Always aboveMs. Chin Lee Phing (MAICSA 7057836) Ms. Chew Peck Kheng (LS0009559) COMPANY SECRETARIES Suite 18.05, MWE Plaza No. 8, Lebuh Farquhar 10200 Georgetown Penang. Tel: 604 -

1 SAM ENGINEERING & EQUIPMENT (M) BERHAD

Always abovenever beneath

2CROSSOVER . ANNUAL REPORT 2018

Mightyamong the beasts

Does not turn away from any

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


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

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

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

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

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

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

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

Walk Straight, Act Rightvaluescoreour

CROSSOVER . ANNUAL REPORT 2018

C O N T E N T S

The fool despises wisdom, the wise embraces it

No.6-7

No. 10 The Management Team

No. 12 Profile of Directors 5.

6.

8.

9.

10.

12.

18.

20.

27.

40.

41.

57.

61.

65.

67.

150.

153.

158.

159.

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

Group Structure and Activities

No. 8-9


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

Chairman

Mr. Lee Hock Chye

Members

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

AUDIT COMMITTEE

Non-Independent Non-Executive Chairman

Mr. Tan Kai Hoe

Executive Director and Chief Executive Officer

Mr. Goh Wee Keng, Jeffrey

Non-Independent Non-Executive Director

Mr. Shum Sze Keong

Independent Non-Executive Directors

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

BOARD OF DIRECTORS

Chairman

Datuk Dr. Wong Lai SumMembers

Dato’ Mohamed Salleh Bin BajuriDato’ Wong Siew Hai

RISK & SUSTAINABILITY COMMITTEE

Chairman

Dato’ Wong Siew Hai

Members

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

NOMINATING & REMUNERATION COMMITTEE

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

COMPANY SECRETARIES

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

REGISTERED OFFICE

www.sam-malaysia.com

COMPANY WEBSITE

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

PRINCIPAL PLACE OF BUSINESS

Citibank BerhadAmBank (M) BerhadHong Leong Bank Berhad

PRINCIPAL BANKERS

Plantation Agencies Sdn. Bhd. (2603-D)

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

REGISTRARS

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

AUDITORS

RM 212,730,621

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

ISSUED AND PAID-UP CAPITAL


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

The fool despises wisdom,

the wise embraces it


In a race, everyone runs but only one wins.

Run to win


All things are

for the one who believespossible


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

LKT TECHNOLOGY SDN. BHD.

(418108-T) Dormant

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

Ceased Operations

MEERKAT PRECISION SDN. BHD.

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

parts, spares, components and precision engineering

parts

LKT AUTOMATION SDN. BHD.

(75724-W)Dormant

LKT INTEGRATION SDN. BHD.

(455256-X) Dormant

MEERKAT INTEGRATOR SDN. BHD.

(479992-T) Dormant

SAM TOOLING TECHNOLOGY SDN. BHD.

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

form dies and suspension tooling for hard disk drive

parts

SAM PRECISION (M) SDN. BHD.

(43230-K)Fabrication of precision

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

spares, components and precision engineering parts.

SAM PRECISION (THAILAND) LIMITED

(0145543000048)Manufacture of die, jigs

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

industries

MEERKAT TECHNOLOGY PTE. LTD.

(200008724 Z)Design, manufacture

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

equipment

SAM MEERKAT (M) SDN. BHD.

(364889-X)Design and assembly of

modular or complete machine and equipment

AVITRON PRIVATE LIMITED

(201116715M)Manufacture of aircraft

components and precision engineering parts

SAM ENGINEERING & EQUIPMENT (M) BERHAD

(298188-A)


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

TEO SIEW GEOKHELENChief Financial Officer,SAMEE Group

TAN GUAN THONG Chief Operating Officer, SAM Singapore Group

GOH WEE KENGJEFFREYCEO & Executive Director

LIM KEAN THYEGeneral Manager, SAM Meerkat

NG BOON KEATChief Operating Officer,SAMEE Group

YAP HAN LINSenior Operations Director,Meerkat Precision

TEH MUN LING Vice President – FinanceSAMEE Group

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

LIM HEE SENGPETERGeneral Manager, Avitron

StewardshipWhoever tends the fig tree will eat its fruit


TEO SIEW GEOKHELENChief Financial Officer,SAMEE Group

Age

Gender

Nationality

Date Joined

59

Female

Singaporean

15 Aug 2011

Academic / ProfessionalQualification(s)

•BachelorofAccounting, National University of Singapore, Singapore.

TAN GUAN THONG Chief Operating Officer, SAM Singapore Group

Age

Gender

Nationality

Date Joined

57

Male

Singaporean 15 Aug 2011


•BachelorofEngineering,Nanyang Technology

University of Singapore, Singapore.

GOH WEE KENGJEFFREYCEO & Executive Director

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

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

LIM KEAN THYEGeneral Manager, SAM Meerkat

Age

Gender

Nationality

Date Joined

51

Male

Malaysian

28 Jun 2010


•BachelorofElectrical& Electronics Engineering, Imperial College of Science &

Technology, University of London, England, UK.

NG BOON KEATChief Operating Officer,SAMEE Group

Age

Gender

Nationality

Date Joined

50

Male

Malaysian 17 Apr 2006


• MastersofScience (Mechatronics Engineering), De

Montfort University of Leicester, UK.

YAP HAN LINSenior Operations Director,Meerkat Precision

Age

Gender

Nationality

Date Joined

43

Male

Malaysian

16 Feb 2011


•BachelorofAerospace Engineering (Honours), Royal

Melbourne Institute of Technology, Victoria, Australia.

TEH MUN LING Vice President – Finance,SAMEE Group

Age

Gender

Nationality

Date Joined

47

Female

Malaysian

21 Aug 2017


•BachelorofAccountancy (Honours), Northern University

of Malaysia, Malaysia•CharteredAccountant,Malaysia

Institute of Accountants

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

Age

Gender

Nationality

Date Joined

41

Male

Malaysian 29 Dec 2005


•DiplomainCivilEngineering,University Technology Malaysia,

Malaysia.

LIM HEE SENGPETERGeneral Manager, Avitron

Age

Gender

Nationality

Date Joined

56

Male

Singaporean

1 Jan 2017


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

•MastersofBusiness Administration, University of Leicester, UK.


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

The plans of the

lead surely to abundancediligent


Non-Independent Non-Executive DirectorSHUM SZE KEONG

Age

Gender

Nationality

Date of Appointment

56

Male

Singaporean

4 March 2008

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

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

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

• AuditCommittee

Academic / Professional Qualification(s)• BachelorofScienceinAeronauticalEngineering,

Embry Riddle Aeronautical University, USA

GOH WEE KENG, JEFFREYExecutive Director & Chief Executive Officer

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

UK

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

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

59

Male

Singaporean

4 March 2008

Age

Gender

Nationality

Date of Appointment

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

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

Board Committee Membership(s)• NominatingandRemunerationCommittee

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

UK• MastersofScience(Management)Stanford University, USA

52

Male

Singaporean

26 August 2015

Age

Gender

Nationality

Date of Appointment

Non-Independent Non-Executive ChairmanTAN KAI HOE

from left to right


from left to right

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

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

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

67

Male

Malaysian

15 March 2004

Age

Gender

Nationality

Date of Appointment

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

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

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

from left to right

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

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

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

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

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

67

Male

Malaysian

4 June 2007

Age

Gender

Nationality

Date of Appointment

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

Academic / Professional Qualification(s)• BachelorofScienceinMechanicalEngineering,

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

Independent Non-Executive DirectorLEE HOCK CHYE

58

Male

Malaysian

8 July 2008

Age

Gender

Nationality

Date of Appointment

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

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

increases power Knowledge



is strong

The

Wise


Independent Non-Executive DirectorDATUK DR. WONG LAI SUM

Age

Gender

Nationality

Date of Appointment

63

Female

Malaysian

1 October 2016

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

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

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

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

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

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

from left to right

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

Age

Gender

Nationality

Date of Appointment

64

Male

Malaysian

8 July 2008

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

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

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

Board Committee Membership(s)• AuditCommittee

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

Accountants• MastersinBusinessAdministration

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

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


Financial Year Ended

2014 2015 2016 2017 2018

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

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

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

EARNINGS PER SHARE (Sen) 38.84 42.42 73.55 36.33 48.26

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

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

(RM’ 000)

598,164

REVENUE

20182017201620152014

0

100,000

300,000

500,000

200,000

400,000

600,000

700,000

(RM’ 000)

(RM’ 000)

73,187

PROFIT BEFORE TAX

20182017201620152014

10,000

30,000

50,000

20,000

40,000

60,000

80,000

70,000

(RM’ 000)

0

0

10,000

30,000

50,000

20,000

40,000

60,000

70,000

(RM’ 000)

(RM’ 000)

63,144

PROFIT AFTER TAX

20182017201620152014

(Sen)

48.26

EARNINGS PER SHARE

10

30

50

20

40

60

80

70

(Sen)

0

20182017201620152014


Financial Year Ended

2014 2015 2016 2017 2018

DIVIDEND (Sen) 17.25 32.20 40.31 17.23 23.36

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

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

RETURNONEQUITY(%) 8.6 9.2 14.4 9.6 13.7

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

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

20182017201620152014

0

50,000

150,000

100,000

200,000

(RM’ 000)

(RM’ 000)

21,556

CASH AND CASH EQUIVALENTS

(%)

13.7

RETURN ON EQUITY

2

6

10

4

8

12

16

14

(%)

0

20182017201620152014

(RM)

3.41

NET ASSETS PER SHARE

1

3

5

2

4

6

(RM)

0

20182017201620152014

(Sen)

23.36

DIVIDEND

10

30

20

40

50

(Sen)

0

20182017201620152014


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

Aerospace

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

Equipment

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

Group

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

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

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

REVIEW

MANAGEMENT D I SCUSS ION AND ANALYS I S

Revenue(RM’m)

Aerospace Equipment Total

537.4

227.2

310.2

598.2

244.7

353.5

FY2017 FY2018

55.4

23.931.5

73.2

35.6 37.6

Aerospace Equipment Total

FY2017 FY2018

Profit Before Tax (PBT)(RM’m)


Total Asset Employed

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

FINANCIAL POSITION

Property, Plant & Equipment

Intangibles & Other Assets

Trade Receivables & Other Receivables

Inventories

Cash & Cash Equivalents

100 200 300 400 500 600 7000

FY2017

FY2018

Total Assets Employed(RM’m)

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

Capital Employed

TheaverageCapitalEmployedinFY2018wasRM469mascomparedtoRM450minFY2017.

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

Equity

Others *

Long-Term Loan and Other Long Term Liabilities **

0

FY2017

FY2018

Capital Employed(RM’m)

100 200 300 400 500


Capital Expenditure

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

Cash Flows

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

Operating Activities

(RM’000) FY2018 FY2017

Operating Activities before changes in Working Capital

93 72

Changes in Working Capital 17 -25

Income Tax -12 -13

“Net Cash from Operating Activities”

98 34

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

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

(Cont’d)FINANCIAL POSITION


FY2017

FY2018

Cash Flows(RM’m)

Financing Activities

Investing Activities

Net Cash from Operating Activities

-100-100 -50 50 100 1500


(Cont’d)FINANCIAL POSITION


Dividend

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

Dividend Per Share(sen)

Interim/Final

Special

10

20

30

40

50

0FY2018FY2014 FY2017FY2015 FY2016


HIGHLIGHTS


Customers & Programs

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

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

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

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

Operations Initiatives

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

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


HIGHLIGHTS


(Cont’d)

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

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

and projected to complete within the next 2 years.

Core Asset Investments

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


Aerospace

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

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

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

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

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

Equipment

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

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

OUTLOOK

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

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

The Management Team



About this Statement

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

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

Scope

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

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

Operating Scope Business Units

Malaysian Operations SAM Meerkat (M) Sdn. Bhd.

SAM Tooling Technology Sdn. Bhd.

SAM Technologies (M) Sdn. Bhd.

SAM Precision (M) Sdn. Bhd.

Meerkat Precision Sdn. Bhd.

Singapore Operations Avitron Private Limited

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

Sustainability Governance Structure

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

SUSTA INAB I L I TY STATEMENT 2018

Our Environmental Management

Our PeopleOur Business Performance Our Outreach


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

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

Stakeholder Engagement

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

Stakeholder Groups Engagement Channels

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

Management Quarterly management meetingMonthly operation meetingWeekly coordinating meetingOngoing meetings and interactions

Customers Feedback surveySatisfaction assessmentsFace-to-face interaction

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

Board of Directors

Sustainability Committee(Lead by COO)

Group ManagementSustainability Committee

(Lead by CEO)

BusinessUnits

InvestorRelations

Health &Safety Finance

HumanResource

InformationTechnology Facilities


Stakeholder Groups Engagement Channels

Vendors/Suppliers InterviewsFeedback surveyFace-to-face interactionVendor audits

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

Directors Board and Board Committee meetingsOngoing meetings and interactions

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

Media Media releasesMedia interviews

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

Materiality Matrix

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

Economic, Environment and Social Matters

1 Product and Service Quality

2 Technology, Innovation and Development

3 Economic Performance

4 Customer Satisfaction and Relationship

5 Employee Learning & Development

6 Information Technology & Cybersecurity

7 Employee Well-Being, Health and Safety

8 Ethics and Compliance

9 Supply Chain Management

10 Labour Practices

11 Waste and Hazardous Material Management

12 Energy Consumption

13 Local Communities

14 Indirect Econimic Impact

15 Diversity and Inclusion


Importance to SAM MalaysiaHighMedium

Imp

ort

ance

to

Sta

keho

lder

s Hig

hM

ediu

m 15

14

13 1211

10 7

6

54

3 12

9

8

Our Business Performance


Legend:

Our People

Our Outreach


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

Product and Service Quality

Technology, Innovation and Development

Economic Performance

Customer Satisfaction and Relationship

Employee Learning & Development

Cybersecurity & IT Resource Management

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


Ethics and Compliance

Technology, Innovation andDevelopment

Information Technology & Cybersecurity

Supply Chain Management



Waste and Hazardous Material Management

Energy Consumption

Labour Practices

Diversity and Inclusion


Employee Well-Being, Health and Safety

Local Communities

Indirect Economic Impact

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

Our Business Performance

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

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


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

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



Our PeopleOur Business Performance Our Outreach


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

Our economic footprints

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

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

Ethics and Compliance

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

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

Technology, Innovation and Development

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

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

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

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


North America81%

EU17%

Asia2%

Customer Base by Region

http://www.sam-malaysia.commailto:[email protected]



Information Technology (“IT”) & Cybersecurity

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

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

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

Supply Chain Management

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

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

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


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

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

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

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



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

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

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

Environmental Management

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

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

Waste and Hazardous Material Management

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

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

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

0.60

0.40

0.20

0.50

0.30

0.10

0.00Tonn

es/m

illionRM

reve

nue

FY2016

0.32

FY2017

0.47

FY2018

0.57



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

Energy Consumption

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

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

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

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

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

Our people

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

Labour Practices

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

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

Electricity Consumption (MWh/million RM revenue)

42.0

38.0

44.0

40.0

36.0

34.0MWh/millionRM

reve

nue

FY2016

38.0

FY2017

43.1

FY2018

39.2




Raising awareness

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

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

InFY2018,therehavenotbeenanycasesreportedthroughthegrievancechannels.

Foreign workforce

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

Diversity and Inclusion

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

Employee statistics Employees by age group Employees by contract

Men 83% Over 50 9% Permanent 82%

Women 17% 30 to 50 46% Contract 18%

Below 30 45%

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


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

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

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

mailto:[email protected]



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

FY2017 FY2018

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

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

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

FY2017 FY2018

Structured OJT Softskills/Quality/Safety/TeamTraining

Structured OJT Softskills/Quality/Safety/TeamTraining

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

Career development programmes

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

Type of initiative Brief description and aim of the initiative

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

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

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

Scholarship offers to pursue further education

Outstanding staff are offered scholarships to further develop their skills.

Employee Well-being, Health and Safety

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

Health and safety

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

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



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

Health and safety programmes and training

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

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

Safety training

Name of the training Description of the training Employee category

Emergency Response Team (ERT)

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

All assigned ERT members

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

Employees handle chemicals

EHS Awareness Training for contractors & Employees

Briefing contractors on relevant regulatory compliance safe work practices.

All contractors assigned to SAM

Ergonomics awareness Awareness trainings based on conducted ergonomics risk assessments.

Employees exposed to potential ergonomics risks

Roles & Responsibilities of EHS Committee

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

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

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

Managers, Engineers & Supervisory level employees

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

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

Shopfloor Workers

Singapore Workforce Skills Qualifications (“WSQ”) Operate Forklift

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

Shopfloor Workers who are required to drive forklifts

Apply Workplace Health and Safety in Metalwork

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

All Shop Floor Workers

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



Employee well being

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

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

Our Outreach

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

Local Communities and Indirect Economic Impact

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

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

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

PSDC – Malaysian Skills Certification System FY2016 FY2017 FY2018

No. of students 2 3 14

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

PSDC – Meister Program FY2018

No. of student 2

Total sponsorship amount (RM) 8,200

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


Name of programme Description

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

Profession-Conversion-Programme (“PCP”)

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

Outlook for Sustainability

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

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

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

exceptional strengthCollaborating together as one is our



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

Location Tenure Area(sq. ft.)

Build-uparea

(sq. ft.)

Description Approximateage of

building

Expirydate

Date of revaluation

Net BookValue at

31 Mar 2018(RM’000)

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

Leasehold 60 years

111,988 18,472

26,000

Office &Factory

Office & Factory

25 years

18 years

9 September 2051

14 August2009

5,304

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

Leasehold60 years

54,013 33,500 Office &Factory

32 years 22 November

2041

14 August2009

2,596

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

Leasehold60 years


16 years 16 June 2057

14 August2009

7,689

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

Leasehold60 years


20 years 14 May 2051 14 August2009

12,495

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

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

Leasehold60 years

Leasehold60 years

176,629

148,218

92,500

134,000

Office &Factory

Office &Factory

10 years

9 years

18 December

2074

23 April 2068

17 August2009

17 August2009

9,906

10,392

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

54321

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2

3

4

5


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

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

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

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

Principle A: Board Leadership and Effectiveness

Part 1 - Board Responsibilities

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

collectively responsible for meeting the objectives and goals of the company

1.1 Strategic aims, values and standards

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

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

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

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

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

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

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

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


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

Part 1 - Board Responsibilities (Cont’d)

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

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

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

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

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

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

1.2 The Chairman of the Board

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

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

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

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

1.4 Qualified and Competent Company Secretaries

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

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

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

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

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

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

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

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


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



1.4 Qualified and Competent Company Secretaries (Cont’d)

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

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

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

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

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

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

1.5 Access to Information and Meeting Materials

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

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

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

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




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

The Board ordinarily meets at least four (4) times a year with additional meetings convened when urgent and important decisions needed to be taken between the scheduled meetings. During the financial year ended 31 Ma