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Annual Report 2015 Gearing Up For Green Opportunities

Gearing Up - Innovalues · advantages and our ability to enhance operational efficiencies, ... last year to address the concern of rising labour costs in ... for energy saving devices

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Annual Report 2015

Gearing Up For Green Opportunities

01 Corporate Profile02 Chairman’s Statement04 Operations Review06 Directors’ Profile

08 Key Management Profile09 Corporate Structure 10 Corporate Information13 Financial Highlights

18 Performance Summary21 Financial Contents

Contents

our VisionTo be the preferred global partner in quality precision engineering.

our Mission statementTo provide our customers with products and services of the highest quality and to deliver the necessary operating and financial performance to enhance shareholder value. To achieve these goals, INNOValues will continue its focus on delivering excellence in performance, flexibility and technology, and exceeding customers’ expectations in quality, delivery and services.

Innovalues Limited Annual Report 2015 1

Corporate Profile

Capable of high VoluMe and high preCision toleranCe ManufaCturing and surfaCe treatMent serViCes

Innovalues specializes in the manufacturing of customized

precision machine parts and components, including

automotive components, printer rollers, mechanical devices,

and sub-assemblies, as well as surface treatment services

such as electroless nickel plating, zinc phosphating and hard

anodizing. the Group’s products are mainly produced for

the automotive and office automation equipment industries,

with its automotive products geared towards fuel efficiency,

environmental protection and vehicle safety.

Backed by strong capabilities in manufacturing high volume

and high quality precision parts, the Group’s dynamic

team of experienced engineers are involved in all stages

of the production cycle from design to mass production.

Drawing on its strengths and expertise gained over the

years, Innovalues aims to be the preferred global partner in

precision engineering by continuously delivering a complete

array of high-quality value chain solutions to its customers.

established in 1997 by founder Mr. Goh Leng tse, Innovalues

has built on its humble beginnings to become a major

global supplier of high-precision parts and components

through a regionalistion strategy of product and customer

diversification. Its global customers include multi-national

corporations such as Sensata technologies, Hilite

International, Hewlett-packard, Flextronics and Lexmark.

Marking a major milestone, the Group was listed on the

Mainboard of Singapore exchange of Singapore.

Headquartered in Singapore, the Group has operations

in Malaysia, thailand and China with an area capacity of

approximately 50,000 sqm that are supported by a staff

strength of approximately 1,600.

For more information, please visit the Group’s website at

www.innovalues.com.

Innovalues Limited Annual Report 20152

dear Valued shareholders,

FY2015 was a good year for us. Leveraging on our competitive

advantages and our ability to enhance operational efficiencies,

we are pleased to share our achievement of a record S$23.0

million net profit for FY2015.

the key growth driver of our business has been the continued

success of our automotive (“aU”) segment. With a focus on

the manufacturing of high precision machined components

for complex automotive parts, our proprietary technical

know-how continues to differentiate us from industry peers.

apart from introducing increased automation to our processes

to improve productivity, we concurrently implemented

effective cost management across our manufacturing facilities

in thailand, Malaysia and China. With our leaner operating

structure, it ensures improvement and sustainability on our

gross profit margin levels. In addition, our steadfast dedication

in adhering to the highest standards of quality created greater

cohesion with our key customers. With highly entrenched

customer relationships, we are poised to take advantage of

an increase in demand for products used in safety/control,

energy saving and environment protection globally.

Further to our competitive strengths, one other key aspect

of aU components is their relatively long product life cycles.

this characteristic enables us to plan ahead and effectively

manage our capital expenditures such as increasing

integrated automation and streamlining costs to gain

strategic advantages.

on our secondary business segment in office automation

(“oa”), we relocated our operations in Shanghai to Malaysia

last year to address the concern of rising labour costs in

China. this shift in operations is in response to our overall

objective of improving profitability levels. over the years, our

oa segment has provided the Group with a stable source

of income as we continue to leverage on our existing high

precision manufacturing capabilities.

CHaIrMan’S Statement

Innovalues Limited Annual Report 2015 3

outlook

Going into 2016, the Group will continue to focus on

strengthening cost controls and improving productivity

across all business segments. Despite the relative slowdown

in demand for our aU products in the second half of 2015

which may continue into the first two quarters of this year, we

are cautiously optimistic that our key customers will look to

ramp up operations in the second half of 2016.

there has been an increasing trend for governments

worldwide to adopt stricter regulations with regard to safety,

energy consumption and the protection of the environment.

With the goal of reducing emissions in order to avoid rising

temperatures, world leaders have placed global warming at

the top of their agendas. this fight against environmental

degradation represents an opportunity for our aU products

which detect abnormal combustion in gasoline engines and

help reduce raw emissions. We will strive to enhance our

engineering capabilities and work with our customers in

product development to ensure that the Group is well poised

to take advantage of these growth catalysts in the automotive

industry.

the push for environmental protection will also pave the way

for further growth in our sensor component business. the

aU sector is increasingly adopting sensors in automobiles

due to their increasing sophistication and the growing need

for energy saving devices. We will continue to collaborate

with our long-term partners in order to drive and accelerate

growth in our sensor component business.

acknowledgements

Lastly, I would like to express my sincere appreciation to

our shareholders, customers, business partners, fellow

directors, management team and employees, for their

continued support and belief in the long term outlook of the

company. Supported by our strong set of financial results,

we are pleased to announce final and special dividends of

1.2 Singapore cents and 1.4 Singapore cents respectively.

In addition to the interim dividend of 1.2 Singapore cents,

this will bring our full year dividends to 3.8 Singapore cents

(FY2014: 2.0 Singapore cents), representing a payout ratio

of 53.7% for FY2015.

encouraged by the support from our various stakeholders,

we remain committed in striving towards enhancing

shareholders’ value in the long term.

Mr. goh leng tseChairman and Chief executive officer

CHaIrMan’S Statement

Innovalues Limited Annual Report 20154

the Group achieved a record net profit of S$23.0 million

for the financial year ended 31 December 2015 (“FY2015”),

a 45.5% year-on-year (“yoy”) increase from the S$15.8

million for the financial year ended 31 December 2014

(“FY2014”).

Driven by favourable currency exchange rates and the

Group’s focus on enhancing operational efficiencies, gross

profit increased 21.1% yoy to S$34.9 million for FY2015.

this resulted in a gross profit margin expansion from 26.6%

for FY2014 to 30.7% for FY2015.

business segMent perforManCe

Despite the challenging business conditions, the Group’s

overall revenue grew by 4.8% yoy from S$108.5 million for

FY2014 to S$113.7 million for FY2015.

the automotive (“aU”) segment continues to be the primary

driver of growth with a revenue contribution of S$89.4 million

for FY2015, accounting for 78.7% of total revenue. this

represents an increase of 1.9% yoy for FY2015, from S$87.8

million for FY2014. revenue growth in the aU segment was

a result of an increase in orders from customers.

In the office automation (“oa”) segment, revenue increased

18.4% yoy to S$23.8 million for FY2015. the rise in revenue

from the oa segment was mainly attributed to an increase in

orders from the Group’s customers in the thailand market.

finanCial position highlights

the Group’s net asset value strengthened to S$82.4 million

for FY2015 as compared to S$70.7 million for FY2014. this

was the result of the continued positive performance of the

Group’s profitability. Correspondingly, the Group’s net asset

value per ordinary share improved to 25.34 cents (FY2014:

21.87 cents) as at 31 December 2015.

property, plant and equipment decreased by approximately

S$3.1 million from S$38.0 million as at 31 December 2014

to S$34.9 million as at 31 December 2015. the decrease

was mainly due to depreciation charges during the year,

offset by additions of plant and equipment which are in line

operatIonS review

Innovalues Limited Annual Report 2015 5

operatIonS review

with the Group’s plans to ramp up operations and meet

growing business demands.

Driven by an increase in orders from customers, inventories

rose by 20.3% from S$8.4 million as at 31 December 2014

to S$10.1 million as at 31 December 2015.

as a result of slightly slower payments from customers,

trade and other receivables increased by 7.0% from S$23.9

million as at 31 December 2014 to S$25.6 million as at

31 December 2015. However, debt collections continue

to remain efficient as those slightly overdue trade debts

of substantial amounts were subsequently recovered in

January 2016.

Scheduled repayments of term loans made during the year

lead to a 61.7% decrease in interest-bearing borrowings

from S$6.5 million as at 31 December 2014 to S$2.5 million

as at 31 December 2015.

Cash floW highlights

on the back of improved financial performance, the Group’s

core business segments in aU and oa continue to generate

strong positive operating cash flows. net cash flows from

operating activities increased by 11.1% from S$24.3 million

for FY2014 to S$27.0 million for FY2015.

Capital expenditure contributed to net cash flows used

in investing activities of approximately S$5.5 million for

FY2015, while net cash flows used in financing activities

of S$13.7 million was mainly for dividends payment and

repayments of loans and finance leases.

as an indication of the Group’s improved financial strength,

the Group closed FY2015 with cash and cash equivalents

amounting to S$30.5 million. this represents a 34.5% yoy

increase from S$22.7 million for FY2014. Correspondingly,

the Group’s net cash position improved to S$26.8 million as

at 31 December 2015 as compared to a net cash position

of S$13.9 million as at 31 December 2014.

Innovalues Limited Annual Report 20156

Mr. goh leng tse

Chairman and Chief Executive Officer

Mr. Goh Leng tse is the Chairman of the Board, a member of the audit Committee,

remuneration Committee and nominating Committee of the Company. Mr. Goh founded

Innovalues Ltd in april 1997 and was appointed director on 25 april 1997.

He has more than 20 years’ experience in the precision turned-parts industry and has

worked for nMB Singapore pte Ltd and tnH Metal pte Ltd. Mr. Goh holds a Diploma in

Business Management from the Singapore Institute of Management.

Mr. pung tong seng

Executive Director

Mr. pung tong Seng was appointed director on 7 June 2008. Mr. pung joined Innovalues

Limited in June 2000 and is responsible for the Group’s marketing and business development

functions.

He holds an MSc in total Quality Management from the Sheffield Hallam University. Mr

pung has about 20 years experience working with MnC such as Micropolis (S) Ltd and

Iomega pacific pte Ltd in the electronics and hard disk drives industries prior to taking up his

responsibilities in Innovalues.

Mr. pung was last re-elected as a director at the annual General Meeting on 24 april 2014.

Mr. ong tiaK beng

Non-executive Director

Mr. ong tiak Beng is a member of the nominating Committee and remuneration Committee

of the Company. He was appointed as non-executive Director on 20 May 1997.

Mr. ong holds a Bachelor of Science in Industrial engineering and Management and has

more than 19 years’ experience in the precision engineering industry. He provides valuable

support, insights and business contacts to the Group.

Mr. ong was last re-elected as a director at the annual General Meeting on 28 april 2015.

aDVISor to tHe BoarD oF DIreCtorSMr. Koh boon hWee

Advisor

Mr. Koh Boon Hwee is the advisor to our Board of Directors. Mr. Koh was appointed as advisor

to our Board on 1 June 2005 after he retired as non-executive director on 25 april 2005.

DIreCtorS’ Profile

Innovalues Limited Annual Report 2015 7

Mr. anthonY teo soon ChYe

Lead Independent Director

Mr. anthony teo Soon Chye is our lead Independent Director, Chairman of the audit and

nominating Committees and a member of remuneration Committee of the Company. Mr.

teo was appointed as an Independent Director on 1 June 2005.

Up to august 2010, he was the Secretary to the University, nanyang technological University

and concurrently an exofficio member of the Senate and a member of the University Cabinet.

additionally, he is a member of the Management Board of the Middle east Institute, Board of

Greenship Holdings Manager pte Limited and member of the endowment Fund Committee

of the Singapore Symphony orchestra. In 2010, he was awarded the Chevalier of the French

order of the palmes académiques and in 2009 Visiting Fellow at Wolfson College, Cambridge

University. He was appointed adjunct professor of the Lee Kuan Yew School of public policy

in 2013. He was awarded ntU pioneer educator’s Medallion 2015 and appointed adjunct

professor at the Singapore Institute of Management University’s Business School and the

School for Human Development.

He was Vice Chairman of the Singapore Chamber of Commerce in Hong Kong and an

emeritus Board of the global Harvard Business School alumni Board of Governors based in

Boston. a graduate from Harvard Business School, his career spans banking, consulting,

higher education and own business.

Mr. teo was last re-elected as a director at the annual General Meeting on 28 april 2015.

Mr. lieW YoKe pheng, Joseph

Independent Director

Mr. Liew Yoke pheng, Joseph is our Independent Director, Chairman of the remuneration

Committee, a member of the audit Committee and nominating Committee of the Company.

Mr. Liew was appointed as an Independent Director on 15 March 2013.

Mr. Liew has more than 30 years of experience in It, finance and accounting. He is currently

the General Manager of Giti tire, a global tire company, responsible for overseeing the

business compliance function. prior to this, Mr. Liew was the asia regional CFo of Sage from

2006 to 2014, a leading global software company, listed in the London Stock exchange.

Mr. Liew has a Bachelor of Commerce (accountancy) degree from the nanyang University,

Singapore. He is a Fellow of the Institute of Singapore Chartered accountants (FCaS),

Fellow of the association of Chartered Certified accountants (FCCa), a certified member

of the Information Systems audit and Control association (CISa), a certified member of the

association of Certified Fraud examiners (CFe), Fellow of the Life Management Institute

(FLMI) with Distinction and a member of the Singapore Institute of Directors.

Mr. Liew was last re-elected as a director at the annual General Meeting on 25 april 2013.

DIreCtorS’ Profile

Innovalues Limited Annual Report 20158

Mr. soo King tengGroup Financial Controller

Mr. Soo King teng is our Group Financial Controller and Company Secretary. He joined Innovalues in april 2009 as Group Finance Manager and was subsequently promoted as Group Financial Controller in Dec 2011. He has more than 15 years of accounting and finance experience in various industries. He is responsible for overseeing the financial and accounting functions of the Group.

He holds a professional accountancy qualification from the association of Chartered Certified accountants, UK and is a Chartered accountant of the Institute of Singapore Chartered accountant.

Mr. ho beng JooSenior Project Manager

Mr. Ho Beng Joo joined Innovalues in october 2001 and is responsible for the Group’s sales, engineering and quality control functions. He holds a Diploma in production technology from German Singapore Institute.

He has more than 30 years of experience in the metal machining and quality control, including 20 years in aerospace industry.

KeY manaGement Profile

Innovalues Limited Annual Report 2015 9

thailandinnovalues precision

(thailand) ltd

MalaYsia

innovalues precision sdn bhd

nissohatsu elastomer (M)

sdn bhd

innovalues technologies

sdn bhd

innovalues Microtech sdn

bhd

innovalues precision (Kluang)

sdn bhd

China

innovalues industry (shanghai) Co., ltd

shenzhen innovaluesprecision Co., ltd

innovalues technology (shanghai) Co., ltd

innovalues precision (shanghai) Co., ltd

innovalues auto precision (shanghai) Co., ltd

Corporate StrUctUre

Innovalues Limited Annual Report 201510

established

april 1997

produCt & serViCes

Manufacturer of High-precision turned parts and Components, Metal Components Machining, en plating Services, assembly of printer rollers and Mechanical devices

ManufaCturing proCesses

CnC autolathes, Machining Centres, Centreless Grinding, en plating and Super Finishing Grinding

Capabilities

Ultra High-precision Manufacturing (+/-0.001mm tolerance). High Volume Manufacturing Facilities

Corporate information

industries supported

automotive and office automation (printers, copiers, photographic imaging, plotters)

QualitY aCCreditations

IpSB - ISo9001:2008 , ISo/tS16949:2009IpK - ISo9001:2008 , ISo/tS16949:2009IMSB - ISo/tS16949:2009, ISo 14001:2004 + Cor1:2009IptL - ISo/tS16949:2009, ISo 14001:2004IaSH - ISo/tS16949:2009

aCColades

– ForBeS GLoBaL Best Under a Billion 200 Companies for 2002

– SMart InVeStor Most admired SeSDaQ Companies 2002

– FaSteSt GroWInG 50 Companies in Singapore 2004

– Singapore 1000 company 2006 & 2008

Innovalues Limited Annual Report 2015 11

board of direCtors

Mr. goh leng tse Chairman and Chief Executive Officer

Mr. pung tong seng Executive Director

Mr. anthony teo soon ChyeLead Independent Director

Mr. liew Yoke pheng, JosephIndependent Director

Mr. ong tiak bengNon-Executive Director

audit CoMMittee

Mr. anthony teo soon ChyeChairman

Mr. goh leng tse

Mr. liew Yoke pheng, Joseph

noMinating CoMMittee

Mr. anthony teo soon Chye Chairman

Mr. goh leng tse

Mr. liew Yoke pheng, Joseph

Mr. ong tiak beng

reMuneration CoMMittee

Mr. liew Yoke pheng, Joseph Chairman

Mr. anthony teo soon Chye

Mr. goh leng tse

Mr. ong tiak beng

CoMpanY seCretarY

Mr. soo King teng CA (Singapore)

Corporate information

Innovalues Limited Annual Report 201512

ManufaCturing sites

Malaysia:Innovalues precision Sdn Bhdarea : 14,597 sqmInnovalues precision (Kluang) Sdn Bhdarea : 8,826 sqmInnovalues precision Microtech Sdn Bhdarea : 3,979 sqm

China:Innovalues Industry (Shanghai) Co., Ltdarea : 2,056 sqmInnovalues technology (Shanghai) Co., Ltdarea : 500 sqmInnovalues auto precision (Shanghai) Co., Ltdarea : 9,469 sqm

thailand:Innovalues precision (thailand) Ltdarea : 10,400 sqm

registered offiCe

Blk 9 Kallang place #07-08/09Singapore 339154tel : (65) 6298-2374Fax : (65) 6298-2375Website : www.innovalues.comregistration no.199702822e

share registrar

Boardroom Corporate & advisory Services pte. Ltd.50 raffles place#32-01Singapore Land towerSingapore 048623

auditors

rSM Chio Lim LLppublic accountants and Chartered accountants8 Wilkie road,#03-08, Wilkie edgeSingapore 228095

audit partner-in-chargeMs. See Ling Ling, Helenpartner-in-charge since financial year ended 31 December 2012

prinCipal banKers

the Development Bank of Singapore LtdMalayan Banking BerhadBangkok Bank public Company Limitedoversea-Chinese Banking Corporation Limited

Corporate information

Innovalues Limited Annual Report 2015 13

fiVe - Year finanCial highlights

for the year (s$’000) 2015 2014 2013 2012 2011

revenue 113,691 108,468 99,327 93,189 89,081 Finance costs 255 376 802 1,003 1,145earnings before interests, tax, depreciation and amortisation (eBItDa) 33,810 24,765 17,298 24,012 (3,348)Gross profit 34,918 28,841 18,519 15,058 12,544 profit/(Loss) before tax and non-controlling interests 26,229 17,376 9,179 15,588 (13,871)profit/(Loss), net of tax and non-controlling interests 23,001 15,811 8,676 15,345 (14,222)

at year end (s$’000)

total inventory 10,084 8,384 12,713 13,934 14,300 Cash and cash equivalents 30,643 22,839 11,327 12,313 10,688Current assets 68,162 56,952 43,980 43,966 44,473 total assets 103,483 95,333 83,879 87,292 78,278 total borrowings 3,811 8,927 12,509 23,071 26,193 Current liabilities 20,199 22,881 22,132 27,715 33,395total liabilities 21,053 24,670 26,972 35,340 37,722 total equity 82,430 70,663 56,907 51,952 40,556

Key ratios

revenue growth (%) 4.8% 9.2% 6.6% 4.6% (12.5%)Gross profit growth (%) 21.1% 55.7% 23.0% 20.0% (18.8%)net debt/equity (%) (32.6%) (19.7%) 2.1% 20.7% 38.2%return on shareholders funds (%) 27.9% 22.4% 15.2% 29.5% (35.1%)return on total assets (%) 22.2% 16.6% 10.3% 17.6% (18.2%)Current ratio (times) 3.37 2.49 1.99 1.59 1.33Quick ratio (times) 2.88 2.12 1.41 1.08 0.90 Cash ratio (times) 1.52 1.00 0.51 0.44 0.32

per share information

number of shares - Issued and fully paid (‘000) 325,243 323,079 320,834 318,214 318,214 number of shares - Basic (‘000) 324,348 323,079 320,834 318,214 318,214number of shares - Fully diluted (‘000) 327,428 324,232 321,314 318,231 318,214earning per share - Basic (cents) 7.09 4.89 2.70 4.82 (4.47)earning per share - Fully diluted (cents) 7.02 4.88 2.70 4.82 (4.47)net assets per share (cents) 25.34 21.87 17.74 16.33 12.74Dividend per share - ordinary (cents) 2.4 1.2 1.2 1.2 0.6Dividend per share - Special (cents) 1.4 0.8 – – –

FInanCIaL HiGHliGHtS

Innovalues Limited Annual Report 201514

reVenue bY business segMent

2015

2015

2014

2014

2013

2013

2012

2012

2011

2011

reVenue bY geographiCal loCations

prC USa Malaysia Mexico thailand Singapore Brazil Germany others

automotive office automation others

FInanCIaL HiGHliGHtS

4%1%

31%23%19%21%

68%77%81%79% 53%

43%

60%

19%

14%

2%

1%

1%1%1%1%

1%1%4% 1%

1%

60%

19%

9%

5%

2%

62%

19%

7%

5%

2%

3%

59%

18%

6%

6%

3%

7%

58%

16%

18%

3%

1%1%

2%

1%

Innovalues Limited Annual Report 2015 15

14.6%

20.2%

16.5%

(16.0%)

8.7%

net profit/(loss) bY Year

gross profit bY Year

2013 201420122011 2015

14.1%16.2%

18.6%

26.6%

30.7%

Gross profit (S$’000)

net profit/(loss) (S$’000)

Gross profit margin (%)

net profit/(loss) margin (%)

2013(c) 2014 20152012(b)

2011(a)

8,676 15,811 23,00115,345

(14,222)

18,519 28,84115,05812,544 34,918

FInanCIaL HiGHliGHtS

(a) net loss includes thailand flood-related charges of $13.6 million.(b) net profit includes insurance claims of $12.5 million relating to thailand flood.(c) net profit includes insurance claims of $2.3 million relating to thailand flood.

Innovalues Limited Annual Report 201516

leVerage ratio

liQuiditY ratio

2015

2.49

2.12

1.00

3.37

2.88

1.52

2014

1.991.41

2013

1.59

1.08

2012

1.33

0.90

2011

Current ratio (times)

net cash/(debt) (S$’000) net debt-to-equity (%)

Quick ratio (times) Cash ratio (times)

38.2%

20.7%

(19.7%)

(32.6%)

2.1%

2014 2015201320122011

(1,182)(10,758)(15,505)

13,912 26,832

FInanCIaL HiGHliGHtS

0.32 0.44 0.51

Innovalues Limited Annual Report 2015 17

Dividend (S$’000) net profit (S$’000)

2015

2014

2013

2012

2011

6,461

12,359

3,8518,676

15,3453,821

1,909(14,222)

15,811

23,001

diVidend

epS-fully diluted (cents) naV per share (cents)

12.74

16.3317.74

21.8725.34

4.822.70

4.88

7.02

(4.47)

2014 201520132011 2012

eps & naV

FInanCIaL HiGHliGHtS

Innovalues Limited Annual Report 201518

Consolidated statement of profit or loss and other Comprehensive incomeYear ended 31 December

revenue - Growth was mainly driven by an increase in orders from the Group’s OA and AU customers.

gross profit - Increase was mainly due to the growth in revenue, improved operational efficiencies, and favourable currency exchange rate movements. Gross profit margin increased by 4.1 percentage points to 30.7% for FY2015 from 26.6% for FY2014.

administrative expenses - Increase was mainly due to staff-related costs and provision of directors’ incentive bonus in line with the Group’s profit growth.

income tax expense - Increase was mainly due to an increase in profit before tax for the Group and the provision of deferred tax expense.

finance costs - Decrease was mainly due to a reduction of net interest-bearing borrowings and finance leases.

2015

s$’000

2014

s$’000

revenue 113,691 108,468

Cost of sales (78,773) (79,627)

gross profit 34,918 28,841

other items of income

Interest income 93 27

other gains 4,831 1,270

other items of expense

Marketing and distribution costs (2,048) (2,158)

administrative expenses (11,226) (10,009)

Finance costs (255) (376)

other losses (84) (219)

profit before tax 26,229 17,376

Income tax expense (3,228) (1,565)

profit from continuing operations, net of tax

23,001 15,811

other comprehensive (loss)/income:

exchange differences on translating foreign operations, net of tax

(3,583) 1,435

other comprehensive (loss)/income for the year, net of tax

(3,583) 1,435

total comprehensive income 19,418 17,246

perForManCe SUmmary

Innovalues Limited Annual Report 2015 19

statements of financial positionAs At 31 December

property, plant and equipment - Decrease was mainly due to depreciation charges during the year, offset by additions of plant and equipment in line with the expected ramping up of operations to meet growing demands.

inventories - Increase was mainly due to meet the growing orders from customers.

Cash and cash equivalents - Increase was mainly due to net cash flows generated from operating activities as a result of improved financial performance.

trade and other receivables - Increase was mainly due to slightly slower payments from our customers. However, debts collections continue to remain efficient.

other financial liabilities - Decrease was mainly due to scheduled repayments of term loans made during the year.

2014

s$’000

2015

s$’000

assets

non-current assets

property, plant and equipment 38,000 34,940

other financial assets 381 381

total non-current assets 38,381 35,321

Current assets

Inventories 8,384 10,084

trade and other receivables 23,931 25,599

other assets 1,798 1,836

Cash and cash equivalents 22,839 30,643

total current assets 56,952 68,162

total assets 95,333 103,483

equity and liabilities

equity

Share capital 11,891 12,248

retained earnings 58,314 72,871

other reserves 458 (2,689)

total equity, attributable to owners of the

parent70,663 82,430

non-current liabilities

Deferred tax liabilities - 530

other financial liabilities, non-current 549 24

Finance leases, non-current 1,240 300

total non-current liabilities 1,789 854

Current liabilities

Income tax payable 537 1,393

trade and other payables 15,206 15,319

other financial liabilities, current 5,960 2,470

Finance leases, current 1,178 1,017

total current liabilities 22,881 20,199

total liabilities 24,670 21,053

total equity and liabilities 95,333 103,483

finance leases - Decrease was mainly due to repayments made, offset by additions of finance leases committed during the year.

perForManCe SUmmary

Financial contents22 Corporate Governance Report

40 Risk Factors

42 Statement by Directors

49 Independent Auditor’s Report

51 Consolidated Statement of Profit or Loss and Other Comprehensive Income

52 Statements of Financial Position

53 Statements of Changes in Equity

55 Consolidated Statement of Cash Flows

56 Notes to the Financial Statements

103 Information on Shareholdings

105 Notice of Annual General Meeting

109 Proxy Form

Innovalues Limited Annual Report 201522

corporate Governance report

The Board of Directors (the “Board”) and its Management are committed to maintaining high standards of corporate conduct, and place overriding importance on its Corporate Governance practices and systems, so as to ensure transparency and protection of shareholders’ interests.

This report describes the Group’s corporate governance structures and practices that were in place throughout the financial year ended 31 December 2015, with specific reference made to the principles of the Code of Corporate Governance 2012 (the “Code”).

The Board is pleased to confirm that for the financial year ended 31 December 2015, the Group has adhered to the principles and guidelines as set out in the Code where appropriate and has disclosed and explained any deviations from the Code in this report.

A. BOARD MATTERS

The Board’s Conduct of its Affairs

Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the long-term success of the company. The Board works with Management to achieve this objective and the Management remains accountable to the Board.

The Board is entrusted with the responsibility of the overall management of the Company. Its primary function is to protect and enhance long-term value and returns for its shareholders. Besides carrying out its statutory responsibilities, the Board’s role is to:

(a) Provide entrepreneurial leadership, set strategic objectives, and ensure that the necessary financial and human resources are in place for the Company to meet its objectives;

(b) Establish a framework of robust and effective controls which enables risks to be assessed and managed, including safeguarding of shareholders’ interests and the Company’s assets;

(c) Review management performance, approve annual budgets, funding requirements, expansion programs, capital investment and major acquisitions and divestments proposals;

(d) Identify the key stakeholder groups and recognize that their perceptions affect the Company’s reputation;

(e) Set the Company’s values and standards (including ethical standards), and ensure that obligations to shareholders and other stakeholders are understood and met;

(f) Consider sustainability issues, e.g. environmental and social factors, as part of its strategic formulation; and

(g) Assume responsibility for corporate governance.

The Board exercises objective judgment independently from Management on corporate affairs of the Group and no individual or small group of individuals dominate the decisions of the Board. All directors are required to objectively discharge their duties and responsibilities at all times as fiduciaries and take decisions in the interests of the Company. To assist in the execution of its responsibilities, the Board has established three Board Committees: the Nominating Committee (“NC”), the Remuneration Committee (“RC”) and the Audit Committee (“AC”). To facilitate effective management, certain functions have been delegated by the Board to the various Board Committees. The Board Committees operate under clearly defined terms of reference. All the Board Committees are actively engaged and play an important role in ensuring good corporate governance in the Company. The Board acknowledges that while these Board Committees have the authority to examine specific issues and reports back to the Board with their decisions and

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recommendations, the ultimate responsibility on all matters lies with the Board. Minutes of all Board Committee meetings held are made available to the Board members. The key terms of reference and composition of each Board Committee can be found in this report.

A schedule of all Board and Board Committee meetings as well as the Annual General Meeting for the next calendar year is planned well in advance. The Board meets at least four times a year. In addition to the scheduled meetings, ad-hoc board briefings, conference calls and physical meetings are held as warranted by particular circumstance or as deemed appropriate by the Board members. The Company’s Constitution permits meetings of the directors to be conducted by telephone or other methods of simultaneous communication by electronic means. The Board and Board Committees may also make decisions through circulating resolutions.

A record of the directors’ attendances at Board and Board Committee meetings during the financial year ended 31 December 2015 is disclosed as follows:-

Name of Director BoardAudit

Committee Nominating CommitteeRemuneration

Committee

No. of meetings Attendance

No. of meetings Attendance

No. of meetings Attendance

No. of meetings Attendance

Mr. Goh Leng Tse 4 4 4 4 1 1 1 1

Mr. Pung Tong Seng 4 4Not

applicableNot

applicableNot

applicableNot

applicableNot

applicableNot

applicable

Mr. Ong Tiak Beng 4 4Not

applicableNot

applicable 1 1 1 1

Mr. Anthony Teo Soon Chye 4 4 4 4 1 1 1 1

Mr. Liew Yoke Pheng, Joseph 4 4 4 4 1 1 1 1

The Company has adopted internal guidelines setting forth matters, such as annual budget and transactions relating to investment, financing and legal and corporate secretarial matters which require the Board’s approval. The Board oversees the processes for evaluating the adequacy of internal controls, risk management, financial reporting and compliance. It also approves broad policies, group strategies and financial objectives of the Company. Major acquisitions and/or disposal were also approved at Board level. The Board will review these internal guidelines on a periodic basis to ensure their relevance to the operations of the Group.

When a new director is appointed, the Company will conduct an orientation programme which will be led by the chief executive officer. This is to provide the new director with background information about the Group’s structure and core values, its strategic direction and corporate governance practices as well as industry-specific knowledge. The new director will also have the opportunity to visit the Group’s operational facilities and meet with Management to gain a better understanding of the Group’s business operations. The orientation programme gives the new director an understanding of the Group’s businesses to enable him to assimilate into his new role. It also allows the new director to get acquainted with the Management, thereby facilitating interaction and independent access to the Management. The Company will also provide newly appointed director with a formal letter setting out the duties and obligations of a director.

The directors are provided with continuous briefings and updates in areas such as changes in company law, changes in SGX listing rules, corporate governance practices and changes in financial reporting standards, so as to enable them to make well-informed decisions. Where possible and when opportunity arises, the directors will be invited to locations within the Group’s operating businesses to enable them to obtain a better perspective of the business and enhance their understanding of the Group’s operations.

The Board as a whole is updated regularly on corporate governance, industry specific knowledge and the key changes in the relevant regulatory requirements and financial reporting standards, so as to enable them to properly discharge their duties.

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The directors may also attend other appropriate courses, conferences and seminars, at the Company’s expense. They can also request for further explanations, briefings or information on any aspect of the Company’s operations or business issues from Management.

Board Composition and Guidance

Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management and 10% shareholders. No individual or small group of individuals should be allowed to dominate the Board’s decision making.

The Company endeavors to maintain a strong and independent element on the Board. As at the date of this report, two out of the five Board members are independent directors, making up more than one-third of the Board. The Board comprises the following members:-

Executive DirectorsMr. Goh Leng Tse (Chairman and Chief Executive Officer)Mr. Pung Tong Seng

Non-Executive DirectorsMr. Ong Tiak BengMr. Anthony Teo Soon Chye (Independent)Mr. Liew Yoke Pheng, Joseph (Independent)

While the Chairman and the chief executive officer is the same person, the Board is of the opinion that based on the Group’s current size and operations, it is not necessary to have independent directors make up at least half of the Board at present. To strengthen the independence of the Board, Mr. Anthony Teo Soon Chye has also been appointed as the lead independent director. He is the principal liaison in the event that any issues arise between the independent directors and the executive directors.

In line with the guidance in the Code, the Board takes into account the existence of relationships or circumstances that are relevant in its determination as to whether a director is independent, including (i) the employment of a director by the company or any of its related corporations; (ii) employment of an immediate family member by the company or any of its related corporations and whose remuneration is determined by the Remuneration Committee; (iii) the acceptance by a director of any significant compensation from the company or any of its related corporations, other than compensation for board service; (iv) a director being related to any organisation from which the company of any of its subsidiaries received significant payments or material services; (v) a director who is a 10% shareholder of the company or is an immediate family member of a 10% shareholder of the company; (vi) a director who is or has been associated with a 10% shareholder of the company, for the current or any of the past three financial years. Each independent director is required to complete a Director’s Independence Form annually to confirm his independence. The NC critically reviews the Form completed by each director to determine whether a director is independent. For FY2015, the NC carried out a review on the independence of each independent non-executive director based on the foregoing considerations, the respective Director’s Independence Form and their actual performance on the Board and Committees. Having carried out their review, the NC is satisfied that the two directors, who are non-executive, are independent.

The Board recognizes that independent directors may over time develop significant insights in the Group’s businesses and operations, and can continue to provide valuable contribution to the Board. The independence of the independent directors must be based on the substance of their professionalism, integrity, objectivity and not merely based on the number of years which they have served on the Board.

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Currently, Mr. Anthony Teo Soon Chye has served on the Board for more than nine years from the date of his first appointment. The Board has subjected his independence to a rigorous review in the light of Guideline 2.4 of the Code, taking into consideration the absence of potential conflicts of interests which may arise through any business dealings directly or indirectly with the Group, and assessment of his independence in character, judgement through his contributions to the Board discussions and deliberations. The Board is of the view that Mr. Anthony Teo Soon Chye has demonstrated strong independence of character and judgment over the years in discharging his duties and responsibilities as independent director of the Company with the utmost commitment in upholding the interest of the shareholders. He has expressed individual viewpoints, objectively scrutinized issues and sought clarification as he deemed necessary. Given this, the Board is satisfied that Mr. Anthony Teo Soon Chye has and will continue to exercise independent business judgement with the view to the best interests of the Company, notwithstanding the length of tenure of his service.

The Board is of the opinion that its current size of five Board members is both effective and efficient. The Board’s structure, size and composition is reviewed annually by the NC who is of the view that the current size of the Board is appropriate, taking into account the nature and scope of the Group’s operations, to facilitate effective decision making.

To facilitate the annual review of the directors’ mix of skills and experiences that the Board requires to function competently and efficiently, all directors will provide information of their areas of specialization and expertise to the NC. The NC, having reviewed such information, is satisfied that the Board members possess a balanced field of core competencies such as accounting and finance, business and management experience and the requisite industry knowledge to lead the Company. Details of the Board members’ qualifications and experience are presented in this Annual Report under the heading “Directors’ Profile”.

Management regularly puts up proposals or reports for the Board’s approval (where appropriate), for instance, proposals relating to specific proposed transactions or general business direction or strategy of the Group. Independent non-executive directors, when presented with these proposals for their consideration, evaluate the proposals made by Management and where appropriate, provide guidance to Management on relevant aspects of the Group’s business. In addition, independent non-executive directors meet, at least once a year, in the meetings with the external auditors and internal auditors and on such other occasions as may be required.

Chairman and Chief Executive Officer

Principle 3: There should be a clear division of responsibilities between the leadership of the Board and the executives responsible for managing the company’s business. No one individual should represent a considerable concentration of power.

The chairman and chief executive officer of the Company is Mr. Goh Leng Tse. The Board, after careful consideration, is of the opinion that the need to separate the roles of the chairman and chief executive officer is not necessary for the time being. The presence of a strong independent element and the participation of the non-executive as well as independent directors ensure that Mr. Goh Leng Tse does not have unfettered powers of decision. This has been reflected in Board and Committee meetings where the independent directors and non-executive director have participated actively in the decision-making process. A lead independent director, Mr. Anthony Teo Soon Chye, has also been appointed to be an alternative avenue for shareholders and other directors to raise their concerns where raising through the normal channel of the chairman has failed to resolve, or where such channel of communication is considered inappropriate.

Should the need arise, the independent directors, led by the lead independent director, will meet without the presence of the other directors and the lead independent director would provide feedback to the chairman after such meetings.

The chief executive officer is responsible for the proper functioning of the Board. As the chairman, he also assumes responsibility for the smooth functioning of the Board, ensures the timely flow of information between Management and the Board, sets the agenda for Board meetings, ensures sufficient allocation of time for thorough discussion of each agenda item, promotes a culture of openness and debate at the Board and cultivates high standards of corporate governance.

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The chairman’s duties and responsibilities includes:-

(a) Leading the Board to ensure it is effective in its role;

(b) Setting directions and agendas for the Company and scheduling of meetings to enable the Board to perform its duties responsibly;

(c) Ensuring the proper conduct of meetings and accurate documentation of the proceedings;

(d) Ensuring the smooth and timely flow of information between the Board and Management;

(e) Ensuring compliance with internal polices and guidelines of the Company and high standards of corporate governance;

(f) Ensuring effective communication with shareholders through investors’ relationship channels and timely announcements of Company’s development;

(g) Encouraging constructive relations between the Board and Management as well as between all directors.

In addition to the above duties, the chairman will assume duties and responsibilities as may be required from time to time.

Board Membership

Principle 4: There should be a formal and transparent process for the appointment and re-appointment of directors to the Board.

The Nominating Committee (“NC”) is established for the purposes of ensuring that there is a formal and transparent process for all Board appointments. The NC comprises the following four members, of whom the chairman is a non-executive and independent director:-

Mr. Anthony Teo Soon Chye (Chairman)Mr. Goh Leng Tse (Member)Mr. Ong Tiak Beng (Member) Mr. Liew Yoke Pheng, Joseph (Member)

The NC has adopted written terms of reference defining its membership, administration and duties. Some of the duties and responsibilities of the NC include:

(a) to make recommendations to the Board on all Board appointments, including development of a set of criteria for director appointments, which includes qualifications of director; ability to exercise sound business judgments, relevance to the Company and the industry and appropriate personal qualities;

(b) to re-nominate directors having regard to the director’s contribution and performance (e.g. attendance, participation and critical assessment of issues deliberated upon by the Board) including, if applicable, as an independent director;

(c) to determine annually whether or not a director is independent;

(d) to decide how the Board’s performance may be evaluated and propose objective performance criteria, such as return on equity (“ROE”), revenue and profit growth, as well as making comparison with industry peers to the Board; and

(e) to assess the effectiveness of the Board as a whole.

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The responsibilities of the NC are, among other things, to make recommendations to the Board on all Board appointments and re-appointments. The NC is responsible for identifying candidates and reviewing all nominations for the appointment of new directors. The search and nomination process will be through search companies, contacts and recommendations. The NC will review and assess candidates before making recommendation to the Board. In recommending new directors to the Board, the NC takes into consideration the individual’s skills, qualifications, calibre and experience required to support the Group’s business activities or strategies, the current composition and size of the Board, and strives to ensure that the Board has an appropriate balance of independent directors as well as directors with the right profile of expertise, skills, attributes and ability.

The role of NC also includes the reviewing of the re-nomination of directors who retire by rotation, taking into consideration the director’s integrity, independence, contribution and performance. The Constitution of the Company currently require one-third of the directors to retire and subject themselves to re-election by the shareholders in every Annual General Meeting (“AGM”). All directors of the Company (other than the chief executive officer) shall retire from office at least once every three years. Taking into consideration that the chief executive officer is instrumental to the Group’s operations, the Company has not adopted the guideline for the retirement of the chief executive officer once in every three years. The Constitution of the Company also provides that a newly appointed director must retire and submit himself for re-election at the next annual general meeting following his appointment. Thereafter, he is subject to be re-elected at least once every three years. A director who is due for retirement, shall abstain from voting on any resolution in respect of this re-nomination as a director. The Board recognizes the contribution of its independent directors who over time, have developed insight into the Group’s businesses and operations and are therefore able to provide invaluable contributions to the Group. As such, the Board has decided not to set a fixed term of office for its independent directors.

All directors are required to declare their board representations. When a director has multiple board representation, the NC will consider whether the director is able to adequately discharge his duties as a director of the Company, taking into consideration the director’s number of listed company board representations and other principal commitments. Acknowledging that a director’s ability to commit time to the Group’s affairs is essential, the Board has set an internal limit on the maximum number of listed company board representations which any director may hold. The Board agrees that there should be no more than 4 directorships for a director with full-time employment and 6 directorships for a director with no full-time employment. The NC has reviewed each Director’s outside directorships and all directors have complied with the maximum limit.

Currently, the Company does not have any alternate director.

The details of the Board members’ directorship including the year of initial appointment and election are disclosed as follows:

Name of Director Appointment Date of Initial Appointment

Date of Last Re-election

Directorship/ Chairmanship in other Listed Companies (Current)

Directorship/ Chairmanship in other Listed Companies (Preceding 3 years)

Goh Leng Tse Executive 25 April 1997 Not applicable Nil Nil

Pung Tong Seng Executive 7 June 2008 24 April 2014 Nil Nil

Ong Tiak Beng Non-executive/Non-independent

20 May 1997 28 April 2015 Nil Nil

Anthony Teo Soon Chye Independent 1 June 2005 28 April 2015 Nil Nil

Liew Yoke Pheng, Joseph Independent 15 March 2013 25 April 2013 Nil Nil

Apart from the foregoing, further information on each director are set out on pages 6 to 7 of this Annual Report. In addition, information on shareholding held by each director in the Company and its related corporations is found on page 42 of this Annual Report.

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Board Performance

Principle 5: There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each Director to the effectiveness of the Board.

The NC has adopted a process for assessing the performance of the Board as a whole instead of individual assessment. The performance appraisal includes qualitative and quantitative factors including board structure, conduct of meetings, corporate strategy and planning, risk management and internal control, degree of compliance with the code of corporate governance, transparency in terms of disclosures and communication with shareholders. The NC has decided unanimously, that the directors will not be evaluated individually, as each member of the Board contributes in different aspects to the success of the Group, and therefore, it would be more appropriate to assess the Board as a whole.

Although the Code proposes certain financial indicators as performance criteria, such as the Company’s share price performance, the Board is of the opinion that the performance criteria should be geared toward evaluating the Board’s performance in discharging its principal responsibilities, upholding high standards of corporate governance and strategic oversight of the Company’s business rather than the specific performance of its share price and other financial indicators. The NC will at the relevant time look into adopting guidelines for annual assessment of the contribution of each individual director to the effectiveness of the Board and also the assessment of board committees. The Board has not engaged any external facilitator in conducting the assessment of the Board’s performance. Where relevant, the NC will consider such engagement.

For FY2015, the following process was undertaken in relation to the evaluation of the performance of the Board as a whole:

(a) Evaluation process

Each of the directors has completed a Board Performance Evaluation Checklist, giving their individual assessment and evaluation of the Board’s ability to meet the relevant criteria stated in the Board Performance Evaluation Checklist.

The results of such assessment and evaluation were collated by the corporate secretarial agent and reviewed and considered by the NC.

(b) Determining directors’ independence

Each independent director is required to complete a Director’s Independence Form annually to confirm his independence. The form is drawn up based on the guideline provided in the Code. The NC has reviewed and is satisfied with the independence of the independent directors as mentioned in relation to Guideline 2 above.

(c) Commitments of directors sitting on multiple boards.

Following its review, the NC is of the view that the Board and its Board Committees operate effectively and each director has been adequately contributing to the overall effectiveness and objectives of the Board. The Board and the NC have endeavoured to ensure that directors appointed to the Board possess the experience, knowledge and expertise critical to the Group’s business.

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Access to Information

Principle 6: In order to fulfill their responsibilities, Board members should be provided with complete, adequate and timely information prior to Board meetings and on an on-going basis so as to enable them to make informed decisions to discharge their duties and responsibilities.

The Board is furnished with Board papers prior to any Board meeting. These papers are issued in sufficient time to enable the directors to obtain additional information or explanations from the Management, if necessary. The Board papers include minutes of the previous meeting, reports relating to investment proposals, budgets, financial results announcements and reports from committees, internal and external auditors.

The directors receive monthly management financial statements and annual budgets to enable them to oversee the Group’s operational and financial performance. The directors are also informed of any significant developments or events relating to the Group.

The directors may communicate directly with the Management team and the company secretary on all matters whenever they deem necessary. The directors have also been provided with the phone numbers and email-particulars of the company’s key management and the company secretary to facilitate access.

The company secretary attends all Board meetings and is responsible for recording of the proceedings. It is the company secretary’s responsibility to advise the Board on corporate governance matters and to assist the Board in complying with the relevant rules and regulations applicable to the Company. Under the direction of the chairman, the company secretary facilitates the information flow within the Board and its Committees and between Management and independent directors. The appointment and removal of the company secretary are decisions taken by the Board as a whole.

The Company currently does not have a formal procedure for directors to seek independent professional advice for the furtherance of their duties. However, directors may, on a case-to-case basis, propose to the Board for such independent professional advice, the cost of which may be borne by the Company.

The Company has a transparent policy wherein directors are welcomed to request further information or informal discussions and make recommendations on any aspects of the Company’s operations or business issues.

B. REMUNERATION MATTERS

Procedures for Developing Remuneration Policies

Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.

The Remuneration Committee (“RC”) is established for the purposes of ensuring that there is a formal and transparent process for developing policy and fixing the remuneration packages of individual directors. The RC comprises the following four members, of whom the chairman is a non-executive and independent director:-

Mr. Liew Yoke Pheng, Joseph (Chairman) Mr. Anthony Teo Soon Chye (Member)Mr. Goh Leng Tse (Member)Mr. Ong Tiak Beng (Member)

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The Board recognises that the composition of the RC is not in accordance with the Code’s guidelines that RC should comprise of entirely non-executive directors. However, the Board is of the view that the membership of Mr. Goh Leng Tse is necessary to facilitate a more effective discussion on the remuneration packages of the Group’s key management personnel. Apart from Mr. Goh Leng Tse, two of the members (including Chairman) are non-executive independent directors while the remaining member is a non-executive non-independent director. The presence of a strong independent element ensures that no individual has unfettered powers of decision.

The RC has adopted written terms of reference defining its membership, administration and duties. The duties of the RC are as follows:

(a) to review and recommend to the Board in consultation with senior management a framework of remuneration for executive directors, CEO and key management personnel;

(b) to review the remuneration packages of all managerial staff that are related to any of the executive directors or CEO; and

(c) to recommend to the Board in consultation with senior management and the chairman of the Board, the Executive’s and Employees’ Share Option Schemes or any long term incentive scheme.

The RC is established for the purpose of ensuring that there is a formal and transparent framework for determination of appropriate remuneration packages of individual directors and key management personnel. No director shall participate in decisions relating to any remuneration, compensation or any form of benefits to be granted to him. The overriding principle is to ensure that the level of remuneration should be appropriate to attract, retain and motivate the directors and key management personnel needed to run the Company successfully and ensure that they are fairly rewarded for their individual contributions to overall performance. The RC will also work within the principle that the remuneration should be structured so as to link rewards to corporate and individual performance. The RC will seek professional advice when necessary in discharging its duties and responsibilities.

The RC will review the Company’s obligations arising in the event of termination of the executive directors and key management personnel’s contracts of service, to ensure that such contracts of service contain fair and reasonable termination clauses.

Level and Mix of Remuneration

Principle 8: The level and structure of remuneration should be aligned with the long-term interest and risk policies of the company, and should be appropriate to attract, retain and motivate (a) the directors to provide good stewardship of the company, and (b) key management personnel to successfully manage the company. However, companies should avoid paying more than is necessary for this purpose.

The Company has approved the remuneration framework for executive directors on recommendation by the RC. The framework will cover directors’ basic salaries, allowances, bonuses, stock options and benefits in kind. In developing the framework, the RC has taken into consideration factors, such as the Company’s performance, the economic scenario, market practices and the individual’s contributions to the Company.

The RC has adopted a framework to remunerate the non-executive directors based on their appointments, roles in respective committees and contributions to the Board and the Company. The remuneration packages of non-executive directors comprise a basic director retainer fee and additional fees for appointment to Board Committees. While the remuneration frameworks are not subject to shareholders’ approval, the directors’ fees for non-executive directors will be subject to the approval of shareholders at AGMs.

Additional information is disclosed under principle 9 of this report.

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Disclosure on Remuneration

Principle 9: Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure for setting remuneration in the company’s annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key executives, and performance.

A breakdown showing the level and mix of each individual director’s remuneration for the financial year ended 31 December 2015 is disclosed in the table below:

Name of DirectorsRemuneration

band(S$)

Salary# (%)

VariableBonus

(%)Allowance

(%)

Director’s Fees (%)

Other Benefits

(%)Total (%)

Mr. Goh Leng Tse 1,600,000 to 1,699,999

44 54 1 0 1 100

Mr. Pung Tong Seng 600,000 to 699,999

51 48 0 0 1 100

Mr. Anthony Teo Soon Chye 70,000to

99,999

0 0 0 100 0 100

Mr. Liew Yoke Pheng, Joseph 0 0 0 100 0 100

Mr. Ong Tiak Beng 0 0 0 100 0 100

Note:(#) includes annual wage supplement and employer’s CPF.

Details of share options granted to the directors are set out in the Statement by Directors on pages 45 to 46 of this Annual Report.

The Company had entered into separate Service Agreements with each of the executive directors. The Agreements shall continue for an indefinite period unless terminated in writing by either party. Amongst other clauses in the service agreements, the executive directors shall be paid a fixed monthly salary, an annual wage supplement of an amount equal to 1 month of the last drawn salary and an incentive bonus. In addition, Mr. Goh Leng Tse is also paid a monthly allowance of RM2,000 (Malaysian Ringgit) by Innovalues Precision Sdn Bhd for services rendered. The incentive bonus shall be payable if the audited consolidated profit before tax of the Group excluding incentive bonus and extraordinary items but after non-controlling interest for the preceding year exceeds S$2 million. The Service Agreements also contain contractual provisions which allow the Company to reclaim the incentive bonus from the executive directors in exceptional circumstance of material restatement of the Company’s financial statements.

Apart from the directors, the Company has two key management personnel and the aggregate total remuneration paid to them for the year ended 31 December 2015 is approximately S$305,125. Their remuneration is made up of fixed and variable compensations. The fixed compensation consists of monthly basic salary and the variable compensation is determined based on the level of achievement of corporate and individual performance objectives. A breakdown showing the level and mix of each key management personnel’s remuneration for the financial year ended 31 December 2015 is disclosed in the table below:

Name of key management personnel

Remuneration band(S$)

Salary# (%)

VariableBonus

(%)Total (%)

Mr. Ho Beng Joo 100,000to

199,999

82 18 100

Mr. Soo King Teng 81 19 100

Note:

(#) includes employer’s CPF.

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During the year, there was no termination, retirement or post-employment benefits granted to any director or key management personnel. For the financial year ended 31 December 2015, there was no employee who is an immediate family member of a director or the chief executive officer whose remuneration exceeded S$50,000.

The Board is of the opinion that the information as disclosed above would be sufficient for shareholders to have an adequate appreciation of the Company’s compensation policies and practices and therefore does not intend to issue a separate remuneration report, the contents of which would be largely similar.

In considering the disclosure of remuneration of the directors and key executives, the Company has regarded the industry conditions in which the Company operates as well as the confidential nature of such remuneration. The Company believes that full detailed disclosure of the remuneration of each director and each key management personnel as recommended by the Code would be prejudicial to the company’s interests and hamper its ability to retain and nurture the Company’s talent pool. The Company has instead presented such information in remuneration bands.

The Company had a previous share option scheme known as the “Innovalues Group Share Option Scheme 2001” (the “2001 Scheme”) which expired on 8 February 2011. In view that the said 2001 Scheme had expired, the Company has adopted a new share option scheme known as the “Innovalues Group Share Option Scheme 2011” (the “Scheme”) on 15 August 2011. The Scheme, which forms an integral component of the Company’s compensation plan, is designed to reward and retain eligible participants whose services are vital to the Group’s well-being and success.

The Company recognizes the commitment, support and services of its employees and directors. The rationale for allowing participation by the executive director is to encourage loyalty and contribution towards future growth and the development of the Company.

Under the rules of the Scheme, executive and non-Executive directors and employees of the Group are eligible to participate.

Controlling shareholders or their associates are also eligible to participate in the Scheme subject to the approval of independent shareholders’ in the form of a separate resolution for each participant. Further, independent shareholders’ approval will also be required in the form of a separate resolution for each grant of options and the terms thereof to each participant who is a controlling shareholder or an associate of a controlling shareholder.

The total number of shares over which options may be granted pursuant to the Scheme shall not exceed 15% of the issued shares of the Company at any time and from time to time during the existence of the Scheme. Based on the total number of issued shares as at 31 December 2015, 15% of the issued shares of the Company would amount to 48,786,450 shares.

The exercise price of options granted is fixed at the price (“Market Price”) equal to the average of the last dealt price for a share on the SGX-ST for the period of 5 consecutive market days immediately prior to the relevant date of grant. The Company has the discretion to either set the exercise price for options granted at the Market Price or set the exercise price for options granted at a discount not exceeding 20% of the Market Price.

Options granted with the exercise price set at Market Price shall only be exercisable by a grantee after the first anniversary of the date of grant of the options in accordance with the terms and vesting period as enumerated in Clause 11 (“Exercise Period”) of the Scheme.

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The schedule below shows options granted by the Company and outstanding as at 31 December 2015.

Offer Date Options Granted

Exercise Price Options Outstanding Remarks

09/05/2014 4,000,000 S$0.150 2,610,000 Exercise price set at Market Price

25/07/2014 2,000,000 S$0.200 1,340,000 Exercise price set at Market Price

28/04/2015 5,060,000 S$0.710 5,030,000 Exercise price set at Market Price

With the adoption of FRS 102, the compensation expenses relating to both share options and performance shares are taken to the profit and loss account over the vesting periods of the grants. The compensation expenses are based on the respective fair values of shares options computed using Black-Scholes Valuation Model.

C. ACCOUNTABILITY AND AUDIT

Accountability

Principle 10: The Board should present a balanced and understandable assessment of the company’s performance, position and prospects.

One of the Board’s principal duties is to protect and enhance the long-term value and returns to the shareholders of the company. The accountability of the Board to the shareholders is demonstrated through the presentation of the periodic financial statements as well as timely announcements and news releases of significant corporate developments and activities so that the shareholders can have a detailed explanation and balanced assessment of the Group’s financial position and prospects. The Board has taken adequate steps to ensure compliance with legislative and regulatory requirements.

The Board ensures that the Management maintains a sound system of internal control to safeguard the shareholders’ investment and the Group’s assets. Board papers are given prior to any Board meeting to facilitate effective discussion and decision making.

The Management presents to the Audit Committee the interim and full-year results. The Audit Committee reviews the results and recommends them to the Board for approval. The Board approves the results and authorizes the release of the results to the SGX-ST and the public via SGXNET as required by the SGX-ST Listing Manual.

The Group recognizes the importance of providing the Board with accurate and relevant information on a timely basis. On a monthly basis, directors are provided with management financial statements and other information on the Group’s performance for effective monitoring and decision making. The Management also highlights key business indicators and major issues that are relevant to the Group’s performance from time to time in order for the Board to make a balanced and informed assessment of the Group’s performance, position and prospects.

Risk Management and Internal Controls

Principle 11: The Board is responsible for the governance of risk. The Board should ensure that Management maintains a sound system of risk management and internal controls to safeguard the shareholders’ investments and the company’s assets, and should determine the nature and extent of the significant risks which the Board is willing to take in achieving its strategic objectives.

The Board acknowledges that it is responsible for the governance of risks and the overall internal control framework, but recognizes that no cost effective internal control system will preclude all errors and irregularities. A system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss.

Innovalues Limited Annual Report 201534

corporate Governance report

The Board is assisted by the Risk Management Committee (“RMC”) which was formed as part of the Group’s efforts to strengthen its risk management processes and framework. The RMC constitutes representatives from different business units in the Company. The Group has done up a documentation on its risk profile which summarizes the material risks faced by the Group, the appropriate risk tolerance limits set for the respective risks and the countermeasures in place to manage or mitigate those risks. On an annual basis, the RMC will review the key risks identified, considered the relevance of these risks, identify new risks which may arise and assess the internal controls in place to mitigate such risks. RMC will report to the Board and the Board members will then evaluate and provide their feedbacks to the RMC. For FY2015, the Board has received assurances from the chief executive officer and the group financial controller that the Group’s risk management and internal control systems in place are adequate and effective in addressing the material risks of the Group in its current business environment including financial, operational, compliance and IT risks and also that the financial records have been properly maintained and the financial statements give a true and fair view of the Group’s business operations and finances.

Based on the internal control policies and procedures established and maintained by the Group, work performed by the external and internal auditors, as well as reviews performed by the RMC, the Board, with the concurrence of the AC, is of the view that the internal controls of the Group, addressing the financial, operational, compliance and information technology risks are adequate as at 31 December 2015.

Audit Committee

Principle 12: The Board should establish an Audit Committee (“AC”) with written terms of reference which clearly set out its authority and duties.

The AC comprises the following three members, majority of whom, including the chairman, are independent directors:-

Mr. Anthony Teo Soon Chye (Chairman)Mr. Goh Leng Tse (Member)Mr. Liew Yoke Pheng, Joseph (Member)

The profile of each member of the AC is set out on pages 6 to 7 of this Annual Report. Mr. Anthony Teo Soon Chye, Chairman of the AC, is a graduate from Harvard Business School and has many years of experience in banking and consulting. Other members of the AC possess experience in finance, accounting and business management. The Board is of the view that the members of the AC are appropriately qualified, having accounting or related financial management expertise or experience as the Board interprets such qualification, to discharge their responsibilities.

The Board recognises that the composition of the AC is not in accordance with the Code’s guidelines that the AC should be made up of entirely non-executive directors. However, for the same reasons stated under Principle 3 of this report, the Board is of the view that independence is not compromised as majority of the members of the AC are independent.

As a sub-committee of the Board of directors, AC assists the Board in discharging their responsibility to safeguard the Group’s assets, maintain adequate accounting records and develop and maintain effective systems of internal control, with the overall objective of ensuring that our management creates and maintains an effective control environment in the Group. The AC also reviews and supervises the internal audit functions of the Group.

AC provides a channel of communication between the Board, Management and the external auditors on matters relating to audit.

Innovalues Limited Annual Report 2015 35

corporate Governance report

AC has adopted written terms of reference defining its membership, administration and duties. Duties and responsibilities of the AC include:

(a) discuss with the external auditors, prior to the commencement of audit, the audit plan which states the nature and scope of the audit;

(b) review with external auditors, their evaluation of the system of internal controls, the Management Letter and Management’s response thereon;

(c) discuss problems and concerns, if any, arising from the interim and final audits and any matters that the external auditors may wish to discuss with the AC in the absence of the Management;

(d) review of the independence and objectivity of the external auditors and nomination of their re-appointment as auditors of the company. The review of the adequacy of the company’s internal controls, and the effectiveness of the company’s internal audit function, the internal audit program including the scope and results of the internal audit;

(e) review of interested person transactions (as defined in the Chapter 9 of the Listing Manual of SGX-ST);

(f) review of interim and full year financial results, including review of the significant financial reporting issues and judgments so as to ensure the integrity of the financial statements of the company and any formal announcements relating to the company’s financial performance; and

(g) any other functions that are requested by the Board, as may be required by statute or the Listing Manual. In discharging the above duties, the AC confirms that it has full access to and co-operation from Management and is given full discretion to invite any director or executive director to attend its meetings. In addition, the AC has also been given reasonable resources to enable it to perform its functions properly.

The AC has conducted an annual review of the volume of non-audit services provided by the external auditors to satisfy it that the nature and extent of such services will not prejudice the independence and objectivity of the auditors before recommending their re-nomination to the Board. A breakdown of the fees in total for audit and non-audit services is set out in the Notes to the Financial Statements on page 76 of this Annual Report. In addition, the AC has reviewed the adequacy of the resources, experience of the external auditors and of the audit engagement partner assigned to the audit. The AC is satisfied that the external auditors are able to meet their audit obligations and has recommended the re-appointment of the external auditors at the forthcoming annual general meeting of the Company.

The AC meets with the internal auditors and the external auditors, at least once a year, without the presence of Management, to have free and unfettered access to unfiltered information and feedback.

In the event that any director has a personal material interest in any contract or proposed contract or arrangement, he will abstain from reviewing that particular transaction or voting on the particular resolution.

Apart from the duties listed above, the AC shall commission and review the findings of internal investigations into matters where there is any suspected fraud or irregularity, or failure of internal controls or infringement of any Singapore law, rule or regulation which has or is likely to have a material impact on our Company’s operating results and/or financial position.

In performing its functions, the AC has explicit authority to investigate any matter within its terms of reference, having full access to and co-operation by management and full discretion to invite any director or executive officer to attend meetings, and reasonable resources to enable it to discharge its function properly.

Innovalues Limited Annual Report 201536

corporate Governance report

The Company has put in place a whistle blowing policy and has implemented relevant procedures for the purposes of handling complaints, concerns or issues relating to activities or affairs of the Group or conduct of any officer, Management or employee of the Group. The policy serves to encourage and provide a channel for any employee, officers and other stakeholders of the Group to report in good faith and without fear of reprisals to the chief executive officer or the chairman of the AC. All complaints or concerns raised will be dealt with in confidentiality, including anonymous complaints. Any report of wrong-doing will be thoroughly investigated. Details of the whistle-blowing policy and arrangements have been made available to all employees. During FY2015, there were no complaints, concerns or issues received.

In FY2015, the AC has reviewed with the Management and the external auditors, the results of the Group before submitting them to the Board for its approval and announcement of the financial results. The AC also reviewed the Group’s financial condition, internal and external audit reports.

The AC is kept abreast by Management, the external and internal auditors on changes and updates to accounting standards, and other issues which could have a direct impact on the financial statements of the Group, if any.

None of the members of the Audit Committee is a former partner or director of the Company’s external or internal auditors.

Internal Audit

Principle 13: The Company should establish an internal audit function that is independent of the activities it audits.

The AC is aware that internal audit function is essential to assist in obtaining the assurance it requires regarding the effectiveness of the system of internal control. Accordingly, the Company has outsourced its internal audit function to an internationally reputable public accounting firm to cover the various geographical locations in which the Group is presently operating.

The internal auditors are able to meet the standards set by nationally or internationally recognized bodies, including the Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors.

The internal auditors report directly to the chairman of the AC although they will also report administratively to the chief executive officer. The main function of the internal auditors is to review the effectiveness and quality of the systems of control of the Company and this review is performed with impartiality, proficiency and due professional care. The internal audit function is independent of the activities or operations of the Company.

Prior to the commencement of the internal audit, the AC will discuss with the internal auditors as to the scope of the internal audit, including deliverables expected by the AC. This is to ensure that major areas of weakness are identified and addressed.

The AC reviews the adequacy of the internal audit function to ensure that the internal audits are conducted effectively and that Management provides the necessary cooperation to enable the internal auditors to perform its function. The AC also reviews the internal audit reports as well as the remedial measures recommended by the internal auditors and adopted by Management to address any issues or inadequacies identified. Since the implementation of the internal audit, the AC is satisfied that the internal audit on systems and controls are adequate and the AC will continue to assess the adequacy of internal audit function annually.

Innovalues Limited Annual Report 2015 37

corporate Governance report

D. SHAREHOLDER RIGHTS AND RESPONSIBILITIES

Shareholder Rights

Principle 14: Companies should treat all shareholders fairly and equitably, and should recognize, protect and facilitate the exercise of shareholders’ rights, and continually review and update such governance arrangements

The Group’s corporate governance culture and awareness promotes fair and equitable treatment of all shareholders. All shareholders enjoy specific rights under the Singapore Companies Act, Chapter 50, and Constitution of the Company. To facilitate shareholders’ ownership rights, the Company ensures that all material information is disclosed on a comprehensive and timely basis via SGXNET and its corporate website http://www.innovalues.com, especially information pertaining to the Group’s business development and financial performance which could have a material impact on the share price of the Company, so as to enable shareholders to make informed decisions in respect of their investments in the Company.

Shareholders are informed of general meetings through notices published in the newspaper and the Company’s announcements and press releases via SGXNET as well as through reports/circulars sent to all shareholders. They are given the opportunity to participate effectively and vote at general meetings of the company, where relevant rules and procedures governing the meetings are clearly communicated.

The Constitution of the Company allows each shareholder to appoint up to two proxies to attend general meetings. On 3 January 2016, the legislation was amended, among other things to allow certain members, defined as “relevant intermediary” to attend and participate in general meetings without being constrained by the two-proxy requirement. Relevant intermediary includes corporations holding licenses in providing nominee and custodial services and CPF Board which purchases shares on behalf of the CPF investors.

Communication with Shareholders

Principle 15: Companies should actively engage their shareholders and put in place an investor relations policy to promote regular, effective and fair communication with shareholders.

The Company endeavours to communicate regularly, effectively and fairly with its shareholders. Timely, as well as, detailed disclosure is made to the public in compliance with SGX-ST guidelines. The Company does not practice selective disclosure. All price sensitive information is announced on the SGXNET on a timely basis. Shareholders are encouraged to attend and raise questions to the directors at the Company’s general meetings. At these meetings, shareholders are given the opportunity to express their views and raise issues either formally or informally. These meetings provide opportunities for the Board to engage with shareholders and solicit their feedback.

The Company also communicates through its corporate website http://www.innovalues.com to provide shareholders with corporate announcements, press releases, annual reports and profile of the Group. In addition, the Company also engaged the services of a public relations firm Financial PR Pte Ltd to assist in communication with its shareholders. Outside of the financial announcement periods, when necessary and appropriate, the Management will meet analysts and fund managers who like to seek a better understanding of the Group’s operations.

The Company does not have a fixed dividend policy at present. The frequency and amount of dividends declared each year will take into consideration the Group’s profit growth, cash position, projected capital requirements for business growth and other factors as the Board may deem appropriate. The Board of directors has proposed a final exempt (one-tier) dividend of 1.2 cents per ordinary share and a special exempt (one-tier) dividend of 1.4 cents per ordinary share for the financial year ended 31 December 2015.

Innovalues Limited Annual Report 201538

corporate Governance report

Conduct of shareholder meetings

Principle 16: Companies should encourage greater shareholder participation at general meetings of shareholders, and allow shareholders the opportunity to communicate their views on various matters affecting the Company.

All shareholders of the company receive the annual report of the Company and notice of AGM within the mandatory period. The notice is also published in the local newspaper and made available on the SGXNET and the Company’s website. Participation of shareholders is encouraged at the company’s general meetings.

Each item of special business included in the notice of meeting will be accompanied by the relevant explanatory notes. This is to enable the shareholders to understand the nature and effect of the proposed resolutions.

To facilitate voting by shareholders, the Company’s Constitution allows shareholders to appoint up to two proxies to attend and vote at the same general meeting. The Board of directors (including the chairman of the respective Board committees), Management, as well as the external auditors will attend the Company’s annual general meeting to address any questions that shareholders may have.

The minutes of general meetings will be made available to shareholders upon written request.

All resolutions at general meetings of the Company will be put to vote by poll so as to better reflect shareholders’ shareholding interest and ensure greater transparency. The results of the poll voting on each resolution tabled will be announced after the general meetings via SGXNET and the Company’s website.

E. DEALINGS IN SECURITIES

The Company has issued a policy on share dealings by its directors and key officers, setting out the implications of insider trading and providing guidance to employees on dealing in the Company’s shares. The key guidelines are:

• Directors and key officers are prohibited from trading in the Company’s securities during the period commencing two weeks before the announcement of the Company’s financial results for each of the first three quarters or one month before the announcement of the Company’s full year financial results, and the prohibition ends on the day of the announcement of such results.

• Directors and key officers should not deal in the Company’s securities on short-term consideration.

• Directors and key officers are required to observe the insider trading laws under the Securities Industries Act at all times even when engaging in dealings of securities within the non-prohibitory periods. To enable the Company to monitor such share transactions, directors and key officers are required to report to the Company whenever they deal in the Company’s securities.

The Company has complied with Rule 1207(19) of the SGX-ST Listing Manual in relation to dealings in the Company’s securities by the Directors and officers of the Group.

Innovalues Limited Annual Report 2015 39

corporate Governance report

F. INTERESTED PERSON TRANSACTIONS

The Company has adopted internal guidelines in respect of any transactions with interested persons and has set out the procedures for review and approval of the Company’s interested person transactions. The main objective is to ensure that all interested person transactions are conducted on arm’s length basis and on normal commercial terms.

The Board had reviewed all interested person transactions for the financial year ended 31 December 2015 and was satisfied that there is no such transaction conducted during the financial year.

G. MATERIAL CONTRACTS

Pursuant to Rule 1207(8) of the Listing Manual, the Company confirms that there was no material contract entered into between the Company and its subsidiaries which involved the interests of any director, CEO or controlling shareholder, either still subsisting at the end of the financial year or if not then subsisting, which was entered into since the end of the previous financial year.

H. AUDITORS

The Company has complied with Rules 712, 715 and 716 of the Listing Manual issued by Singapore Exchange Securities Trading Limited in relation to its auditors.

I. ADDITIONAL DISCLOSURE

The Company has undertaken to disclose the total remuneration paid to the controlling shareholder and his associates in its Prospectus dated 21st February 2001. Total remuneration paid to this controlling shareholder for the year under review amounted to S$1,694,440.

Innovalues Limited Annual Report 201540

risk Factors

1. Natural disasters in certain regions could adversely affect our operations

Our operations are subject to natural disasters and other events beyond our control. These include floods, earthquakes and tsunamis. Nature disasters could cause severe destruction or interruption to our operations and hence, might adversely affect our operating conditions and financial results.

To mitigate the impact of natural disasters, we diversified our production facilities to multiple countries. In the event of natural disasters, we could reallocate orders from the facility affected by the disaster to other unaffected plants in other regions or countries. This will enable us to minimise disruptions to our supply chain in order to meet customer demand.

2. Dependence on major customers

We currently derive a significant portion of our revenue from our major automotive customers. However, we expect our revenue from other automotive customers to continue growing, thereby reducing our reliance on our major automotive customers. Although we are continuing the diversification of our customer base, any significant reduction in orders from any of our major customers will still have an material adverse impact on our earnings.

3. Our operations may be affected should we fail to comply with the conditions stipulated in permits and/or licenses

We are required to obtain the relevant permits and licenses from the Malaysian, Thai and Chinese government authorities to operate our respective subsidiaries in these countries. All these permits and licenses stipulate certain conditions which we are required to comply. As such, we will have to continuously monitor and ensure compliance with all these conditions. The non-renewal or revocation of the relevant permits due to failure to comply with the conditions will have a material adverse impact on our operations.

4. We are exposed to foreign currency exchange risk

Our foreign currency exchange risks arise mainly because sales are transacted predominantly in US Dollars while our overhead expenses and some level of purchases are transacted in the local currencies of the respective countries of operations. In addition, the Group also has borrowings denominated in US Dollars and Thai Baht. Any fluctuation in the exchange rate of the US Dollars against the Singapore Dollars, Malaysian Ringgit, Thai Baht and PRC Renminbi may have an adverse effect on the Group’s financial performance.

5. Any significant increase in raw material prices may have an adverse impact on our earnings

Steel products such as free cutting steel and stainless steel are used in the manufacturing of our products. We are, therefore vulnerable to the risk of rising steel prices that are impacted by the global supply and demand conditions. Any significant increase in the price of steel products that cannot be absorbed by our customers on a timely basis will have a material adverse effect on our financial results.

Innovalues Limited Annual Report 2015 41

risk Factors

6. We are subject to credit risks of our customers

From time to time, some of our customers may default on their payments. Although we regularly review our credit exposure to our customers, including but not limited to, through the application of credit approvals, credit limits and monitoring procedures, credit risks will nevertheless arise from unanticipated events or circumstances that impact our customers’ ability to make timely payment. These unanticipated events or circumstance include economic downturn or significant fluctuations in foreign currency exchange rates. As a result of our customers defaulting on their payments, we would have to make allowances for doubtful debts or incur write-offs, which may have an adverse impact on our profitability.

7. Our business may be affected by global economic downturn or regional political, social and economic conditions

Our manufacturing facilities are located in Malaysia, Thailand and China. Any unfavourable changes in the political, social, legal, regulatory and economic conditions in these countries or globally such as changes in customs and import tariffs, restrictions on currency conversions and remittances, devaluation of currencies, etc. may disrupt our operations or affect our financial performance.

8. We may be exposed to the risk of inventory obsolescence

As part of the supply chain of our end-customers, we often have to maintain certain level of inventory to satisfy the demand of these end-customers and reduce our response time in relation to customer orders. This will expose us to the risk of unanticipated decreases in demand for certain finished goods we manufactured for end-customers arising from, inter alia, products upgrades, changes in the specifications of products and end of a product lifecycle. In the event that we are unable to anticipate changes in the demand for our products accurately, we may be exposed to the risk of inventory obsolescence and this will adversely affect our operations and financial position.

9. Our operations will be affected if our banking facilities are withdrawn

Our Group makes use of banking facilities such as term loan, revolving credit and bills payable facilities to finance our operations. If substantial portion of our banking facilities are withdrawn, the working capital required to finance our operations will be affected. These banking facilities are subject to certain financial covenants.

Innovalues Limited Annual Report 201542

statement by Directors

The directors of the company are pleased to present the accompanying financial statements of the company and of the group for the reporting year ended 31 December 2015.

1. Opinion of the directors

In the opinion of the directors,

(a) the accompanying financial statements and the consolidated financial statements are drawn up so as to give a true and fair view of the financial position and performance of the company and, of the financial position and performance of the group for the reporting year covered by the financial statements or consolidated financial statements; and

(b) at the date of the statement there are reasonable grounds to believe that the company will be able to pay its debts as and when they fall due.

The board of directors approved and authorised these financial statements for issue.

2. Directors in office at date of report

The directors of the company in office at the date of this statement are:

Goh Leng Tse Pung Tong Seng Ong Tiak Beng Anthony Teo Soon Chye Liew Yoke Pheng, Joseph

3. Directors’ interests in shares and debentures

The directors of the company holding office at the end of the reporting year were not interested in shares in or options of the company or other related body corporate as recorded in the register of directors’ shareholdings kept by the company under section 164 of the Companies Act, Chapter 50 (“the Act”) except as follows:

Direct interest Deemed interest

Name of directors and companies in which interests are held

At beginningof the

reporting year

At endof the

reporting year

At21 January

2016

At beginningof the

reporting year

At endof the

reporting year

At21 January

2016

Innovalues Limited Number of shares of no par value (‘000)

Goh Leng Tse 65,700 66,360 66,360 2,886 2,886 2,886

Pung Tong Seng 2,154 2,525 2,525 1,797 1,797 1,797

Ong Tiak Beng 29,564 29,160 29,160 2,050 2,050 2,050

Anthony Teo Soon Chye 437 533 533 – – –

Liew Yoke Pheng, Joseph – 83 83 – – –

By virtue of section 7 of the Companies Act, Chapter 50, Goh Leng Tse is deemed to have an interest in the company and in all the related body corporate of the company.

Innovalues Limited Annual Report 2015 43

statement by Directors

4. Arrangements to enable directors to acquire benefits by means of the acquisition of shares and debentures

Neither at the end of the reporting year nor at any time during the reporting year did there subsist arrangements to which the company is a party, being arrangements whose objects are, or one of whose objects is, to enable 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 except for the options rights and other rights mentioned below.

5. Options

The company has two employee share option schemes. They are the “Innovalues Group Share Option Scheme 2001” and “Innovalues Group Share Option Scheme 2011” (known collectively as the “Scheme”). With the expiry of the Innovalues Group Share Option Scheme 2001 on 8 February 2011, the company has adopted the Innovalues Group Share Option Scheme 2011 on 15 August 2011. The Scheme, which forms an integral component of its compensation plan, is designed to reward and retain eligible participants whose services are vital to its well being and success. It provides eligible participants who have contributed to the success and development of the company with an opportunity to participate and also increase the dedication and loyalty of these participants and motivate them to perform better.

Under the rules of the Scheme, all directors and employees of the company are eligible to participate in the Scheme. Controlling shareholders or their associates are also eligible to participate in the Scheme subject to the approval of independent shareholders in the form of separate resolutions for each participant. Further, independent shareholders’ approval is also required in the form of separate resolutions for each grant of options and the terms thereof, to each participant who is a controlling shareholder or his associate.

The total number of shares over which options may be granted shall not exceed 15% of the issued share capital of the company at any time.

The Remuneration Committee is charged with the administration of the Scheme in accordance with the rules of the Scheme. The Remuneration Committee consists of 4 directors appointed by the board of directors of the company. They are Liew Yoke Pheng, Joseph, Goh Leng Tse, Anthony Teo Soon Chye and Ong Tiak Beng. The number of options to be offered to a participant shall be determined at the discretion of the Remuneration Committee who shall take into account criteria such as the rank, performance, seniority, potential for future development and length of service of the participant provided that: (a) the total number of shares which may be offered to any participant during the entire operation of the Scheme (including adjustments under the rules) shall not exceed 25% of the shares in respect of which the company may grant options; (b) the aggregate number of shares which may be offered to participants who are controlling shareholders and their associates during the entire operation of the Scheme (including adjustments under the rules) shall not exceed 25% of the shares in respect of which the company may grant options; and (c) the number of shares which may be offered to each participant who is a controlling shareholder or his associate during the entire operation of the Scheme shall not exceed 10% of the shares in respect of which the company may grant options.

The exercise price for each share in respect of which an option is exercisable shall be determined by the Remuneration Committee at its absolute discretion and fixed by the Committee at: (a) where the options are offered to a grantee prior to the date of the listing and quotation of the shares, a price equal to the price per share offered to the public at the initial public offering of the shares, that is $0.35; (b) where the options are offered after the listing date (i) a price (the “Market Price”) equal to the average of the last dealt prices for a share on the SGX-ST for the period of five (5) consecutive Market Days immediately prior to the relevant offer date; or (ii) a price which is set at a discount to the Market Price, provided that the maximum discount shall not exceed 20 per cent of the Market Price.

Innovalues Limited Annual Report 201544

statement by Directors

5. Options (cont’d)

Options must be exercised before the expiry of 6 and 5 years for the Innovalues Group Share Option Scheme 2001 and the Innovalues Group Share Option Scheme 2011 respectively, from the date of the offer or such earlier date as may be determined by the Remuneration Committee. There are special provisions dealing with the lapsing or permitting the earlier exercise of options under certain circumstances including termination, bankruptcy, and death of the participant.

During the reporting year, no option to take up unissued shares of the company or any subsidiary was granted.

The outstanding number of options at the end of the reporting year was:

Date of grant

Balanceas at

01.01.2015Granted/

(exercised)Options lapsed

Balanceas at

31.12.2015Exercise

price Exercise period

03.08.2010 190,000 (190,000) – – $0.166 04.08.2011 to 03.08.2016

15.08.2011 75,000 (75,000) – – $0.100 16.08.2012 to 15.08.2016

09.05.2014 3,950,000 (1,239,000) (101,000) 2,610,000 $0.150 10.05.2015 to 09.05.2019

25.07.2014 2,000,000 (660,000) – 1,340,000 $0.200 26.07.2015 to 25.07.2019

28.04.2015 – 5,060,000 (30,000) 5,030,000 $0.710 29.04.2016 to 28.04.2020

6,215,000 2,896,000 (131,000) 8,980,000

The table below summarises the number of options that were outstanding, their weighted average exercise price as at the end of the reporting year as well as the movements during the reporting year.

Totalshare options

Weighted average exercise price

2015 2014 2015 2014

No:’000 No:’000

Balance at 1 January 6,215 2,635 $0.166 $0.130

Granted 5,060 6,000 $0.710 $0.167

Exercised (2,164) (2,245) $0.165 $0.129

Lapsed (131) (175) $0.278 $0.133

Balance at 31 December 8,980 6,215 $0.471 $0.166

During the year,131,000 (2014: 175,000) share options granted to employees that had not yet vested were lapsed. The grant date fair value of the options as originally priced and not yet charged to the income statement has been taken immediately to the income statement.

Innovalues Limited Annual Report 2015 45

statement by Directors

5. Options (cont’d)

The following table summarises information about directors’ share options outstanding at 31 December 2015:

Grants in

Grants from start of

Scheme to end of

Exercised/lapsed from

start of Scheme to end of Balance at

Participants 2015 2015 2015 31.12.2015No:’000 No:’000 No:’000 No:’000

Directors and controllingshareholder of the company

Goh Leng Tse – 3,000(a) (3,000) –

– 360(e) (360) –

– 1,500(g) (1,500) –

– 2,000 (660) 1,340(h)

1,100 1,100 – 1,100(j)

Sub-total 1,100 7,960 (5,520) 2,440

Directors of the company

Ong Tiak Beng – 300(b) (300) –

– 720(e) (720) –

– 200(c) (200) –

– 100(d) (100) –

– 150(g) (150) –

– 250 (83) 167(i)

250 250 – 250(j)

Sub-total 250 1,970 (1,553) 417

Innovalues Limited Annual Report 201546

statement by Directors

5. Options (cont’d)

Grants in

Grants from start of

Scheme to end of

Exercised/lapsed from

start of Scheme to end of Balance at

Participants 2015 2015 2015 31.12.2015No:’000 No:’000 No:’000 No:’000

Directors of the company

Anthony Teo Soon Chye – 300(b) (300) –

– 200(c) (200) –

– 100(d) (100) –

– 150(g) (150) –

– 250 (83) 167(i)

250 250 – 250(j)

Sub-total 250 1,250 (833) 417

Pung Tong Seng – 376(f) (376) –

– 1,000(b) (1,000) –

– 200(c) (200) –

– 300(d) (300) –

– 750(g) (750) –

– 1,000 (333) 667(i)

1,000 1,000 – 1,000(j)

Sub-total 1,000 4,626 (2,959) 1,667

Liew Yoke Pheng, Joseph – 250 (83) 167(i)

250 250 – 250(j)

Sub-total 250 500 (83) 417

Total 2,850 16,306 (10,948) 5,358

(a) Exercise price of $0.450. Exercise period from 30 October 2008 to 29 October 2013

(b) Exercise price of $0.720. Exercise period from 12 June 2008 to 11 June 2013

(c) Exercise price of $0.080. Exercise period from 2 June 2010 to 1 June 2015

(d) Exercise price of $0.166. Exercise period from 4 August 2011 to 3 August 2016

(e) Exercise price of $0.217. Exercise period from 6 June 2003 to 4 June 2008

(f) Exercise price of $0.435. Exercise period from 22 October 2004 to 20 October 2009

(g) Exercise price of $0.100. Exercise period from 16 August 2012 to 15 August 2016

(h) Exercise price of $0.200. Exercise period from 26 July 2015 to 25 July 2019

(i) Exercise price of $0.150. Exercise period from 10 May 2015 to 9 May 2019

(j) Exercise price of $0.710. Exercise period from 29 April 2016 to 28 April 2020

Save as disclosed above, no participant has received 5% or more of the total number of the options available under the Scheme.

Innovalues Limited Annual Report 2015 47

statement by Directors

5. Options (cont’d)

The following table summarises information about share options outstanding at 31 December 2015:

Number outstanding

Number exercisable Remaining life

(years)Exercise price No:’000 No:’000

$0.150 2,610 18 3.36

$0.200 1,340 – 3.57

$0.710 5,030 – 4.33

8,980 18

During the reporting year, there were no shares of the company or any subsidiary issued by virtue of the exercise of an option to take up unissued shares except for those disclosed above.

At the end of the reporting year, there were no unissued shares of the company or any subsidiary under option except for those disclosed above.

6. Independent auditor

RSM Chio Lim LLP has expressed willingness to accept re-appointment.

7. Report of audit committee

The members of the audit committee at the date of this report are as follows:

Anthony Teo Soon Chye – Chairman of Audit Committee and Independent DirectorGoh Leng Tse – Executive DirectorLiew Yoke Pheng, Joseph – Independent Director

The audit committee performs the functions specified by section 201B(5) of the Companies Act. Among others functions, it performed the following:

• Reviewed with the independent external auditor their audit plan.

• Reviewed with the independent external auditor their evaluation of the company’s internal accounting controls relevant to their statutory audit, and their report on the financial statements and the assistance given by management to them.

• Reviewed with the internal auditor the scope and results of the internal audit procedures (including those relating to financial, operational and compliance controls and risk management) and the assistance given by the management to the internal auditor.

• Reviewed the financial statements of the group and the company prior to their submission to the directors of the company for adoption.

• Reviewed the interested person transactions (as defined in Chapter 9 of the Singapore Exchange Securities Trading Limited’s Listing Manual).

Innovalues Limited Annual Report 201548

statement by Directors

7. Report of audit committee (cont’d)

Other functions performed by the audit committee are described in the report on corporate governance included in the annual report of the company. It also includes an explanation of how independent auditor objectivity and independence is safeguarded where the independent auditor provide non-audit services.

The audit committee has recommended to the board of directors that the independent auditor, RSM Chio Lim LLP, be nominated for re-appointment as independent auditor at the next annual general meeting of the company.

8. Directors’ opinion on the adequacy of internal controls

Based on the internal controls established and maintained by the company, work performed by the internal and external auditors, and reviews performed by management, other committees of the board and the board, the audit committee and the board are of the opinion that company’s internal controls, addressing financial, operational, compliance and information technology risks, are adequate as at the end of the reporting year 31 December 2015.

9. Subsequent developments

There are no significant developments subsequent to the release of the group’s and the company’s preliminary financial statements, as announced on 18 February 2016, which would materially affect the group’s and the company’s operating and financial performance as of the date of this report.

On behalf of the directors

.................................................. ..................................................Goh Leng Tse Pung Tong SengDirector Director

8 March 2016

Innovalues Limited Annual Report 2015 49

inDepenDent auDitor’s reportto the Members of INNOVALUES LIMITED

(Registration No: 199702822E)

Report on the financial statements

We have audited the accompanying financial statements of Innovalues Limited (the “company”) and its subsidiaries (the “group”), which comprise the consolidated statement of financial position of the group and the statement of financial position of the company as at 31 December 2015, and the consolidated statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows of the group, and statement of changes in equity of the company for the reporting year then ended, and significant accounting policies and other explanatory information.

Management’s responsibility for the financial statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair financial statements and to maintain accountability of assets.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, 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.

Innovalues Limited Annual Report 201550

inDepenDent auDitor’s reportto the Members of INNOVALUES LIMITED(Registration No: 199702822E)

Opinion

In our opinion, the consolidated financial statements of the group and the statement of financial position and statement of changes in equity of the company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the financial position of the group and of the company as at 31 December 2015 and of the financial performance, changes in equity and cash flows of the group and the changes in equity of the company for the reporting year ended on that date.

Report on other legal and regulatory requirements

In our opinion, the accounting and other records required by the Act to be kept by the company have been properly kept in accordance with the provisions of the Act.

RSM Chio Lim LLPPublic Accountants andChartered AccountantsSingapore

8 March 2016

Partner in charge of audit: See Ling Ling, HelenEffective from year ended 31 December 2012

Innovalues Limited Annual Report 2015 51

The accompanying notes form an integral part of these financial statements.

consoliDateD statement oF proFit or loss anD other comprehensive income

Year Ended 31 December 2015

GroupNotes 2015 2014

$’000 $’000

Revenue 5 113,691 108,468

Cost of sales (78,773) (79,627)

Gross profit 34,918 28,841

Interest income 93 27

Other gains 6 4,831 1,270

Marketing and distribution costs (2,048) (2,158)

Administrative expenses 7 (11,226) (10,009)

Finance costs 8 (255) (376)

Other losses 6 (84) (219)

Profit before tax from continuing operations 26,229 17,376

Income tax expense 10 (3,228) (1,565)

Profit from continuing operations, net of tax 23,001 15,811

Other comprehensive (loss)/income:Items that may be reclassified subsequently to profit or loss:Exchange differences on translating foreign operations, net of tax (3,583) 1,435

Other comprehensive (loss)/income for the year, net of tax (3,583) 1,435

Total comprehensive income 19,418 17,246

Earnings per shareEarnings per share currency unit Cents Cents

Basic 12 7.09 4.89

Diluted 12 7.02 4.88

Innovalues Limited Annual Report 201552

statements oF Financial positionAs at 31 December 2015

The accompanying notes form an integral part of these financial statements.

Group CompanyNotes 2015 2014 2015 2014

$’000 $’000 $’000 $’000

ASSETSNon-current assets Property, plant and equipment 13 34,940 38,000 1,167 715

Investment in subsidiaries 14 – – 31,285 31,285

Other financial assets 15 381 381 381 381

Total non-current assets 35,321 38,381 32,833 32,381

Current assetsInventories 16 10,084 8,384 69 –

Trade and other receivables 17 25,599 23,931 25,635 20,692

Other assets 18 1,836 1,798 185 142

Cash and cash equivalents 19 30,643 22,839 20,721 11,421

Total current assets 68,162 56,952 46,610 32,255

Total assets 103,483 95,333 79,443 64,636

EQUITY AND LIABILITIESEquityShare capital 20 12,248 11,891 12,248 11,891

Retained earnings 72,871 58,314 10,017 7,143

Other reserves 22 (2,689) 458 823 468

Total equity, attributable to owners of the parent 82,430 70,663 23,088 19,502

Non-current liabilitiesDeferred tax liabilities 10 530 – – –

Other financial liabilities, non-current 23 24 549 – 332

Finance leases, non-current 24 300 1,240 261 249

Total non-current liabilities 854 1,789 261 581

Current liabilitiesIncome tax payable 1,393 537 1,183 15

Trade and other payables 25 15,319 15,206 52,537 38,929

Other financial liabilities, current 23 2,470 5,960 2,282 5,543

Finance leases, current 24 1,017 1,178 92 66

Total current liabilities 20,199 22,881 56,094 44,553

Total liabilities 21,053 24,670 56,355 45,134

Total equity and liabilities 103,483 95,333 79,443 64,636

Innovalues Limited Annual Report 2015 53

statements oF chanGes in equityYear Ended 31 December 2015

The accompanying notes form an integral part of these financial statements.

ShareTotal Share Capital Option Translation Statutory Retained

Group Equity Capital Reserve Reserve Reserve Reserve Earnings$’000 $’000 $’000 $’000 $’000 $’000 $’000

Current year:Opening balance at 1 January 2015 70,663 11,891 1,212 468 (3,075) 1,853 58,314Movements in equity:Share-based payments (Note 21C) 439 – – 439 – – –Expiry of share options transferred to

retained earnings (Note 21C) – – – (84) – – 84Total comprehensive income for

the year 19,418 – – – (3,583) – 23,001Dividends paid (Note 29) (8,447) – – – – – (8,447)Statutory reserve transferred from

retained earnings – – – – – 81 (81)Equity share options exercised

(Note 20) 357 357 – – – – –Closing balance at 31 December

2015 82,430 12,248 1,212 823 (6,658) 1,934 72,871

Previous year:Opening balance at 1 January 2014 56,907 11,603 1,212 1,865 (4,510) 1,495 45,242

Movements in equity:Share-based payments (Note 21C) 86 – – 86 – – –

Expiry of share options transferred to retained earnings (Note 21C) – – – (1,483) – – 1,483

Total comprehensive income for the year 17,246 – – – 1,435 – 15,811

Dividends paid (Note 29) (3,864) – – – – – (3,864)

Statutory reserve transferred from retained earnings – – – – – 358 (358)

Equity share options exercised (Note 20) 288 288 – – – – –

Closing balance at 31 December 2014 70,663 11,891 1,212 468 (3,075) 1,853 58,314

Innovalues Limited Annual Report 201554

statements oF chanGes in equityYear Ended 31 December 2015

The accompanying notes form an integral part of these financial statements.

ShareTotal Share Option Retained

Company Equity Capital Reserve Earnings$’000 $’000 $’000 $’000

Current year:Opening balance at 1 January 2015 19,502 11,891 468 7,143Movements in equity:Share-based payments (Note 21C) 439 – 439 –Expiry of share options transferred to retained earnings

(Note 21C)– – (84) 84

Total comprehensive income for the year 11,237 – – 11,237Dividends paid (Note 29) (8,447) – – (8,447)Equity share options exercised (Note 20) 357 357 – –Closing balance at 31 December 2015 23,088 12,248 823 10,017

Previous year:Opening balance at 1 January 2014 16,421 11,603 1,865 2,953

Movements in equity:Share-based payments (Note 21C) 86 – 86 –

Expiry of share options transferred to retained earnings (Note 21C)

– – (1,483) 1,483

Total comprehensive income for the year 6,571 – – 6,571

Dividends paid (Note 29) (3,864) – – (3,864)

Equity share options exercised (Note 20) 288 288 – –

Closing balance at 31 December 2014 19,502 11,891 468 7,143

Innovalues Limited Annual Report 2015 55

consoliDateD statement oF cash FlowsYear Ended 31 December 2015

The accompanying notes form an integral part of these financial statements.

Group 2015 2014

$’000 $’000

Cash flows from operating activitiesProfit before tax 26,229 17,376

Adjustments for:

Interest income (93) (27)

Interest expense 255 376

Depreciation of property, plant and equipment 7,326 7,013

Gain on disposal of plant and equipment (35) (129)

Plant and equipment written off 84 219

Share-based payments 439 86

Net effect of exchange rate changes in consolidating subsidiaries (2,061) 1,159

Operating cash flows before changes in working capital 32,144 26,073

Inventories (1,700) 4,329

Trade and other receivables (1,668) (6,032)

Other assets (38) 243

Trade and other payables 113 903

Net cash flows from operations 28,851 25,516

Income taxes paid (1,830) (1,188)

Net cash flows from operating activities 27,021 24,328

Cash flows from investing activitiesDisposal of plant and equipment 94 247

Purchase of plant and equipment (Note 19B) (5,679) (4,905)

Increase in other financial assets – (53)

Interest received 93 27

Net cash flows used in investing activities (5,492) (4,684)

Cash flows from financing activitiesDecrease/(increase) in cash restricted in use 7 (7)

Repayment of loans (4,469) (2,794)

Increase/(decrease) in interest-bearing borrowings, net 267 (172)

Finance leases repayments (1,178) (1,214)

Interest paid (255) (376)

Dividends paid (8,447) (3,864)

Proceeds from equity share options exercised 357 288

Net cash flows used in financing activities (13,718) (8,139)

Net increase in cash and cash equivalents 7,811 11,505

Cash and cash equivalents, statement of cash flows, beginning balance 22,671 11,166

Cash and cash equivalents, statement of cash flows, ending balance (Note 19A) 30,482 22,671

Innovalues Limited Annual Report 201556

notes to the Financial statements31 December 2015

1. General

The company is incorporated in Singapore with limited liability. The financial statements are presented in Singapore dollars and they cover the company (referred to as “parent”) and the subsidiaries.

The board of directors approved and authorised these financial statements for issue on the date of the statement by directors.

The company’s principal activities are those of manufacturing, assembly, sub-assembly of precision turned machining parts, components and electronic and mechanical devices. The company is listed on the Singapore Exchange Securities Trading Limited.

The subsidiaries’ principal activities are disclosed in Note 14 to the financial statements below.

The registered office is: 9 Kallang Place #07-08/09, Singapore 339154. The company is situated in Singapore.

Accounting convention

The financial statements have been prepared in accordance with the Singapore Financial Reporting Standards (“FRS”) and the related Interpretations to FRS (“INT FRS”) as issued by the Singapore Accounting Standards Council and the Companies Act, Chapter 50. The financial statements are prepared on a going concern basis under the historical cost convention except where a FRS requires an alternative treatment (such as fair values) as disclosed where appropriate in these financial statements. The accounting policies in FRSs need not be applied when the effect of applying them is immaterial. The disclosures required by FRSs need not be made if the information is immaterial. Other comprehensive income comprises items of income and expense (including reclassification adjustments) that are not recognised in the income statement, as required or permitted by FRS. Reclassification adjustments are amounts reclassified to profit or loss in the income statement in the current period that were recognised in other comprehensive income in the current or previous periods.

Basis of presentation

The consolidated financial statements include the financial statements made up to the end of the reporting year of the company and all of its subsidiaries. The consolidated financial statements are the financial statements of the group in which the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as those of a single economic entity and are prepared using uniform accounting policies for like transactions and other events in similar circumstances. All significant intragroup balances and transactions, including income, expenses and cash flows are eliminated on consolidation. Subsidiaries are consolidated from the date the reporting entity obtains control of the investee and cease when the reporting entity loses control of the investee. Control exists when the group has the power to govern the financial and operating policies so as to gain benefits from its activities.

Changes in the group’s ownership interest in a subsidiary that do not result in the loss of control are accounted for within equity as transactions with owners in their capacity as owners. The carrying amounts of the group’s and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. When the group loses control of a subsidiary it derecognises the assets and liabilities and related equity components of the former subsidiary. Any gain or loss is recognised in profit or loss. Any investment retained in the former subsidiary is measured at its fair value at the date when control is lost and is subsequently accounted as available-for-sale financial assets in accordance with FRS 39.

The company’s separate financial statements have been prepared on the same basis, and as permitted by the Companies Act, Chapter 50, the company’s separate statement of profit or loss and other comprehensive income is not presented.

Innovalues Limited Annual Report 2015 57

notes to the Financial statements31 December 2015

1. General (cont’d)

Basis of preparation of the financial statements The preparation of financial statements in conformity with generally accepted accounting principles requires the

management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Actual results could differ from those estimates. The estimates and assumptions are reviewed on an ongoing basis. Apart from those involving estimations, management has made judgements in the process of applying the entity’s accounting policies. The areas requiring management’s most difficult, subjective or complex judgements, or areas where assumptions and estimates are significant to the financial statements, are disclosed at the end of this footnote, where applicable.

2. Significant accounting policies and other explanatory information

2A. Significant accounting policies

Revenue recognition

The revenue amount is the fair value of the consideration received or receivable from the gross inflow of economic benefits during the reporting year arising from the course of the activities of the entity and it is shown net of any related sales taxes, estimated returns and rebates. Revenue from the sale of goods is recognised when significant risks and rewards of ownership are transferred to the buyer, there is neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the amount of revenue and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Interest is recognised using the effective interest method.

Employee benefits

Contributions to a defined contribution retirement benefit plan are recorded as an expense as they fall due. The entity’s legal or constructive obligation is limited to the amount that it is obligated to contribute to an independently administered fund (such as the Central Provident Fund in Singapore, a government managed defined contribution retirement benefit plan). For employee leave entitlement the expected cost of short-term employee benefits in the form of compensated absences is recognised in the case of accumulating compensated absences, when the employees render service that increases their entitlement to future compensated absences; and in the case of non-accumulating compensated absences, when the absences occur. A liability for bonuses is recognised where the entity is contractually obliged or where there is constructive obligation based on past practice.

Share-based compensation

For the equity-settled share-based compensation transactions, the fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed on a straight-line basis over the vesting period is measured by reference to the fair value of the options granted ignoring the effect of non-market conditions such as profitability and sales growth targets. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. The fair value is measured using the Black-Scholes Pricing Model. The expected lives used in the model are adjusted, based on management’s best estimates, for the effects of non-transferability, exercise restrictions and behavioural considerations. At each end of the reporting year, a revision is made of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the profit or loss, with a corresponding adjustment to equity. The proceeds received net of any directly attributable transaction costs are credited to share capital when the options are exercised. Cancellations of grants of equity instruments during the vesting period (other than a grant cancelled by forfeiture when the vesting conditions are not satisfied) are accounted for as an acceleration of vesting, therefore any amount unrecognised that would otherwise have been charged is recognised immediately in profit or loss. The share option reserve is transferred to retained earnings upon expiry of the share option.

Innovalues Limited Annual Report 201558

notes to the Financial statements31 December 2015

2. Significant accounting policies and other explanatory information (cont’d)

2A. Significant accounting policies (cont’d)

Income tax

The income taxes are accounted using the asset and liability method that requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequence of events that have been recognised in the financial statements or tax returns. The measurements of current and deferred tax liabilities and assets are based on provisions of the enacted or substantially enacted tax laws; the effects of future changes in tax laws or rates are not anticipated. Tax expense (tax income) is the aggregate amount included in the determination of profit or loss for the reporting year in respect of current tax and deferred tax. Current and deferred income taxes are recognised as income or as an expense in profit or loss unless the tax relates to items that are recognised in the same or a different period outside profit or loss. For such items recognised outside profit or loss the current tax and deferred tax are recognised (a) in other comprehensive income if the tax is related to an item recognised in other comprehensive income and (b) directly in equity if the tax is related to an item recognised directly in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same income tax authority. The carrying amount of deferred tax assets is reviewed at each end of the reporting year and is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realised. A deferred tax amount is recognised for all temporary differences, unless the deferred tax amount arises from the initial recognition of an asset or liability in a transaction which (i) is not a business combination; and (ii) at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). A deferred tax liability or asset is recognised for all taxable temporary differences associated with investments in subsidiaries except where the reporting entity is able to control the timing of the reversal of the taxable temporary difference and it is probable that the taxable temporary difference will not reverse in the foreseeable future or for deductible temporary differences, they will not reverse in the foreseeable future and they cannot be utilised against taxable profits.

Foreign currency transactions

The functional currency is the Singapore dollar as it reflects the primary economic environment in which the entity operates. Transactions in foreign currencies are recorded in the functional currency at the rates ruling at the dates of the transactions. At each end of the reporting year, recorded monetary balances and balances measured at fair value that are denominated in non-functional currencies are reported at the rates ruling at the end of the reporting year and fair value measurement dates respectively. All realised and unrealised exchange adjustment gains and losses are dealt with in profit or loss except when recognised in other comprehensive income and if applicable deferred in equity such as for qualifying cash flow hedges. The presentation is in the functional currency.

Translation of financial statements of other entities

Each entity in the group determines the appropriate functional currency as it reflects the primary economic environment in which the relevant reporting entity operates. In translating the financial statements of such an entity for incorporation in the consolidated financial statements in the presentation currency the assets and liabilities denominated in other currencies are translated at end of the reporting year rates of exchange and the income and expense items for each statement presenting profit or loss and other comprehensive income are translated at average rates of exchange for the reporting year. The resulting translation adjustments (if any) are recognised in other comprehensive income and accumulated in a separate component of equity until the disposal of that relevant reporting entity.

Innovalues Limited Annual Report 2015 59

notes to the Financial statements31 December 2015

2. Significant accounting policies and other explanatory information (cont’d)

2A. Significant accounting policies (cont’d)

Borrowing costs

Borrowing costs are interest and other costs incurred in connection with the borrowing of funds. Interest expense is calculated using the effective interest rate method. Borrowing costs are recognised as an expense in the period in which they are incurred except that borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset that necessarily take a substantial period of time to get ready for their intended use or sale are capitalised as part of the cost of that asset until substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete.

Property, plant and equipment

Depreciation is provided on a straight-line basis to allocate the gross carrying amounts of the assets less their residual values over their estimated useful lives of each part of an item of these assets. The annual rates of depreciation are as follows:

Freehold land – Not depreciatedLeasehold land and buildings – 2% - 5%Plant and equipment – 10% - 331/3%

An asset is depreciated when it is available for use until it is derecognised even if during that period the item is idle. Fully depreciated assets still in use are retained in the financial statements.

Property, plant and equipment are carried at cost on initial recognition and after initial recognition at cost less any accumulated depreciation and any accumulated impairment losses. The gain or loss arising from the derecognition of an item of property, plant and equipment is measured as the difference between the net disposal proceeds, if any, and the carrying amount of the item and is recognised in profit or loss. The residual value and the useful life of an asset is reviewed at least at each end of the reporting year and, if expectations differ significantly from previous estimates, the changes are accounted for as a change in an accounting estimate, and the depreciation charge for the current and future periods are adjusted.

Cost also includes acquisition cost, borrowing cost capitalised and any cost directly attributable to bringing the asset or component to the location and condition necessary for it to be capable of operating in the manner intended by management. Subsequent costs are recognised as an asset only when it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss when they are incurred.

Innovalues Limited Annual Report 201560

notes to the Financial statements31 December 2015

2. Significant accounting policies and other explanatory information (cont’d)

2A. Significant accounting policies (cont’d)

Leases

Leases are classified as finance leases if substantially all the risks and rewards of ownership are transferred to the lessee. All other leases are classified as operating leases. At the commencement of the lease term, a finance lease is recognised as an asset and as a liability in the statement of financial position at amounts equal to the fair value of the leased asset or, if lower, the present value of the minimum lease payments, each measured at the inception of the lease. The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease, if this is practicable to determine, the lessee’s incremental borrowing rate is used. Any initial direct costs of the lessee are added to the amount recognised as an asset. The excess of the lease payments over the recorded lease liability are treated as finance charges which are allocated to each reporting year during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the reporting years in which they are incurred. The assets are depreciated as owned depreciable assets. Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets are classified as operating leases. For operating leases, lease payments are recognised as an expense in profit or loss on a straight-line basis over the term of the relevant lease unless another systematic basis is representative of the time pattern of the user’s benefit, even if the payments are not on that basis. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense.

Segment reporting

The reporting entity discloses financial and descriptive information about its consolidated reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing the performance. Generally, financial information is reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.

Subsidiaries

A subsidiary is an entity including unincorporated and special purpose entity that is controlled by the reporting entity and the reporting entity is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The existence and effect of substantive potential voting rights that the reporting entity has the practical ability to exercise (that is, substantive rights) are considered when assessing whether the reporting entity controls another entity.

In the reporting entity’s separate financial statements, an investment in a subsidiary is accounted for at cost less any allowance for impairment in value. Impairment loss recognised in profit or loss for a subsidiary is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying value and the net book value of the investment in a subsidiary are not necessarily indicative of the amount that would be realised in a current market exchange.

Business combinations

Business combinations are accounted for by applying the acquisition method. There were no acquisitions during the reporting year.

Innovalues Limited Annual Report 2015 61

notes to the Financial statements31 December 2015

2. Significant accounting policies and other explanatory information (cont’d)

2A. Significant accounting policies (cont’d)

Impairment of non-financial assets

Irrespective of whether there is any indication of impairment, an annual impairment test is performed at the same time every year on an intangible asset with an indefinite useful life or an intangible asset not yet available for use. The carrying amount of other non-financial assets is reviewed at each end of the reporting year for indications of impairment and where an asset is impaired, it is written down through profit or loss to its estimated recoverable amount. The impairment loss is the excess of the carrying amount over the recoverable amount and is recognised in profit or loss unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. When the fair value less costs to sell method is used, any available recent market transactions are taken into consideration. When the value in use method is adopted, in assessing the 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 purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). At each end of the reporting year non-financial assets other than goodwill with impairment loss recognised in prior periods are assessed for possible reversal of the impairment. 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 measured, net of depreciation or amortisation, if no impairment loss had been recognised.

Inventories

Inventories are measured at the lower of cost and net realisable value. Cost of raw materials and consumables are accounted based on first in first out basis, and the cost of work in progress and finished goods are accounted based on standard costing which approximate actual cost. 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. A write down on cost is made where the cost is not recoverable or if the selling prices have declined. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Financial assets

Initial recognition, measurement and derecognition:

A financial asset is recognised on the statement of financial position when, and only when, the entity becomes a party to the contractual provisions of the instrument. The initial recognition of financial assets is at fair value normally represented by the transaction price. The transaction price for financial asset not classified at fair value through profit or loss includes the transaction costs that are directly attributable to the acquisition or issue of the financial asset. Transaction costs incurred on the acquisition or issue of financial assets classified at fair value through profit or loss are expensed immediately. The transactions are recorded at the trade date.

Innovalues Limited Annual Report 201562

notes to the Financial statements31 December 2015

2. Significant accounting policies and other explanatory information (cont’d)

2A. Significant accounting policies (cont’d)

Financial assets (cont’d)

Irrespective of the legal form of the transactions performed, financial assets are derecognised when they pass the “substance over form” based on the derecognition test prescribed by FRS 39 relating to the transfer of risks and rewards of ownership and the transfer of control. Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is currently a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

Subsequent measurement:

Subsequent measurement based on the classification of the financial assets in one of the following categories under FRS 39 is as follows:

1. Financial assets at fair value through profit or loss: As at end of the reporting year date there were no financial assets classified in this category.

2. Loans and receivables: Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Assets that are for sale immediately or in the near term are not classified in this category. These assets are carried at amortised costs using the effective interest method (except that short-duration receivables with no stated interest rate are normally measured at original invoice amount unless the effect of imputing interest would be significant) minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibility. Impairment charges are provided only when there is objective evidence that an impairment loss has been incurred as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The methodology ensures that an impairment loss is not recognised on the initial recognition of an asset. Losses expected as a result of future events, no matter how likely, are not recognised. For impairment, the carrying amount of the asset is reduced through use of an allowance account. The amount of the loss is recognised in profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. Typically the trade and other receivables are classified in this category.

3. Held-to-maturity financial assets: As at end of the reporting year date there were no financial assets classified in this category.

Innovalues Limited Annual Report 2015 63

notes to the Financial statements31 December 2015

2. Significant accounting policies and other explanatory information (cont’d)

2A. Significant accounting policies (cont’d)

Financial assets (cont’d)

4. Available-for-sale financial assets: These are non-derivative financial assets that are designated as available-for-sale on initial recognition or are not classified in one of the previous categories. These assets are carried at fair value. Changes in fair value of available-for-sale financial assets (other than those relating to foreign exchange translation differences on monetary investments) are recognised in other comprehensive income and accumulated in a separate component of equity under the heading revaluation reserves. Such reserves are reclassified to profit or loss when realised through disposal. When there is objective evidence that the asset is impaired, the cumulative loss is reclassified from equity to profit or loss as a reclassification adjustment. A significant or prolonged decline in the fair value of the investment below its cost is considered to be objective evidence of impairment. If, in a subsequent period, the fair value of an equity instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss, it is reversed against revaluation reserves and is not subsequently reversed through profit or loss. However for debt instruments classified as available-for-sale impairment losses recognised in profit or loss are subsequently reversed if an increase in the fair value of the instrument can be objectively related to an event occurring after the recognition of the impairment loss. For non-equity instruments classified as available-for-sale the reversal of impairment is recognised in profit or loss. The weighted average method is used when determining the cost basis of publicly listed equities being disposed of. Usually non-current investments in equity shares and debt securities are classified in this category but it does not include subsidiaries, joint ventures, or associates. Unquoted investments are stated at cost less allowance for impairment in value where there are no market prices, and management is unable to establish fair value by using valuation techniques except that where management can establish fair value by using valuation techniques the relevant unquoted investments are stated at fair value. For unquoted equity instruments impairment losses are not reversed.

Cash and cash equivalents

Cash and cash equivalents include bank and cash balances, on demand deposits and any highly liquid debt instruments purchased with an original maturity of three months or less. For the statement of cash flows the item includes cash and cash equivalents less cash subject to restriction and bank overdrafts payable on demand that form an integral part of cash management.

Financial liabilities

Initial recognition, measurement and derecognition:

A financial liability is recognised on the statement of financial position when, and only when, the entity becomes a party to the contractual provisions of the instrument and it is derecognised when the obligation specified in the contract is discharged or cancelled or expires. The initial recognition of financial liability is at fair value normally represented by the transaction price. The transaction price for financial liability not classified at fair value through profit or loss includes the transaction costs that are directly attributable to the acquisition or issue of the financial liability. Transaction costs incurred on the acquisition or issue of financial liability classified at fair value through profit or loss are expensed immediately. The transactions are recorded at the trade date. Financial liabilities including bank and other borrowings are classified as current liabilities unless there is an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting year.

Innovalues Limited Annual Report 201564

notes to the Financial statements31 December 2015

2. Significant accounting policies and other explanatory information (cont’d)

2A. Significant accounting policies (cont’d)

Financial liabilities (cont’d)

Subsequent measurement:

Subsequent measurement based on the classification of the financial liabilities in one of the following two categories under FRS 39 is as follows:

1. Liabilities at fair value through profit or loss: Liabilities are classified in this category when they are incurred principally for the purpose of selling or repurchasing in the near term (trading liabilities) or are derivatives (except for a derivative that is a designated and effective hedging instrument) or have been classified in this category because the conditions are met to use the “fair value option” and it is used. Financial guarantee contracts if significant are initially recognised at fair value and are subsequently measured at the greater of (a) the amount determined in accordance with FRS 37 and (b) the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with FRS 18. All changes in fair value relating to liabilities at fair value through profit or loss are charged to profit or loss as incurred.

2. Other financial liabilities: All liabilities, which have not been classified as in the previous category fall into this residual category. These liabilities are carried at amortised cost using the effective interest method. Trade and other payables and borrowings are usually classified in this category. Items classified within current trade and other payables are not usually re-measured, as the obligation is usually known with a high degree of certainty and settlement is short-term.

Fair value measurement

Fair value is taken to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (that is, an exit price). It is a market-based measurement, not an entity-specific measurement. When measuring fair value, management uses the assumptions that market participants would use when pricing the asset or liability under current market conditions, including assumptions about risk. The entity’s intention to hold an asset or to settle or otherwise fulfil a liability is not taken into account as relevant when measuring fair value. In making the fair value measurement, management determines the following: (a) the particular asset or liability being measured (these are identified and disclosed in the relevant notes below); (b) for a non-financial asset, the highest and best use of the asset and whether the asset is used in combination with other assets or on a stand-alone basis; (c) the market in which an orderly transaction would take place for the asset or liability; and (d) the appropriate valuation techniques to use when measuring fair value. The valuation techniques used maximise the use of relevant observable inputs and minimise unobservable inputs. These inputs are consistent with the inputs a market participant may use when pricing the asset or liability.

Innovalues Limited Annual Report 2015 65

notes to the Financial statements31 December 2015

2. Significant accounting policies and other explanatory information (cont’d)

2A. Significant accounting policies (cont’d)

Fair value measurement (cont’d)

The fair value measurements and related disclosures categorise the inputs to valuation techniques used to measure fair value by using a fair value hierarchy of three levels. These are recurring fair value measurements unless state otherwise in the relevant notes to the financial statements. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The level is measured on the basis of the lowest level input that is significant to the fair value measurement in its entirety. Transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of the reporting year. If a financial instrument measured at fair value has a bid price and an ask price, the price within the bid-ask spread or mid-market pricing that is most representative of fair value in the circumstances is used to measure fair value regardless of where the input is categorised within the fair value hierarchy. If there is no market, or the markets available are not active, the fair value is established by using an acceptable valuation technique.

The carrying values of current financial instruments approximate their fair values due to the short-term maturity of these instruments and the disclosures of fair value are not made when the carrying amount of current financial instruments is a reasonable approximation of the fair value. The fair values of non-current financial instruments may not be disclosed separately unless there are significant differences at the end of the reporting year and in the event the fair values are disclosed in the relevant notes to the financial statements.

Provisions

A liability or provision is recognised when there is a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. A provision is made using best estimates of the amount required in settlement and where the effect of the time value of money is material, the amount recognised is the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. Changes in estimates are reflected in profit or loss in the reporting year they occur.

2B. Other explanatory information

Classification of equity and liabilities

A financial instrument is classified as a liability or as equity in accordance with the substance of the contractual arrangement on initial recognition. Equity instruments are contracts that give a residual interest in the net assets of the reporting entity. Where the financial instrument does not give rise to a contractual obligation on the part of the issuer to make payment in cash or kind under conditions that are potentially unfavourable, it is classified as an equity instrument. Ordinary shares are classified as equity. Equity instruments are recognised at the amount of proceeds received net of incremental costs directly attributable to the transaction. Dividends on equity are recognised as liabilities when they are declared. Interim dividends are recognised when declared by the directors.

Innovalues Limited Annual Report 201566

notes to the Financial statements31 December 2015

2. Significant accounting policies and other explanatory information (cont’d)

2C. Critical judgements, assumptions and estimation uncertainties

The critical judgements made in the process of applying the accounting policies that have the most significant effect on the amounts recognised in the financial statements and the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting year, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities currently or within the next reporting year are discussed below. These estimates and assumptions are periodically monitored to ensure they incorporate all relevant information available at the date when financial statements are prepared. However, this does not prevent actual figures differing from estimates.

Allowance for doubtful trade accounts:

An allowance is made for doubtful trade accounts for estimated losses resulting from the subsequent inability of the customers to make required payments. If the financial conditions of the customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required in future periods. To the extent that it is feasible impairment and uncollectibility is determined individually for each item. In cases where that process is not feasible, a collective evaluation of impairment is performed. At the end of the reporting year, the trade receivables carrying amount approximates the fair value and the carrying amounts might change materially within the next reporting year but these changes may not arise from assumptions or other sources of estimation uncertainty at the end of the reporting year. The carrying amount is disclosed in the Note on trade and other receivables.

Net realisable value of inventories:

A review is made periodically on inventory for excess inventory and declines in net realisable value below cost and an allowance is recorded against the inventory balance for any such declines. The review requires management to consider the future demand for the products. In any case the realisable value represents the best estimate of the recoverable amount and is based on the acceptable evidence available at the end of the reporting year and inherently involves estimates regarding the future expected realisable value. The usual considerations for determining the amount of allowance or write-down include ageing analysis, technical assessment and subsequent events. In general, such an evaluation process requires significant judgement and materially affects the carrying amount of inventories at the end of the reporting year. Possible changes in these estimates could result in revisions to the stated value of the inventories. The carrying amount of inventories at the end of the reporting year is disclosed in the Note on inventories.

Income tax amounts:

The entity recognises tax liabilities and assets tax based on an estimation of the likely taxes due, which requires significant judgement as to the ultimate tax determination of certain items. Where the actual amount arising from these issues differs from these estimates, such differences will have an impact on income tax and deferred tax amounts in the period when such determination is made. In addition management judgement is required in determining the amount of current and deferred tax recognised and the extent to which amounts should or can be recognised. A deferred tax asset is recognised if it is probable that the entity will earn sufficient taxable profit in future periods to benefit from a reduction in tax payments. This involves the management making assumptions within its overall tax planning activities and periodically reassessing them in order to reflect changed circumstances as well as tax regulations. Moreover, the measurement of a deferred tax asset or liability reflects the manner in which the entity expects to recover the asset’s carrying value or settle the liability. As a result, due to their inherent nature assessments of likelihood are judgmental and not susceptible to precise determination. The income tax amounts are disclosed in the Note on income tax.

Innovalues Limited Annual Report 2015 67

notes to the Financial statements31 December 2015

2. Significant accounting policies and other explanatory information (cont’d)

2C. Critical judgements, assumptions and estimation uncertainties (cont’d)

Useful lives of plant and equipment:

The estimates for the useful lives and related depreciation charges for plant and equipment is based on commercial and other factors which could change significantly as a result of innovations and competitor actions in response to market conditions. The depreciation charge is increased where useful lives are less than previously estimated lives, or the carrying amounts written off or written down for technically obsolete items or assets that have been abandoned or sold. It is impracticable to disclose the extent of the possible effects. It is reasonably possible, based on existing knowledge, that outcomes within the next reporting year that are different from assumptions could require a material adjustment to the carrying amount of the balances affected. The carrying amount of the specific asset (or class of assets) at the end of the reporting year affected by the assumption is $26,396,000.

Determination of functional currency:

Judgement is required to determine the functional currencies of the reporting entity. Management considers economic environment in which the reporting entity operates and factors such as the currency that mainly influence sales prices for goods and services; the currency of the country whose competitive forces and regulation mainly determine the sales prices of its goods and services; and the currency that mainly influence labour, material and other costs of providing goods or services. It also considers other relevant factors that may also provide evidence of an entity’s functional currency. Management resolved that the Singapore dollar to be functional currency of the company after taking into consideration potential exposure to fluctuation in the exchange rate of other currencies when fixing the sales price. Billing and settlement are done in other foreign currencies merely for the convenience of the customers. In addition, the main bulk of cost of sales and other operating cost are priced and settled in Singapore dollar. The management believes that due to the high level of integration in terms of sales and supply chain of its operations, the Singapore dollar is the currency that best reflects the economic environment in which it operates.

3. Related party relationships and transactions

FRS 24 on related party disclosures requires the reporting entity to disclose: (a) transactions with its related parties; and (b) relationships between parents and subsidiaries irrespective of whether there have been transactions between those related parties. A party is related to a party if the party controls, or is controlled by, or can significantly influence or is significantly influenced by the other party.

3A. Members of a group:

The ultimate controlling party is Goh Leng Tse, a director and significant shareholder.

3B. Related party transactions:

There are transactions and arrangements between the reporting entity and related parties and the effects of these on the basis determined between the parties are reflected in these financial statements. The related party balances are unsecured without fixed repayment terms and interest or charge unless stated otherwise.

Intragroup transactions and balances that have been eliminated in these consolidated financial statements are not disclosed as related party transactions and balances below.

Innovalues Limited Annual Report 201568

notes to the Financial statements31 December 2015

3. Related party relationships and transactions (cont’d)

3C. Key management compensation:

Group2015$’000

2014$’000

Salaries and other short-term employee benefits 2,679 2,293

Directors’ fees 250 205

Share-based payments 282 56

The above amounts are included under employee benefits expense. Included in the above amounts are the following items:

Group2015$’000

2014$’000

Remuneration of directors of the company 2,374 2,005

Remuneration of directors of the subsidiaries 119 134

Fees to directors of the company 250 205

Further information about the remuneration of individual directors is provided in the report on corporate governance.

Key management personnel include the directors and those persons having authority and responsibility for planning, directing and controlling the activities of the company, directly or indirectly. The above amounts for key management compensation are for all the directors and other key management personnel.

3D. Other receivables from and other payables to related parties:

The trade transactions and the related receivables and payables balances arising from sales and purchases of goods and services are disclosed elsewhere in the notes to the financial statements.

The movements in other receivables from and other payables to related parties are as follows:

Subsidiaries2015$’000

2014$’000

Other receivables/(other payables):

Balance at beginning of the year – net debit 58 10

Amounts paid out and settlement of liabilities on behalf of the subsidiaries 76 48

Balance at end of the year – net debit 134 58

Presented in the statements of financial position as follows:

Other receivables (Note 17) 139 58

Other payables (Note 25) (5) –

Balance at end of the year – net debit 134 58

Innovalues Limited Annual Report 2015 69

notes to the Financial statements31 December 2015

4. Financial information by operating segments

4A. Information about reportable segment profit or loss, assets and liabilities

The group discloses financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, financial information is reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.

For management purposes, the group is currently organised into three major strategic operating segments that offer different products and services:

Automotive (“AU”) : Precision machined parts and components for vehicles;Office automation (“OA”) : Shafts and rollers for various types of printers; Others: Components for other industries.

It represents the basis on which the management reports the primary segment information. They are managed separately because each business requires different strategies.

Inter-segment sales are measured on the basis that the entity actually used to price the transfers. Internal transfer pricing policies of the group are as far as practicable based on market prices. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.

Unallocated assets and liabilities are analysed below. Unallocated profit or loss items comprise interest income, finance costs, marketing and distribution costs, administrative expenses, other gains/(losses) and income tax expense. The information to allocate these amounts by business segments is not available and the cost to develop it would be excessive.

4B. Profit or loss from continuing operations and reconciliations

These segments are the basis on which the group reports its primary segment information. Segment information about these businesses is presented below:

AU OA Others Group Total2015 2014 2015 2014 2015 2014 2015 2014$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Revenue by segmentExternal revenue 89,446 87,787 23,834 20,128 411 553 113,691 108,468Results :Segment result 27,671 24,481 7,191 4,282 56 78 34,918 28,841Interest income 93 27Finance costs (255) (376)Other gains 4,831 1,270Marketing and distribution

costs (2,048) (2,158)Administrative expenses (11,226) (10,009)Other losses (84) (219)Profit before tax from

continuing operations 26,229 17,376Income tax expense (3,228) (1,565)Profit from continuing

operations, net of tax 23,001 15,811

Innovalues Limited Annual Report 201570

notes to the Financial statements31 December 2015

4. Financial information by operating segments (cont’d)

4C. Assets and reconciliations

AU OA Others Unallocated Group Total$’000 $’000 $’000 $’000 $’000

2015Total assets for reportable segments 51,758 10,109 931 – 62,798Unallocated:

Property, plant and equipment – – – 8,261 8,261Other financial assets – – – 381 381Trade and other receivables – – – 47 47Other assets – – – 1,353 1,353Cash and cash equivalents – – – 30,643 30,643Total group assets 51,758 10,109 931 40,685 103,483

2014Total assets for reportable segments 56,180 13,715 1,791 – 71,686

Unallocated:

Property, plant and equipment – – – 8,401 8,401

Other financial assets – – – 381 381

Trade and other receivables – – – 29 29

Other assets – – – 1,175 1,175

Cash and cash equivalents – – – 13,661 13,661

Total group assets 56,180 13,715 1,791 23,647 95,333

4D. Liabilities and reconciliations

AU OA Others Unallocated Group Total$’000 $’000 $’000 $’000 $’000

2015Total liabilities for reportable segments – – – – – Unallocated:

Deferred tax liabilities – – – 530 530Income tax payable – – – 1,393 1,393Other financial liabilities – – – 2,494 2,494Finance leases – – – 1,317 1,317Trade and other payables – – – 15,319 15,319Total group liabilities – – – 21,053 21,053

2014Total liabilities for reportable segments – – – – –

Unallocated:

Deferred tax liabilities – – – – –

Income tax payable – – – 537 537

Other financial liabilities – – – 6,509 6,509

Finance leases – – – 2,418 2,418

Trade and other payables – – – 15,206 15,206

Total group liabilities – – – 24,670 24,670

Innovalues Limited Annual Report 2015 71

notes to the Financial statements31 December 2015

4. Financial information by operating segments (cont’d)

4E. Other material items and reconciliations

AU OA Others Unallocated Group Total$’000 $’000 $’000 $’000 $’000

Capital expenditure:

2015 4,718 147 – 944 5,8092014 3,776 601 46 815 5,238

Depreciation:

2015 5,562 939 60 765 7,3262014 5,129 1,241 148 495 7,013

4F. Geographical Information

The group’s operations are located in Singapore, Malaysia, Thailand and People’s Republic of China (“PRC”).

The following table provides an analysis of the revenue by geographical market based on customers’ location, irrespective of the origin of the goods:

Revenue bygeographical segments2015 2014

$’000 $’000

Singapore 564 660

Malaysia 6,562 8,000

Thailand 7,649 3,387

PRC 67,166 67,637

USA 20,786 20,724

Brazil 228 2

Germany 2,927 2,347

Mexico 7,365 5,373

Others 444 338

Total 113,691 108,468

The following is an analysis of the carrying amount of non-current assets, and additions to property, plant and equipment, analysed by the geographical area in which the assets are located:

Carrying amount ofnon-current assets

Additions to property, plant and equipment

2015 2014 2015 2014

$’000 $’000 $’000 $’000

Singapore 1,090 638 700 572

Malaysia 9,926 10,806 1,778 1,127

Thailand 16,081 17,331 1,397 1,956

PRC 7,843 9,225 1,934 1,583

Total 34,940 38,000 5,809 5,238

Innovalues Limited Annual Report 201572

notes to the Financial statements31 December 2015

4. Financial information by operating segments (cont’d)

4G. Information about major customers

2015$’000

2014$’000

Revenue:

Top 1 customer in AU segment 35,852 29,492

Top 2 customers in AU segment 51,080 47,492

Top 3 customers in AU segment 63,317 64,422

5. Revenue

Group 2015$’000

2014$’000

Sale of goods 111,522 105,863

Sale of waste materials 2,169 2,605

113,691 108,468

6. Other gains and (other losses)

Group 2015$’000

2014$’000

Foreign exchange adjustment gain 4,503 623

Plant and equipment written off (84) (219)

Gain on disposal of plant and equipment 35 129

Other income 293 518

Net 4,747 1,051

Presented in profit or loss as:

Other gains 4,831 1,270

Other losses (84) (219)

Net 4,747 1,051

7. Administrative expenses

The major components and other selected components include the following:

Group 2015$’000

2014$’000

Employee benefits expense 7,621 6,466

Rental – office and equipment 285 255

Depreciation expense 708 527

Innovalues Limited Annual Report 2015 73

notes to the Financial statements31 December 2015

8. Finance costs

Group 2015$’000

2014$’000

Interest expense 255 376

9. Employee benefits expense

Group 2015$’000

2014$’000

Employee benefits expense 19,712 19,132

Contributions to defined contribution plan 2,886 2,544

Share-based payments (Note 21C) 439 86

Other benefits 177 147

Total employee benefits expense 23,214 21,909

10. Income tax

10A. Components of tax expense recognised in profit or loss include:

Group 2015$’000

2014$’000

Current tax expense

Current tax expense 2,699 1,568

(Over)/under adjustments of current tax in respect of prior periods (1) 4

Subtotal 2,698 1,572

Deferred tax expense/(income)

Deferred tax expense/(income) 530 (7)

Subtotal 530 (7)

Total income tax expense 3,228 1,565

Innovalues Limited Annual Report 201574

notes to the Financial statements31 December 2015

10. Income tax (cont’d)

10A. Components of tax expense recognised in profit or loss include (cont’d):

The reconciliation of income taxes below is determined by applying the Singapore corporate tax rate where the parent is situated. The income tax in profit or loss varied from the amount of income tax determined by applying the Singapore income tax rate of 17% (2014: 17%) to profit or loss before income tax as a result of the following differences:

Group 2015$’000

2014$’000

Profit before tax 26,229 17,376

Income tax expense at the above rate 4,459 2,954

Expenses not deductible for tax purposes 97 85

Tax incentives (519) (342)

Income not subject to tax (59) –

Unrecognised deferred tax assets (647) (1,715)

Effect of different tax rates in different countries 1,114 1,014

Corporate tax rebate (20) (5)

Stepped income exemption (26) (16)

Tax exemptions (a) (1,144) (843)

(Over)/under adjustments to tax in respect of previous periods (1) 4

Tax loss forfeited – 427

Effect of change in tax rate (39) –

Other items less than 3% each 13 2

Total income tax expense 3,228 1,565

(a) Tax exemptions relate to tax incentives granted by the relevant authority on subsidiary’s profits. The Board of Investment of Thailand has granted the subsidiary, Innovalues Precision (Thailand) Ltd, promotional privileges under the Investment Promotion Act, B.E. 2520. With these incentives, Innovalues Precision (Thailand) Ltd enjoys tax exemption for a period of 8 years from 2014 on manufacturing income.

10B. Deferred tax expense/(income) recognised in profit or loss includes:

Group 2015$’000

2014$’000

Excess of net book value of plant and equipment over tax values 8 (244)

Excess of tax values over net book value of plant and equipment – 13

Tax loss carryforwards 11 564

Unutilised tax credits 1,248 1,394

Other temporary differences (90) (19)

Unrecognised deferred tax assets (647) (1,715)

Total deferred income tax expense/(income) recognised in profit or loss 530 (7)

Innovalues Limited Annual Report 2015 75

notes to the Financial statements31 December 2015

10. Income tax (cont’d)

10C. Deferred tax balance in the statement of financial position:

Group 2015$’000

2014$’000

Deferred tax assets/(liabilities) recognised in profit or loss:

Excess of net book value of plant and equipment over tax values (785) (777)

Tax loss carryforwards 128 139

Unutilised tax credits 114 1,362

Other temporary differences 128 38

Unrecognised deferred tax assets (115) (762)

Total (530) –

Presented in the statements of financial position as follows:

Group 2015$’000

2014$’000

Deferred tax liabilities 530 –

It is impractical to estimate the amount expected to be settled or used within one year.

The table below summarises the unrecognised deferred tax assets for the tax losses which will be expired from years 2016 to 2020:

Group 2015$’000

2014$’000

Unrecognised deferred tax assets

Tax losses expiring in year 2016 12 12

Tax losses expiring in year 2017 53 53

Tax losses expiring in year 2020 6 –

71 65

The realisation of the future income tax benefits from tax loss carryforwards and temporary differences from capital allowances is available for an unlimited future period subject to the conditions imposed by law including the retention of majority shareholders as defined.

There are no income tax consequences of dividends to shareholders of the company.

Temporary differences arising in connection with interests in subsidiaries are insignificant.

Innovalues Limited Annual Report 201576

notes to the Financial statements31 December 2015

11. Items in the statement of profit or loss and other comprehensive income

In addition to the charges and credits disclosed elsewhere in the notes to the financial statements, the profit or loss includes the following charges:

Group 2015$’000

2014$’000

Audit fees to independent auditors included under administrative expenses:

- Company’s auditors 85 85

- Other auditors 104 99

Other fees to independent auditors included under administrative expenses:

- Company’s auditors 33 33

- Other auditors 40 36

12. Earnings per share

The following table illustrates the numerators and denominators used to calculate basic and diluted earnings per share of no par value:

2015$’000

2014$’000

A. Numerators: earnings attributable to equity:

Continuing operations: attributable to equity holders 23,001 15,811

2015 2014

No:’000 No:’000

B. Denominators: weighted average number of equity shares

Basic 324,348 323,079

Dilutive share options effect 3,080 1,153

Diluted 327,428 324,232

The weighted average number of equity shares refers to shares in circulation during the reporting period.

The dilutive effect is derived from transactions such as: share options (Note 21).

The ordinary share equivalents included in these calculations are: (1) the average number of ordinary shares assumed to be outstanding during the reporting year and (2) shares of ordinary share issuable upon assumed exercise of share options which (if any) would have a dilutive effect.

Innovalues Limited Annual Report 2015 77

notes to the Financial statements31 December 2015

13. Property, plant and equipment

GroupFreehold

landLeasehold

landLeaseholdbuildings

Plant and equipment Total

$’000 $’000 $’000 $’000 $’000

Cost:

At 1 January 2014 3,069 1,199 8,440 83,316 96,024

Foreign exchange adjustments 110 (23) 129 157 373

Additions – – 10 5,228 5,238

Disposals – – – (3,872) (3,872)

Written off – – – (2,987) (2,987)

At 31 December 2014 3,179 1,176 8,579 81,842 94,776Foreign exchange adjustments (112) (152) (588) (4,207) (5,059)Additions – – 48 5,761 5,809Disposals – – – (341) (341)Written off – – – (1,306) (1,306)At 31 December 2015 3,067 1,024 8,039 81,749 93,879

Accumulated depreciation:

At 1 January 2014 – 327 2,850 53,276 56,453

Foreign exchange adjustments – (5) 39 (202) (168)

Depreciation for the year – 20 310 6,683 7,013

Disposals – – – (3,754) (3,754)

Written off – – – (2,768) (2,768)

At 31 December 2014 – 342 3,199 53,235 56,776Foreign exchange adjustments – (46) (241) (3,372) (3,659)Depreciation for the year – 20 312 6,994 7,326Disposals – – – (282) (282)Written off – – – (1,222) (1,222)At 31 December 2015 – 316 3,270 55,353 58,939

Carrying value:

At 1 January 2014 3,069 872 5,590 30,040 39,571

At 31 December 2014 3,179 834 5,380 28,607 38,000

At 31 December 2015 3,067 708 4,769 26,396 34,940

The depreciation expense is charged as follows:

Group 2015$’000

2014$’000

Cost of sales 6,618 6,486

Administrative expenses 708 527

7,326 7,013

Innovalues Limited Annual Report 201578

notes to the Financial statements31 December 2015

13. Property, plant and equipment (cont’d)

CompanyPlant and

equipment$’000

Cost:At 1 January 2014 1,086Additions 572Disposals (285)Written off (96)At 31 December 2014 1,277Additions 700Disposals (93)Written off (3)At 31 December 2015 1,881

Accumulated depreciation:At 1 January 2014 882Depreciation for the year 60Disposals (284)Written off (96)

At 31 December 2014 562Depreciation for the year 240Disposals (85)Written off (3)At 31 December 2015 714

Carrying value:At 1 January 2014 204At 31 December 2014 715At 31 December 2015 1,167

Certain items are under finance lease agreements (see Note 24).

Certain machinery of the Thailand subsidiary at a net book value of Thai Baht 7,173,541 (or S$280,959 equivalent) (2014: Thai Baht 8,260,000 or S$332,000 equivalent) are subject to a negative pledge for bank facilities (see Note 23).

Included in plant and equipment are computer software amounted to S$291,559 (2014: nill)

Details of properties owned by the group are as follows:

Description/LocationTotal gross land area

Tenure of land/lastvaluation date

Thailand:83 Moo 2, Hi-Tech Industrial Estate, Bannlen, Bangpa-In, Ayutthaya

36,800 sqm Freehold property.Not revalued.

Malaysia:No. 22A, Jalan 18, Taman Sri Kluang, Kluang, Johor

4,413 sqm Freehold property.Not revalued.

PLO 505, Jalan Keluli 3, Pasir Gudang Ind Estate, Johor

11,120 sqm Leasehold property 51 years from 2 October 2003. Not revalued.

Innovalues Limited Annual Report 2015 79

notes to the Financial statements31 December 2015

14. Investment in subsidiaries

Company2015$’000

2014$’000

Unquoted shares at cost 31,957 31,957

Less allowance for impairment (672) (672)

Total at cost 31,285 31,285

Net book value of subsidiaries 90,807 82,928

Analysis of above amount denominated in non-functional currency:

Malaysian Ringgit 2,118 2,118

Thai Baht 8,885 8,885

United States Dollar 20,954 20,954

Movements in allowance for impairment:

Balance at beginning and end of the year 672 672

The subsidiaries held are listed below:

Name of subsidiaries, country of incorporation,place of operations and principal activities (and independent auditors)

Cost in booksof the company

Effective percentageof equity held by the

group2015$’000

2014$’000

2015%

2014%

Innovalues Precision Sdn Bhd (1) 211 211 100 100MalaysiaManufacture and sale of precision machined parts, components

and sub-assemblies(Crowe Horwath)

Innovalues Microtech Sdn Bhd (1) 730 730 100 100MalaysiaElectroless plating(Crowe Horwath)

Innovalues Precision (Kluang) Sdn Bhd (1) 214 214 100 100MalaysiaManufacture and sale of precision machined parts, components

and sub-assemblies(Crowe Horwath)

Innovalues Technologies Sdn Bhd (1) 46 46 100 100MalaysiaAssembly of rollers(Crowe Horwath)

Innovalues Limited Annual Report 201580

notes to the Financial statements31 December 2015

14. Investment in subsidiaries (cont’d)

Name of subsidiaries, country of incorporation,place of operations and principal activities (and independent auditors)

Cost in booksof the company

Effective percentageof equity held by the

group2015$’000

2014$’000

2015%

2014%

Nissohatsu Elastomer (Malaysia) Sdn Bhd (1) 917 917 100 100MalaysiaRubber compounding, moulding and other rubber-related

products(Crowe Horwath)

Innovalues Precision (Thailand) Ltd (1) 8,885 8,885 100 100ThailandManufacture and sale of precision machined parts,

components and sub-assemblies(Ernst & Young Office Limited)

Innovalues Precision (Shanghai) Co., Ltd (1) 894 894 100 100People’s Republic of ChinaManufacture and sale of precision machined parts,

components and sub-assemblies(BDO China Shu Lun Pan CPA)

Innovalues Industry (Shanghai) Co., Ltd (1) 7,292 7,292 100 100People’s Republic of ChinaPrecision engineering and manufacture of turned parts(BDO China Shu Lun Pan CPA)

Innovalues Technology (Shanghai) Co., Ltd (1) 1,394 1,394 100 100People’s Republic of ChinaPrecision engineering and manufacture of turned parts(BDO China Shu Lun Pan CPA)

Innovalues Auto Precision (Shanghai) Co., Ltd (1) 11,374 11,374 100 100People’s Republic of ChinaPrecision engineering and manufacture of turned parts(BDO China Shu Lun Pan CPA)

Held through Innovalues Industry (Shanghai) Co., Ltd:Shenzhen Innovalues Precision Co. ,Ltd (1) 100 100People’s Republic of ChinaPrecision engineering, manufacturing and sale of precision

engineered turned parts and machinery(BDO China Shu Lun Pan CPA)

(1) Other independent auditors. Audited by firms of accountants other than member firms of RSM International of which RSM Chio Lim LLP in Singapore is a member. Their names are indicated above.

As is required by Rule 716 of the Listing Manual of The Singapore Exchange Securities Trading Limited, the audit committee and the board of directors of the company have satisfied themselves that the appointment of different auditors for its overseas subsidiaries would not compromise the standard and effectiveness of the audit of the group.

Innovalues Limited Annual Report 2015 81

notes to the Financial statements31 December 2015

15. Other financial assets

Group and Company2015 2014

$’000 $’000

Balance is made up of:

Unquoted equity shares in corporation at cost less allowance for impairment 328 328

Unquoted convertible notes in corporation at cost less allowance for impairment 53 53

Balance at the end of the year 381 381

Movement during the year:

Balance at beginning of the year 381 328

Addition – 53

Balance at end of the year 381 381

There were no market prices for the above unquoted available-for-sale investments and the fair value (by using valuation techniques) for the above investments are unable to be established. Accordingly, the above investments are stated at cost less allowance for impairment.

16. Inventories

Group Company2015$’000

2014$’000

2015$’000

2014$’000

Finished goods and goods for resale 3,744 3,753 – –

Work in progress 1,363 1,133 – –

Raw materials and consumables 4,977 3,498 69 –

10,084 8,384 69 –

Inventories are stated after allowance.

Movements in allowance:

Balance at beginning of the year 237 274 – –

Reversed to profit or loss included in cost of sales (30) (37) – –

Balance at end of the year 207 237 – –

The reversal of the allowance is due to goods provided for subsequently sold.

Group Company2015$’000

2014$’000

2015$’000

2014$’000

The write-downs of inventories reversed to profit or loss included in cost of sales (30) (37) – –

Changes in inventories of finished goods and work in progress (increase)/decrease (221) 3,459 – –

Raw materials and consumables used 39,970 38,552 – –

There are no inventories pledged as security for liabilities.

Innovalues Limited Annual Report 201582

notes to the Financial statements31 December 2015

17. Trade and other receivables

Group Company2015$’000

2014$’000

2015$’000

2014$’000

Trade receivables:

Outside parties 25,552 23,902 23,744 17,078

Subsidiaries (Note 3) – – 1,752 3,556

Net trade receivables – subtotal 25,552 23,902 25,496 20,634

Other receivables:

Other receivables 47 29 – –

Subsidiaries (Note 3) – – 139 58

Net other receivables – subtotal 47 29 139 58

Trade and other receivables 25,599 23,931 25,635 20,692

18. Other assets

Group Company2015$’000

2014$’000

2015$’000

2014$’000

Deposits to secure services 761 909 59 59

Prepayments 957 704 126 83

Income tax recoverable 118 185 – –

1,836 1,798 185 142

19. Cash and cash equivalents

Group Company2015$’000

2014$’000

2015$’000

2014$’000

Not restricted in use 30,482 22,671 20,721 11,421

Restricted in use (a) 161 168 – –

Cash at end of year 30,643 22,839 20,721 11,421

Interest earning balances 161 168 – –

(a) Bank balances held by banks to cover bank facilities issued.

The rates of interest for the cash on interest earning balances ranged between 0.05% and 4.00% (2014: 0.06% and 0.38%) per annum.

Innovalues Limited Annual Report 2015 83

notes to the Financial statements31 December 2015

19. Cash and cash equivalents (cont’d)

19A. Cash and cash equivalents in the statement of cash flows:

Group2015$’000

2014$’000

Amount as shown above 30,643 22,839

Cash restricted in use over 3 months (161) (168)

Cash and cash equivalents for statement of cash flows purposes at end of the year 30,482 22,671

19B. Non-cash transactions:

There were acquisitions of certain assets under plant and equipment with a total cost of $130,000 (2014: $333,000) acquired by means of finance leases.

20. Share capital

Number of shares

issued Share capitalGroup and Company No:’000 $’000

Ordinary shares of no par value:

Balance at beginning of the year 1 January 2014 320,834 11,603

Employee share option scheme – proceeds from equity share options exercised (Note 21B) 2,245 288

Balance at end of the year 31 December 2014 323,079 11,891

Employee share option scheme – proceeds from equity share options exercised (Note 21B) 2,164 357

Balance at end of the year 31 December 2015 325,243 12,248

During the reporting year, nil (2014: 185,000) ordinary shares of no par value were issued under the “Innovalues Group Share Option Scheme 2001” for cash at $0.080 each, 190,000 (2014: 1,030,000) ordinary share of no par value were issued under “Innovalues Group Share Option Scheme 2001” for cash at $0.166 each, 75,000 (2014: 1,030,000) ordinary shares of no par value were issued under the “Innovalues Group Share Option Scheme 2011” for cash at $0.100 each, 1,239,000 (2014: nil) ordinary shares of no par value were issued under the “Innovalues Group Share Option Scheme 2011” for cash at $0.150 each and 660,000 (2014: nil) ordinary shares of no par value were issued under the “Innovalues Group Share Option Scheme 2011” for cash at $0.200 each. The new shares rank pari passu in all respects with the existing shares of the company.

The ordinary shares of no par value are fully paid, carry one vote each and have no right to fixed income.

Innovalues Limited Annual Report 201584

notes to the Financial statements31 December 2015

20. Share capital (cont’d)

Capital management:

The objectives when managing capital are: to safeguard the reporting entity’s ability to continue as a going concern, so that it can continue to provide returns for owners and benefits for other stakeholders, and to provide an adequate return to owners by pricing the sales commensurately with the level of risk. The management sets the amount of capital to meet its requirements and the risk taken. There were no changes in the approach to capital management during the reporting year. The management manages the capital structure and makes adjustments to it where necessary or possible in the light of changes in conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the management may adjust the amount of dividends paid to owners, return capital to owners, issue new shares, or sell assets to reduce debt. Adjusted capital comprises all components of equity (that is, share capital and reserves).

The only externally imposed capital requirement is that, for the company to maintain its listing on the Singapore Stock Exchange, it has to have share capital with at least a free float of 10% of the shares. The company met the capital requirement on its initial listing and the rules limiting treasury share purchases mean it will automatically continue to satisfy that requirement, as it did throughout the reporting year. Management receives a report from the share registrars monthly on substantial share interests showing the non-free float and it demonstrated continuing compliance with the 10% limit throughout the reporting year.

The management does not set a target level of gearing but uses capital opportunistically to add value for shareholders. The key discipline adopted is to widen the margin between the return on capital employed and the cost of that capital.

The management monitors the capital on the basis of the debt-to-adjusted capital ratio. This ratio is calculated as net debt/adjusted capital. Net debt is calculated as total borrowings (as shown in the statement of financial position) less cash and cash equivalents.

Group Company2015$’000

2014$’000

2015$’000

2014$’000

Net debt:

All current and non-current other financial liabilities including finance leases 3,811 8,927 2,635 6,190

Less cash and cash equivalents (30,643) (22,839) (20,721) (11,421)

Net debt (26,832) (13,912) (18,086) (5,231)

Adjusted capital:

Equity 82,430 70,663 23,088 19,502

Net debt-to-adjusted capital ratio N.M. N.M. N.M. N.M.

N.M. – Not meaningful

Innovalues Limited Annual Report 2015 85

notes to the Financial statements31 December 2015

21. Share–based payments

21A. Share options – the scheme:

The company has two employee share option schemes. They are the “Innovalues Group Share Option Scheme 2001” and “Innovalues Group Share Option Scheme 2011” (known collectively as the “Scheme”). With the expiry of the Innovalues Group Share Option Scheme 2001 on 8 February 2011, the company has adopted the Innovalues Group Share Option Scheme 2011 on 15 August 2011. The Scheme, which forms an integral component of its compensation plan, is designed to reward and retain eligible participants whose services are vital to its well being and success. It provides eligible participants who have contributed to the success and development of the company with an opportunity to participate and also increase the dedication and loyalty of these participants and motivate them to perform better.

Under the rules of the Scheme, all directors and employees of the company are eligible to participate in the Scheme. Controlling shareholders or their associates are also eligible to participate in the Scheme subject to the approval of independent shareholders in the form of separate resolutions for each participant. Further, independent shareholders’ approval is also required in the form of separate resolutions for each grant of options and the terms thereof, to each participant who is a controlling shareholder or his associate.

The total number of shares over which options may be granted shall not exceed 15% of the issued share capital of the company at any time.

The Remuneration Committee is charged with the administration of the Scheme in accordance with the rules of the Scheme. The Remuneration Committee consists of 4 directors appointed by the board of directors of the company. They are Liew Yoke Pheng, Joseph, Goh Leng Tse, Anthony Teo Soon Chye and Ong Tiak Beng. The number of options to be offered to a participant shall be determined at the discretion of the Remuneration Committee who shall take into account criteria such as the rank, performance, seniority, potential for future development and length of service of the participant provided that: (a) the total number of shares which may be offered to any participant during the entire operation of the Scheme (including adjustments under the rules) shall not exceed 25% of the shares in respect of which the company may grant options; (b) the aggregate number of shares which may be offered to participants who are controlling shareholders and their associates during the entire operation of the Scheme (including adjustments under the rules) shall not exceed 25% of the shares in respect of which the company may grant options; and (c) the number of shares which may be offered to each participant who is a controlling shareholder or his associate during the entire operation of the Scheme shall not exceed 10% of the shares in respect of which the company may grant options.

The exercise price for each share in respect of which an option is exercisable shall be determined by the Remuneration Committee at its absolute discretion and fixed by the Committee at: (a) where the options are offered to a grantee prior to the date of the listing and quotation of the shares, a price equal to the price per share offered to the public at the initial public offering of the shares, that is $0.35; (b) where the options are offered after the listing date (i) a price (the “Market Price”) equal to the average of the last dealt prices for a share on the SGX-ST for the period of five (5) consecutive Market Days immediately prior to the relevant offer date; or (ii) a price which is set at a discount to the Market Price, provided that the maximum discount shall not exceed 20% of the Market Price.

Options must be exercised before the expiry of 6 years and 5 years for the Innovalues Group Share Option Scheme 2001 and the Innovalues Group Share Option Scheme 2011 respectively, from the date of the offer or such earlier date as may be determined by the Remuneration Committee. There are special provisions dealing with the lapsing or permitting the earlier exercise of options under certain circumstances including termination, bankruptcy, and death of the participant.

During the reporting year, no option to take up unissued shares of the company or any corporation in the group was granted.

Innovalues Limited Annual Report 201586

notes to the Financial statements31 December 2015

21. Share-based payments (cont’d)

21B. Activities under the Share Option Scheme:

The outstanding number of options at the end of the reporting year was:

Date of grant

Balanceas at

01.01.2015Granted/

(exercised)Options lapsed

Balanceas at

31.12.2015Exercise

price Exercise period

03.08.2010 190,000 (190,000) – – $0.166 04.08.2011 to 03.08.2016

15.08.2011 75,000 (75,000) – – $0.100 16.08.2012 to 15.08.2016

09.05.2014 3,950,000 (1,239,000) (101,000) 2,610,000 $0.150 10.05.2015 to 09.05.2019

25.07.2014 2,000,000 (660,000) – 1,340,000 $0.200 26.07.2015 to 25.07.2019

28.04.2015 – 5,060,000 (30,000) 5,030,000 $0.710 29.04.2016 to 28.04.2020

6,215,000 2,896,000 (131,000) 8,980,000

The table below summarises the number of options that were outstanding, their weighted average exercise price as at the end of the reporting year as well as the movements during the reporting year.

Totalshare options

Weighted average exercise price

2015 2014 2015 2014

No:’000 No:’000

Balance at 1 January 6,215 2,635 $0.166 $0.130

Granted 5,060 6,000 $0.710 $0.167

Exercised (2,164) (2,245) $0.165 $0.129

Lapsed (131) (175) $0.278 $0.133

Balance at 31 December 8,980 6,215 $0.471 $0.166

During the reporting year, 131,000 (2014: 175,000) shares options granted to employees that had not yet vested were lapsed. The grant date fair value of the options as originally priced and not yet charged to the profit or loss has been taken immediately to the profit or loss.

Innovalues Limited Annual Report 2015 87

notes to the Financial statements31 December 2015

21. Share-based payments (cont’d)

21B. Activities under the Share Option Scheme (cont’d):

The following table summarises information about directors’ share options outstanding at 31 December 2015:

Grants in

Grants from start of

Scheme to end of

Exercised/lapsed from

start of Scheme to

end of Balance atParticipants 2015 2015 2015 31.12.2015

No:’000 No:’000 No:’000 No:’000

Directors and controllingshareholders of the company

Goh Leng Tse – 3,000(a) (3,000) –– 360(e) (360) –– 1,500(g) (1,500) –– 2,000 (660) 1,340(h)

1,100 1,100 – 1,100(j)

Sub-total 1,100 7,960 (5,520) 2,440

Directors of the company

Ong Tiak Beng – 300(b) (300) –– 720(e) (720) –– 200(c) (200) –– 100(d) (100) –– 150(g) (150) –– 250 (83) 167(i)

250 250 – 250(j)

Sub-total 250 1,970 (1,553) 417

Anthony Teo Soon Chye – 300(b) (300) –– 200(c) (200) –– 100(d) (100) –– 150(g) (150) –– 250 (83) 167(i)

250 250 – 250(j)

Sub-total 250 1,250 (833) 417

Pung Tong Seng – 376(f) (376) –– 1,000(b) (1,000) –– 200(c) (200) –– 300 (300) –– 750(g) (750) –– 1,000(g) (333) 667(i)

1,000 1,000 – 1,000(j)

Sub-total 1,000 4,626 (2,959) 1,667

Liew Yoke Pheng – 250 (83) 167(i)

250 250 – 250(j)

Sub-total 250 500 (83) 417

Total 2,850 16,306 (10,948) 5,358

Innovalues Limited Annual Report 201588

notes to the Financial statements31 December 2015

21. Share-based payments (cont’d)

21B. Activities under the Share Option Scheme (cont’d):

(a) Exercise price of $0.450. Exercise period from 30 October 2008 to 29 October 2013

(b) Exercise price of $0.720. Exercise period from 12 June 2008 to 11 June 2013

(c) Exercise price of $0.080. Exercise period from 2 June 2010 to 1 June 2015

(d) Exercise price of $0.166. Exercise period from 4 August 2011 to 3 August 2016

(e) Exercise price of $0.217. Exercise period from 6 June 2003 to 4 June 2008

(f) Exercise price of $0.435. Exercise period from 22 October 2004 to 20 October 2009

(g) Exercise price of $0.100. Exercise period from 16 August 2012 to 15 August 2016

(h) Exercise price of $0.200. Exercise period from 26 July 2015 to 25 July 2019

(i) Exercise price of $0.150. Exercise period from 10 May 2015 to 9 May 2019

(j) Exercise price of $0.710. Exercise period from 29 April 2016 to 28 April 2020

Save as disclosed above, no participant has received 5% or more of the total number of the options available under the Scheme.

21C. Accounting for the share options:

The company has two employee share option schemes (the “Scheme”) as disclosed in Note 21A above.

Activities under the Scheme are summarised in Note 21B above.

The following table summarises information about the share options outstanding at the end of the reporting year:

Number outstanding

Number exercisable

Remaining life (years)Exercise price No:’000 No:’000

$0.150 2,610 18 3.36

$0.200 1,340 – 3.57

$0.710 5,030 – 4.33

8,980 18

Group and CompanyShare Option Reserve: 2015

$’0002014$’000

At beginning of the year 468 1,865

Expense recognised in profit or loss 439 86

Expiry of share options transferred to retained earnings (84) (1,483)

At end of the year 823 468

The expense for the year is allocated in the profit or loss as follows:

Administrative expenses 439 86

During the reporting year, the total charge to profit or loss amounted to $439,000 (2014: $86,000).

These expensed amounts are also disclosed in employee benefits expense (Note 9).

Innovalues Limited Annual Report 2015 89

notes to the Financial statements31 December 2015

21. Share-based payments (cont’d)

21C. Accounting for the share options (cont’d):

The estimate of the grant date fair value of each option issued is based on the Black-Scholes Option Pricing Model. In order to approximate the expectations that would be reflected in a current market or negotiated exchange price for these options, the calculation takes into consideration factors like behavioural considerations and non-transferability of the options granted.

Inputs to the model included:

Options granted on 28.04.2015

Options granted on 09.05.2014

Options granted on 25.07.2014

Share price # $0.765 $0.154 $0.195

Exercise price * $0.710 $0.150 $0.200

Dividend yield expected 4.0% 4.0% 4.0%

Risk-free annual interest rates 1.04% 0.486% 0.443%

Volatility expected – determined by calculating the historical volatility of the company’s share price over the previous 3 years 44.05% 58.65% 53.36%

Expected option term of years, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations 3 3 3

# Market price (last done price) of shares on date of grant. * The exercise price of the options granted is equal to the average of the last dealt prices for a share of the company

on the Singapore Securities Limited (SGX-ST) for the period of five consecutive market days immediately prior to the date of grant.

22. Other reserves

Other reserves classified on the face of the statements of financial position include the capital reserve, share option reserve, translation reserve and statutory reserve.

(a) The capital reserve represents retained earnings of Innovalues Industry (Shanghai) Co., Ltd amounting to RMB 6,077,214 (or S$1,212,000 equivalent) which were capitalised as part of the paid up capital of this subsidiary.

(b) The share option reserve represents the equity-settled options granted to employees (Note 21). The reserve is made up of the cumulative value of services received from employees recorded over the vesting period commencing from the grant date of equity-settled share options, and is reduced by the expiry, forfeiture or exercise of the share options.

(c) The currency translation reserve accumulates all foreign exchange differences on translating the results and net assets of foreign operations during the year that the group controls.

Innovalues Limited Annual Report 201590

notes to the Financial statements31 December 2015

22. Other reserves (cont’d)

(d) The statutory reserve comprises the following:

(i) Under section 102 of the Thai Civic and Commercial code, 1,250,000 Thai Baht (or S$50,700 equivalent) is not distributable as dividends and cannot be used to offset against deficits.

(ii) The subsidiaries incorporated in the PRC are required by the relevant PRC regulations and the articles of association to appropriate, where applicable, a certain percentage of profit after tax (after offsetting all recognised tax losses carried forward from previous financial years) arrived at in accordance with the PRC GAAP each year to statutory reserves. The appropriation to statutory reserves must be made before distribution of dividends to shareholders. Subject to certain restrictions, part of the reserve may be converted to increase share capital. These statutory reserves are not distributable in the form of cash dividends. The amount of retained earnings under restriction amounts to RMB 9,226,684 (or S$1,883,275 equivalent).

All reserves classified on the face of the statements of financial position as retained earnings represents past accumulated earnings and are distributable as cash dividends. The other reserves are not available for cash dividends unless realised.

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

23. Other financial liabilities

Group Company2015$’000

2014$’000

2015$’000

2014$’000

Non-current:

Financial instruments with floating interest rates:

Bank loans (Note 23B) 24 549 – 332

Non-current 24 549 – 332

Current:

Financial instruments with floating interest rates:

Bills payable to banks (Note 23A) 1,950 1,683 1,950 1,459

Bank loans (Note 23B) 520 4,277 332 4,084

Current 2,470 5,960 2,282 5,543

Total 2,494 6,509 2,282 5,875

The non-current portion is repayable as

follows:

Due within 2 to 5 years 24 549 – 332

Total non-current portion 24 549 – 332

Innovalues Limited Annual Report 2015 91

notes to the Financial statements31 December 2015

23. Other financial liabilities (cont’d)

Group Company2015 2014 2015 2014

The range of floating interest rates paid were as follows:

Bank loans2.62% to

5.25%2.20% to

5.25%2.62% to

3.47%2.20% to

2.63%

Bills payable to banks1.83% to

3.24%1.75% to

3.24%1.83% to

2.30%1.75% to

2.46%

The carrying amounts of the current and non-current portions are assumed to be a reasonable approximation of fair values.

23A. Bills payable to banks

The other credit facilities of the company are unsecured. However, the company has to comply certain financial covenants as stipulated in the bank facilities letters.

The other credit facilities of a subsidiary are covered by corporate guarantees given by the company (Note 26E).

23B. Bank loans

The bank loans of the company are unsecured. However, the company has to comply certain financial covenants as stipulated in the bank facilities letters.

The bank loans of a subsidiary are covered by a corporate guarantee from the company (Note 26E), the negative pledge on certain machinery of a subsidiary (Note 13) and the need to comply with certain financial covenants.

The bank loans are listed as follows:

Group Company2015 2014 2015 2014

$’000 $’000 $’000 $’000

(a) 3-year bank loan of SGD 2,000,000 repayable by 36 equal monthly instalments commencing October 2012 – 500 – 500

(b) 4-year bank loan of Thai Baht 19,000,000 repayable by 48 equal monthly instalments commencing March 2013 212 410 – –

(c) 36-month bank loan of SGD 2,000,000 repayable by 30 equal monthly instalments commencing August 2013 332 999 332 999

(d) 24-month bank loan of SGD 2,200,000 repayable by 24 equal monthly instalments commencing November 2013 – 917 – 917

(e) Revolving bank loan with maturity of one month – 2,000 – 2,000

Total 544 4,826 332 4,416

Innovalues Limited Annual Report 201592

notes to the Financial statements31 December 2015

24. Finance leases

Group CompanyMinimum Finance Present Minimum Finance Presentpayments charges value payments charges value

2015 $’000 $’000 $’000 $’000 $’000 $’000

Minimum lease payments payable:

Due within 1 year 1,050 (33) 1,017 103 (11) 92Due within 2 to 5 years 334 (34) 300 291 (30) 261Total 1,384 (67) 1,317 394 (41) 353

Net book value of plant and equipment under finance leases 3,844 706

Group CompanyMinimum Finance Present Minimum Finance Presentpayments charges value payments charges value

2014 $’000 $’000 $’000 $’000 $’000 $’000

Minimum lease payments payable:

Due within 1 year 1,279 (101) 1,178 74 (8) 66

Due within 2 to 5 years 1,296 (56) 1,240 279 (30) 249

Total 2,575 (157) 2,418 353 (38) 315

Net book value of plant and equipment under finance leases 4,314 579

There are leased assets under finance leases. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. The obligations under finance leases are secured by the lessor’s charge over the leased assets. Other details are as follows:

2015 2014

Average lease term, in years 4 to 7 4 to 7

Fixed interest rate per year of finance leases 3.66 % to 6.31% 3.57% to 6.31%

The fair value is a reasonable approximation of the carrying amount (Level 2).

Innovalues Limited Annual Report 2015 93

notes to the Financial statements31 December 2015

25. Trade and other payables

Group Company2015$’000

2014$’000

2015$’000

2014$’000

Trade payables:

Outside parties and accrued liabilities 13,903 14,370 4,981 5,934

Subsidiaries (Note 3) – – 47,525 32,891

Trade payables – subtotal 13,903 14,370 52,506 38,825

Other payables:

Other payables 1,416 836 26 104

Subsidiaries (Note 3) – – 5 –

Other payables – subtotal 1,416 836 31 104

Trade and other payables 15,319 15,206 52,537 38,929

26. Financial instruments: information on financial risks

26A. Categories of financial assets and liabilities

The following table categorises the carrying amount of financial assets and liabilities recorded at the end of the reporting year:

Group Company2015$’000

2014$’000

2015$’000

2014$’000

Financial assets:

Cash and cash equivalents 30,643 22,839 20,721 11,421

Loans and receivables 25,599 23,931 25,635 20,692

Available-for-sale financial assets 381 381 381 381

At end of the year 56,623 47,151 46,737 32,494

Financial liabilities:

Measured at amortised cost:

- Other financial liabilities and finance leases 3,811 8,927 2,635 6,190

- Trade and other payables 15,319 15,206 52,537 38,929

At end of the year 19,130 24,133 55,172 45,119

Further quantitative disclosures are included throughout these financial statements.

There are no significant fair value measurements recognised in the statements of financial position.

Innovalues Limited Annual Report 201594

notes to the Financial statements31 December 2015

26. Financial instruments: information on financial risks (cont’d)

26B. Financial risk management

The main purpose for holding or issuing financial instruments is to raise and manage the finances for the entity’s operating, investing and financing activities. The main risks arising from the entity’s financial instruments are credit risk, interest risk, liquidity risk, foreign currency risk and market price risk comprising interest rate and currency risk exposures. The management has certain practices for the management of financial risks. The guidelines set up the short and long term objectives and action to be taken in order to manage the financial risks. The major guidelines are the following:

1. Minimise interest rate, currency, credit and market risk for all kinds of transactions.

2. Maximise the use of “natural hedge”: favouring as much as possible the natural off-setting of sales and costs and payables and receivables denominated in the same currency and therefore put in place hedging strategies only for the excess balance.

3. Enter into derivatives or any other similar instruments solely for hedging purposes.

4. All financial risk management activities are carried out and monitored by senior management staff.

5. All financial risk management activities are carried out following good market practices.

6. May consider investing in shares or similar instruments.

There have been no changes to the exposures to risk; the objectives, policies and processes for managing the risk and the methods used to measure the risk.

The group financial controller who monitors the procedures reports to the board of directors.

26C. Fair values of financial instruments

The analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 are disclosed in the relevant notes to the financial statements. These include both the significant financial instruments stated at amortised cost and at fair value in the statement of financial position. The carrying values of current financial instruments approximate their fair values due to the short-term maturity of these instruments and the disclosures of fair value are not made when the carrying amount of current financial instruments is a reasonable approximation of the fair value.

Innovalues Limited Annual Report 2015 95

notes to the Financial statements31 December 2015

26. Financial instruments: information on financial risks (cont’d)

26D. Credit risk on financial assets

Financial assets that are potentially subject to concentrations of credit risk and failures by counterparties to discharge their obligations in full or in a timely manner consist principally of cash balances with banks, cash equivalents, receivables and certain other financial assets. The maximum exposure to credit risk is: the total of the fair value of the financial assets; the maximum amount the entity could have to pay if the guarantee is called on; and the full amount of any payable commitments at the end of the reporting year. Credit risk on cash balances with banks and any other financial instruments is limited because the counter-parties are entities with acceptable credit ratings. Credit risk on other financial assets is limited because the other parties are entities with acceptable credit ratings. For credit risk on receivables, an ongoing credit evaluation is performed on the financial condition of the debtors and a loss from impairment is recognised in profit or loss. The exposure to credit risk with customers is controlled by setting limits on the exposure to individual customers and these are disseminated to the relevant persons concerned and compliance is monitored by management. There is no significant concentration of credit risk on receivables, as the exposure is spread over a large number of counter-parties and customers unless otherwise disclosed in the notes to the financial statements below.

Cash and cash equivalents represent short-term deposits with less than 90 days maturity except for cash restricted in use (Note 19).

The credit period generally granted to non-related trade receivable customers is about 30 days to 90 days (2014: 30 days to 90 days). But some customers take a longer period to settle the amounts.

(a) Ageing analysis of the age of trade receivables amounts that are past due as at the end of reporting year but impaired:

Group Company2015$’000

2014$’000

2015$’000

2014$’000

Trade receivables:

31-60 days 5,032 4,503 4,350 3,685

61-90 days 2,434 1,350 1,944 846

Over 90 days 80 – 36 –

At end of the year 7,546 5,853 6,330 4,531

As at the end of reporting year, there were no amounts that were impaired.

Trade receivable amounts that were past due at the end of the reporting year have been settled after the end of the reporting year. Other receivables are normally with no fixed terms and therefore there is no maturity.

Concentration of trade receivable customers:

Group Company2015$’000

2014$’000

2015$’000

2014$’000

Top 1 customer 9,115 6,512 9,074 4,598

Top 2 customers 11,775 11,110 11,735 7,183

Top 3 customers 13,970 12,812 13,929 8,884

Innovalues Limited Annual Report 201596

notes to the Financial statements31 December 2015

26. Financial instruments: information on financial risks (cont’d)

26E. Liquidity risk – financial liabilities maturity analysis

The following table analyses the non-derivative financial liabilities by remaining contractual maturity (contractual and undiscounted cash flows):

Less than1 year 1 – 5 years Total$’000 $’000 $’000

Non-derivative financial liabilities:Group2015:Gross borrowings commitments 2,529 25 2,554Gross finance lease obligations 1,050 334 1,384Trade and other payables 15,319 – 15,319At end of the year 18,898 359 19,257

Less than1 year 1 – 5 years Total$’000 $’000 $’000

Non-derivative financial liabilities:Group2014:Gross borrowings commitments 6,097 569 6,666Gross finance lease obligations 1,279 1,296 2,575Trade and other payables 15,206 – 15,206At end of the year 22,582 1,865 24,447

Less than1 year 1 – 5 years Total$’000 $’000 $’000

Non-derivative financial liabilities:Company2015:Gross borrowings commitments 2,330 – 2,330Gross finance lease obligations 103 291 394Trade and other payables 52,537 – 52,537At end of the year 54,970 291 55,261

Less than1 year 1 – 5 years Total$’000 $’000 $’000

Non-derivative financial liabilities:Company2014:Gross borrowings commitments 5,656 341 5,997Gross finance lease obligations 74 279 353Trade and other payables 38,929 – 38,929

At end of the year 44,659 620 45,279

Innovalues Limited Annual Report 2015 97

notes to the Financial statements31 December 2015

26. Financial instruments: information on financial risks (cont’d)

26E. Liquidity risk – financial liabilities maturity analysis (cont’d)

The above amounts disclosed in the maturity analysis are the contractual undiscounted cash flows and such undiscounted cash flows differ from the amount included in the statements of financial position. When the counterparty has a choice of when an amount is paid, the liability is included on the basis of the earliest date on which it can be required to pay.

Financial guarantee contracts – For financial guarantee contracts the maximum earliest period in which the guarantee could be called is used. At the end of the reporting year no claims on the financial guarantees are expected. The following table shows the maturity analysis of the contingent liabilities:

Less than1 year 1 – 5 years Total$’000 $’000 $’000

Company2015:Financial guarantee contracts – in favour of subsidiaries’

banking facilities 776 23 799At end of the year 776 23 799

Less than1 year 1 – 5 years Total$’000 $’000 $’000

Company2014:Financial guarantee contracts – in favour of subsidiaries’

banking facilities 417 217 634At end of the year 417 217 634

The liquidity risk is managed on the basis of expected maturity dates of the financial liabilities. The average credit period taken to settle non-related trade payables is about 90 days (2014: 90 days). The other payables are with short-term durations. The classification of the financial assets is shown in the statements of financial position as they may be available to meet liquidity needs and no further analysis is deemed necessary.

The liquidity risk refers to the difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. It is expected that all the liabilities will be paid at their contractual maturity. In order to meet such cash commitments the operating activity is expected to generate sufficient cash inflows.

Bank facilities:

2015$’000

2014$’000

Undrawn borrowing facilities 32,408 31,353Unused bank guarantees 412 663

The undrawn borrowing facilities are available for operating activities and to settle other commitments. Borrowing facilities are maintained to ensure funds are available for the operations. A monthly schedule showing the maturity of financial liabilities and unused borrowing facilities is provided to the directors to assist them in monitoring the liquidity risk.

Innovalues Limited Annual Report 201598

notes to the Financial statements31 December 2015

26. Financial instruments: information on financial risks (cont’d)

26F. Interest rate risk

The interest rate risk exposure is mainly from changes in fixed rate and floating interest rates. The interest from financial assets including cash balances is not significant. The following table analyses the breakdown of the financial liabilities (excluding derivatives) by type of interest rate:

Group Company2015$’000

2014$’000

2015$’000

2014$’000

Financial liabilities:

Fixed rate 1,317 2,418 353 315

Floating rate 2,494 6,509 2,282 5,875

At end of the year 3,811 8,927 2,635 6,190

The floating rate debt obligations are with interest rates that are re-set regularly at one, three or six month intervals. The interest rates are disclosed in the respective notes.

Sensitivity analysis: The effect on pre-tax profit is not significant.

26G. Foreign currency risks

Analysis of amounts denominated in non-functional currency:

2015 2014

Group Cash Receivables Total Cash Receivables Total

Financial assets: $’000 $’000 $’000 $’000 $’000 $’000

At 31 December

US Dollar 19,328 23,841 43,169 15,863 22,818 38,681

Singapore Dollar 236 26,774 27,010 77 25,117 25,194

Euro 1,734 602 2,336 1,002 32 1,034

21,298 51,217 72,515 16,942 47,967 64,909

2015 2014

Group Borrowings Payables Total Borrowings Payables Total

Financial liabilities: $’000 $’000 $’000 $’000 $’000 $’000

At 31 December :

US Dollar 1,950 3,564 5,514 1,460 5,030 6,490

Singapore Dollar – 2,328 2,328 – 2,678 2,678

Malaysian Ringgit – – – – 37 37

Euro – 120 120 – 160 160

1,950 6,012 7,962 1,460 7,905 9,365

Innovalues Limited Annual Report 2015 99

notes to the Financial statements31 December 2015

26. Financial instruments: information on financial risks (cont’d)

26G. Foreign currency risks (cont’d)

2015 2014

Company Cash Receivables Total Cash Receivables Total

Financial assets: $’000 $’000 $’000 $’000 $’000 $’000

At 31 December :

US Dollar 16,756 24,575 41,331 9,111 18,566 27,677

Euro 1,734 602 2,336 1,002 32 1,034

18,490 25,177 43,667 10,113 18,598 28,711

2015 2014

Company Borrowings Payables Total Borrowings Payables Total

Financial liabilities: $’000 $’000 $’000 $’000 $’000 $’000

At 31 December :

US Dollar 1,950 22,258 24,208 1,460 12,850 14,310

Malaysian Ringgit – – – – 37 37

Euro – 120 120 – 153 153

1,950 22,378 24,328 1,460 13,040 14,500

There is exposure to foreign currency risk as part of its normal business. In particular, there is significant exposure to US Dollar currency risk due to the large value of sales made in this currency.

Sensitivity analysis for significant items:

Group Company2015$’000

2014$’000

2015$’000

2014$’000

A hypothetical 10% depreciation in the exchange rate of the functional currency against the US Dollar would have a favourable effect on profit before tax of 3,766 3,219 1,712 1,337

A hypothetical 10% depreciation in the exchange rate of the functional currency against the Singapore Dollar would have a favourable effect on profit before tax of 2,468 2,252 – –

A hypothetical 10% depreciation in the exchange rate of the functional currency against the Malaysian Ringgit would have an adverse effect on profit before tax of – (4) – (4)

A hypothetical 10% depreciation in the exchange rate of the functional currency against the Euro would have a favourable effect on profit before tax of 222 87 222 88

Innovalues Limited Annual Report 2015100

notes to the Financial statements31 December 2015

26. Financial instruments: information on financial risks (cont’d)

26G. Foreign currency risks (cont’d)

The above table shows sensitivity to a hypothetical 10% variation in the functional currency against the relevant non-functional foreign currencies. The sensitivity rate used is the reasonably possible change in foreign exchange rates. For similar rate strengthening of the functional currency against the relevant foreign currencies above, there would be comparable impacts in the opposite direction on the profit or loss.

The hypothetical changes in exchange rates are not based on observable market data (unobservable inputs). The sensitivity analysis is disclosed for each non-functional currency to which the entity has significant exposure at end of the reporting year. The analysis above has been carried out on the following basis that there are no hedged transactions.

In management’s opinion, the above sensitivity analysis is unrepresentative of the foreign currency risks as the historical exposure does not reflect the exposure in future.

27. Capital commitments

Estimated amounts committed at the end of the reporting year for future capital expenditure but not recognised in the financial statements are as follows:

Group Company2015$’000

2014$’000

2015$’000

2014$’000

Commitments to purchase property,

plant and equipment 1,962 1,096 144 244

28. Operating lease payment commitments – as lessee

At the end of the reporting year, the total of future minimum lease payment commitments under non-cancellable operating leases are as follows:

Group Company2015$’000

2014$’000

2015$’000

2014$’000

Not later than one year 1,164 1,085 97 153

Later than one year and not later than five years 313 590 222 319

Rental expense for the year 1,021 1,066 153 146

Operating lease payments represent rentals payable for certain of its rented factory property, and plant and equipment. The lease rental terms are negotiated for an average term of three years and rentals are subject to an escalation clause but the amount of the rent increase is not to exceed a certain percentage.

Innovalues Limited Annual Report 2015 101

notes to the Financial statements31 December 2015

29. Dividends and equity shares

Group and Company2015$’000

2014$’000

Interim exempt (1-tier) dividend paid of 1.2/0.6 cents 3,903 1,938

Final exempt (1-tier) dividend paid of 0.6 cents 1,947 1,926

Special exempt (1-tier) dividend paid of 0.8 cents 2,597 –

8,447 3,864

In respect of the current reporting year, the directors propose that a final dividend of 1.2 cents per share and a special dividend of 1.4 cents per share with a total of $8,456,000 be paid to shareholders after the annual general meeting to be held on 19 April 2016. There are no income tax consequences. This dividend is subject to approval by shareholders at the next annual general meeting and has not been included as a liability in these financial statements. The proposed dividend is payable in respect of all ordinary shares in issue at the end of the reporting year and including any new qualifying shares issued up to the date the dividend becomes payable.

30. Changes and adoption of financial reporting standards

For the current reporting year new or revised Singapore Financial Reporting Standards and the related Interpretations to FRS (“INT FRS”) were issued by the Singapore Accounting Standards Council. Those applicable to the reporting entity are listed below. These applicable new or revised standards did not require any modification of the measurement methods or the presentation in the financial statements.

FRS No. Title

FRS 1 Amendments to FRS 1: Disclosure Initiative (early application)

FRS 19 Amendments To FRS 19: Defined Benefit Plans: Employee Contributions

Various Improvements to FRSs (Issued in January 2014). Relating to FRS 102 Share-based Payment FRS 103 Business Combinations FRS 108 Operating Segments FRS 113 Fair Value MeasurementFRS 16 Property, Plant and Equipment FRS 24 Related Party Disclosures FRS 38 Intangible Assets

Various Improvements to FRSs (Issued in February 2014). Relating to FRS 103 Business Combinations FRS 113 Fair Value Measurement

Innovalues Limited Annual Report 2015102

notes to the Financial statements31 December 2015

31. New or amended standards in issue but not yet effective

For the future reporting years new or revised Singapore Financial Reporting Standards and the related Interpretations to FRS (“INT FRS”) were issued by the Singapore Accounting Standards Council and these will only be effective for future reporting years. Those applicable to the reporting entity for future reporting years are listed below. The transfer to the applicable new or revised standards from the effective dates is not expected to result in material adjustments to the financial position, results of operations, or cash flows for the following year.

FRS No. Title

Effective date for periods beginning

on or after

FRS 1 Amendments to FRS 1: Disclosure Initiative 1 Jan 2016

FRS 16 & 38 Amendments to FRS 16 and FRS 38: Clarification of Acceptable Methods of Depreciation and Amortisation

1 Jan 2016

Various Improvements to FRSs (Issued in November 2014) 1 Jan 2016

FRS 19 Employee Benefits - Discount rate: regional market issue FRS 34 Interim Financial Reporting - Disclosure of information elsewhere in the interim financial report

FRS 115 Revenue from Contracts with Customers 1 Jan 2018

FRS 109 Financial Instruments 1 Jan 2018

Innovalues Limited Annual Report 2015 103

inFormation on shareholDinGsAs at 11 March 2016

Issued and fully paid capital : SGD12,248,354.00Number of shares : 325,243,000 Class of shares : ordinary sharesVoting rights : one vote per share

Distribution of shareholdings

Size of Shareholdings No. of Shareholders % No. of Shares %

1 – 99 3 0.24 101 0.00

100 – 1,000 37 2.93 28,400 0.01

1,001 – 10,000 527 41.69 3,676,920 1.13

10,001 – 1,000,000 668 52.85 46,203,602 14.21

1,000,001 and above 29 2.29 275,333,977 84.65

TOTAL: 1,264 100.00 325,243,000 100.00

Shareholding held by the public

Based on the information available to the Company as at 11 March 2016, approximately 54.83% of the issued ordinary shares of the Company is held by the public and, therefore, Rule 723 of the Listing Manual issued by the Singapore Exchange Securities Trading Limited is complied with.

Substantial shareholders

Direct interest Deemed interestName of shareholders No. of shares % of shares No. of shares % of shares

Goh Leng Tse 66,360,000 20.40 2,886,000(1) 0.89

Koh Boon Hwee 22,000,000 6.76 – –

Ong Tiak Beng 29,160,000 8.97 2,050,000(2) 0.63

Saga Tree Capital Advisors Pte. Ltd. – – 19,469,600(3) 5.99

Catherine Tan Suat Wah – – 19,469,600(4) 5.99

Notes:-

(1) The deemed interest of Mr Goh Leng Tse arises from shares held by his nominee and spouse.

(2) The deemed interest of Mr Ong Tiak Beng arises from shares held by his nominee.

(3) Saga Tree Capital Advisors Pte. Ltd. (“STCA”) is the Investment Manager/Advisor to a number of separate Funds. The deemed interest of STCA arises as it is able to exercise control and management of the portfolios and has been given limited discretionary voting authority by the underlying investors.

(4) Catherine Tan Suat Wah is deemed to be interested in the shares held by STCA by virtue of her controlling interest in STCA.

Innovalues Limited Annual Report 2015104

inFormation on shareholDinGsAs at 11 March 2016

Top twenty shareholders

No. Name No. of Shares %

1 Goh Leng Tse 66,360,000 20.40

2 DBS Nominees (Private) Limited 38,293,794 11.77

3 Ong Tiak Beng 29,160,000 8.97

4 Citibank Nominees Singapore Pte Ltd 23,746,719 7.30

5 Koh Boon Hwee 22,000,000 6.76

6 HSBC (Singapore) Nominees Pte Ltd 18,829,200 5.79

7 Morgan Stanley Asia (Singapore) Securities Pte Ltd 12,170,711 3.74

8 Raffles Nominees (Pte) Limited 9,020,200 2.77

9 United Overseas Bank Nominees (Private) Limited 6,663,500 2.05

10 Hia Cher Bee 5,343,000 1.64

11 Bnp Paribas Securities Services Singapore Branch 4,979,200 1.53

12 Ho Su Chin 4,671,800 1.44

13 DBS Vickers Securities (Singapore) Pte Ltd 4,017,400 1.24

14 CIMB Securities (Singapore) Pte. Ltd. 3,468,606 1.07

15 Maybank Kim Eng Securities Pte. Ltd. 3,241,447 1.00

16 Pung Tong Seng 2,525,000 0.78

17 Koh Beow Ko 2,112,000 0.65

18 OCBC Nominees Singapore Private Limited 2,100,500 0.65

19 UOB Kay Hian Private Limited 1,953,400 0.60

20 Lau Kin Hong 1,931,300 0.59

TOTAL 262,587,777 80.74

Innovalues Limited Annual Report 2015 105

notice oF annual General meetinG

NOTICE IS HEREBY GIVEN that the 2016 Annual General Meeting of the shareholders of the Company will be held at 8 Wilkie Road #03-08 Wilkie Edge Singapore 228095 on 19 April 2016 at 3.00 p.m. to transact the following businesses:

AS ORDINARY BUSINESS

1. To receive and consider the Directors’ Statements and Audited Financial Statements of the Company for the year ended 31 December 2015 and the Auditors’ Report thereon.

Resolution 1

2. To declare a final exempt (one-tier) dividend of 1.2 cents per ordinary share for the year ended 31 December 2015.

Resolution 2

3. To declare a special exempt (one-tier) dividend of 1.4 cents per ordinary share for the year ended 31 December 2015.

Resolution 3

4. To re-elect the following Director retiring pursuant to the Company’s Constitution: Resolution 4

(a) Mr Liew Yoke Pheng, Joseph (Article 106)

[Note: Mr Liew Yoke Pheng, Joseph, upon re-election as Director of the Company, shall remain as Chairman of the Remuneration Committee and as a member of the Audit Committee and Nominating Committee. Mr Liew Yoke Pheng, Joseph shall be considered independent for the purpose of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited.]

5. To re-elect the following Director retiring pursuant to the Company’s Constitution:

(a) Mr Pung Tong Seng (Article 106)

Resolution 5

6. To approve the Directors’ fees of S$250,000 for the year ended 31 December 2015. Resolution 6

7. To re-appoint RSM Chio Lim LLP as the Auditors for the ensuing year and to authorise the Directors to fix their remuneration.

Resolution 7

AS SPECIAL BUSINESS

To consider and, if thought fit, to pass the following Resolutions as Ordinary Resolutions, with or without amendments:

8. Proposed Share Issue Mandate

“That pursuant to Section 161 of the Companies Act, Cap. 50. and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”), the Directors of the Company be authorized and empowered to:

(a) (i) issue shares in the Company (“shares”) whether by way of rights, bonus or otherwise; and/or

(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) options, warrants, debentures or other instruments convertible into shares,

Resolution 8

Innovalues Limited Annual Report 2015106

notice oF annual General meetinG

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors of the Company may in their absolute discretion deem fit; and

(b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instrument made or granted by the Directors of the Company while this Resolution was in force,

provided that:

(1) the aggregate number of shares (including shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution) to be issued pursuant to this Resolution shall not exceed fifty per centum (50%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares and Instruments to be issued other than on a pro rata basis to existing shareholders of the Company shall not exceed twenty per centum (20%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below);

(2) (subject to such calculation as may be prescribed by the SGX-ST) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraph (1) above, the total number of issued shares (excluding treasury shares) shall be based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time of the passing of this Resolution, after adjusting for:

(a) new shares arising from the conversion or exercise of any convertible securities;

(b) new shares arising from exercising share options or vesting of share awards which are outstanding or subsisting at the time of the passing of this Resolution; and

(c) any subsequent bonus issue, consolidation or subdivision of shares.

(3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the Constitution of the Company; and

(4) unless revoked or varied by the Company in a general meeting, such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held whichever is earlier.”

[See Explanatory Note (i)]

Innovalues Limited Annual Report 2015 107

notice oF annual General meetinG

9.

10.

Authority to offer and grant options and issue shares in accordance with the Innovalues Group Share Option Scheme 2011

“That approval be and is hereby given to the Directors of the Company to offer and grant options in accordance with the provisions of the Innovalues Group Share Option Scheme 2011 (“the Scheme”), and pursuant to Section 161 of the Companies Act, Cap. 50, to allot and issue from time to time such number of ordinary shares in the Company as may be required to be issued pursuant to the exercise of the options under the Scheme provided always that the aggregate number of ordinary shares to be issued pursuant to the Scheme shall not exceed 15 per cent of the total issued shares excluding treasury shares of the Company at any time and from time to time.”

[See Explanatory Note (ii)]

And to transact any other business which may be properly transacted at an Annual General Meeting.

Resolution 9

Explanatory Notes:

(i)

(ii)

The proposed Resolution 8 above, if passed, will empower the Directors of the Company, effective until the conclusion of the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares, make or grant instruments convertible into shares and to issue shares pursuant to such instruments, up to a number not exceeding, in total, 50% of the total number of issued shares (excluding treasury shares) in the capital of the Company, of which up to 20% may be issued other than on a pro-rata basis to shareholders.

The Ordinary Resolution proposed in item 9 above, if passed, will empower the Directors of the Company to offer and grant options under the Scheme and to allot and issue shares pursuant to the exercise of options under the Scheme, subject to the terms of the resolution.

BY ORDER OF THE BOARD

SOO KING TENGCompany Secretary

Date : 1 April 2016

Innovalues Limited Annual Report 2015108

notice oF annual General meetinG

Notes :

(a) A member entitled to attend and vote at a general meeting is entitled to appoint no more than two proxies to attend and vote on his behalf. Where a member appoints more than one proxy, he shall specify the proportion of his shares to be represented by each proxy.

(b) Pursuant to Section 181 of the Companies Act, Cap. 50 of Singapore, any member who is a relevant intermediary is entitled to appoint one or more proxies to attend and vote at a general meeting. Relevant intermediary is either:

(i) a banking corporation licensed under the Banking Act (Cap. 19) or its wholly-owned subsidiary which provides nominee services and holds shares in that capacity;

(ii) a capital market services license holder which provides custodial services for securities under the Securities and Futures Act

(Cap. 289) and holds in that capacity; or

(iii) the Central Provident Fund (“CPF”) Board established by the Central Provident Fund Act (Cap. 36), in respect of shares purchased on behalf of CPF investors.

(c) If a proxy is to be appointed, the form must be deposited at the registered office of the Company at 9 Kallang Place #07-08/09 Singapore 339154 not less than 48 hours before the meeting.

(d) A proxy need not be a member of the Company.

Personal Data Privacy:

By submitting an instrument appointing a proxy(ies) and/or representatives to attend, speak and vote at the AGM and/or any adjournment thereof, a member of the Company (i) consents to the collection, use and disclosure of the member’s personal data by the Company (or its agents) for the purpose of the processing and administration by the Company (or its agents) of proxies and representatives appointed for the AGM (including any adjournment thereof) and the preparation and compilation of the attendance lists, minutes and other documents relating to the AGM (including any adjournment thereof), and in order for the Company (or its agents) to comply with any applicable laws, listing rules, regulations and/or guidelines (collectively, the “Purposes”), (ii) warrants that where the member discloses the personal data of the member’s proxy(ies) and/or representative(s) to the Company (or its agents), the member has obtained the prior consent of such proxy(ies) and/or representative(s) for the collection, use and disclosure by the Company (or its agents) of the personal data of such proxy(ies) and/or representative(s) for the Purposes, and (iii) agrees that the member will indemnify the Company in respect of any penalties, liabilities, claims, demands, losses and damages as a result of the member’s breach of warranty.

&INNOVALUES LIMITED Registration No. 199702822E (Incorporated in Singapore)

PROXY FORM

I/We

of

being a member(s) of INNOVALUES LIMITED (the “Company”), hereby appoint

Name AddressNRIC/Passport

NumberProportion of Shareholdings

and/or (delete as appropriate)

Name AddressNRIC/Passport

NumberProportion of Shareholdings

as my/our proxy/proxies to attend and to vote for me/us on my/our behalf at the 2016 Annual General Meeting of the Company to be held at 8 Wilkie Road #03-08 Wilkie Edge Singapore 228095 on Tuesday, 19 April 2016 at 3.00 p.m. and at any adjournment thereof.

(Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the resolutions as set out in the Notice of Annual General Meeting. In the absence of specific directions, the proxy/proxies will vote or abstain as he/they may think fit, as he/they will on any other matter arising at the Annual General Meeting.)

No. Resolutions For Against

1 To receive and consider the Directors’ Statements and Audited Financial Statements for the Financial Year Ended 31 December 2015 and the Auditors’ Report thereon.

2 To declare a final exempt (one-tier) dividend of 1.2 cents per ordinary share for the year ended 31 December 2015.

3 To declare a special exempt (one-tier) dividend of 1.4 cents per ordinary share for the year ended 31 December 2015.

4 To re-elect Mr Liew Yoke Pheng, Joseph as Director.

5 To re-elect Mr Pung Tong Seng as Director.

6 To approve Directors’ fees for the year ended 31 December 2015.

7 To re-appoint RSM Chio Lim LLP as Auditors for the ensuing year and to authorise the Directors to fix their remuneration.

8 To authorise the Directors to allot and issue shares and convertible securities.

9 To authorise the Directors to offer and grant options and issue shares in accordance with the Innovalues Group Share Option Scheme 2011.

Dated this day of 2016

Total number of Shares held

Signature(s) of member(s) or common sealIMPORTANT: PLEASE READ NOTES OVERLEAF

IMPORTANT

1. A relevant intermediary may appoint more than two proxies to attend the Annual General Meeting and vote (please see Note 3 for the definition of “relevant intermediary”).

2. For investors who have used their CPF monies to buy shares in the Company, this Proxy Form is not valid for use and shall be ineffective for all intents and purposes if used or is purported to be used by them.

3. Please read the notes to the Proxy Form.

NOTES : 1. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 81SF of the

Securities and Futures Act, Cap. 289), you should insert that number of shares. If you have shares registered in your name in the Register of Members, you should insert that number of shares. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares. If no number is inserted, this form of proxy will be deemed to relate to all the shares held by you.

2. A member who is not a relevant intermediary is entitled to appoint not more than two proxies to attend, speak and vote on his behalf at the general meeting. Where a member appoints more than one proxy, he shall specify the proportion of his shares to be represented by each such proxy, failing which, the nomination shall be deemed to be alternative.

3. Pursuant to Section 181 of the Companies Act, Cap. 50 of Singapore, any member who is a relevant intermediary is entitled to appoint one or more proxies to attend and vote at the general meeting. Relevant intermediary is either: (i) a banking corporation licensed under the Banking Act (Cap. 19) or its wholly-owned subsidiary which provides nominee services and holds shares in that

capacity; (ii) a capital market services license holder which provides custodial services for securities under the Securities and Futures Act (Cap. 289) and holds in that

capacity; or (iii) the Central Provident Fund (“CPF”) Board established by the Central Provident Fund Act (Cap. 36), in respect of shares purchased on behalf of CPF

investors.4. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at Blk 9 Kallang Place #07-08/09 Singapore 339154 not later

than 48 hours before the time set for the Annual General Meeting.5. The instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorised in writing. Where the instrument appointing a

proxy or proxies is executed by a corporation, it must be executed under its common seal or signed on its behalf by an attorney duly authorized in writing or by an authorised officer of the corporation.

6. Where an instrument appointing a proxy or proxies is signed on behalf of the appointer by an attorney the letter or power of attorney (or other authority) or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.

7. A corporation which is a member may by resolution of its directors or other governing body authorise such person as it thinks fit to act as its representative at the Annual General Meeting.

8. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of members of the Company whose shares are entered against their names in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if such members are not shown to have shares entered against their names in the Depository Register at 72 hours before the time appointed for holding the Annual General Meeting as certified by The Central Depository (Pte) Limited to the Company.

Personal Data Privacy:By submitting an instrument appointing a proxy(ies) and/or representative(s), the member accepts and agrees to the personal data privacy terms set out in the Notice of Annual General Meeting dated 1 April 2016.

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Company SecretaryInnovalues Limited

Block 9, Kallang Place#07-08/09

Singapore 339154

AffixPostageStamp

innovalues limitedRegistration No. 199702822E

9 Kallang Place #07-08/09

Singapore 339154

Tel: [65] 6298 2374

Fax: [65] 6298 2375

www.innovalues.com