A n n u a l R e p o r t LKT Industrial Berhad ( A)

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2 CONTENTS Notice of Annual General Meeting 2 Statement Accompanying Notice of Annual General Meeting 5 Group Structure and Activities 6 Corporate Information 7 Group Financial Highlights 8 Profile of Directors 9 Chairman s Statement 13 Corporate Governance Statement 15 Other Information 33 Corporate Social Responsibility 34 Financial Statements 35 Analysis of Shareholdings 101 Particulars of Properties 103 Particulars of Material Contracts 104 Proxy Form 1

3 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the Sixteenth Annual General Meeting of LKT Industrial Berhad will be held at the Ground Floor (Lobby), SAM Meerkat (M) Sdn Bhd (formerly known as Meerkat Technologies Sdn. Bhd.), Plot 103, Hilir Sungai Keluang Lima, Taman Perindustrian Bayan Lepas 4, Penang on Tuesday, 21 September 2010 at a.m. to transact the following business:- 1. To receive the Audited Financial Statements for the year ended 31 March 2010 and the Reports of Directors and Auditors thereon. 2. To re-elect the following Directors who retire pursuant to Article 91 of the Company s Articles of Association: i) Mr Goh Wee Keng ii) Dato Wong Siew Hai 3. To approve the Directors fees totaling RM309,792/- for the year ended 31 March To re-appoint Messrs KPMG as auditors of the Company and to authorise the Directors to fix their remuneration. 5. As Special Business To consider and if thought fit, to pass the following Ordinary Resolution: Ordinary Resolution 1 Ordinary Resolution 2 Ordinary Resolution 3 Ordinary Resolution 4 Ordinary Resolution 5 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 Annual General Meeting ( 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. 6. Proposed Renewal of Shareholders Mandate for Existing Recurrent Related Party Transactions ( RRPT ) Ordinary Resolution 6 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 ( LKT 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 26 August 2010 which transactions are necessary for the day-to-day operations in the ordinary course of business of LKT Group on terms 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 and the shareholders mandate is subject to annual renewal and disclosure is made in the 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:- 2

4 Notice of Annual General Meeting (cont d) i) 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; ii) iii) 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 resolutions passed by the shareholders of the Company in a general meeting; whichever is the earlier. 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. 7. Proposed New Shareholders Mandate for Additional 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 ( LKT Group ) to enter into new/additional recurrent related party transactions of a revenue or trading nature as specified in Section 2.5 of the Circular to Shareholders dated 26 August 2010 which transactions are necessary for the day-to-day operations in the ordinary course of business of LKT Group on terms 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 and the shareholders mandate is subject to annual renewal and disclosure is made in the 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:- i) 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; ii) iii) 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 resolutions passed by the shareholders of the Company in a general meeting; whichever is the earlier. 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. 3

5 Notice of Annual General Meeting (cont d) 8. Proposed Change of Name from LKT Industrial Berhad to SAM ENGINEERING & EQUIPMENT (M) BERHAD ( Proposed Change of Name ) Special Resolution 1 THAT the name of the Company be changed from LKT Industrial Berhad to SAM ENGINEERING & EQUIPMENT (M) BERHAD effective from the date of issuance of the Certificate of Incorporation on the Change of Name of the Company by the Companies Commission of Malaysia AND THAT all references in the Memorandum and Articles of Association of the Company to the name LKT Industrial Berhad, wherever the same may appear, shall be deleted and substituted with SAM ENGINEERING & EQUIPMENT (M) BERHAD AND THAT the Directors and/or the Company Secretary be and are hereby authorised to carry out all necessary formalities to effect the Change of Name of the Company. 9. To transact any other business of which due notice shall have been given. By Order of the Board Lam Voon Kean (MIA 4793) Company Secretary Penang, 26 August Notes: 1. A member may appoint two (2) or more 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 Act shall not apply to the Company. If a Member appoints two (2) or more proxies, 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, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. 3. 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. 4. To be valid, the proxy form must be deposited at the Company s Registered Office at Suite 2-1, 2nd Floor, 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. 4

6 Notice of Annual General Meeting (cont d) Explanatory Notes on Special Business: 1. The proposed Ordinary Resolution 5 is for the purpose of granting a renewed general mandate ( General Mandate ) and empowering the Directors of the Company, pursuant to Section 132D of the Companies Act, 1965 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 paidup 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 Annual General Meeting of the Company. As at the date of this Notice, no new shares in the Company were issued pursuant to the mandate granted to the Directors at the last Annual General Meeting held on 5 August 2009 and which will lapse at the conclusion of the Sixteenth Annual General Meeting. 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. 2. The proposed Ordinary Resolution 6 and 7, if approved by shareholders, will approve the Proposed Renewal Of Existing And New Shareholders Mandate on RRPT 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 26 August 2010, 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 Annual General Meeting 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 Annual General Meeting 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 earlier. Further information on the Proposed Renewal Of Existing And New Shareholders Mandate is set out in the Circular to Shareholders dated 26 August 2010 which is dispatched together with the Company s The proposed Special Resolution 1, if approved by shareholders, will facilitate the Proposed Change of Name of the Company. The Board of Directors ( Board ) is proposing to change the name of the Company from LKT Industrial Berhad to SAM ENGINEERING & EQUIPMENT (M) BERHAD in a move to re-align its corporate identity and consolidate its business structure with that of the parent company, Singapore Aerospace Manufacturing Pte Ltd ( SAM ). The brand name SAM has been in existence for more than 25 years and is well established in the aviation industry as a premier designer of motion control components as well as a leading manufacturer of niche aerospace products. The Board is confident this will significantly strengthen the Group s corporate branding and identity. STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING (Pursuant to Paragraph 8.28(2) of the Listing Requirements of Bursa Malaysia Securities Berhad) Details of individuals who are standing for election as Directors No individual is seeking election as a Director at the forthcoming Sixteenth Annual General Meeting of the Company. 5

7 Group Structure and Activities SAM MEERKAT (M) SDN BHD ( X) (Formerly known as MEERKAT TECHNOLOGIES SDN BHD) Design and assembly of modular or complete machine and equipment SAM PRECISION (M) SDN BHD (43230 K) (Formerly known as LKT PRECISION ENGINEERING SDN BHD) Fabrication of precision tools and machinery parts LKT AUTOMATION SDN BHD (75724 W) Designing and assembling of automation equipment complete with equipment control software LKT INTEGRATION SDN BHD ( X) Development and production of computer process control system for printed circuit board handling system and component assembly line LKT TECHNOLOGY SDN BHD ( T) Design and manufacture of industrial storage system, material handling system, logistic system, precision tools and machinery parts LKT TOOLING TECHNOLOGY SDN BHD ( D) Design, development and manufacture of trim and form dies and suspension tooling for hard disc drive parts MEERKAT INTEGRATOR SDN BHD ( T) Designing, manufacturing and assembly of metal and non-metal ergonomic workstations and electronic products MEERKAT PRECISION SDN BHD ( V) Design, develop and manufacture of aircraft and other related equipment parts, spares, components and precision engineering parts SAM PRECISION (THAILAND) LIMITED ( ) (Formerly known as LKT ENGINEERING (THAILAND) LIMITED) Manufacturing of die, jig and parts and cutting tools for disc drives, electronics, semiconductor and other industries MEERKAT TECHNOLOGY PTE LTD ( Z) Design, manufacture and service support for semiconductor, electronic, disc drive, medical, solar, L.E.D and other industrial equipments OTHERS (Dormant) LKT CORPORATION BERHAD (Strike off application in progress) LKT SUPPORT SERVICES SDN BHD (Strike off application in progress) MEERKAT CORPORATION SDN BHD 6

8 Corporate Information BOARD OF DIRECTORS Executive Chairman and Chief Executive Officer Mr Goh Wee Keng, Jeffrey Senior Independent Non-Executive Director Mr Shum Sze Keong Independent Non-Executive Directors Dato Mohamed Salleh bin Bajuri Dato Seo Eng Lin, Robin Dato Wong Siew Hai Dato Lee Tuck Fook Mr Lee Hock Chye AUDIT & RISK MANAGEMENT COMMITTEE Chairman Mr Shum Sze Keong Members Dato Mohamed Salleh bin Bajuri Dato Lee Tuck Fook Mr Lee Hock Chye NOMINATION COMMITTEE Chairman Dato Wong Siew Hai Members Dato Seo Eng Lin, Robin Mr Lee Hock Chye PRINCIPAL PLACE OF BUSINESS Plot 17, Hilir Sungai Keluang Tiga Bayan Lepas Free Industrial Zone Phase IV, Penang Tel: Fax: REGISTRARS Plantation Agencies Sdn. Bhd. (2603-D) 3rd Floor Standard Chartered Bank Chambers Beach Street, Penang Tel: Fax: AUDITORS KPMG (AF 0758) 1st Floor Wisma Penang Garden 42, Jalan Sultan Ahmad Shah Penang Tel: Fax: PRINCIPAL BANKERS Citibank Berhad Hong Leong Bank Berhad Malayan Banking Berhad AUTHORISED CAPITAL RM 100,000,000 REMUNERATION COMMITTEE Chairman Dato Seo Eng Lin, Robin Members Mr Goh Wee Keng, Jeffrey Dato Wong Siew Hai ISSUED AND PAID-UP CAPITAL (As at 2 August 2010) RM 70,881,357 WEBSITE COMPANY SECRETARY Ms Lam Voon Kean (MIA No. 4793) REGISTERED OFFICE Suite 2-1, 2nd Floor Menara Penang Garden 42A, Jalan Sultan Ahmad Shah Penang Tel: Fax:

9 Group Financial Highlights Year/Period Ended * 2009*^ 2010 TURNOVER (RM 000) 214, , , , ,531 PROFIT BEFORE TAXATION (RM 000) 33,855 31,662 (13,301) (8,385) 29,180 PROFIT AFTER TAXATION (RM 000) 24,996 25,191 (12,732) (7,391) 25,984 EARNINGS PER SHARE (SEN) (18.39) (10.42) Note*: Figures derived from continuing operations and discontinued operations. Note^: Figures reflecting 15 months financial results ended 31 March 2009 due to change of the Group s financial year end from 31 December to 31 March. TURNOVER (RM million) * 2009*^ 2010 PROFIT / (LOSS) BEFORE TAXATION (RM million) * 2009*^ 2010 PROFIT / (LOSS) AFTER TAXATION (RM million) * 2009*^ 2010 EARNINGS PER SHARE (Sen) * 2009*^

10 Profile of Directors GOH WEE KENG, JEFFREY Mr Goh Wee Keng, Jeffrey, Singaporean, aged 51, is the Executive Chairman and Chief Executive Officer. He is also a member of the Remuneration Committee. He was first appointed to the Board as a Non-Independent Non-Executive Director on 4 March Mr Goh has his roots in Penang as he was born on the island. Mr Goh received his Bachelor of Science from Salford University and a Masters from Cranfield University, United Kingdom, specializing in Turbine Technology. He began his career footprint in Aerospace Industry in 1982, working as Engineer in Engineering, Quality Assurance, Business Unit Manager and subsequently as Executive Vice President. He presently serves as the President and Chief Executive Officer of Singapore Aerospace Manufacturing Pte Ltd and is a member of the Board of Singapore Precision Engineering Limited, SAM (Suzhou) Co. Ltd and Singapore Aerospace Manufacturing Pte Ltd. Mr Goh does not sit on the Board of any other public companies in Malaysia and does not have any family relationship with any of the directors and/or substantial shareholder of LKT, nor any personal interest in any business arrangement involving LKT. He has not been convicted of any offences within the past 10 years. Mr Goh attended all Board Meetings held during the year ended 31 March 2010 save for two meetings where he abstained. SHUM SZE KEONG Mr Shum Sze Keong, Singaporean, aged 48, is the Senior Independent Non-Executive Director. He was appointed to the Board on 4 March He is also the Chairman of the Audit & Risk Management Committee. Mr Shum received his Bachelor of Science in Aeronautical Engineering from Embry Riddle Aeronautical University, Daytona Beach, Florida, USA. He currently sits on the Board of Lafe Technology Ltd, a listed company in Singapore, which specializes in design and manufacture of recording heads and related assemblies for tape autoloaders, tape drives, hard disc drives, optical drives, and card readers in the data storage market. Mr Shum is also the General Manager of Shum Enterprise Pte Ltd, a position held since 2000 to present day. He has previously held positions as Executive Director of The Grande Group Ltd from 1994 to In addition, he also held prominent portfolios such as Executive Director and Consultant, General Management, Corporate Finance and Restructuring of The Grande Group Ltd from 1995 to Mr Shum served as a Senior Officer at the Singapore Economic Development Board from 1986 to Mr Shum does not sit on the Board of any other public companies in Malaysia and does not have any family relationship with any of the directors and/or substantial shareholder of LKT, or any personal interest in any business arrangement involving LKT. He has not been convicted of any offences within the past 10 years. Mr Shum attended all seven Board Meetings held during the year ended 31 March

11 Profile of Directors (cont d) DATO MOHAMED SALLEH BIN BAJURI DPTJ Dato Mohamed Salleh, Malaysian, aged 59, is an Independent Non-Executive Director. He has been appointed to the Board since 15 March He is also a member of the Audit and Risk Management Committee. Dato Mohamed Salleh is a Chartered Accountant from Ireland and he is a member of the Malaysian Institute of Accountants. His career began in 1978 with Peat Marwick & Co., as a Senior Auditor. In 1979, he joined Mayban Finance Berhad as a Manager and was in 1982 promoted to become General Manager. In 1987 he was seconded to Malayan Banking Berhad and subsequently promoted to General Manager where he served the Bank until He was appointed the Managing Director of JB Securities Sdn Bhd, a stock broking firm of which he was a founder member in Upon disposing his equity stake in the stock broking firm in 1995, he joined CRSC Holdings Berhad, which principally engages in hotel operations and property development and management, as a Group Executive Director. Dato Mohamed Salleh served as a director in Saham Sabah Berhad from 1997 to He was also a trustee for Tabung Melayu Pontian Berhad and Yayasan Kebajikan SDARA in 1995 and 1997 respectively. Dato Mohamed Salleh also sits on the Board of Asian Pac Holdings Berhad, Harbour Link Group Bhd, Eden Enterprise (M) Berhad, Milux Corp Bhd, CRSC Holdings Berhad (Group), UPECA Technologies Berhad and Vastalux Energy Berhad. Dato Mohamed Salleh does not have any family relationship with any of the directors and/or substantial shareholder of LKT, or any personal interest in any business arrangement involving LKT. He has not been convicted of any offences within the past 10 years. Dato Mohamed Salleh attended all seven Board Meetings held during the year ended 31 March DATO SEO ENG LIN, ROBIN DSPN Dato Seo Eng Lin, Robin, Malaysian, aged 59, is an Independent Non-Executive Director. He was appointed to the Board on 15th May He is the Chairman of the Remuneration Committee and a member of the Nomination Committee. Dato Robin holds a Masters Degree from Nova University, Florida, USA, specializing in Business Administration and a Bachelor of Engineering (Mechanical) from Melbourne University, Australia. His career began in 1976 as a Research and Design Engineer with State Electricity Commission of Victoria, Melbourne, Australia. Subsequently, and after a short stint with National Semiconductor, Penang, Dato Robin joined Motorola in 1978 and expanded his responsibility as the Managing Director of Motorola Technology Sdn Bhd, Penang in He was promoted to Vice President and Director of Supply Chain Operations in 2000 and further extended his role as Motorola Country President for Malaysia in 2002 and served to retirement in Dato Robin does not sit on the Board of any other public companies and does not have any family relationship with any of the directors and/or substantial shareholder of LKT, or any personal interest in any business arrangement involving LKT. He has not been convicted of any offences within the past 10 years. Dato Robin attended all seven Board Meetings held during the year ended 31 March

12 Profile of Directors (cont d) DATO WONG SIEW HAI DSPN Dato Wong Siew Hai, Malaysian, aged 59, is an Independent Non-Executive Director. He was appointed to the Board on 4 June He is the Chairman of the Nomination Committee and a member of the Remuneration Committee. Dato Wong holds a BSc. in Mechanical Engineering from University of Leeds, England and a MSc. in Management Science, Imperial College of Science & Technology, University Of London, England. Having worked with an established MNC for about three decades, Dato Wong has vast knowledge of the electronics industry. He previously worked at Intel as Vice President for Technology Manufacturing Group and General Manager of Assembly Test Manufacturing. Dato Wong is also actively involved in trade and industry associations as well as government agencies, in which he holds prominent portfolios as follows: Member of the Board of Governor of AMCHAM (American Malaysian Chamber of Commerce) Chairman of MAEI (Malaysian American Electronics Industry; an industry group under AMCHAM) Board Member of Matrade (Malaysia External Trade Development Corporation, a sub group of MITI) Committee member of MICCI, Northern Region (Malaysian International Chamber of Commerce and Industry) Dato Wong does not sit on the Board of any other public companies and does not have any family relationship with any of the directors and/or substantial shareholder of LKT, or any personal interest in any business arrangement involving LKT. He has not been convicted of any offences within the past 10 years. Dato Wong attended all seven Board Meetings held during the year ended 31 March DATO LEE TUCK FOOK DIMP Dato Lee Tuck Fook, Malaysian, aged 56, is an Independent Non-Executive Director. He was appointed to the Board on 8 July He is a member of the Audit and Risk Management Committee. Dato Lee is a professional accountant and is a member of Malaysian Institute of Accountants (MIA) and Malaysian Institute of Certified Public Accountants. He also holds a Masters degree in Business Administration. He began his career with KPMG in 1974 under articleship, subsequently admitted as a partner to the Firm in 1985 and was responsible for the Malaysian management consultancy practice until he left the practice in From 1990 to 1992, Dato Lee was appointed the Vice President of Samling Group in Sarawak. He later joined the Renong Group as the Managing Director of Renong Overseas Corporation. Between 1994 to 2000, Dato Lee was the Chairman of the Executive Committee of the Board of Peremba-Kentz Ltd, an engineering company with operations ranging from South Africa, the Middle East, Thailand, Ireland, and Malaysia. He was the Managing Director of Cement Industries of Malaysia Bhd. from 2001 to Dato Lee joined Malton Group in 2002, a public listed company in the business of property development and management and was the Managing Director of Malton Berhad. He retired from the Board of Malton Berhad in February He is currently the Group CEO of Kuala Lumpur Pavilion Sdn. Bhd and a Director of Pavilion International. Dato Lee does not sit on the Board of any other public companies and does not have any family relationship with any of the directors and/or substantial shareholder of LKT, or any personal interest in any business arrangement involving LKT. He has not been convicted of any offences within the past 10 years. Dato Lee attended all seven Board Meetings held during the year ended 31 March

13 Profile of Directors (cont d) LEE HOCK CHYE Mr Lee Hock Chye, Malaysian, aged 50, is an Independent Non-Executive Director. He was appointed to the Board on 8 July He is a member of the Audit and Risk Management Committee and the Nomination Committee. Mr Lee graduated from National University of Singapore with LL.B (Hons). He is a lawyer by profession. He was called to the Singapore Bar in 1985 and subsequently called to the Malaysian Bar in Mr. Lee has been a partner in a legal firm practicing in the areas of corporate law, banking and finance since Mr Lee does not sit on the Board of any other public companies and does not have any family relationship with any of the directors and/or substantial shareholder of LKT, or any personal interest in any business arrangement involving LKT. He has not been convicted of any offences within the past 10 years. Mr Lee attended all seven Board Meetings held during the year ended 31 March

14 Chairman s Statement Dear Shareholders, On behalf of the Board of Directors, I am pleased to present the and Audited Accounts of LKT Industrial Berhad and the Group for the financial year ended 31 March FINANCIAL PERFORMANCE The financial year under review saw the semiconductor industry facing unprecedented challenges. The industry witnessed back-to-back decline as it entered calendar year 2009, fuelled by a deepening global economic slowdown and meltdowns of financial institutions which aggravated the market condition. The first half of 2009 was particularly tough for the Group, as the worldwide slump in the semiconductor market had adversely affected the Group s performance. Against this backdrop, manufacturers had cut their production drastically, resulting in a dramatic reduction of orders from our customers. However, in the wake of these challenges, the management was able to mitigate the situation and lead the Company to a profitable year. This was made possible with strong support from a major OEM customer, and buoyed by the industry pulling back up in the second half of The faster-than-expected recovery in the second half was mainly attributed to a strong rebound in the semiconductor industry, with impetus coming from new product launches and strength in the consumer and PC markets towards the end of the year. The Group registered RM million in turnover, a significant increase of 41% compared to the preceding year, making a net profit after tax of RM25.98million compared to a net loss of RM7.38million registered in the previous financial period. This is a significant achievement as the Group finally made profit after registering losses in the last two financial years. BUSINESS OUTLOOK With the global economic recovery expected well into 2010, the Semiconductor Industry Association is anticipating the industry to experience modest growth in revenue of about 10.2% for the corresponding period. In tandem with this, demand for our semiconductor products and services have been steadily picking up, and the Group is cautiously optimistic of improving its positive growth for financial year The Group has started shipping out its aero-engine casings, and in the long-term, hopes to reduce its dependency on the semiconductor/electronics sector. The Group shall remain very much committed on the manufacture of critical aerospace components for commercial aircrafts to help cushion the impact of the cyclical nature of the semiconductor industry. To further strengthen its positioning, the Group has consolidated its Commercial and Engineering Business sectors to ensure sustainable performance in the years to come. The Group is also in the process of changing its corporate name and corporate identity to re-align and consolidate its business structure with that of our parent company, Singapore Aerospace Manufacturing Pte Ltd ( SAM ). We are confident that the restructuring will enhance operative effectiveness and create synergy for the SAM Group of Companies via its global network, thus enabling us to better enhance shareholders value. 13

15 Chairman s Statement (cont d) ACKNOWLEDGEMENT On behalf of the Board of Directors, I would like to convey our sincere appreciation to the management and staff of the Group for their tremendous dedication and commitment which contributed to the turnaround and sustainability of the Group. I also wish to express my sincere thanks to our shareholders, customers, financiers, business associates and all the various Government Departments and Authorities for their continued support and confidence in the Group. The Board and I also wish to record our sincere appreciation to Mr Oh Chong Ho, a Non-Independent Non- Executive Director who has resigned from the Board on 26 March Last but not least, I wish to thank my fellow Board members for their support and wise counsel. Jeffrey Goh Executive Chairman and Chief Executive Officer 14

16 Corporate Governance Statement The Board of Directors ( Board ) remains committed to achieving and maintaining the highest standards of corporate governance throughout the Group by supporting and implementing the prescriptions of the principles and best practices set out in Parts 1 and 2 of the Malaysian Code on Corporate Governance (MCCG) even though the Company is undergoing the proposed delisting exercise. The Board is pleased to provide the following statement, which outlines the main corporate governance practices that were in place throughout the financial year, unless otherwise stated. I. PRINCIPLES STATEMENT The following statement sets out how the Company has applied the principles in Part 1 of MCCG. The principles are dealt with under the following headings: A. Board of Directors, B. Directors Remuneration, C. Shareholders and D. Accountability and Audit. A. BOARD OF DIRECTORS i. Board responsibilities The Group acknowledges the pivotal role played by the Board of Directors in the stewardship of its direction and operations, and ultimately the enhancement of long-term shareholder value. To fulfill this role, the Board is responsible for the overall corporate governance of the Group, including its strategic direction, establishing goals for management and monitoring the achievement of these goals. The Board has a formal schedule of matters reserved to itself for decisions, which includes the acquisition and divestment policy, approval of major capital expenditure projects, consideration of significant financial matters and it reviews the financial and operating performance of the Group. The schedule ensures that the governance of the Group is in check. ii. Board Balance As at the date of this statement, the Board consists of Seven (7) members as depicted below: Directors Goh Wee Keng, Jeffrey Shum Sze Keong Dato Mohamed Salleh Bin Bajuri Dato Seo Eng Lin, Robin Dato Wong Siew Hai Dato Lee Tuck Fook Lee Hock Chye Designation Executive Chairman and Chief Executive Officer Senior Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director A brief profile of each Director is presented in the corresponding section of this. The concept of independence adopted by the Board is in tandem with the definition of an independent Director in paragraph 1.01 of the Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Malaysia ) and Bursa Malaysia s Practice Note 13/2002. The key elements for fulfilling the criteria are the appointment of independent Directors who are not members of management (Non-Executive) and who are free from any business or other relationship which could interfere with the exercise of independent judgement or the ability to act in the best interests of the Company. The Board 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. 15

17 Corporate Governance Statement (cont d) I. PRINCIPLES STATEMENT (cont d) A. BOARD OF DIRECTORS (cont d) ii. Board Balance (cont d) The Directors, with their different backgrounds and specialisations, collectively bring with them a wide range of experience and expertise in areas such as finance, corporate affairs, legal, marketing and operations. The Executive Director is responsible for implementing the policies and decisions of the Board, overseeing the operations as well as coordinating the development and implementation of business and corporate strategies. The Independent Non-Executive Directors bring to bear objective and independent judgement to the decision making of the Board and provide a capable check and balance for the Executive Director and management. They contribute significantly in areas such as policy and strategy, 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 a proper understanding of and competence to deal with the current and emerging business issues. MCCG recommends the appointment of a Senior Independent Non-Executive Director to whom concerns may be conveyed. In compliance with the recommendation, the Board has appointed a Senior Independent Non-Executive Director, Shum Sze Keong to fulfill the role. Any matters of concern may be raised to the Senior Independent Non-Executive Director through regular mail to the Company s registered address or via at independent@lkt.com.my. The Board is satisfied that the current Board size and composition brings the required mix of skills, core competencies and balance required for the Board to discharge its duties effectively. The high proportion of Independent Non-Executive Directors (more than three quarters) provides for effective check and balance in the functioning of the Board. The Board is also satisfied that it fairly reflects the interests of minority shareholders in the Company. iii. Supply of Information The Board recognises that the decision making process is highly contingent on the quality of information furnished. As such, all Directors have unrestricted access to any information pertaining to the Company and the Group. The Chairman ensures that all Directors have full and timely access to information with Board papers distributed in advance of meetings. This ensures that Directors have sufficient time to appreciate issues to be deliberated at the Board meeting and expedites the decision making process. Every Director has unhindered access to the advice and services of the Company Secretary. The Board believes that the current Company Secretary is capable of carrying out her duties to ensure the effective functioning of the Board. In the event that the Company Secretary fails to fulfill her functions effectively, the terms of appointment permit her removal and appointment of a successor only by the Board as a whole. There is also a formal procedure sanctioned by the Board of Directors, whether as a full Board or in their individual capacity, for Directors to obtain independent professional advice at the Company s expense. 16

18 Corporate Governance Statement (cont d) I. PRINCIPLES STATEMENT (cont d) A. BOARD OF DIRECTORS (cont d) iv. Appointment process New appointees will be considered and evaluated by the Nomination Committee. The Committee will then recommend the candidates to be approved and appointed by the Board. The Company Secretary will ensure that all appointments are properly made, and that legal and regulatory obligations are met. v. Re-election 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 shall take place each year. A retiring Director shall retain office until the close of the meeting at which he retires. In any case of a Director so appointed during the year, he shall hold office only until the next Annual General Meeting (AGM) and shall be eligible for re-election. 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 Group 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 vi. 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). For 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. The Board continues to encourage participation of Directors in various training programmes and ensures that the Directors training needs are met. vii. Board Meetings 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 2010, the Board met on seven (7) occasions; where it deliberated upon and considered various matters. The Board receives documents on matters requiring its consideration prior to and in advance of each meeting 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. All proceedings from the Board meetings are minuted and signed by the Chairman of the meeting. 17

19 Corporate Governance Statement (cont d) I. PRINCIPLES STATEMENT (cont d) A. BOARD OF DIRECTORS (cont d) vii. Board Meetings (cont d) Details of each existing and past Director s meeting attendances during the financial year are as follows: Directors (Current) Designation Attendance Goh Wee Keng, Jeffrey Executive Chairman and (Redesignated 21 January 2010) Chief Executive Officer 5/5 Shum Sze Keong Senior Independent Non-Executive Director 7/7 Dato' Mohamed Salleh Bin Bajuri Independent Non-Executive Director 7/7 Dato Seo Eng Lin, Robin Independent Non-Executive Director 7/7 Dato Wong Siew Hai Independent Non-Executive Director 7/7 Dato Lee Tuck Fook Independent Non-Executive Director 7/7 Lee Hock Chye Independent Non-Executive Director 7/7 Director (Past) Oh Chong Ho Non-Independent (Resigned 26 March 2010) Non-Executive Director 5/5 viii. Board Committees The Board of Directors delegates certain responsibilities to the Board Committees as follows: 1. AUDIT AND RISK MANAGEMENT COMMITTEE The following table depicts the members of the Committee and the attendance of the Committee meetings for the financial year under review. Name Chairman Shum Sze Keong Designation Total Attendance Senior Independent Non-Executive Director 6/6 Members Dato Mohamed Salleh Bin Bajuri Independent Non-Executive Director 6/6 Dato Lee Tuck Fook Independent Non-Executive Director 6/6 Lee Hock Chye Independent Non-Executive Director 5/5 18

20 Corporate Governance Statement (cont d) I. PRINCIPLES STATEMENT (cont d) A. BOARD OF DIRECTORS (cont d) viii. Board Committees (cont d) 1. AUDIT AND RISK MANAGEMENT COMMITTEE (cont d) Activities of Audit and Risk Management Committee In line with the terms of reference, the Audit and Risk Management Committee (ARMC) conducted six (6) meetings during the financial year and the activities carried out by the ARMC during the year include: Reviewed the Company s and the Group s quarterly financial results and the announcement and annual audited financial statements before submission to the Board for adoption; Performed the following, in relation to the external auditors: o Reviewed the external auditors scope of work, proposed audit fee and audit plan for the year under review; o 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, their management letters and response by management; o Reviewed the performance of the existing external auditors for the Group; Performed the following, in relation to the internal auditor: o 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; o Reviewed the internal audit plan adopted by the internal audit function; o Reviewed the internal auditors report and the management response to the audit findings; o Reviewed any appraisal or assessment of the performance of member of the internal audit function; Performed the following, in relation to the risk management: o Reviewed the risk management framework, risk strategies, risk appetite and objectives of the Group prepared by Risk Management Steering Committee; o Reviewed the adequacy and completeness of the Group s risk management process and recommended improvement where deemed necessary; o Reviewed the Group risk profile and risk management reports which includes management s action plan and implementation status from the management; o Reported and monitored the risk management priorities, including oversight of reporting to the Board on an exception basis, where required, and routinely on matters of regular interest of the Board; Reported to the Board on its activities and significant findings and results. 19

21 Corporate Governance Statement (cont d) I. PRINCIPLES STATEMENT (cont d) A. BOARD OF DIRECTORS (cont d) viii. Board Committees (cont d) 1. AUDIT AND RISK MANAGEMENT COMMITTEE (cont d) Terms of Reference Objectives of the ARMC The primary function of the ARMC is to assist the Board in fulfilling the following oversight objectives on the Group s activities: Assess the Group s processes relating to its risks, governance and control environment; Oversee financial reporting; Evaluate the internal and external audit processes; Overseeing the risk management framework of the Group; Reviewing and recommending an appropriate risk management strategy so as to ensure that business risks are effectively addressed by the Group; Reviewing the adequacy and completeness of the Group s risk management process and recommending improvements where required. Composition of ARMC The Committee shall be appointed by the Board from among its members and shall consist of not less than three (3) members of whom a majority are independent and the members shall not, Be Executive Directors of the company or any related corporations; 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; Comprise persons having a relationship which in the opinion of the Board would interfere with the exercise of independent judgement in carrying out the function of the Audit and Risk Management Committee. The Committee shall elect a Chairman from among its members who is Independent Director. All the members should be financially literate and at least one member is a member of an accounting association or body. All members of the Committee, including the Chairman, will hold office only so long as they serve as Directors of the Company and have not been removed from the Committee by the Board. 20

22 Corporate Governance Statement (cont d) I. PRINCIPLES STATEMENT (cont d) A. BOARD OF DIRECTORS (cont d) viii. Board Committees (cont d) 1. AUDIT AND RISK MANAGEMENT COMMITTEE (cont d) Terms of Reference (cont d) Composition of ARMC (cont d) In the event that a member of the Committee resigns, dies or for any reason ceases to be a member with the result that the number is reduced below three (3), the Board shall, within three (3) months of that event, appoint such number of members as may be required to make up the minimum number of three (3) members. Secretary to ARMC The Company Secretary shall be the secretary of the Committee and shall be responsible for drawing up the agenda in consultation with the Chairman of the ARMC. The agenda together with relevant explanatory papers and documents shall be circulated to the Committee members prior to each meeting. The Secretary shall be responsible for keeping the minutes of the meeting of the Committee, circulating them to the Committee members and ensuring compliance with Bursa Malaysia Listing Requirements. Meetings The Committee shall meet at least four (4) times a year. The Chairman of the Committee will highlight any major issues and any items requiring resolution by the Board. In addition, the Chairman shall convene a meeting of the Committee if requested to do so by any member, the management of internal or external auditors to consider any matters within the scope and responsibilities of the Committee. The Chairman of the Audit and Risk Management Committee should engage on a continuous basis with senior management, such as the Chairman, Chief Executive Officer, the Head of Finance, the Head of Internal Audit and the External Auditors in order to be kept informed of matters affecting the company. Quorum A quorum shall consist of 2 Committee members; however it must be made up of a majority of independent Directors. Attendance by Invitation The Group s Head of Finance, the Head of Internal Audit and the representative of the External Auditors should normally attend meetings. The Committee may invite any person to be in attendance to assist in its deliberations. However, the Committee should meet with the External Auditors without Executive Board members present at least twice a year. 21

23 Corporate Governance Statement (cont d) I. PRINCIPLES STATEMENT (cont d) A. BOARD OF DIRECTORS (cont d) viii. Board Committees (cont d) 1. AUDIT AND RISK MANAGEMENT COMMITTEE (cont d) Terms of Reference (cont d) Rights of the External Auditors The External Auditors have the right to appear and be heard at any meeting of the Committee and their representative shall appear before the ARMC when required to do so by the Committee. Authority of the ARMC The Audit and Risk Management Committee should Have authority to investigate any activity within its terms of reference; Have the resources which are required to perform its duties; 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; Have direct communications channels with the External Auditors and person(s) carrying out the internal audit function or activity; Be able to obtain outside legal or other independent professional advice as it considers necessary; and Be able to convene meetings with the External Auditors, Internal Auditors or both, excluding the attendance of other Directors and employees of the Group, whenever deemed necessary. Duties and Responsibilities The duties and responsibilities of the Committee shall be: To review the Company s and the Group s quarterly announcements and annual financial statement before submission to the Board, focusing on: o Any changes in accounting policies and practices; o Major judgement areas; o Significant adjustments proposed by the external auditors; o Going concern assumption; o Compliance with accounting standards; o Compliance with stock exchange and legal requirement; To review with the external auditors their audit plan, scope and nature of audit for the Company and the Group; To assess the adequacy and effectiveness of the system of internal control and accounting control procedures of the Company and the Group by reviewing the external auditors management letters and management s response; 22

24 Corporate Governance Statement (cont d) I. PRINCIPLES STATEMENT (cont d) A. BOARD OF DIRECTORS (cont d) viii. Board Committees (cont d) 1. AUDIT AND RISK MANAGEMENT COMMITTEE (cont d) Terms of Reference (cont d) Duties and Responsibilities (cont d) 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); To perform the following, in relation to the internal audit function: o 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; o Review the internal audit programme and results of the internal audit process and, where necessary, ensure that appropriate actions are taken on the recommendations of internal audit function; o 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; o Review any appraisal or assessment of the performance of members of the internal audit function; o Approve any appointment or termination of senior staff members of the internal audit function; and o 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 perform the following, in relation to the risk management function: o To review the risk management framework, risk strategies, risk appetite and objectives of the Group; o To review the adequacy and completeness of the Group s risk management process and recommend improvement where deemed necessary; o To review the Group risk profile and risk management reports which include management s action plan and implementation status from the management; o To report and monitor the risk management priorities, including oversight of reporting to the Board on an exception basis, where required, and routinely on matters of regular interest of the Board. To review any related parties transactions that may arise within the Company and the Group; To consider the appointment of the external auditors, the audit fee, the terms of reference of their appointment, and any question of resignation or dismissal; 23

25 Corporate Governance Statement (cont d) I. PRINCIPLES STATEMENT (cont d) A. BOARD OF DIRECTORS (cont d) viii. Board Committees (cont d) 1. AUDIT AND RISK MANAGEMENT COMMITTEE (cont d) Terms of Reference (cont d) Duties and Responsibilities (cont d) To verify the allocation of option granted pursuant to Employee Share Option Scheme; To report to the Board its activities, significant results and findings; and To undertake any such responsibilities as may be agreed by the Committee and the Board. Review The terms of reference will be subjected to review at least annually by the Committee and the CEO, and any amendments are to be approved by the Board before becoming effective. Internal Audit Function The Company s Internal Audit function reports directly to the ARMC assisting it to discharge its duties and responsibilities. The Internal Audit plan is approved by the ARMC covering three main areas namely internal control, risk management and governance process. Based on the audit plan, the audit work is being 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, the Internal Audit tabled audit reports and implementation status to the management and the ARMC on a quarterly basis to ensure key issues are being addressed. Internal Audit is also the coordinator for the Risk Management Steering Committee to follow up on the implementation of risk management activities without taking ownership of the risks identified. This is in order to ensure Internal Audit independence is not compromised. During the financial year, the estimated total cost incurred is RM110,

26 Corporate Governance Statement (cont d) I. PRINCIPLES STATEMENT (cont d) A. BOARD OF DIRECTORS (cont d) viii. Board Committees (cont d) 2. NOMINATION COMMITTEE The following table depicts the members of the Committee and the attendance of the Committee meetings for the financial year under review. Name Designation Total Attendance Chairman Dato' Wong Siew Hai Independent Non-Executive Director 1 / 1 (Re-designated as Chairman 12 November 2009) Goh Wee Keng, Jeffrey Executive Chairman and (Resigned 12 November 2009) Chief Executive Officer 1/1 Members Dato Seo Eng Lin, Robin Independent Non-Executive Director 1/1 Lee Hock Chye (Appointed 12 November 2009) Independent Non-Executive Director N/A Activities of Nomination Committee The Nomination Committee met once during the financial year to discuss and make recommendations to the Board in line with the terms of reference set up for the Committee. During the year, the Committee reviewed the Board balance and composition of the Board. The Committee also carried out, compiled and reviewed the assessment on the effectiveness of the Board, Committees of the Board and the contributions of each individual Director based on the process and procedures laid out by the Board. Terms of Reference Objectives In accordance with the MCCG, the Nomination Committee is set up to recommend candidates to the Board. The final decision on the appointment of any of the Directors shall be made by the Board. The Nomination Committee shall be responsible in ensuring the appropriate Board balance and size, and that the Board has a required mix of skills, experience and other core competencies. Based on the process and procedures laid out by the Board, the Nomination Committee shall annually carry out and ensure proper documentation of all assessments and evaluations on the effectiveness of the Board, the Board Committees and the contribution of each individual Director. 25

27 Corporate Governance Statement (cont d) I. PRINCIPLES STATEMENT (cont d) A. BOARD OF DIRECTORS (cont d) viii. Board Committees (cont d) 2. NOMINATION COMMITTEE (cont d) Terms of Reference (cont d) Composition The Nomination Committee shall comprise wholly of Non-Executive Directors, the majority of whom are independent. The members of the Nomination Committee shall elect a Chairman from amongst any of its members. Meetings The Nomination Committee shall meet as and when necessary. The quorum for any meetings shall be two members subject to any laws, guidelines or rules that may be imposed by Bursa Malaysia and/or any other relevant authority. Duties and Responsibilities To make recommendations to the Board with regard to any appointment of Directors considering their skills, knowledge, expertise and experience; professionalism; integrity; and for the position of Independent Non-Executive Directors, the ability to discharge such responsibilities/ functions as expected; To consider, in making its recommendations, candidates for Directorships proposed by the Chief Executive Officer and within the bounds of practicability, by any other senior executive or any other Director or shareholder; To assist the Board to review regularly the Board structure, size and composition and the required mix of skills and experience and other qualities including core competencies which Non-Executive Directors should bring to the Board; To assess the effectiveness of the Board, any other committees of the Board and the contributions of each individual Director, including Independent Non-Executive Directors, as well as the Chief Executive Officer, based on the process and procedures laid out by the Board; To ensure proper documentation of all assessments and evaluations so carried out; To recommend to the Board, the Directors to fill the seats on any committees of the Board; To recommend to the Board for continuation or discontinuation in service of Directors as an Executive Director or Non-Executive Director; 26

28 Corporate Governance Statement (cont d) I. PRINCIPLES STATEMENT (cont d) A. BOARD OF DIRECTORS (cont d) viii. Board Committees (cont d) 2. NOMINATION COMMITTEE (cont d) Terms of Reference (cont d) Duties and Responsibilities (cont d) To recommend to the Board, Directors who are retiring by rotation to be put forward for re-election; To recommend to the Board the employment of the services of such advisers as it deems necessary to fulfill the Board s responsibilities; and To carry out other responsibilities, functions or assignments as may be defined by the Board from time to time. 3. REMUNERATION COMMITTEE The following table depicts the members in the Committee and the attendance of the Committee meetings for the financial year under review. Name Designation Total Attendance Chairman Dato Seo Eng Lin, Robin Independent Non-Executive Director 1 / 1 (Re-designated as Chairman 12 Nov 2009) Members Goh Wee Keng, Jeffrey Executive Chairman and (Re-designated as member Chief Executive Officer 1 / 1 12 Nov 2009) Dato' Wong Siew Hai Independent Non-Executive Director 1/1 Activities of Remuneration Committee The Remuneration Committee met once during the financial year. During the year under review, the Committee reviewed and recommended to the Board the remuneration packages of the Executive Director in all its forms and the remuneration of the Non-Executive Directors according to the pre-approved Director s Fee Schedule. The Board as a whole determined the remuneration of the Executive and Non-Executive Directors, including the Executive Chairman, with the individual Directors abstaining from decisions in respect of their own remuneration. 27

29 Corporate Governance Statement (cont d) I. PRINCIPLES STATEMENT (cont d) A. BOARD OF DIRECTORS (cont d) viii. Board Committees (cont d) 3. REMUNERATION COMMITTEE (cont d) The policy practiced by the Remuneration Committee is to provide remuneration packages necessary to attract, retain and motivate Directors of caliber to oversee the affairs of the Company while aligning the interest of the shareholders; at the same time ensuring compliance to requirements of the relevant authorities and best practices. Terms of Reference Objectives In accordance with the MCCG, the Remuneration Committee is set up to provide recommendations to the Board on the remuneration of the Executive Directors in all its forms such that the component parts of remuneration are structured to link rewards to corporate and individual performance. Executive Directors should play no part in decisions on their own remuneration while the remuneration of the Non-Executive Directors should be a matter for the Board as a whole to determine. The individuals concerned should abstain from discussion of and voting on their own remuneration. Size and Composition The Remuneration Committee shall consist wholly or mainly of Non-Executive Directors. The members of the Remuneration Committee shall elect a Chairman from amongst its members who shall be a Non-Executive Director. Meetings The Remuneration Committee shall meet as and when necessary. The quorum for any meetings shall be two Non-Executive Directors subject to any laws, guidelines or rules as may be imposed by Bursa Malaysia and/or any other relevant authority. Duties and Responsibilities To determine and recommend to the Board the framework or broad policy for the remuneration, in all forms, of the Executive Directors and/or any other persons as the Committee is designated to consider by the Board, drawing from outside advice as necessary; To determine and recommend to the Board any performance related pay schemes for the Executive Directors and/or any other persons as the Committee is designated to consider by the Board; 28

30 Corporate Governance Statement (cont d) I. PRINCIPLES STATEMENT (cont d) A. BOARD OF DIRECTORS (cont d) viii. Board Committees (cont d) 3. REMUNERATION COMMITTEE (cont d) Terms of Reference (cont d) Duties and Responsibilities (cont d) To determine the policy for and scope of service agreements for the Executive and Non-Executive Directors, termination payment and compensation commitments; To recommend to the Board the appointment of the services of such advisers or consultants as it deems necessary to fulfill its responsibilities; The Committee should ensure that the following disclosure requirements pertaining to Directors remuneration are being complied with; o o Membership of the Remuneration Committee appears in the Director Report; Details of the remuneration of each Director are disclosed in the in the name of the full Board. B. DIRECTORS REMUNERATION Details of the nature and amount of each major element of the remuneration of each Director of the Company for the year ended 31 March 2010 including resigned Director are as follows: 1. Aggregate remuneration of Directors categorised into appropriate components: Fees Salaries Benefits in Allowance Total Directorship & Bonuses kind RM Executive Directors 45, ,880 45, ,286 1,001,142 Non-Executive Directors 264, , ,792 Total 309, ,880 45, ,286 1,431,934 29

31 Corporate Governance Statement (cont d) I. PRINCIPLES STATEMENT (cont d) B. DIRECTORS REMUNERATION (cont d) 2. Number of Directors whose remuneration falls into the following bands, including resigned Directors: Remuneration Band Number of Directors Executive Non-Executive Below RM50,000 1* 1* RM50,001 to RM100,000-6 RM100,001 to RM150, RM150,001 to RM200, RM200,001 to RM950, RM950,001 to RM1,000, RM1,000,001 to RM1,050, RM1,050,001 to RM1,100, RM1,100,001 to RM1,150, Note: * Re-designation of Director from Non-Executive to Executive C. SHAREHOLDERS It is a policy of the Company to maintain an active dialogue with its shareholders with the intention of giving shareholders as clear and complete a picture of the Company s performance and position as possible. The key element of the Company s dialogue with its shareholders, is the opportunity to gather views of, and answer questions from, both individual and institutional shareholders on all issues relevant to the Company at general meetings through the Annual General Meeting (AGM) or the Extraordinary General Meeting (EGM), when applicable. Every notice convening general meetings 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. At the general meeting, shareholders are provided time and encouraged to ask questions both about the resolutions being proposed or about the Group s operations in general. Where it is not possible to provide immediate answers, the Chairman will undertake to furnish the shareholder with a written answer after the meeting. When applicable the Company also holds briefings for fund managers, institutional investors and investment analysts. Press conferences would be held to brief members of the media on key events of the Company. The Company s website, provides a comprehensive avenue for information dissemination, such as dedicated sections on corporate information including financial information, Bursa announcements, press releases and company news. Shareholders are able to put questions to the Company through the website and the Company will reply accordingly. While the Company endeavors to provide as much information as possible to its shareholders and stakeholders, it is mindful of the legal and regulatory framework governing the release of material and price-sensitive information. Such material and price-sensitive information are not released unless it has been duly announced or made public through the proper channels. 30

32 Corporate Governance Statement (cont d) I. PRINCIPLES STATEMENT (cont d) D. ACCOUNTABILITY AND AUDIT i. Financial Reporting 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 and review of operations in the. The Board is assisted by the Audit and Risk Management Committee to oversee the Group s financial reporting processes and the quality of its financial reporting. ii. Internal Control The state of internal control of the Group is furnished in the Statement on Internal Control in section IV of this Corporate Governance Statement. iii. Relationship with External Auditors The External Auditors of the Company fulfill an essential role on behalf of Company Shareholders 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 ARMC and Company management any significant defects in Company systems of reporting, internal control and compliance with approved accounting standards and legal and regulatory requirements. The External Auditors of the Company are invited to attend at least two meetings of the ARMC a year without the presence of the management. During the year, the breakdown of audit and non-audit fees paid to the External Auditors are as follows: Audit Fee RM159,000 Non-Audit Fee RM 2,000 The Internal Audit function of the Company is coordinated with the findings of the External Auditors to ensure as complete audit coverage of Company 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 ARMC with the External Auditors are included in the ARMC s terms of reference as detailed in this. A summary of the activities of the ARMC during the financial year, are set out in the ARMC Report in this. 31

33 Corporate Governance Statement (cont d) II. COMPLIANCE STATEMENT The Group has, throughout the year ended 31 March 2010, complied with all the best practices of corporate governances set out in Part 2 of MCCG save as explained below. The role of Chairman and Chief Executive Officer was combined w.e.f. 21 January 2010 for strategic business purposes. However, with a strong independent element on the Board, where it is consisted of a high majority of Independent Non-Executive Directors (6/7), it would not impede independent decisionmaking. III. DIRECTORS RESPONSIBILITY STATEMENT IN RESPECT OF THE PREPARATION OF THE AUDITED FINANCIAL STATEMENTS The Board is responsible for ensuring that the financial statements of the Group 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 judgements 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. IV. STATEMENT ON INTERNAL CONTROL The Board recognises that an effective system of internal control is necessary in order to safeguard shareholder s investment and an important part of managing risk to achieve the Group s corporate objective. The Board is responsible to review the effectiveness of the system of internal control implemented by the management. The key policies and procedures designed to provide effective control include: The Group has a clear organisation structure with well-defined lines of responsibility and appropriate levels of authority. The full Board meets at least once every quarter to discuss matters brought to its attention. There is also a formal schedule of matters specifically reserved to the Board for decision-making. The Board has adopted a formal risk management policy and risk management framework. There is a structured process of identifying, analysing, assessing, treating, monitoring, managing and communicating significant risks faced by the Group. The ARMC of the Board reviews the risk management activities tabled by the Risk Management Steering Committee on a yearly basis. The objective of the risk management activities is to contain significant risks faced by the Group to an acceptable level which commensurate to the rate of returns rather than to eliminate the risks. The Board approved a detailed annual budget where the financial targets are set in consultation with the management. The Executive Director is involved in all aspects of the day-to-day business and attends weekly or monthly management meetings at which performance against budget and forecast is reviewed. Expenditure is controlled against formal authorisation limits. Capital expenditure is prepared annually for approval by the Board. 32

34 Corporate Governance Statement (cont d) IV. STATEMENT ON INTERNAL CONTROL (cont d) Procedures and authority level in the Group are documented in the Corporate Manual and Quality Manual which are regularly reviewed and updated. Internal Audit function reports directly to the ARMC with the main role to assist the ARMC in discharging their duties and responsibilities. The details of activities carried out by the ARMC are reported in the ARMC section of the. For the year under review, the Board has through the ARMC reviewed the effectiveness of the internal controls. The Board is of the view that the system of internal controls in place for the year under review and up to the date of issuance of the financial statements is sound and sufficient to safeguard the stakeholders investment and Group s assets. The system of internal controls is monitored internally by the Finance Department together with the Internal Audit function. The system of internal control provides reasonable but not absolute assurance against material misstatement or loss. This statement is issued in accordance with a resolution of the Directors dated 12 May Other Information Recurrent Related Party Transactions (RRPT) of a revenue or trading nature for the year ended 31 March 2010 Details of RRPT made during the financial year ended 31 March 2010 pursuant to the shareholders mandate obtained by the Company at the 15th Annual General Meeting held on 5 August 2009 are as follows:- Related Party with Nature of Companies within Amount in Interested whom the Group is transactions the Group involved RM 000 Related Party transacting in RRPT Singapore Aerospace Sales of aerospace Meerkat Precision 75 Goh Wee Keng Manufacturing parts and other Sdn Bhd Oh Chong Ho* Pte. Ltd. precision tools to SAM SAM Group Singapore Aerospace Structured training Meerkat Precision 434 Goh Wee Keng Manufacturing and engineering Sdn Bhd Oh Chong Ho* Pte. Ltd. support services SAM provided by SAM Group to accelerate LKT s capability to manufacture critical aerospace components Notes: SAM Group Singapore Aerospace Manufacturing Pte. Ltd. and its subsidiaries/associates. * Resigned on 26 March

35 Corporate Social Responsibility The Company has always believed in making a difference where it matters, and this is evident from the way it embraced its role as a responsible corporate citizen. In year 2009, the Company took part in two major community works namely the Penang Skills Development Centre (PSDC) 20th Anniversary Charity Run, and the Let s Make a Difference Project, initiated by the Company in aid of the Pusat Jagaan & Kebajikan Nasyiatul Aiyisyah in Balik Pulau. PSDC 20th Anniversary Run July 2009 The Company participated and supported the charity run with a total of 120 employees signing up for the Run, which covers a distance of 6.5km. This makes the Company one of the top 5 companies in terms of number of registrations, with the entry fee of RM10 per participant being borne by the Company. Being one of the founding members of PSDC, the Company contributed additional RM5,000 donation to the Run, and was subsequently recognised as the Organisation with the highest donation. All proceeds (donations and entry fees, totaling RM6,200) from the Company were channeled to the Mount Miriam Cancer Hospital. Let s Make a Difference Project Dec 2009 The Project was achieved through the concerted effort of the management and employees who teamed up to create a happier and better living condition for the orphans at Pusat Jagaan & Kebajikan Nasyiatul Aiyisyah, with contribution in cash and kind amounting to RM35,476. Located in Sungai Pinang Village, Balik Pulau, Nasyiatul Aiyisyah is a family-run home providing care to orphans, abandoned children, as well as children from underprivileged homes and troubled families. The Orphanage depended mostly on donations from the public and well-wishers, and currently has 20 children under its care, ranging from the age of three months to 16 years. Of the total contribution, approximately RM20,000 was spent on repairs and renovation works, mainly on the roof, which suffered from extensive leakage. Another RM10,000 went to the purchase of electrical, household appliances, groceries and baby care items. The remainder of RM5,476 was given to the Orphanage in cash to ease their financial constraints. In the true spirit of 1Malaysia, a group of employees from all races and religions volunteered to spend half a day doing gotong-royong on a weekend at the Orphanage, to help spruce-up the place. They even helped with some painting work. The Company takes the role as a responsible corporate citizen seriously, not out of obligation but of concern for the community. The best reward of CSR is in knowing that in some ways, the Company has reached out and touched someone s life. CSR will remain an important part of the Company s corporate culture. 34

36 FINANCIAL STATEMENTS Directors Report 36 Consolidated Balance Sheet 39 Consolidated Income Statement 40 Consolidated Statement of Changes in Equity 41 Consolidated Cash Flow Statement 42 Balance Sheet 45 Income Statement 46 Statement of Changes in Equity 47 Cash Flow Statement 48 Notes to the Financial Statements 50 Statement by Directors 98 Statutory Declaration 98 Report of the Auditors to the Members 99 35

37 Directors Report for the year ended 31 March 2010 The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the 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 6 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 attributable to shareholders of the Company 25,984 1,464 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 No dividend was paid since the end of the previous financial period and the Directors do not recommend any dividend to be paid in respect of the financial year ended 31 March Directors of the Company Directors who served since the date of the last report are : Goh Wee Keng Shum Sze Keong Dato Mohamed Salleh Bin Bajuri Dato Wong Siew Hai Dato Seo Eng Lin Dato Lee Tuck Fook Lee Hock Chye Oh Chong Ho (Resigned on ) Directors interests None of the Directors holding office at 31 March 2010 had any interest in the ordinary shares of the Company and of its related corporations during the financial year. 36

38 Directors Report for the year ended 31 March 2010 (cont d) Directors benefits Since the end of the previous financial period, 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 of the Company) 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 the Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. Issue of shares and debentures There were no changes in the issued and paid-up capital of the Company and no debentures were in issue during the financial year. Other statutory information Before the balance sheets and income 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) all current assets have been stated at the lower of cost and net realisable value. 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 Group and in the Company s financial statements 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. 37

39 Directors Report for the year ended 31 March 2010 (cont d) 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 results of the operations of the Group and of the Company for the financial year ended 31 March 2010 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report. Significant events during the year The details of such events are 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 : Goh Wee Keng Shum Sze Keong Date : 12 May

40 Consolidated Balance Sheet at 31 March 2010 Assets Note RM 000 RM 000 Property, plant and equipment 3 108,853 77,071 Prepaid lease payments 4 15,874 20,744 Intangible assets 5 1,461 1,941 Total non-current assets 126,188 99,756 Receivables, deposits and prepayments 8 30,598 28,264 Inventories 9 23,101 36,243 Assets classified as held for sale 10 8,356 - Current tax assets Cash and cash equivalents 11 31,580 24,760 Total current assets 93,849 90,085 Total assets 220, ,841 Equity Share capital 12 70,881 70,881 Reserves 13 82,740 51,728 Total equity attributable to shareholders of the Company 153, ,609 Liabilities Borrowings 14 15,406 23,304 Deferred tax liabilities 15 4,323 2,196 Total non-current liabilities 19,729 25,500 Payables and accruals 16 29,883 24,337 Provisions 17 5,024 6,496 Borrowings 14 10,236 10,857 Current tax liabilities 1, Total current liabilities 46,687 41,732 Total liabilities 66,416 67,232 Total equity and liabilities 220, ,841 The notes on pages 50 to 97 are an integral part of these financial statements. 39

41 Consolidated Income Statement for the year ended 31 March 2010 Continuing operations 12 months 15 months ended ended Note RM 000 RM 000 Revenue , ,247 Cost of sales (260,535) (176,597) Gross profit 41,996 20,650 Selling and distribution expenses (1,048) (545) General and administrative expenses (13,243) (19,216) Other operating expenses (5,208) (12,564) Other operating income 7,672 5,273 Operating profit/(loss) 19 30,169 (6,402) Finance costs 20 (989) (1,298) Profit/(Loss) before tax 29,180 (7,700) Tax expense 22 (3,196) 976 Profit/(Loss) from continuing operations 25,984 (6,724) Loss from discontinued operations, net of tax 23 - (667) Profit/(Loss) for the year/period 25,984 (7,391) Attributable to: Shareholders of the Company 25,984 (7,388) Minority interest - (3) Profit/(Loss) for the year/period 25,984 (7,391) Basic earnings/(loss) per ordinary share (sen) (10.42) The notes on pages 50 to 97 are an integral part of these financial statements. 40

42 Consolidated Statement of Changes in Equity for the year ended 31 March 2010 Attributable to shareholders of the Company Non-Distributable Distributable Assets Share Share revaluation Translation Retained Minority Total Note capital premium reserve reserve earnings Total interest equity RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 1 January ,881 6,850 5, , , ,447 Realisation of assets revaluation reserve on disposal of a subsidiary - - (1,915) - 1, Foreign exchange translation differences Net gains/(losses) recognised directly in equity - - (1,915) 142 1, Loss for the period (7,388) (7,388) (3) (7,391) 41 Dividend (3,544) (3,544) - (3,544) Winding up of a subsidiary (45) (45) At 31 March ,881 6,850 3, , , ,609 Foreign exchange translation differences Surplus on revaluation of buildings (net of deferred tax) - - 4, ,956-4,956 Net gains recognised directly in equity - - 4, ,028-5,028 Profit for the year ,984 25,984-25,984 At 31 March ,881 6,850 8, , , ,621 Note 12 Note 13 Note 13 Note 13 Note 13 The notes on pages 50 to 97 are an integral part of these financial statements.

43 Consolidated Cash Flow Statement for the year ended 31 March 2010 Cash flows from operating activities 12 months 15 months ended ended Note RM 000 RM 000 Profit/(Loss) before tax from - continuing operations 29,180 (7,700) - discontinued operations - (685) Adjustments for: Revaluation deficit of buildings Impairment loss on property, plant and equipment ,172 Depreciation on property, plant and equipment 3 8,549 10,620 Amortisation of prepaid lease payments Amortisation of intangible assets Provision for onerous contracts ,675 (Reversal of)/provision for severance costs 17 (198) 1,669 Realisation of provision for onerous contracts 17 (1,675) - Provision for warranty cost, net 19 1,876 1,192 Loss/(Gain) on disposal of plant and equipment 19 4 (32) Gain on disposal of investment property - (52) Interest income (86) (426) Plant and equipment written off Loss on winding up of a subsidiary (Gain)/Loss on disposal of subsidiaries 19 (1) 3,848 Interest expense ,298 Operating profit before changes in working capital 40,134 14,833 Changes in working capital : Receivables, deposits and prepayments (13,022) 15,393 Inventories 13,142 (14,096) Payables and accruals 5,606 2,913 Cash generated from operations 45,860 19,043 Warranty cost paid 17 (24) (318) Severance costs paid 17 (1,471) - Income tax (paid)/refunded (613) 8,985 Net cash generated from operating activities 43,752 27,710 42

44 Consolidated Cash Flow Statement for the year ended 31 March 2010 (cont d) Cash flows from investing activities 12 months 15 months ended ended Note RM 000 RM 000 Purchase of plant and equipment A (27,476) (22,385) Purchase of intangible assets (computer software) 5 (28) (419) Interest received Withdrawal of pledged deposits - 26 Proceeds from disposal of plant and equipment - 67 Proceeds from disposal of assets classified as held for sale Net cash outflow from disposal and winding up of subsidiaries B - (17) Net cash used in investing activities (27,418) (21,952) Cash flows from financing activities Dividend paid - (3,544) Interest paid (989) (1,298) (Repayment)/Drawdown of borrowings, net (3,406) 3,406 Drawdown of term loans 3,452 13,445 Repayment of term loans (8,565) (7,582) Net cash (used in)/generated from financing activities (9,508) 4,427 Net increase in cash and cash equivalents 6,826 10,185 Cash and cash equivalents at 1 April 2009/ 1 January ,760 14,483 Effect of exchange differences on cash and cash equivalents (6) 92 Cash and cash equivalents at 31 March 11 31,580 24,760 43

45 Consolidated Cash Flow Statement for the year ended 31 March 2010 (cont d) NOTES: A. Purchase of plant and equipment During the financial year/period, the Group acquired plant and equipment with an aggregate cost of RM38,181,000 (2009 : RM11,680,000). Additionally, the Group has also paid RM Nil (2009 : RM10,705,000) as deposits for the purchase of plant and equipment which have been considered as payments made for the purchase of plant and equipment for the purpose of the consolidated cash flow statement. B. Disposal and winding-up of subsidiaries During the current financial year, the Company disposed of its entire equity interest in the LKT Wafer Technology Sdn. Bhd. and World Depot Sdn. Bhd. for a total cash consideration of RM2 each. During the financial period ended 31 March 2009, the Company disposed of LKT Plastic Technology Sdn. Bhd., LKT Research & Development Sdn. Bhd., Iconext Sdn. Bhd., and LKT Holdings Sdn. Bhd. for a total cash consideration of RM1,725,000. The estimated fair values of assets disposed of and liabilities relieved are as follows: Note RM 000 RM 000 Plant and equipment 3-1,010 Current assets Receivables, deposits and prepayments - 2,197 Inventories - 2,908 Current tax assets - 13 Cash and cash equivalents - 1,742 Current liability Payables and accruals (1) (1,717) Non-current liability Deferred tax liabilities 15 - (468) Net (liabilities)/assets (1) 5,685 Minority interest - (45) Loss on winding up of a subsidiary 19 - (67) Gain/(Loss) on disposal of subsidiaries 19 1 (3,848) Total sale consideration satisfied by cash - 1,725 Less : Cash and cash equivalents disposed of - 1,742 Net cash outflow - (17) The notes on pages 50 to 97 are an integral part of these financial statements. 44

46 Balance Sheet at 31 March 2010 Assets Note RM 000 RM 000 Property, plant and equipment 3 1,154 1,274 Prepaid lease payments 4-4,537 Intangible assets 5 1,343 1,771 Investment in subsidiaries 6 17,124 15,224 Total non-current assets 19,621 22,806 Receivables, deposits and prepayments 8 76,722 81,177 Assets classified as held for sale 10 4,466 - Current tax assets 31 4 Cash and cash equivalents ,010 Total current assets 82,009 83,191 Total assets 101, ,997 Equity Share capital 12 70,881 70,881 Reserves 13 26,521 25,057 Total equity 97,402 95,938 Deferred tax liability Total non-current liability Payables and accruals 16 3,344 8,207 Provisions 17-1,111 Total current liabilities 3,344 9,318 Total liabilities 4,228 10,059 Total equity and liabilities 101, ,997 The notes on pages 50 to 97 are an integral part of these financial statements. 45

47 Income Statement for the year ended 31 March 2010 Continuing operations 12 months 15 months ended ended Note RM 000 RM 000 Revenue 18 11,242 17,288 General and administrative expenses (11,755) (13,513) Other operating expenses (412) (2,101) Other operating income 2, Profit before tax 19 1,607 1,793 Tax expense 22 (143) 100 Profit for the year/period 1,464 1,893 The notes on pages 50 to 97 are an integral part of these financial statements. 46

48 Statement of Changes in Equity for the year ended 31 March 2010 Non-distributable Distributable Assets Share Share revaluation Retained Total capital premium reserve earnings equity RM 000 RM 000 RM 000 RM 000 RM 000 At 1 January ,881 6,850 2,127 17,731 97,589 Profit for the period ,893 1,893 Dividend (Note 25) (3,544) (3,544) At 31 March ,881 6,850 2,127 16,080 95,938 Profit for the year ,464 1,464 At 31 March ,881 6,850 2,127 17,544 97,402 Note 12 Note 13 Note 13 Note 13 The notes on pages 50 to 97 are an integral part of these financial statements. 47

49 Cash Flow Statement for the year ended 31 March 2010 Cash flows from operating activities 12 months 15 months ended ended Note RM 000 RM 000 Profit before tax from continuing operations 1,607 1,793 Adjustments for: Depreciation of property, plant and equipment Amortisation of prepaid lease payments Amortisation of intangible assets (Reversal of)/provision for severance costs 17 (6) 1,111 Dividend income 19 (2,000) (4,000) Gain on disposal of plant and equipment 19 - (36) Interest income 19 (1) (5) Plant and equipment written off Loss on winding up of a subsidiary Loss on disposal of subsidiaries Operating profit before changes in working capital Changes in working capital: Receivables, deposits and prepayments 4,455 (4,837) Payables and accruals (4,863) 5,981 Cash (used in)/generated from operations (10) 1,474 Severance costs paid 17 (1,105) - Dividend received 2,000 4,000 Income tax (paid)/refunded (27) 42 Net cash generated from operating activities 858 5,516 Cash flows from investing activities Purchase of plant and equipment (161) (800) Purchase of intangible assets (computer software) 5 (18) (241) Proceeds from disposal of plant and equipment - 36 Interest received 1 5 Proceeds from disposal of subsidiary companies - 1,725 Subscription of additional shares in a subsidiary 6 (1,900) (2,000) Net cash used in investing activities (2,078) (1,275) 48

50 Cash Flow Statement for the year ended 31 March 2010 (cont d) 12 months 15 months ended ended Note RM 000 RM 000 Cash flows from financing activity Dividend paid - (3,544) Net cash used in financing activity - (3,544) Net (decrease)/increase in cash and cash equivalents (1,220) 697 Cash and cash equivalents at 1 April 2009/1 January ,010 1,313 Cash and cash equivalents at 31 March ,010 The notes on pages 50 to 97 are an integral part of these financial statements. 49

51 Notes to the Financial Statements LKT Industrial 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 its registered office and principal place of business are as follows: Registered office Suite 2-1, 2nd Floor Menara Penang Garden 42A, Jalan Sultan Ahmad Shah Penang Principal place of business Plot 17, Hilir Sungai Keluang Tiga Bayan Lepas Free Industrial Zone Phase IV Penang The consolidated financial statements of the Company as at and for the financial year ended 31 March 2010 comprise the Company and its subsidiaries (together referred to as the Group). 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 6 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 respectively. The ultimate holding company is Temasek Holdings (Private) Limited. All the above companies are incorporated in the Republic of Singapore. The financial statements were approved by the Board of Directors on 12 May Basis of preparation (a) Statement of compliance These financial statements have been prepared in accordance with Financial Reporting Standards ( FRS ), accounting principles generally accepted and the Companies Act, 1965 in Malaysia. The Group and the Company have not applied the following accounting standards (including its consequential amendments) and interpretations that have been issued by the Malaysian Accounting Standards Board ( MASB ) but are not yet effective: FRS effective for annual periods beginning on or after 1 July 2009 FRS 8, Operating Segments 50

52 Notes to the Financial Statements (cont d) 1. Basis of preparation (cont d) (a) Statement of compliance (cont d) FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2010 FRS 4, Insurance Contracts * FRS 7, Financial Instruments: Disclosures FRS 101, Presentation of Financial Statements (revised) FRS 123, Borrowing Costs (revised) FRS 139, Financial Instruments: Recognition and Measurement Amendments to FRS 1, First-time Adoption of Financial Reporting Standards Amendments to FRS 2, Share-based Payment: Vesting Conditions and Cancellations * Amendments to FRS 7, Financial Instruments: Disclosures Amendments to FRS 101, Presentation of Financial Statements Puttable Financial Instruments and Obligations Arising on Liquidation * Amendments to FRS 127, Consolidated and Separate Financial Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate Amendments to FRS 132, Financial Instruments: Presentation - Puttable Financial Instruments and Obligations Arising on Liquidation * - Separation of Compound Instruments * Amendments to FRS 139, Financial Instruments: Recognition and Measurement - Reclassification of Financial Assets - Collective Assessment of Impairment for Banking Institutions * Improvements to FRSs (2009) IC Interpretation 9, Reassessment of Embedded Derivatives IC Interpretation 10, Interim Financial Reporting and Impairment IC Interpretation 11, FRS 2 Group and Treasury Share Transactions * IC Interpretation 13, Customer Loyalty Programmes * IC Interpretation 14, FRS 119 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction * Amendments effective for annual periods beginning on or after 1 March 2010 Amendments to FRS 132, Financial Instruments: Presentation Classification of Rights Issues* FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 July 2010 FRS 1, First-time Adoption of Financial Reporting Standards (revised) FRS 3, Business Combinations (revised) FRS 127, Consolidated and Separate Financial Statements (revised) Amendments to FRS 2, Share-based Payment # Amendments to FRS 5, Non-current Assets Held for Sale and Discontinued Operations Amendments to FRS 138, Intangible Assets # IC Interpretation 12, Service Concession Agreements # IC Interpretation 15, Agreements for the Construction of Real Estate # IC Interpretation 16, Hedges of a Net Investment in a Foreign Operation # IC Interpretation 17, Distribution of Non-cash Assets to Owners # Amendments to IC Interpretation 9, Reassessment of Embedded Derivatives 51

53 Notes to the Financial Statements (cont d) 1. Basis of preparation (cont d) (a) Statement of compliance (cont d) Amendments effective for annual periods beginning on or after 1 January 2011 Amendments to FRS 1, First-time Adoption of Financial Reporting Standards Limited Exemption from Comparative FRS 7 Disclosures for First-time Adopters Amendments to FRS 7, Financial Instruments: Disclosures Improving Disclosures about Financial Instruments The Group and the Company plan to apply the abovementioned standards, amendments and interpretations: from the annual period beginning 1 April 2010 for those standards, amendments or interpretations that will be effective for annual periods beginning on or after 1 July 2009, 1 January 2010 and 1 March 2010, except for those marked * which are not applicable to the Group and the Company; and from the annual period beginning 1 April 2011 for those standards, amendments or interpretations that will be effective for annual periods beginning on or after 1 July 2010 and 1 January 2011, except for those marked # which are not applicable to the Group and the Company. The initial application of a standards, an amendment or an interpretation, which will be applied prospectively, is not expected to have any financial impact to the current and prior period financial statements upon their first adoption. The impact and disclosures as required by FRS (b), Accounting Policies, Changes in Accounting Estimates and Errors, in respect of applying FRS 7 and FRS 139 are not disclosed by virtue of the exemptions given in these respective FRSs. The initial application of the other standards, interpretations and amendments is not expected to have any material impact on the financial statements or any material change in accounting policy except as follows: (i) FRS 8, Operating Segments FRS 8 replaces FRS Segment Reporting and requires the identification and reporting of operating segments based on internal reports that are regularly reviewed by the chief operating decision maker of the Group in order to allocate resources to the segment and to assess its performance. Currently, the Group presents segment information in respect of its business and geographical segments (see Note 27). The adoption of FRS 8 will not have any significant impact on the financial statements of the Group other than changes in disclosures. (ii) FRS 123, Borrowing Costs (revised) The revised FRS 123 removes the option to expense borrowing costs and requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The adoption of this standard will result in a change in accounting policy. In accordance with the transitional provision, the Company will apply the revised FRS 123 to borrowing costs related to qualifying assets for which the commencement date of capitalisation is on or after 1 April

54 Notes to the Financial Statements (cont d) 1. Basis of preparation (cont d) (a) Statement of compliance (cont d) (iii) IC Interpretation 10, Interim Financial Reporting and Impairment IC Interpretation 10 prohibits the reversal of an impairment loss that has been recognised in an interim period during a financial year in respect of the following : (a) (b) (c) goodwill; an investment in an equity instrument; or a financial asset carried at cost In accordance with the transitional provision, the Group and the Company will apply IC Interpretation 10 to goodwill, investments in equity instruments, and financial assets carried at cost prospectively from the date the Group and the Company first applied the measurement criteria of FRS 136, Impairment of Assets and FRS 139, Financial Instruments : Recognition and Measurement respectively. IC Interpretation 10 does not have any significant impact on the Group s financial position and result. (b) Basis of measurement The financial statements have been prepared on the historical cost basis except 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 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 estimate is revised and in any future period 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 as disclosed in Note 3 Property, plant and equipment, Note Allowance for doubtful debts, Note 8.3 Amount due from penultimate holding company and subsidiaries, Note 9 - Inventories and Note Provisions. 53

55 Notes to the Financial Statements (cont d) 2. Significant accounting policies The accounting policies set out below have been applied consistently to the year presented in these financial statements, and have been applied consistently by Group entities. (a) Basis of consolidation (i) Subsidiaries Subsidiaries are entities, including unincorporated entities, controlled by the Group. Control exists when the Group has the ability to exercise its power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. Subsidiaries are consolidated using the purchase method of accounting. Under the purchase method of accounting, the financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Investments in subsidiaries are stated in the Company s balance sheet at cost less impairment losses. (ii) Changes in Group composition Where a subsidiary issues new equity shares to minority interests for cash consideration and the issue price has been established at fair value, the reduction in the Group s interests in the subsidiary is accounted for as a disposal of equity interest with the corresponding gain or loss recognised in the income statements. When a group purchases a subsidiary s equity shares from minority interests for cash consideration and the purchase price has been established at fair value, the accretion of the Group s interests in the subsidiary is accounted for as a purchase of equity interest for which the purchase method of accounting is applied. The Group treats all other changes in group composition as equity transactions between the Group and its minority shareholders. 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. (iii) Minority interest Minority interest at the balance sheet date, being the portion of the net identifiable assets of subsidiaries attributable to equity interests that are not owned by the Company, whether directly or indirectly through subsidiaries, are presented in the consolidated balance sheet and statement of changes in equity within equity, separately from equity attributable to the equity shareholders of the Company. Minority interest in the results of the Group are presented on the face of the consolidated income statement as an allocation of the total profit or loss for the year between minority interest and the equity holders of the Company. Where losses applicable to the minority exceed the minority s interest in the equity of a subsidiary, the excess, and any further losses applicable to the minority, are charged against the Group s interest except to the extent that the minority has a binding obligation to, and is able to, make additional investment to cover the losses. If the subsidiary subsequently reports profits, the Group s interest is allocated with all such profits until the minority s share of losses previously absorbed by the Group has been recovered. 54

56 Notes to the Financial Statements (cont d) 2. Significant accounting policies (cont d) (a) Basis of consolidation (cont d) (iv) Transactions eliminated on consolidation Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. (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 transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies are translated at exchange rates at the dates of the transactions except for those that are measured at fair value, which 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 the income statements. (ii) Operations denominated in functional currencies other than Ringgit Malaysia The assets and liabilities of operations in functional currencies other than RM, including goodwill and fair value adjustments arising on acquisition, are translated to RM at exchange rates at the balance sheet date, except for goodwill and fair value adjustments arising from business combinations before 1 January 2006 which are reported using the exchange rates at the dates of the acquisitions. The income and expenses of operations in functional currencies other than in RM, are translated to RM at exchange rates at the dates of the transactions. Foreign currency differences are recognised in translation reserve. On disposal, accumulated translation differences are recognised in the consolidated income statement as part of the gain or loss on sale. (c) Property, plant and equipment (i) Recognition and measurement Items of property, plant and equipment are stated at cost/valuation less accumulated depreciation and accumulated impairment losses, if any. The Group revalues its buildings every 5 years and at shorter intervals whenever the fair value of the revalued assets is expected to differ materially from their carrying value. 55

57 Notes to the Financial Statements (cont d) 2. Significant accounting policies (cont d) (c) Property, plant and equipment (cont d) (i) Recognition and measurement (cont d) Surpluses arising from revaluation are dealt with in the revaluation reserve account. Any deficit arising is offset against the revaluation reserve to the extent of a previous increase for the same property. In all other cases, a decrease in carrying amount is charged to the income statements. 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 and, for qualifying assets, borrowing costs are capitalised in accordance with the Group s accounting policy. 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. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within other operating income or other operating expenses respectively in the income statements. When revalued assets are sold, the amounts included in the revaluation surplus reserve are transferred to retained earnings. (ii) Subsequent costs The cost of replacing part 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 part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in the income statements as incurred. (iii) Depreciation Depreciation is recognised in the income statements on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. 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. 56

58 Notes to the Financial Statements (cont d) 2. Significant accounting policies (cont d) (c) Property, plant and equipment (cont d) (iii) Depreciation (cont d) The straight line method is used to write off the cost/valuation 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 Furniture and fittings 5-20 Motor vehicles 20 Office equipment Plant and machinery Depreciation methods, useful lives and residual values are reassessed at the balance sheet date. During the year, the Group revised the useful life of its buildings from 2% to 3.33% to be consistent with the accounting policy adopted by the immediate holding company. The change in estimate was accounted for prospectively and resulted in an additional depreciation charge of RM879,000 for the financial year ended 31 March % (d) Leased assets Operating lease Leases, where the Group does not assume substantially all the risks and rewards of the ownership are classified as operating leases and the leased assets are not recognised on the Group s balance sheet. Leasehold land that normally has an indefinite economic life and title is not expected to pass to the lessee by the end of the lease term is treated as an operating lease. The payment made on entering into or acquiring a leasehold land is accounted for as prepaid lease payments. The Group has retained the unamortised revalued amount as the surrogate carrying amount of prepaid land lease payments in accordance with the transitional provisions in FRS A when it first adopted FRS 117, Leases in Payments made under operating leases are recognised in the income statements on a straightline basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. 57

59 Notes to the Financial Statements (cont d) 2. Significant accounting policies (cont d) (e) Intangible assets (i) Research and development Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the income statements as an expense as incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible and the Group has sufficient resources to complete development. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Other development expenditure is recognised in the income statements as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. (ii) Other intangible assets Other intangible assets represent computer software that are acquired by the Group and are stated at cost less any accumulated amortisation and accumulated impairment losses. Computer software are amortised on a straight line basis over a period of 3 to 6 years. (f) Impairment of assets The carrying amounts of assets except for financial assets (other than investment in subsidiaries), inventories and non-current assets classified as held for sale are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset s recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. 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. 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 groups of assets (the cash-generating unit ). An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount unless the asset is carried at a revalued amount, in which case the impairment loss is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount in the revaluation surplus for that same asset. Otherwise, impairment losses are recognised in the income statements. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (groups of units) on a pro rata basis. 58

60 Notes to the Financial Statements (cont d) 2. Significant accounting policies (cont d) (f) Impairment of assets (cont d) Impairment losses recognised in prior years are assessed at each reporting date 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. 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 the income statements in the year in which the reversals are recognised, unless it reverses an impairment loss on a revalued asset, in which case it is credited directly to revaluation surplus. Where an impairment loss on the same revalued asset was previously recognised in the income statements, a reversal of that impairment loss is also recognised in the income statements. (g) Receivables Receivables are initially recognised at their cost when the contractual right to receive cash or another financial asset from another entity is established. Subsequent to initial recognition, receivables are stated at cost less allowance for doubtful debts. Receivables are not held for the purpose of trading. (h) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in, first-out principle and includes expenditure incurred in acquiring the inventories and 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 value. For the purpose of the cash flow statements, cash and cash equivalents are presented net of bank overdrafts and pledged deposits. (j) Payables Payables are measured initially and subsequently at cost. Payables are recognised when there is a contractual obligation to deliver cash or another financial asset to another entity. 59

61 Notes to the Financial Statements (cont d) 2. Significant accounting policies (cont d) (k) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. (i) Onerous contracts A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract, if any. (ii) 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. (l) 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 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. Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its group, the Company considers these to be insurance arrangements, and accounts for them as such. In this respect, the Company treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee. (m) Revenue recognition (i) Goods sold Revenue from the sale of goods 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 the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods. 60

62 Notes to the Financial Statements (cont d) 2. Significant accounting policies (cont d) (m) Revenue recognition (cont d) (ii) Services Revenue from services rendered is recognised when invoiced and upon services being rendered. (iii) Dividend income Dividend income is recognised when the right to receive payment is established. (n) Interest income and borrowing costs Interest income is recognised as it accrues, using the effective interest method. All borrowing costs are recognised in the income statement using the effective interest method, in the period in which they are incurred except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to be prepared for its intended use. (o) Loans and borrowings Loans and borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the loans and borrowings using the effective interest method. (p) Tax expense Tax expense comprises current and deferred tax. Tax expense is recognised in the income statements except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for reporting purposes and the amounts used for taxation purposes. 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 (tax 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 balance sheet date. Deferred tax liability is recognised for all taxable temporary differences. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. 61

63 Notes to the Financial Statements (cont d) 2. Significant accounting policies (cont d) (q) 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 provision 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. The Group s contribution to statutory pension funds are charged to the income statements in the year to which they relate. Once the contributions have been paid, the Group has no further payment obligations. (ii) Termination benefits Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date. Termination benefits for voluntary redundancies are recognised if the Group has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. (r) Earnings/(Loss) per share The Group presents basic and diluted earnings/loss per share ( EPS / LPS ) data for its ordinary shares. Basic EPS/LPS is calculated by dividing the profit/loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year/period. (s) Discontinued operations A discontinued operation is a component of the Group s business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative income statements is restated as if the operation had been discontinued from the start of the comparative period. (t) Segment reporting A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. 62

64 Notes to the Financial Statements (cont d) 2. Significant accounting policies (cont d) (u) Derivative financial instruments The Group holds derivative financial instruments to hedge its foreign currency risk exposures. Forward foreign exchange contracts are accounted for on an equivalent basis as the underlying assets, liabilities or net positions. Any profit or loss arising is recognised on the same basis as that arising from the related assets, liabilities or net positions. (v) Equity instruments All equity instruments are stated at cost on initial recognition and are not re-measured subsequently. Issue expenses Incremental costs directly attributable to issue of equity instruments are recognised as a deduction from equity. (w) Non-current assets held for sale Non-current assets (or disposal groups comprising assets and liabilities) that are expected to be recovered primarily through sale rather than through continuing use are classified as held for sale. Immediately before classification as held for sale, the assets (or components of a disposal group) are remeasured in accordance with the Group s accounting policies. Thereafter generally the assets (or disposal group) are measured at the lower of their carrying amount and fair value less cost to sell. Any impairment loss on a disposal group first is allocated to goodwill, and then to remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories and financial assets, which continue to be measured in accordance with the Group s accounting policies. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in the income statements. Gains are not recognised in excess of any cumulative impairment loss. 63

65 64 3. Property, plant and equipment Group Valuation/Cost 2010 At valuation Transfer to assets held As at for sale Exchange As at Additions Written off Disposals Revaluation (Note 10) Reclassification differences RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Buildings 20, ,390 (4,835) 40,293-56,950 At cost Buildings 32,887 1, (34,171) - - Electrical installation and fittings 9, ,803 Capital work-in-progress 8, (8,342) - - Factory equipment 7,971 5,159 (10) ,751 Furniture and fittings 2, (26) ,000 Motor vehicles 1, ,141 Office equipment 17, (488) (35) ,459 Plant and machinery 36,574 30,495 (14) , ,047 38,181 (538) (35) 1,390 (4,835) ,219 Notes to the Financial Statements (cont d)

66 65 3. Property, plant and equipment (cont d) As at Disposal of Exchange As at Group Additions Written off Disposals a subsidiary Reclassification differences RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Valuation/Cost 2009 At valuation Buildings 25, (5,195) - 20,102 At cost Buildings 27, ,780-32,887 Electrical installation and fittings 9, (274) (63) (2) ,491 Capital work-in-progress 440 7,787 (2) ,317 Factory equipment 9, (421) (58) (1,730) (183) 13 7,971 Furniture and fittings 3, (225) (11) (166) (60) 2 2,935 Motor vehicles (155) (130) ,076 Office equipment 18, (386) (198) (774) ,694 Plant and machinery 41, (320) (128) (5,956) ,574 Notes to the Financial Statements (cont d) 136,234 11,680 (1,628) (613) (8,758) ,047

67 66 3. Property, plant and equipment (cont d) Revaluation deficit/ Transfer to Group As at Depreciation Impairment assets held for Exchange As at for the year loss Written off Disposals Revaluation sale (Note 10) Reclassification differences RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Accumulated depreciation 2010 At valuation Buildings 2, * (2,926) (945) At cost Buildings 946 1, (2,292) Electrical installation and fittings 4, ,755 Factory equipment 4, (10) ,621 Furniture and fittings 1, (23) ,720 Motor vehicles Office equipment 13,354 1,291 - (483) (31) ,132 Plant and machinery 31,236 3,123 # 20 (14) ,370 59,976 8, (530) (31) (5,218) (945) ,366 * Revaluation deficit recognised pursuant to revaluation of buildings (see Note 3.3 for details) # Presented after netting off reversal of impairment loss of RM1,189,000 (see Note 3.3 for details) Notes to the Financial Statements (cont d)

68 67 3. Property, plant and equipment (cont d) As at Depreciation Impairment Disposal of Exchange As at Group for the period loss Written off Disposals a subsidiary Reclassification differences RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Accumulated depreciation 2009 At valuation Buildings 1, (28) - 2,693 At cost Buildings Electrical installation and fittings 4, (221) (48) (1) ,863 Factory equipment 5,084 1, (382) (45) (1,153) - 8 4,737 Furniture and fittings 1, (155) (9) (146) (36) 1 1,525 Motor vehicles (154) (98) Office equipment 12,600 2,037 8 (372) (194) (735) (3) 13 13,354 Plant and machinery 30,790 4,979 1,464 (320) (128) (5,615) ,236 Notes to the Financial Statements (cont d) 56,854 10,620 2,172 (1,450) (578) (7,748) ,976

69 Notes to the Financial Statements (cont d) 3. Property, plant and equipment (cont d) As at As at / As at Group RM 000 RM 000 RM 000 Carrying amounts At valuation Buildings 23,623 17,409 56,950 At cost Buildings 27,334 31,941 - Electrical installation and fittings 5,190 4,628 5,048 Capital work-in-progress 440 8,317 - Factory equipment 4,343 3,234 8,130 Furniture and fittings 1,715 1,410 1,280 Motor vehicles Office equipment 5,608 4,340 4,327 Plant and machinery 10,876 5,338 32,745 79,380 77, ,853 Transfer from As at related As at Company Additions Written off company RM 000 RM 000 RM 000 RM 000 RM 000 Cost 2010 Motor vehicles Office equipment 2, (33) 4 2,173 Furniture and fittings Electrical installation and fittings Factory equipment , (33) 4 3,365 68

70 Notes to the Financial Statements (cont d) 3. Property, plant and equipment (cont d) As at As at Company Additions Written off Disposals RM 000 RM 000 RM 000 RM 000 RM 000 Cost 2009 Motor vehicles (155) 176 Office equipment 1, ,054 Furniture and fittings (78) Electrical installation and fittings Factory equipment , (78) (155) 3,237 Accumulated depreciation As at Depreciation As at for the year Written off RM 000 RM 000 RM 000 RM Motor vehicles Office equipment 1, (33) 1,844 Furniture and fittings Electrical installation and fittings Factory equipment , (33) 2,211 Accumulated depreciation Depreciation As at for the As at period Written off Disposals RM 000 RM 000 RM 000 RM 000 RM Motor vehicles (155) 24 Office equipment 1, ,723 Furniture and fittings (36) - 57 Electrical installation and fittings Factory equipment , (36) (155) 1,963 69

71 Notes to the Financial Statements (cont d) 3. Property, plant and equipment (cont d) As at As at / As at Company RM 000 RM 000 RM 000 Carrying amounts Motor vehicles Office equipment Furniture and fittings Electrical installation and fittings Factory equipment Revaluation 1,031 1,274 1,154 The buildings stated at valuation of the Group are shown at Directors valuation based on a valuation exercise carried out on 17 August 2009 by a firm of independent professional valuers on an open market value basis. The revaluation was effected on 31 March Subsequent additions are at cost while deletions are at cost or valuation as appropriate. Had the buildings been carried at historical cost less accumulated depreciation, the carrying amount of the revalued buildings that would have been included in the financial statements at the end of the year/period would be as follows: Accumulated Carrying Cost depreciation amount 2010 RM 000 RM 000 RM 000 Buildings 58,897 6,936 51, Buildings 24,129 4,937 19, Security - Group Buildings with a carrying amount of RM41,900,000 (2009 : RM37,814,000) are charged to a bank as securities for term loans granted to certain subsidiaries (Note 14). 3.3 Impairment of property, plant and equipment - Group During the year, the Group impaired a machinery with a carrying amount of RM1,210,000 belonging to a subsidiary engaged in the manufacturing of aircraft and other related equipment based on fair value less cost to sell. Pursuant to the revaluation of the Group s factory buildings in accordance with its accounting policy (see Note 2(c)(i)), the Group also recognised a revaluation deficit of RM536,000 during the year for buildings where the carrying amount exceeds the Directors valuation based on the valuation exercise carried out (Note 3.1). The Group also reversed an impairment loss of RM1,189,000 previously recognised in the financial period ended 31 March 2009 for a plant and machinery that was idle at the previous balance sheet date. 70

72 Notes to the Financial Statements (cont d) 4. Prepaid lease payments Cost Group Company Unexpired Unexpired Unexpired year less year more year less than 50 than 50 than 50 years years Total years RM 000 RM 000 RM 000 RM 000 At 1 January 2008/ 31 March ,867 6,531 22,398 4,965 At 1 April ,867 6,531 22,398 4,965 Transfer to assets classified as held for sale (Note 10) (4,965) - (4,965) (4,965) 31 March ,902 6,531 17,433 - Amortisation At 1 January , , Amortisation for the period (Note 19) At 31 March 2009/ 1 April , , Amortisation for the year (Note 19) Transfer to assets classified as held for sale (Note 10) (499) - (499) (499) At 31 March , ,559 - Carrying amounts At 1 January ,827 6,446 21,273 4,656 At 31 March 2009/ 1 April ,434 6,310 20,744 4,537 At 31 March ,673 6,201 15,874 - Prepaid lease payments comprising leasehold land of the Group were previously shown at Directors valuation based on a valuation exercise carried out on October 29, 2004 by a firm of independent professional valuers on an open market value basis. The Group has retained the unamortised amount as the surrogate carrying amount in accordance with the transitional provisions in FRS A when it first adopted FRS 117, Leases in Security - Group Certain leasehold land of the Group with a carrying amount of RM9,188,000 (2009 : RM9,364,000) are pledged to a bank as securities for term loans granted to certain subsidiaries (Note 14). 71

73 Notes to the Financial Statements (cont d) 5. Intangible assets Group Company Computer software RM 000 RM 000 RM 000 RM 000 Cost At 1 April 2009/1 January ,637 2,218 2,459 2,218 Additions At 31 March 2,665 2,637 2,477 2,459 Amortisation At 1 April 2009/1 January Amortisation for the year/ period (Note 19) At 31 March 1, , Carrying amount At 31 March 1,461 1,941 1,343 1, Investment in subsidiaries Unquoted shares, at cost Company RM 000 RM 000 Balance at 1 April 2009 /1 January ,224 15,268 Additions 1,900 2,000 Disposal - (2,044) Balance at 31 March 17,124 15,224 Details of the subsidiaries are as follows: Effective Country ownership Name of subsidiary of incorporation interest Principal activities % % LKT Automation Sdn. Bhd. Malaysia Designing and assembling of automation equipment complete with equipment control software 72

74 Notes to the Financial Statements (cont d) 6. Investment in subsidiaries (cont d) Effective Country ownership Name of subsidiary of incorporation interest Principal activities % % SAM Precision (M) Sdn. Bhd. (formerly known as LKT Precision Engineering Sdn. Bhd.) ( SPM ) Malaysia Fabrication of precision tools and machinery parts LKT Integration Sdn. Bhd. Malaysia Development and production of computer process control system for printed circuit board handling system and component assembly line LKT Technology Sdn. Bhd. Malaysia Design and manufacture of industrial storage system, material handling system, logistic system, precision tools and machinery parts SAM Meerkat (M) Sdn. Bhd. (formerly known as Meerkat Technologies Sdn. Bhd.) Malaysia Design and assembly of modular or complete machine and equipment LKT Tooling Technology Sdn. Bhd. Malaysia Design, development and ( LKT TT ) manufacture of trim and form dies and suspension tooling for hard disc drive parts Meerkat Integrator Sdn. Bhd. Malaysia Designing, manufacturing and assembly of metal and non-metal ergonomic workstations and electronic products Meerkat Precision Sdn. Bhd. Malaysia Design, develop and manufacture of aircraft and other related equipment parts, spares, components and precision engineering parts World Depot Sdn. Malaysia Dormant 73

75 Notes to the Financial Statements (cont d) 6. Investment in subsidiaries (cont d) Effective Country ownership Name of subsidiary of incorporation interest Principal activities % % LKT Corporation Berhad Malaysia Dormant LKT Support Services Sdn. Bhd. Malaysia Dormant Alps Tech Corporation Sdn. Bhd. Malaysia Under Members Voluntary Winding-Up LKT Wafer Technology Sdn. Malaysia Dormant Meerkat Corporation Sdn. Bhd. Malaysia Dormant Held by LKT TT LKT Engineering (Thailand) Limited ( LKTET )* Thailand # Manufacturing of die, jig and parts and cutting tools for disc drives, electronics, semi-conductor and other industries Held by SPM Meerkat Technology Pte. Ltd. * Republic of Singapore Design, manufacture and service support for semiconductor, electronic, disc drive, medical, solar, L.E.D. and other industrial equipments * Not audited by Disposed during the financial year. See details in Note 31 # LKTET was formerly a wholly owned subsidiary of SPM. SPM had on transferred its entire equity interest in LKTET to LKT TT for a total consideration equivalent to the carrying amount of its investment in LKTET 74

76 Notes to the Financial Statements (cont d) 7. Investment in joint venture company Group RM 000 RM 000 Unquoted shares, at cost Share of post acquisition reserve (612) (612) Details of the joint venture company are as follows: - - Effective Country ownership Name of company of incorporation interest Principal activities % % Spray Devices Technology Sdn. Bhd. Malaysia Under Members Voluntary Winding-Up 8. Receivables, deposits and prepayments Group Company Note RM 000 RM 000 RM 000 RM 000 Trade receivables ,722 10, Less : Allowance for doubtful debts 8.2 (639) (867) - - Non-trade 27,083 9, Amount due from: - penultimate holding company subsidiaries ,500 78,800 Other receivables 46 2,213-2,178 Deposits 1,832 12, Prepayments 1,615 3, ,515 18,598 76,722 81,177 30,598 28,264 76,722 81,177 75

77 Notes to the Financial Statements (cont d) 8. Receivables, deposits and prepayments (cont d) 8.1 Analysis of foreign currency exposure for significant receivables Significant receivables outstanding at year/period end of the Group that are not denominated in the functional currencies of the Group entities include RM22,227,000 (2009 : RM8,931,000) denominated in US Dollar ( USD ). 8.2 Estimates An estimate for doubtful debts is made when collection of the amount is no longer probable. Allowance for doubtful debts is provided by management for delinquent balances and balances which have exceeded the normal credit period with reference to past default experience. 8.3 Amount due from penultimate holding company and subsidiaries The non-trade receivables due from penultimate holding company and subsidiaries are unsecured, interest-free and repayable on demand. Included in the amount due from subsidiaries is RM32,136,000 (2009 : RM32,302,000) due from a subsidiary which has been long outstanding for which, no allowance for doubtful debt has been made. The Directors are of the opinion that such allowance is not necessary as the holding company will endeavour to inject a new and profitable business into the said subsidiary in the foreseeable future. 9. Inventories Group RM 000 RM 000 Raw materials 12,941 27,803 Work-in-progress 9,665 6,814 Manufactured inventories 495 1,626 23,101 36,243 The write down of inventories to net realisable value amounted to RM Nil (2009 : RM2,384,000) and was included in cost of sales. During the year, the inventories written back amounted to RM2,106,000 (2009 : RM Nil). The write down and write back is based on management s assessment of the inventories net realisable values. 76

78 Notes to the Financial Statements (cont d) 10. Asset classified as held for sale Group Company RM 000 RM 000 RM 000 RM 000 At 1 April 2009/1 January Reclassified from property, plant and equipment (Note 3) 4, Reclassified from prepaid lease payment (Note 4) 4,965-4,965 - At 31 March 9,800-4,965 - Accumulated depreciation At 1 April 2009/1 January Reclassified from property, plant and equipment (Note 3) (945) Reclassified from prepaid lease payment (Note 4) (499) - (499) - At 31 March (1,444) - (499) - Carrying amount At 31 March 8,356-4, Asset classified as held for sale consists of a leasehold land and building and is measured at the lower of their carrying amount and fair value less cost to sell following the Group s intention to dispose of the assets. 11. Cash and cash equivalents Group Company RM 000 RM 000 RM 000 RM 000 Short term deposits with licensed banks 2,205 6, Cash and bank balances 29,375 18, ,010 31,580 24, , Analysis of foreign currency exposure for significant cash and cash equivalents Significant cash and cash equivalents outstanding of the Group at year/period end that are not denominated in the functional currencies of the Group entities include RM24,159,000 (2009 : RM11,647,000) denominated in USD. 77

79 Notes to the Financial Statements (cont d) 12. Share capital Group/Company Ordinary shares of RM1 each Number of Number of shares shares RM 000 ( 000) RM 000 ( 000) Authorised 100, , , ,000 Issued and fully paid-up 70,881 70,881 70,881 70, Reserves Non-distributable: Group Company RM 000 RM 000 RM 000 RM 000 Share premium 6,850 6,850 6,850 6,850 Asset revaluation reserve 8,238 3,282 2,127 2,127 Translation reserve Distributable: 15,403 10,375 8,977 8,977 Retained earnings 67,337 41,353 17,544 16,080 82,740 51,728 26,521 25,057 The movements in reserves are disclosed in the statements of changes in equity Asset revaluation reserve The non-distributable asset revaluation reserve of the Group represents surplus on revaluation of the Group s leasehold land and buildings Translation reserve The exchange translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations. 78

80 Notes to the Financial Statements (cont d) 13. Reserves (cont d) 13.3 Section 108 tax credit Subject to agreement with the Inland Revenue Board, the Company has sufficient Section 108 tax credit and exempt income to frank/distribute its entire retained earnings at balance sheet date if paid out as dividends. The Finance Act, 2007 introduced a single tier company income tax system with effect from year of assessment Effective 1 January 2008, the Company is given the option to make an irrevocable election to move to a single tier system or continue to use its tax credit under Section 108 of the Income Tax Act, 1967 for the purpose of dividend distribution. The Company has not made this election. As such, the Section 108 tax credit as at 31 March 2010 will be available to the Company until such time the credit is fully utilised or upon expiry of the six-year transitional period on 31 December 2013, whichever is earlier. 14. Borrowings Current: Group RM 000 RM 000 Secured Term loan - Variable rate 8,081 4,838 Term loan - Fixed rate 2,155 2,613 Unsecured 10,236 7,451 Bankers acceptances - 3,116 Onshore foreign currency loans Non-current: Secured - 3,406 10,236 10,857 Term loan - Variable rate 13,779 19,522 Term loan - Fixed rate 1,627 3,782 15,406 23,304 79

81 Notes to the Financial Statements (cont d) 14. Borrowings (cont d) 14.1 Security The term loans of the Group are secured as follows: i) Factory buildings and leasehold land belonging to certain subsidiaries (Note 3 and Note 4 respectively); and ii) corporate guarantee by the Company Interest The bankers acceptances and onshore foreign currency loans were subject to interest at 3.5% and 2.5% respectively. The term loans are subject to interest ranging from 1.45% to 6.25% (2009 : 1.75% to 6.25%) per annum Terms and debt repayment schedule Year of Carrying Under Over maturity amount 1 year years years 5 years Group RM 000 RM 000 RM 000 RM 000 RM Term loans - RM (variable rate) ,686 3,277 3, RM (fixed rate) ,782 2,155 1, USD (variable rate) ,174 4,804 4,803 4, ,642 10,236 9,874 5,532 - Term loans - RM (variable rate) ,915 3,229 3,294 4, RM (fixed rate) ,395 2,613 2,155 1, USD (variable rate) ,445 1,609 5,219 6,617 - Bankers acceptances (RM) ,116 3, Onshore foreign currency loans (USD) ,161 10,857 10,668 12,636-80

82 Notes to the Financial Statements (cont d) 15. Deferred tax liabilities Recognised deferred tax liabilities The recognised deferred tax liabilities are in respect of the following: Group Company RM 000 RM 000 RM 000 RM 000 Property, plant and equipment - capital allowances 1, revaluation 3,356 1, Other items (415) (343) (173) (515) 4,323 2, The movements in deferred tax liabilities during the year/period are as follows: Group Recognised Recognised in the Disposal in the At income of a At Recognised income At statement subsidiary in equity statement RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 (Note 22) (Note 22) Property, plant and equipment - capital allowances 1,546 (711) ,382 - revaluation 2,190 (18) (468) 1,704 1,652-3,356 Other items 13 (356) - (343) - (72) (415) 3,749 (1,085) (468) 2,196 1, ,323 Company Recognised Recognised in the in the At income At income At statement statement RM 000 RM 000 RM 000 RM 000 RM 000 (Note 22) (Note 22) Property, plant and equipment - capital allowances (199) revaluation Other items - (515) (515) 342 (173) 962 (221)

83 Notes to the Financial Statements (cont d) 15. Deferred tax liabilities (cont d) Unrecognised deferred tax assets No deferred tax has been recognised for the following items: Group RM 000 RM 000 (Restated) Property, plant and equipment - capital allowances 8,115 1,818 Unutilised tax losses (45,852) (42,297) Unabsorbed capital allowances (16,416) (8,078) Other temporary differences (4,686) (8,963) (58,839) (57,520) The unutilised tax losses, unabsorbed capital allowances and other deductible 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 there from. The comparative figures have been restated to reflect the revised balances available to the Group. 16. Payables and accruals Group Company Note RM 000 RM 000 RM 000 RM 000 Trade payables ,579 8, Non-trade Amount due to: - immediate holding company penultimate holding company 1,728 4,169-4,169 Other payables Accrued expenses ,988 11,157 3,243 3,666 14,304 16,148 3,344 8,207 29,883 24,337 3,344 8,207 82

84 Notes to the Financial Statements (cont d) 16. Payables and accruals (cont d) 16.1 Analysis of foreign currency exposure for significant payables Significant payables outstanding at year/period end that are not denominated in the functional currencies of the Group entities are as follows: Foreign currency RM 000 RM 000 USD 2,921 1,976 Singapore Dollar ( SGD ) Euro Dollar ( EUR ) Thai Baht Accrued expenses Included in accrued expenses is RM Nil (2009 : RM2,175,000) that related to the sales consideration from the disposal of a subsidiary of which, the recognition was deferred pending full settlement. 17. Provisions Group Severance Onerous Warranties costs contracts Total RM 000 RM 000 RM 000 RM 000 At 1 January , ,278 Provisions 1,700 1,669 1,675 5,044 Amount paid (318) - - (318) Reversed to income statement (508) - - (508) At 31 March ,152 1,669 1,675 6,496 Provisions 3, ,515 Amount paid/realised (24) (1,471) (1,675) (3,170) Reversed to income statement (1,619) (198) - (1,817) At 31 March , ,024 Company Severance costs RM 000 RM 000 At 1 April 2009/1 January ,111 - Provisions - 1,111 Amount paid (1,105) - Reversed to income statement (6) - At 31 March - 1,111 83

85 Notes to the Financial Statements (cont d) 17. Provisions (cont d) 17.1 Warranty This represents estimated liabilities of defects arising from products sold under warranty. The provision is based on management s estimates made from historical warranty data associated with the products Onerous contracts Certain subsidiaries in the Group have entered into forward foreign exchange contracts to hedge a certain percentage of their foreign currency exposure for the purchase of plant and machinery. The forward foreign exchange contracts are regarded by management as onerous as the expected economic benefits from the underlying transactions hedged are lower than the marked-to-market losses of the forward foreign exchange contracts using listed market prices. 18. Revenue Group 12 months 15 months ended ended RM 000 RM 000 Revenue from goods sold 298, ,572 Revenue from support services rendered 3,660 2,675 Company 302, ,247 Dividend income 2,000 4,000 Interest income 1 5 Management fee 9,241 13,283 11,242 17,288 84

86 Notes to the Financial Statements (cont d) 19. Operating profit/(loss) Operating profit/(loss) is arrived at: After charging: Group Company 12 months 15 months 12 months 15 months ended ended ended ended RM 000 RM 000 RM 000 RM 000 Amortisation of prepaid lease payments (Note 4) Amortisation of intangible assets (Note 5) Audit fee (statutory audit) Auditors of the Company Other auditors Depreciation on property, plant and equipment 8,549 10, Directors remuneration Directors of the Company - Fees Other remuneration 162 1, ,132 - Employees Provident Fund contributions Benefits-in-kind Other Directors - Other remuneration 754 1, Employees Provident Fund contributions Benefits-in-kind Past Directors - Fees Other remuneration 1, Employees Provident Fund contributions Benefits-in-kind Inventories written down - 2, Inventories written off Impairment loss of property, plant and equipment (Note 3) 20 2, Loss on disposal of equipment Loss on foreign exchange, net 1, Loss on disposal of subsidiaries - 3, Loss on winding up of a subsidiary Plant and equipment written off Provision for warranty cost, net 1,876 1, Rental of premises Rental of machine and equipment Rental of motor vehicles

87 Notes to the Financial Statements (cont d) 19. Operating profit/(loss) (cont d) After charging: Group Company 12 months 15 months 12 months 15 months ended ended ended ended RM 000 RM 000 RM 000 RM 000 Revaluation deficit of buildings (Note 3) Research and development expenditure 222 2, Provision for onerous contracts (Note 17) 20 1, Personnel expenses - Wages, salaries and others 24,504 37,060 6,185 5,804 - Employees Provident Fund contributions 2,283 3, Severance costs paid/provided 417 1, ,111 and crediting: Allowance for doubtful debts written back 146 1, Bad debts recovered Dividends (gross) from subsidiaries - - 2,000 4,000 Gain on disposal of subsidiaries Gain on disposal of plant and equipment Gain on foreign exchange, net Inventories written back (Note 9) 2, Interest income Reversal of severance costs provided

88 Notes to the Financial Statements (cont d) 20. Finance costs Group Company 12 months 15 months 12 months 15 months ended ended ended ended RM 000 RM 000 RM 000 RM 000 Interest expense on: Term loans 897 1, Bankers acceptances Onshore foreign currency loan , Key management personnel compensation Key management personnel compensation are as follows: Group Company 12 months 15 months 12 months 15 months ended ended ended ended RM 000 RM 000 RM 000 RM 000 Director of the Company - Fees Remuneration - 1,037-1,037 - Benefits-in-kind Other Directors - Remuneration 830 1, Benefits-in-kind Past Directors - Fees Remuneration 1, Benefits-in-kind ,782 2,756 1,026 1,144 87

89 Notes to the Financial Statements (cont d) 22. Tax expense Recognised in the income statement Group Company 12 months 15 months 12 months 15 months ended ended ended ended RM 000 RM 000 RM 000 RM 000 Tax expense on continuing operations 3,196 (976) 143 (100) Tax expense on discontinued operations - (18) - - Total tax expense 3,196 (994) 143 (100) Major components of tax expense include: Current tax expense Group Company 12 months 15 months 12 months 15 months ended ended ended ended RM 000 RM 000 RM 000 RM current year/period 2, prior period/years 235 (166) Deferred tax expense 2, origination and reversal of temporary differences 617 (786) 143 (6) - prior period/years (142) (299) - (215) 475 (1,085) 143 (221) Total tax expense 3,196 (994) 143 (100) 88

90 Notes to the Financial Statements (cont d) 22. Tax expense (cont d) Recognised in the income statement Group Company 12 months 15 months 12 months 15 months ended ended ended ended RM 000 RM 000 RM 000 RM 000 Profit/(Loss) for the year/period - continuing operations 25,984 (6,724) 1,464 1,893 - discontinued operations - (667) ,984 (7,391) 1,464 1,893 Total tax expense 3,196 (994) 143 (100) Profit/(Loss) excluding tax 29,180 (8,385) 1,607 1,793 Reconciliation of effective tax expense Group Company 12 months 15 months 12 months 15 months ended ended ended ended RM 000 RM 000 RM 000 RM 000 Tax at Malaysian tax rate at 25% 7,295 (2,096) Effect of different tax rates in foreign jurisdictions Non-deductible expenses 1,712 2, Income not subject to tax (200) (579) (500) (1,464) Effect of change in tax rate* Tax incentives # (6,034) Effect of deferred tax assets not recognised 330 (1,829) (182) 64 Other items (83) (12) Under/(Over) provided in prior period/years 93 (465) - (95) Total tax expense 3,196 (994) 143 (100) * The corporate tax rates are at 26% for year of assessment 2008 and 25% for the subsequent years of assessment. Consequently deferred tax assets and liabilities are measured using these tax rates. # 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 subsidiary in Thailand was granted exemption from corporate income tax for a period of 8 years commencing 4 September 2000 and deduction of taxable income at 5% on the incremental export sales for a period of 10 years. 89

91 Notes to the Financial Statements (cont d) 23. Loss from discontinued operations During the financial period ended 31 March 2009, the Company disposed of LKT Plastic Technology Sdn. Bhd. for a total cash consideration of RM3.9 million. The consolidated income statement for the fifteen months ended 31 March 2009 has been represented to show the discontinued operations separately from the continuing operations of the Group. The loss attributable to the discontinued operations is as follows: Loss from discontinued operations 15 months ended RM 000 Revenue 17,146 Cost of sales (15,787) Gross profit 1,359 Selling and distribution expenses (1,617) General and administrative expenses (730) Other operating expenses (88) Other operating income 391 Loss before tax (685) Tax expense 18 Loss for the period (667) The loss before tax is arrived at: After charging: Allowance for doubtful debts 22 Depreciation of property, plant and equipment 416 Inventories written down 224 Inventories written off 673 Plant and equipment written off 94 Rental of machinery 11 Rental of premises 582 Personnel expenses - Wages, salaries and others 3,048 - Employees Provident Fund contributions 192 and crediting: Gain on foreign exchange - realised 78 - unrealised 159 Gain on disposal of investment property 52 Interest income 26 90

92 Notes to the Financial Statements (cont d) 23. Loss from discontinued operations (cont d) Cash flows from discontinued operations 15 months ended RM 000 Net cash used in operating activities (7,654) Net cash generated from investing activities 8,456 Net cash generated from discontinued operations Earnings/(Loss) per ordinary share - Group Basic earnings/(loss) per ordinary share The calculation of basic earnings/(loss) per ordinary share is based on the profit attributable to ordinary shareholders of RM25,984,000 (2009 : loss attributable to ordinary shareholders of RM7,388,000) and on weighted average number of ordinary shares outstanding during the year/period of RM70,881,357 (2009 : 70,881,357). 25. Dividend - Group/Company No dividend has been recommended in respect of the financial year and period ended 31 March 2010 and 31 March 2009 respectively. The first and final tax exempt dividend of 5 sen per share amounting to RM3,544,068 in respect of the financial year ended 31 December 2008 was shown as an appropriation of retained earnings during the financial period ended 31 March 2009 subsequent to the approval by members during the Annual General Meeting. 26. Related parties For the purposes of these financial statements, parties are considered to be related to the Company if the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Company either directly or indirectly. The key management personnel include the Executive Directors of the Company, and certain members of senior management of the Group. 91

93 Notes to the Financial Statements (cont d) 26. Related parties (cont d) The significant related party transactions, other than key management personnel compensation are as follows: i) Transactions between the Company and subsidiaries: 12 months 15 months ended ended RM 000 RM 000 Dividends received 2,000 4,000 Management fee 9,241 13,283 ii) Transactions between the Group and penultimate holding company: 12 months 15 months ended ended RM 000 RM 000 Sales of aerospace parts 75 - Training and engineering support expense 434 1,291 iii) There were no transactions with the 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 21. iv) The non-trade balance with related parties outstanding at 31 March 2010 and 31 March 2009 are disclosed in Note 8 and Note 16 respectively. All the amounts outstanding are unsecured and expected to be settled in cash. 27. Segmental information - Group Segment information is presented in respect of the Group s business and geographical segments. The primary format, business segments, is based on the Group s management and internal reporting structure. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly interest-earning assets and related revenue, loans and borrowings and related expenses, corporate assets (primarily the Company s headquarters) and expenses. Segment capital expenditure is the total cost incurred during the year/period to acquire property, plant and equipment. Inter-segment pricing is determined on an arm s length basis. 92

94 Notes to the Financial Statements (cont d) 27. Segmental information - Group (cont d) Business segments The Group s business segment mainly comprised of the design, manufacture and fabrication of precision tools, machine parts, and assembly of automated equipment and machine. Business segmental information has not been prepared as the Group s entire revenue, operating profit, assets employed, liabilities, capital expenditure, depreciation and amortisation, and non-cash expenses are mainly confined to one business segment. Geographical segments The Group operates in four principal geographical areas, Malaysia, Asia, Europe and North America. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets Asia (excludes North Malaysia Malaysia) Europe America Others Consolidated RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Revenue from external customers by location of customers 114, ,179 4,549 55,626 1, ,531 Segment assets by location of assets 213,072 6, ,823 Capital expenditure (including intangible assets) by location of assets 38, , Revenue from external customers by location of customers 60,785 51,335 15,312 65,654 4, ,247 Segment assets by location of assets 184,971 4, ,023 Capital expenditure (including intangible assets) by location of assets 12, ,099 93

95 Notes to the Financial Statements (cont d) 28. Contingent liabilities, unsecured - Company i) The Company has issued corporate guarantee to financial institutions amounting to RM110,485,000 (2009 : RM115,049,000) as security for banking facilities granted to certain subsidiaries of which RM25,642,000 (2009 : RM34,161,000) was utilised at balance sheet date. ii) The Company has also undertaken to provide continuing financial support to certain subsidiaries to enable them to meet their financial obligations as and when they fall due. The fair value of such financial guarantees is not expected to be material as the probability of the subsidiaries defaulting on the credit lines is remote. 29. Capital and other commitments Property, plant and equipment Group Company RM 000 RM 000 RM 000 RM 000 Contracted but not provided for in the financial statements - within 1 year 3,130 24, Financial instruments Financial risk management objectives and policies The main risk arising from the Group s financial instruments are foreign currency risk, interest rate risk, credit risk and market risk. The Board reviews and agrees on policies for managing each of these risks and they are summarised below. Foreign currency risk The Group has a subsidiary, LKT Engineering (Thailand) Limited which operates in Thailand and whose revenue and expenses are denominated primarily in US Dollar and Thai Baht. The Group finances its investment in this subsidiary company through internal funds. The Group also has exposures arising from sales to customers mainly in United States, China, Thailand and Singapore. These are sales priced in Ringgit Malaysia but invoiced primarily in US Dollar. The Group also imports raw materials which are mainly denominated in US Dollar. The Group s policy is to deposit all US Dollar proceeds into foreign currency accounts maintained with local banks up to the limit approved by Bank Negara. The Group has also entered into forward foreign exchange contracts to hedge the purchase of certain plant and equipment and its foreign currency receipts anticipated for each month over the next twelve months. Interest rate risk The Group s borrowings are on fixed and floating interest rate basis. These borrowings are closely monitored to ensure that the Group enjoys the lowest possible borrowing rates. The Group s exposure to interest rate risk is also extended to interest-earning cash deposits and bank balances placed with licensed banks. 94

96 Notes to the Financial Statements (cont d) 30. Financial instruments (cont d) Credit risk The Group s exposure to credit risk is primarily attributable to trade receivables. Credit risk is controlled by the application of credit approvals, limits and monitoring procedures. Where appropriate, further sales are suspended and legal actions are taken to attempt recoveries and mitigate losses. Effective interest rates and repricing analysis In respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicates its average effective interest rate at the balance sheet date and the years in which it matures or if earlier, reprices. Group Average effective More interest rate Within than 5 per annum Total year years years % RM 000 RM 000 RM 000 RM Financial assets Short term deposits with licensed banks 1.1 2,205 2, Cash and bank balances 1.0 3,553 3, Financial liabilities Secured: Term loans - Variable rate ,860 21, Term loans - Fixed rate 6.3 3,782 2,155 1, Financial assets Short term deposits with licensed banks 1.1 6,362 6, Cash and bank balances 1.0 3,153 3, Financial liabilities Secured: Term loans - Variable rate ,360 24, Term loans - Fixed rate 4.7 6,395 2,613 3,782 - Unsecured: Bankers acceptances 3.5 3,116 3, Onshore foreign currency loans

97 Notes to the Financial Statements (cont d) 30. Financial instruments (cont d) Company Average effective More interest rate Within than 5 per annum Total year years years % RM 000 RM 000 RM 000 RM Financial asset Cash and bank balances Financial asset Cash and bank balances Fair values Recognised financial instruments The carrying amounts approximate fair value due to the relatively short term nature of these financial instruments in respect of cash and cash equivalents, trade and other receivables, trade and other payables and short term borrowings. The aggregate fair values of the other financial assets and liabilities carried on the balance sheet as at 31 March are shown below: Group Carrying Carrying amount Fair value amount Fair value RM 000 RM 000 RM 000 RM 000 Financial liability Secured term loans - fixed rate 3,782 * 3,782 6,395 * 6,395 * As the current interest rates do not significantly differ from the intrinsic rate of these financial instruments, the Directors are of the opinion that the fair value of these financial instruments approximates their carrying value. 96

98 Notes to the Financial Statements (cont d) 30. Financial instruments (cont d) Unrecognised financial instruments The notional contracted amount, fair value and maturities of financial instruments not recognised in the balance sheet as at 31 March are as follows: Group Nominal Nominal amount Fair value amount Fair value RM 000 RM 000 RM 000 RM 000 Forward foreign exchange contracts to hedge foreign receivables (USD within 1 year) 21,706 21, Forward exchange contracts are marked to market using listed market prices. 31. Significant events during the year 1. On 27 October 2009, Singapore Precision Engineering Limited ( SPE ), the immediate holding company of the Company, requested the Company to undertake a voluntary withdrawal of its listing from the Official List of the Main Market of Bursa Securities pursuant to Paragraph of the Listing Requirements ( Proposed Delisting ). Subject to the approval of the shareholders of the Company, SPE undertook to make an offer to acquire all the remaining shares of the Company not already owned by SPE and its party acting in concert at an offer price of RM2.10 per LKT Share ( Offer ). The Offer Document in relation to the Offer was despatched to the shareholders of the Company on 8 February In view that more than 90% of the issued and paid-up share capital of the Company is now held by SPE and its PAC and pursuant to Paragraph 16.02(3) of the Main Market Listing Requirements, trading in shares of the Company was suspended with effect from 9.00 a.m., Thursday, 4 March As at the date of this report, the completion of the Proposed Delisting is still pending. 2. During the year, the Company disposed of its entire equity interest in the following dormant subsidiaries : (i) (ii) LKT Wafer Technology Sdn. Bhd. for a total cash consideration of RM2; and World Depot Sdn. Bhd. for a total cash consideration of RM2. The above disposals did not result in any significant gain or loss to the Group and the Company for the financial year ended 31 March

99 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 39 to 97 are drawn up in accordance with Financial Reporting Standards and 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 at 31 March 2010 and of the results of their financial performance and cash flows for the year then ended. Signed on behalf of the Board of Directors in accordance with a resolution of the Directors: Goh Wee Keng Shum Sze Keong Date: 12 May 2010 Statutory Declaration pursuant to Section 169(16) of the Companies Act, 1965 I, Ng Beng Sai, the person primarily responsible for the financial management of LKT Industrial Berhad, do solemnly and sincerely declare that the financial statements set out on pages 39 to 97 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 12 May Ng Beng Sai Before me: Cheah Beng Sun, DJN, AMN, PKT, PJK, PJM, PK (No. P103) Commissioner for Oaths Penang 98

100 Report of the Auditors to the members of LKT Industrial Berhad Report on the Financial Statements We have audited the financial statements of LKT Industrial Berhad, which comprise the balance sheets as at 31 March 2010 of the Group and of the Company, and the income statements, statements of changes in equity and cash flow statements of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 39 to 97. Directors Responsibility for the Financial Statements The Directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. 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 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 Company s preparation and fair presentation of the financial statements 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 Company 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 have been properly drawn up in accordance with Financial Reporting Standards and 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 2010 and of their financial performance and cash flows for the year then ended. 99

101 Report of the Auditors to the members of LKT Industrial Berhad (cont d) 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 6 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. 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 AF 0758 Chartered Accountants Ooi Kok Seng 2432/05/11 (J) Chartered Accountant Date: 12 May 2010 Penang 100

102 Analysis of Shareholdings as at 2 August 2010 AUTHORISED SHARE CAPITAL : RM100,000,000 ISSUED AND FULLY PAID-UP CAPITAL : RM70,881,357 CLASS OF SHARE : Ordinary shares of RM1 each fully paid VOTING RIGHTS : On a show of hands - one vote for every shareholder On a poll - one vote for every ordinary share held DISTRIBUTION OF SHAREHOLDINGS Size of No of % of Total % of Total Shareholdings Shareholders Shareholders Holdings Holdings Less than , , , ,001-10, ,594, , , ,118, ,001 to less than 5% of the issued shares , % and above of issued shares ,717, TOTAL 1, ,881, SUBSTANTIAL SHAREHOLDERS AS AT 2 AUGUST 2010 No. Name Direct Interest Indirect Interest No. of % of Issued No. of % of Issued shares Capital shares Capital 1 Singapore Precision Engineering Limited 62,729, Singapore Aerospace Manufacturing Pte Ltd 4,988, ,729, Accuron Technologies Limited ,717, Temasek Holdings (Private) Limited ,717, Note: By virtue of its interest of more than 15% in the Ordinary Shares of the Company, Singapore Precision Engineering Limited, Singapore Aerospace Manufacturing Pte Ltd, Accuron Technologies Limited and Temasek Holdings (Private) Limited are also deemed to have interest in the Ordinary Shares of all the subsidiaries to the extent that the Company has an interest. DIRECTORS' SHAREHOLDINGS AS AT 2 AUGUST 2010 No. Name Direct Interest Indirect Interest No. of % of Issued No. of % of Issued shares Capital shares Capital 1 Goh Wee Keng Shum Sze Keong Dato' Mohamed Salleh bin Bajuri Dato' Robin Seo Eng Lin Dato' Wong Siew Hai Dato' Lee Tuck Fook Lee Hock Chye

103 Analysis of Shareholdings as at 2 August 2010 (cont d) 30 LARGEST SHAREHOLDERS AS AT 2 AUGUST 2010 % of Total No. of Issued No. Name Shares Capital 1 HDM NOMINEES (ASING) SDN BHD 62,729, DBS VICKERS SECS (S) PTE LTD FOR SINGAPORE PRECISION ENGINEERING LIMITED 2 HDM NOMINEES (ASING) SDN BHD 4,988, DBS VICKERS SECS (S) PTE LTD FOR SINGAPORE AEROSPACE MANUFACTURING PTE LTD 3 RICHARD TEH LIP HEONG 300, LIM CHEE KIAT 100, LIP SDN BHD 100, OOI KOK KEE 92, LAI CHIN LOY 84, HSBC NOMINEES (ASING) SDN BHD 68, EXEMPT AN FOR MORGAN STANLEY & CO. INTERNATIONAL PLC (CLIENT) 9 DING LENG KONG 49, WONG PENG WAH & SONS SDN BERHAD 45, HO WAN LEONG 40, KEE PHAIK CHEEN 36, KAMAL KUMAR KISHORCHANDRA KAMDAR 34, CHENG YEAN TAY YAN HOON 31, OOI KOK KEE 26, PEMBINAAN TEKNIKHAS SDN BHD 22, TAN MEE CHOO 21, SHARIFAH SAFIAH BT SYED MAHMOOD 20, HLG NOMINEE (TEMPATAN) SDN BHD 20, PLEDGED SECURITIES ACCOUNT FOR KOK CHEE YEN (CCTS) 20 KOK CHEE YEN 20, LAI TSI LIP 20, LIM KOK TONG 19, CHANG KWEE LAN 18, CHUNG CHOW CHEANG 17, HDM NOMINEES (TEMPATAN) SDN BHD 16, PLEDGED SECURITIES ACCOUNT FOR CURAHAN CEKAL SDN BHD (M10) 26 KEE YONG CHUAN 16, B.A.C.S SENDIRIAN BERHAD 15, CHEAH JIN KOOI 15, LO SENG HOOI 15, SAW CHOO BAN 14,

104 Particular of Properties held as at 31 March 2010 Location Tenure Area Build-up Description Approximate Expiry Date of Carrying (sq. ft.) Area Age of Date acquisition/ amounts (sq. ft.) building * revaluation as at 31 Mar 2010 (RM'000) Plot 7 Hilir Sungai Keluang 4 18,472 Office & 19 years Bayan Lepas Free Industrial Factory Zone, Phase Penang Leasehold 111,988 9 September 14 August 7, years 26,000 Office & 12 years * Factory Plots Lengkok Kampung Leasehold 54,013 33,500 Office & 26 years 22 November 14 August 3,721 Jawa 2, Bayan Lepas Non-Free 60 years Factory * Industrial Zone, Phase Penang Plot 77 Lintang Bayan Lepas Leasehold 131,104 67,500 Office & 10 years 16 June 14 August 10,688 Bayan Lepas Non-Free Industrial 60 years Factory * Zone Phase Penang Plot 17 Hilir Sungai Keluang 3 Leasehold 131,406 92,000 Office & 14 years 14 May 14 August 14,436 Bayan Lepas Free Industrial 60 years Factory * Zone Phase Penang. Plot 103, Hilir Sungai Keluang Leasehold 176,629 92,500 Office & 4 years To be 17 August 15,369 Lima, Taman Perindustrian 60 years Factory Determined 2009* Bayan Lepas Penang, Malaysia Plot 104, Hilir Sungai Keluang Leasehold 148, ,000 Office & 3 year 23 April 17 August 21,283 Lima, Taman Perindustrian 60 years Factory * Bayan Lepas 4, Penang, Malaysia Lot No. 25 Kulim Hi-Tech Industrial Park Leasehold 331,023 40,000 Office & 10 years 31 December 25 October 8,356 Phase 1, Kulim 60 years Factory * Kedah Darul Aman # # The above said property has been classified to assets held for sale. Note: 1. The land area disclosed herein is based on the survey conducted by Jabatan Ukur dan Pemetaan Pulau Pinang. 2. The revaluation policies of the above properties are disclosed in Note 2(c) under the notes to the Financial Statements. 103