14 M & A NOMINEE (TEMPATAN) SDN BHD 404, PLEDGED SECURITIES ACCOUNT FOR SARAH PAULINE A/P MELKEES (M&A) 15 MAYBANK NOMINEES (TEMPATAN) SDN BHD 400, MAYBANK TRUSTEES BERHAD FOR PUBLIC BALANCED FUND (N ) 147

121 Analysis of Shareholdings (Cont d) As at 30 June 2016 LIST OF 30 LARGEST SHAREHOLDERS AS AT 30 JUNE 2016 (cont d) No. Name No. shares % of Total Issued Capital 16 PUBLIC NOMINEES (TEMPATAN) SDN BHD 388, PLEDGED SECURITIES ACCOUNT FOR LOW HENG NAM (E-TJJ) 17 UOBM NOMINEES (TEMPATAN) SDN BHD 362, UOB ASSET MANAGEMENT (MALAYSIA) BERHAD FOR GIBRALTAR BSN AGGRESSIVE FUND 18 HSBC NOMINEES (TEMPATAN) SDN BHD 334, HSBC (M) TRUSTEE BHD FOR MANULIFE INVESTMENT AL-FAID (4389) 19 HLB NOMINEES (TEMPATAN) SDN BHD 317, PLEDGED SECURITIES ACCOUNT FOR NG YONG YIN 20 DB (MALAYSIA) NOMINEE (ASING) SDN BHD 306, BNYM SA/NV FOR GOVERNMENT OF BERMUDA CONTRIBUTORY PENSION FUND 21 NG BOON KEAT 303, RHB NOMINEES (TEMPATAN) SDN BHD 300, MAYBANK KIM ENG SECURITIES PTE. LTD. FOR SIN KHUAN OI 23 AMANAHRAYA TRUSTEES BERHAD 296, PUBLIC SELECT TREASURES EQUITY FUND 24 CIMSEC NOMINEES (TEMPATAN) SDN BHD 294, CIMB BANK FOR SIVA KUMAR A/L M JEYAPALAN (PBCL-0G0015) 25 RICHARD TEH LIP HEONG 294, DB (MALAYSIA) NOMINEE (TEMPATAN) SENDIRIAN BERHAD 272, DEUTSCHE TRUSTEES MALAYSIA BERHAD FOR HONG LEONG STRATEGIC FUND 27 CITIGROUP NOMINEES (TEMPATAN) SDN BHD 270, KUMPULAN WANG PERSARAAN (DIPERBADANKAN) (AFFIN HWNG SM CF) 28 MAYBANK NOMINEES (TEMPATAN) SDN BHD 265, MAYBANK TRUSTEES BERHAD FOR MANULIFE INVESTMENT - ML FLEXI FUND (250283) 29 RHB NOMINEES (ASING) SDN BHD 254, MAYBANK KIM ENG SECURITIES PTE. LTD. FOR EXQUISITE HOLDINGS LIMITED 30 NAHOORAMMAH A/P SITHAMPARAM PILLAY 225,

122 Analysis of ICULS Holdings As at 30 June 2016 NO. OF ICULS ORIGINAL ISSUED : RM135,000,000 nominal value 5-year 4% Irredeemable Convertible Unsecured Loan Stocks ( ICULS ) BALANCE OF ICULS REMAINING : RM19,499,772 CONVERSION PRICE OF ICULS : Means the price of RM2.10 of ICULS for every New Ordinary Share and the Conversion Price is subject to adjustments under certain circumstances in accordance with the provisions of the Trust Deed CONVERSION PERIOD OF ICULS : Means the period during which a Holder shall be at liberty to exercise the Conversion Rights attached to the ICULS which may be on any Market Day commencing from the Issue Date up to the last Market Day prior to the Maturity Date CONVERSION RIGHTS : Means such right(s) as is exercisable by a Holder at any time during the Conversion Period to convert its ICULS into New Ordinary Shares at the Conversion Price, as provided in Condition 4 of Part II of the First Schedule. Unless previously converted, all outstanding ICULS will be mandatorily converted by the Company into New Ordinary Shares at the Conversion Price on Maturity Date DISTRIBUTION OF ICULS HOLDINGS Size of Iculs Holdings No of Iculs Holders % of Iculs Holders Total Iculs Holdings % of Total Iculs Holdings Less than , , ,001-10, , , , , ,001 to less than 5% of issued ICULS , % and above of issued ICULS ,225, TOTAL ,499, DIRECTORS ICULS HOLDINGS AS AT 30 JUNE 2016 Direct Interest % of Total ICULS No. of ICULS Holdings Indirect Interest % of Total ICULS No. of ICULS Holdings No. Name 1 Tan Kai Hoe 2 Goh Wee Keng 3 Shum Sze Keong 4 Dato Mohamed Salleh Bin Bajuri 5 Dato Robin Seo Eng Lin 6 Dato Wong Siew Hai 7 Dato Sri Lee Tuck Fook 8 Lee Hock Chye 149

123 Analysis of ICULS Holdings (Cont d) As at 30 June 2016 LIST OF 30 LARGEST ICULS HOLDERS AS AT 30 JUNE 2016 No. Name No. of ICULS % of Total ICULS 1 AFFIN HWANG NOMINEES (ASING) SDN. BHD. 18,225, DBS VICKERS SECS (S) PTE LTD FOR SINGAPORE AEROSPACE MANUFACTURING PTE LTD 2 OOI KOK KEE 239, WONG PENG WAH & SONS SDN BERHAD 116, CHENG YEAN TAY YAN HOON 80, OOI KOK KEE 69, JUNE SONG HOLDINGS (M) SDN. BHD. 40, PAW GEE JOHN 25, PAW GEE WAI 25, LEE MUI YING 21, TAN SIAN LEE 20, NG LIP NG LIP SAT 19, YEOH WENG HOO 17, CHIN FOOK WENG 15, ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 15, PLEDGED SECURITIES ACCOUNT FOR OOI CHIN CHYE ( ) 15 YONG SIAU YONG SIYAM MAI 15, BEH HENG SEONG SDN.BHD. 14, HLIB NOMINEES (TEMPATAN) SDN BHD 14, PLEDGED SECURITIES ACCOUNT FOR FOO SEE KUANG (CCTS) 18 TAN CHAI CHAN CHOY WAH 14, NAZRILA HAIRIN BINTI NASIR 13, SOONG BEE HONG 13, SHARON SIMON 13, TAN HWANG JIN 13,

124 Analysis of ICULS Holdings (Cont d) As at 30 June 2016 LIST OF 30 LARGEST ICULS HOLDERS AS AT 30 JUNE 2016 (cont d) No. Name No. of ICULS % of Total ICULS 23 TAN LEAN HUA 13, FOO TOCK LAN 12, SHARIFAH INTAN BINTI S.M.AIDID 12, WONG YAM PENG 11, LEE YEOW HIAN 10, LOH ENG LOH TENG CHOON 10, PAW SING PAW KIU HO 10, LOW AH LENG 10,

125 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the Twenty-Second Annual General Meeting ( AGM ) of SAM Engineering & Equipment (M) Berhad will be held at the First Floor, SAM Meerkat (M) Sdn Bhd, Plot 103, Hilir Sungai Keluang Lima, Taman Perindustrian Bayan Lepas 4, Penang on Wednesday, 17 August 2016 at am to transact the following business:- As Ordinary Business 1. To receive the Audited Financial Statements for the financial year ended 31 March 2016 and the Reports of Directors and Auditors thereon. Please refer Note 7 2. To re-elect the following Directors who are retiring pursuant to Article 91 of the Company s Articles of Association and being eligible, offer themselves for re-election:- 2.1 Mr Goh Wee Keng 2.2 Dato Wong Siew Hai 3. To re-elect Mr Tan Kai Hoe who is retiring pursuant to Article 98 of the Company s Articles of Association and being eligible, offers himself for re-election. 4. To approve the payment of Directors fees amounting to RM397,500 for the financial year ended 31 March To re-appoint Messrs KPMG as Auditors of the Company, to hold office until the conclusion of the next AGM, at a remuneration to be determined by the Directors. Ordinary Resolution 1 Ordinary Resolution 2 Ordinary Resolution 3 Ordinary Resolution 4 Ordinary Resolution 5 As Special Business To consider and if thought fit, to pass the following Ordinary Resolutions with or without modification:- 6. Authority to Issue Shares Pursuant to Section 132D of the Companies Act, 1965 Ordinary Resolution 6 THAT, pursuant to Section 132D of the Companies Act, 1965 and subject to the approval of the relevant authorities, the Directors be and are hereby empowered to issue shares in the Company from time to time and upon such terms and conditions and for such purposes as the Directors may deem fit provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the total issued share capital of the Company for the time being and that the Directors be and are also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on the Bursa Malaysia Securities Berhad and that such authority shall continue to be in force until the conclusion of the next AGM or the expiration of the period within which the next AGM is required by law to be held or revoked/varied by resolution passed by the shareholders in general meeting whichever is the earlier. 7. Proposed Renewal of Existing Shareholders Mandate for Recurrent Related Party Transactions ( RRPT ) Ordinary Resolution 7 THAT, subject to the provisions of the Listing Requirements of Bursa Malaysia Securities Berhad, approval be and is hereby given to the Company and/or its subsidiaries ( SAM Malaysia Group ) to enter into recurrent related party transactions of a revenue or trading nature as specified in Section 2.5 of the Circular to Shareholders dated 25 July 2016 which transactions are necessary for the day-to-day operations in the ordinary course of business of SAM Malaysia 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: 152

126 Notice of Annual General Meeting (Cont d) As Special Business (Cont d) 7. Proposed Renewal of Existing Shareholders Mandate for Recurrent Related Party Transactions ( RRPT ) (Cont d) Ordinary Resolution 7 (i) (ii) (iii) the conclusion of the next AGM of the Company following the general meeting at which the authorisation is obtained, at which time it shall lapse, unless by ordinary resolution passed at the meeting, the authority is renewed; the expiration of the period within which the next AGM after that date is required to be held pursuant to Section 143(1) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or revoked or varied by resolution passed by the shareholders of the Company in a general meeting; whichever is the earliest. AND THAT the Directors of the Company be and are hereby authorised to complete and to 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 transactions contemplated and/or authorised by this resolution. 8. Continuation in office as Independent Non-Executive Directors THAT the following Directors be retained as Independent Non-Executive Directors of the Company, in accordance with the Malaysian Code on Corporate Governance 2012 until the conclusion of the next AGM:- 8.1 Dato Mohamed Salleh Bin Bajuri 8.2 Dato Robin Seo Eng Lin 8.3 Dato Wong Siew Hai Ordinary Resolution 8 Ordinary Resolution 9 Ordinary Resolution To transact any other business of which due notice shall have been given. By Order of the Board Ong Tze-En (MAICSA ) Chin Lee Phing (MAICSA ) Joint Company Secretaries Penang, 25 July 2016 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 and the provisions of Section 149(1)(b) of the Companies Act, 1965 ( the Act ) shall not apply to the Company. If a Member appoints more than one (1) proxy, the appointments shall be invalid unless he specifies the proportions of his 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. 153

127 Notice of Annual General Meeting (Cont d) Notes: (Cont d) 4. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under the corporation s seal or under the hand of an officer or attorney duly authorised. 5. To be valid, the proxy form must be deposited at the Company s Registered Office at Suite 16-1 (Penthouse Upper), Menara Penang Garden, 42A Jalan Sultan Ahmad Shah, Penang 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 10 August 2016 (General Meeting Record of Depositors) shall be eligible to attend the meeting or appoint proxy(ies) to attend and/or vote on his behalf. Explanatory Note on Ordinary Business: 7. Agenda 1 is meant for discussion only as the provisions of Section 169(1) of the Act does not require a formal approval of shareholders of the Company and hence, Agenda 1 is not put forward for voting. Explanatory Notes on Special Business: 8. The proposed Ordinary Resolution 6 is for the purpose of granting a renewed general mandate ( General Mandate ) empowering the Directors of the Company, pursuant to Section 132D of the Act to issue and allot new shares in the Company from time to time provided that the aggregate number of shares issued pursuant to the General Mandate does not exceed 10% of the issued and paid-up share capital of the Company for the time being. The General Mandate, unless revoked or varied by the Company in general meeting, will expire at the next AGM of the Company. As at the date of this Notice, no new shares in the Company were issued pursuant to the General Mandate granted to the Directors at the last AGM held on 25 August 2015 and which will lapse at the conclusion of the Twenty-Second AGM. The General Mandate will provide flexibility to the Company for any possible fund raising activities, including but not limited to further placing of shares, for purpose of funding future investment project(s), working capital and/or acquisitions. 9. The proposed Ordinary Resolution 7, if approved by shareholders, will authorise the Proposed Renewal of Shareholders Mandate for RRPT of a revenue or trading nature and allow the Company and its subsidiaries to enter into RRPT of a revenue or trading nature as set out in Section 2.5 of the Circular to Shareholders dated 25 July 2016, 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 143(1) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or revoked/varied by resolutions passed by the shareholders of the Company in general meeting; whichever is the earliest. Further information on the Proposed Renewal of Shareholders Mandate is set out in the Circular to Shareholders dated 25 July The proposed Ordinary Resolutions 8, 9 and 10, if passed, will retain Dato Mohamed Salleh Bin Bajuri, Dato Robin Seo Eng Lin and Dato Wong Siew Hai as Independent Non-Executive Directors of the Company to fulfil the requirements of Paragraph 3.04 of Bursa Malaysia Securities Berhad s Main Market Listing Requirements and in line with the recommendation No. 3.3 of the Malaysian Code on Corporate Governance The detail of the Board s justification and recommendation for the retention of the Independent Directors are set out in the Corporate Governance Statement in the 2016 Annual Report. 154

128 Notice of Annual General Meeting (Cont d) 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 Annual General Meeting (Pursuant to Paragraph 8.27(2) of the Listing Requirements of Bursa Malaysia Securities Berhad) No individual is standing for election as a Director at the forthcoming Twenty-Second AGM of the Company. 155

129 Administrative Details Day and Date Wednesday, 17 August 2016 Time am Venue First Floor, SAM Meerkat (M) Sdn Bhd, Plot 103, Hilir Sungai Keluang Lima, Taman Perindustrian Bayan Lepas 4, Penang REGISTRATION 1. Registration will commence at 9.30 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. An identification tag will be given to you. No one will be allowed to enter the meeting venue without the identification tag. There will be no replacement should you lose or misplace the identification tag. 5. You may proceed to the meeting venue thereafter. 6. Registration must be done in person. No person is allowed to register on behalf of another. 7. The registration counter will handle verification of identity, registration and revocation of proxy/proxies. BUSINESS PRESENTATION 8. A business presentation will commence at am at the meeting venue and will end at am sharp. PROXY 9. A member entitled to attend and vote in the meeting is allowed to appoint proxy. Please submit your Form of Proxy in accordance with the notes and instructions printed therein. 10. The Form of Proxy is not required if you are attending the meeting. You are not allowed to attend the meeting together with a proxy appointed by you. 11. If you have submitted your Form of Proxy prior to the meeting and subsequently decided to attend the meeting in person, please proceed to the Registration Counter to revoke the appointment of your proxy. 12. Please ensure that the original Form of Proxy is deposited at the Company s Registered Office at Suite 16-1 (Penthouse Upper), Menara Penang Garden, 42A Jalan Sultan Ahmad Shah, Pulau Pinang no less than fortyeight (48) hours before the meeting time. No proof of despatch of Form of Proxy will be entertained. GENERAL MEETING RECORD OF DEPOSITORS 13. For the purpose of determining who shall be entitled to attend this 22nd Annual General Meeting, the Company will be requesting Bursa Malaysia Depository Sdn. Bhd. to issue a General Meeting Record of Depositors as at 10 August 2016 and only a depositor whose name appears on such Record of Depositors shall be entitled to attend the said meeting. REFRESHMENT 14. Lunch shall be served immediately after the meeting. ANNUAL REPORT The Company Annual Report 2016 is available on the Company s website at and Bursa Malaysia Securities Berhad s website at AGM ENQUIRY 16. For any enquiry prior to the 22nd AGM, please contact the following during office hours:- (a) Boardroom Corporate Services (Penang) Sdn. Bhd. (Tel ) (b) Share Registrar Plantation Agencies Sdn. Bhd. (Tel ) 156

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132 No. of shares held CDS account no. SAM ENGINEERING & EQUIPMENT (M) BERHAD ( A) Form of Proxy I/We (Full name and NRIC No./Company No. in BLOCK LETTERS) of (Full address in BLOCK LETTERS and telephone no.) being a member/members of SAM Engineering & Equipment (M) Berhad hereby appoint: Proxy 1 Proxy 2 (Optional) (Full name as per NRIC and NRIC No. in BLOCK LETTERS) (Full name as per NRIC and NRIC No. in BLOCK LETTERS) or failing him/her, the Chairman of the meeting as my/our proxy, to vote for me/us and on my/our behalf at the Twenty-Second AGM of the Company to be held at the First Floor, SAM Meerkat (M) Sdn Bhd, Plot 103, Hilir Sungai Keluang Lima, Taman Perindustrian Bayan Lepas 4, Penang, Malaysia on Wednesday, 17 August 2016 at am and at any adjournments thereof, in respect of my/our shareholding in the manner indicated below:- Decision FOR AGAINST ORDINARY RESOLUTIONS (Please indicate with an X how you wish your vote to be cast. If no specific direction as to voting is given, the proxy will vote or abstain at his discretion). Signed this day of 2016 Signature(s)/Common Seal of Shareholder(s) For appointment of two (2) proxies, no. of shares and percentage of shareholdings to be represented by the proxies: - Proxies No. of shares Percentage Proxy 1 Proxy 2 100% 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 and the provisions of Section 149(1)(b) of the Companies Act, 1965 ( the Act ) shall not apply to the Company. If a Member appoints more than one (1) proxy, the appointments shall be invalid unless he specifies the proportions of his 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 authorized 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 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 proxy form must be deposited at the Company s Registered Office at Suite 16-1 (Penthouse Upper), Menara Penang Garden, 42A Jalan Sultan Ahmad Shah, Pulau Pinang 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 10 August 2016 (General Meeting Record of Depositors) shall be eligible to attend the meeting or appoint proxy(ies) to attend and/or vote on his behalf.

133 Fold here Stamp To, The Company Secretaries SAM Engineering & Equipment (M) Berhad (Company No A) Suite 16-1 (Penthouse Upper), Menara Penang Garden 42A, Jalan Sultan Ahmad Shah Penang Fold here

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