Innotek AR2007 reviewsinnotek.listedcompany.com/misc/ar2007.pdf2007 in review 03 financial highlights 08 corporate structure 10 board of directors 12 key executive management 14 innotek

I N N O VAT I N G

ANNUAL REPORT 2007

For Tomorrow

INNOTEK Limited1 Finlayson Green #15-02 Singapore 049246Tel : (65) 6535 0689 Fax : (65) 6533 2680www.innotek.com.sgCo. Reg. No.199508431Z

I N N O VAT I N G

ANNUAL REPORT 2007

INN

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L REPORT 2007

For Tomorrow

12 16BOARD OF DIRECTORS INNOTEK LOCATIONS

STARTS HERE

2007 IN REVIEW 03 FINANCIAL HIGHLIGHTS 08 CORPORATE STRUCTURE 10

BOARD OF DIRECTORS 12 KEY EXECUTIVE MANAGEMENT 14 INNOTEK LOCATIONS 16 CORPORATE GOVERNANCE 17 DIRECTORS’ REPORT 28 STATEMENT BY DIRECTORS 35 INDEPENDENT AUDITORS’ REPORT 36

CONSOLIDATED PROFIT AND LOSS ACCOUNT 38 BALANCE SHEETS 39 STATEMENT OF CHANGES IN EQUITY 40 CONSOLIDATED CASH FLOW STATEMENT 43 NOTES TO THE FINANCIAL STATEMENTS 45

STATISTICS OF SHAREHOLDINGS 115 NOTICE OF ANNUAL GENERAL MEETING 117 PROXY FORM

03 082007 IN REVIEW FINANCIAL HIGHLIGHTS

INNOVATION

CONTENTS

DIRECTORSRobert Sebastiaan Lette (Chairman)Steven Glenn CampbellYong Kok HoonDr Ong Chit ChungLeong Swee Sum (Resigned on 27 April 2007)Prof Low Teck Seng

AUDIT COMMITTEEDr Ong Chit Chung (Chairman) Prof Low Teck SengMr Robert Sebastiaan Lette

REMUNERATION COMMITTEE/SHARE OPTION PLAN COMMITTEEMr Robert Sebastiaan Lette (Chairman) Dr Ong Chit Chung Prof Low Teck Seng

NOMINATING COMMITTEEProf Low Teck Seng (Chairman) Mr Robert Sebastiaan LetteDr Ong Chit Chung

SECRETARIESLinda Sim Hwee Ai Susie Low Geok Eng

REGISTRAR AND SHARE TRANSFER AGENTBoardroom Corporate & Advisory Services Pte Ltd3 Church Street #08-01Samsung HubSingapore 049483

AUDITORS Ernst & YoungOne Raffl es QuayNorth Tower, Level 18Singapore 048583Partner-in-Charge: Nagaraj Sivaram(from 2007)

PRINCIPAL BANKERS The Hongkong and Shanghai Banking CorporationBank of ChinaThe Bank of Tokyo-Mitsubishi UFJ, LtdDBS BankUnited Overseas Bank

REGISTERED ADDRESS 1 Finlayson Green #15-02Singapore 049246Tel: (65) 6535-0689Fax: (65) 6533-2680Website: www.innotek.com.sg

CORPORATE INFORMATION

INNOTEK LIMITED | ANNUAL REPORT 200702

AN INNOVATIVE COMPANY

INNOTEK LIMITED | ANNUAL REPORT 2007 03

InnoTek Limited reversed sharply from losses in FY2006 to profitability in FY2007 from strong contribution of its precision metal stamping division and a one-time gain from the sale of the loss-making data storage division. With a stronger balance sheet, we will continue to pursue organic growth while considering strategic alliances, mergers and acquisitions to enhance shareholder value.

DEAR SHAREHOLDERS,

2007 IN REVIEW

FY2007 marked a major milestone in the corporate history of InnoTek Limited (“InnoTek” or the “Group”), formerly known as Magnecomp International Limited. We present you what we consider to be a commendable set of results which includes strong growth of our precision metal components division, Mansfi eld Manufacturing Company Limited (“MSF”), and a signifi cant one-time gain from the disposal of our loss-making data storage division, Magnecomp Precision Technology Public Limited Company (“MPT”).

DISPOSAL AND PERFORMANCE OF LOSS-MAKING DATA STORAGE DIVISION, MPT

As shareholders are aware, the Group completed the disposal of its entire 74.3%-stake in Thailand-listed MPT in November 2007 to TDK Corporation of Japan (“TDK”) for US$123 million (approximately S$176.9 million), recording a one-time gain of S$82.9 million.

The decision to dispose of MPT was undertaken after a critical review of our future involvement in the Hard Disk Drive suspension industry. We came to the conclusion that to remain a leader in this industry, the Group would have had to make substantial investments to develop advanced product design and next-generation suspension assembly technology.

Such continuing investment will require further fi nancial support, either in the form of capital injection and/or corporate guarantees of bank fi nancing.

Subsequent to the completion of the disposal, which was approved by shareholders in November 2007, we changed our name from Magnecomp International Limited to InnoTek Limited.

In 2007, MPT recorded essentially a fl at revenue run rate of S$334.1 million, (10 months) versus S$401.9 million in FY2006. Nevertheless, the data storage division managed to reduce losses from S$29.3 million in FY2006 to S$25.9 million in FY2007 after much effort to streamline Thailand’s operations, reduce headcount, restructure and trimming operating costs with closure of a non-performing China plant.


PERFORMANCE OF CONTINUING BUSINESS, MSF

Our remaining business under MSF delivered a sterling performance in the year under review.

The precision metal components division has been expanding at a compounded annual average revenue growth of 30% over the last fi ve years. In FY2007, this growth trend continued with turnover from this division rising 40.4% to S$448.9 million from S$319.7 million a year earlier.

MSF’s record turnover in FY2007 came primarily from the result of increased revenue from the Stamping and Tooling businesses. Higher demand for LCD TV components, TV stands and new offi ce automation products contributed to higher turnover for the Stamping and Assembly businesses, while higher demand from European and Japanese automotive customers led to improved turnover for the Tooling business.

The FY2007 turnover was also increased by the maiden contribution from the newly acquired subsidiary, Exerion Precision Technology Holding B.V. (“Exerion”), which manufactures frames for the offi ce automation, industrial, semiconductor and medical industries.

As a result of the higher turnover and broad market coverage, MSF’s FY2007 net profi t rose to a record S$19.4 million (excluding one-time gain of S$1.4 million from acquisition of Exerion), a 31.1% improvement from S$14.8 million in FY2006.

After factoring in the one-time gain on the sale of MPT, on a Group basis, InnoTek recorded a net profi t attributable to shareholders of S$73.7 million in FY2007, reversing sharply from losses of S$21.3 million in FY2006.

The Group’s basic earnings per share rose to 30.7 cents per ordinary share in FY2007 compared to negative 9.0 cents per ordinary share in FY2006, while net asset backing per ordinary share as at 31 December 2007, excluding treasury shares, rose to 98.5 cents from 77.0 cents a year earlier.

2007 In Review


2007 In Review

EXPLORING POSSIBILITIES, UNCOVERING OPPORTUNITIES

2007 In Review

DIVIDEND

Following the disposal of MPT, the Group proposed and paid a special dividend of 10 cents per ordinary share in the last quarter of FY2007.

The Board of Directors is proposing at this forthcoming Annual General Meeting a fi nal one-tier dividend of 10 cents per ordinary share. Upon shareholders’ approval, it will bring the total dividend paid for FY2007 to 20 cents per ordinary share, the highest in the Group’s history.

In Q4’07 and immediately after the end of the fi nancial year, the Group utilised part of the proceeds from the disposal of MPT for share buy-backs under its share buy-back mandate approved at an Extraordinary General Meeting in November 2007.

Since Q4’07 up to 11 March 2008, InnoTek had bought its own shares with prices ranging between 68 cents to 93 cents per share, bringing the amount of treasury shares to 15,787,000 or 6.5% of its issued and paid up share capital as at 14 March 2008. The entire treasury shares were then used to acquire the remaining 16.7% stake in MSF which the Group does not already own in March 2008.


INCREASE IN STAKE OF MSF

In March 2008, the Group acquired the remaining 16.7% stake in MSF from the Founder and President of MSF for S$15.9 million, thus turning the precision metal stamping division into a wholly-owned subsidiary of the Group in a move to enable greater fl exibility in its expansion activities. The purchase consideration was satisfi ed by cash of S$3.0 million and approximately 15.8 million treasury shares value at S$12.9 million.

InnoTek has also entered into a service agreement with MSF’s Founder and President, Mr Harry To Wai Hung, who has emerged as a substantial shareholder of InnoTek with a stake of approximately 6.6% in the enlarged share capital of the Group as at 26 March 2008.

2007 In Review

MOVING FORWARD

With the sale of MPT, InnoTek will focus on further growing MSF as the Group is confi dent of the growth potential of its core business in China. Plans are afoot to expand MSF’s capacity and enhance capabilities to capitalise on this growth potential.

ORGANIC GROWTH

In Suzhou, China, MSF acquired land and is in the process of building a new metal stamping facility to meet rising demand and improve effi ciency. The new facility, which is scheduled to start production in Q3’08, will raise MSF’s total production area to over three million square feet.

Beyond expansion of capacity, MSF will also employ Exerion’s specialized equipment including robotic welding technology in China.

The technology is currently being used by Netherlands-based Exerion to manufacture complex metal frame structures and functional modules for the US and European customers.

The 75%-owned subsidiary was acquired in January 2007 to secure advance automated robotic welding technology and expand into Eastern Europe. In addition, the acquisition allowed MSF to support existing customers and diversify its customer base.d approach will pay off.


CREATING VALUE FOR SHAREHOLDERS

2007 In Review

FUTURE PLANS, PROSPECTS AND MERGERS/ACQUISITIONS

With the conversion of MSF into a wholly-owned subsidiary, our growth plans will be at two levels. The fi rst is to continue to grow MSF organically, while the second focus area of growth will be by way of mergers and acquisitions.

A signifi cant amount of bottom line growth is expected via strategic alliances, mergers and acquisitions. Subsequent to the sale of MPT, InnoTek has been and will continue to be on the lookout for potential businesses which can provide synergies and leverage on its core competencies in precision metal component manufacturing or provide vertical integration of supply to higher level assembly projects on the horizon.

In exercising prudence, we have not rushed to acquire any other business for the sake of doing so. The Group will continue to carefully evaluate potential businesses, and believe that with the dampened sentiment in global markets, this measured approach will pay off.

We thank our shareholders for their understanding and patience in this matter, and will endeavour to enhance shareholder value with future mergers and acquisitions.

OUTLOOK

While the Directors expect higher Group sales in FY2008 compared to FY2007, we are also cautiously assessing the impact of a slower global economic growth due to the sub-prime problem in the US.

Nevertheless, InnoTek remains confident over its prospects in the longer term.

STEVEN GLENN CAMPBELLChief Executive Offi cer

31 March 2008

ROBERT SEBASTIAAN LETTENon-Executive Chairman and Independent Director

Left: Mr Steven Glenn CampbellRight: Mr Robert Sebastiaan Lette

APPRECIATION

In completion of this major milestone year, we have received much help and support from many people.

On behalf of the Board of Directors, we wish to extend our heartfelt thanks to our stakeholders for their continued trust in us, our committed and dedicated management and staff, our customers and business partners for their support, and the advisors who worked behind the scenes to make the disposal of MPT a success. And last but not least, our shareholders for their continued patience and understanding.

We would also like to express our appreciation to our former colleagues in MPT, in particular, Mr Albert Ong Kim Guan, who has served as part of the Group’s key senior management team in FY2007. We wish them well in their future endeavours.


FINANCIAL HIGHLIGHTS

FOR THE YEAR Table 1

AT YEAR END Table 2

PER SHARE Table 3

RATIOS Table 4


* Includes exceptional gain of S$25.2 million which is 10.7 cents per share ** Includes exceptional loss of S$22.2 million which is 9.3 cents per share *** 2007 profi t includes the following one-time gains : (a) Continuing Operation - includes one-time gain of S$1.4 million, net MI which is 0.6 cents per share from the acquisition of Exerion (b) Discontinued Operation - includes one-tme gain of S$82.9 million which is 34.5 cents per share from the disposal of MPT

NA Not Available

FOR THE YEAR (S$ in thousands)

2003 2004 2005 2006 2007 2006 2007

Include discontinued operation (MPT) Continuing operation only

Turnover 329,200 379,181 639,135 721,616 783,065 319,745 448,935

Operating Profi t / (Loss) 28,489 26,013 43,627 (23,147) (4,338) 17,883 26,591

Profi t / (Loss) Before Tax and Minority Interest (MI) 32,062 25,807 62,286 (27,879)

73,872 13,555 25,049

Profi t / (Loss) After Tax and Minority Interests (MI)

Attributable To Members of the Co.

25,326 18,942 54,216* (21,305)** 73,720*** 7,966 16,725

RATIOS

2003 2004 2005 2006 2007 2006 2007


Operating Profi t / (Loss) to Turnover 8.7% 6.9% 6.8% (3.2%) (0.6%) 5.6% 5.9%

Profi t / (Loss) Before Tax and MI to Turnover 9.7% 6.8% 9.7% (3.9%) 9.4% 4.2% 5.6%

Profi t / (Loss) After Tax and MI to Turnover 7.7% 5.0% 8.5% (3.0%) 9.4% 2.5% 3.7%

Current Ratio 1.4 1.5 1.6 1.1 2.1 NA 2.1

AT YEAR END (S$ in thousands)

2003 2004 2005 2006 2007 2006 2007


Shareholders’ Equity 141,026 153,939 208,202 183,453 231,760 183,453 231,760

Fixed Assets (Net) 116,777 136,216 252,254 306,460 97,518 NA 97,518

PER SHARE (Singapore cents)

2003 2004 2005 2006 2007 2006 2007


Profi t / (Loss) After Tax and MI 12.1 8.2 23.1* (9.0)** 30.7*** 3.4 7.0

Net Tangible Assets 58.8 64.5 80.7 69.7 98.5 NA 98.5

Financial Highlights


InnoTek Limited

Mansfi eld Manufacturing

Company Limited

Mansfi eld Manufacturing

(Dalian) Co. Ltd (PRC)

Mansfi eld (Suzhou) Manufacturing Co. Ltd

(PRC)

ME Electronic Products Limited

(HongKong)

Exerion Precision Technology Holding B.V.

(The Netherlands)

Lens Tool & Die (HK) Limited (HongKong)

Feng Chuan Tooling Co. Ltd (HongKong)

Feng Chuan Tooling (Dongguan) Co. Ltd

(PRC)

Exerion Precision Technology Olomouc CZ, s.r.o. (Czech Republic)

Go Smart Technologies (Shenzhen) Co. Ltd

(PRC)

Wong Exerion Precision Technology Sdn. Bhd.

(Malaysia)

Go Smart Development Limited

(HongKong)

Magix Mechatronics (Dongguan) Co. Ltd

(PRC)

Mayax Inc. (USA)

Magix MechatronicsCo. Ltd (HongKong)

Magix Industrial Co. Ltd (HongKong)

Mansfi eld Industrial Co. Ltd (HongKong)

Dongguan Mansfi eld Metal

Forming Ltd (PRC)

Exerion Precision Technolgy Ulft NL B.V.

(The Netherlands)

CORPORATE STRUCTURE

100%

100%

100%

100%

100%

100%

100%

100%

100%

49%

50%

100%

100%

100%

100%

100%

55%

90%

75%


INNOVATING GROWTH THROUGH LEADERSHIP


ROBERT SEBASTIAAN LETTEChairman, Non-Executive Independent Director

Robert Sebastiaan Lette, 60, is a Non-Executive Independent Director of InnoTek Limited since May 16, 2002. Mr Lette was appointed Chairman of the Board on November 12, 2004. A former banker with Credit Suisse Singapore, MeesPierson Asia Ltd and Dresdner South East Asia Ltd. Mr Lette is a member of the Board of Directors of Asia Pacifi c Breweries Ltd., Singapore. Apart from that, he is also a Non-Executive Director of Heineken Beverages Switzerland, A.G. Mr Lette was re-elected as a Director at the 2005 AGM and is due for re-election as a Director at this AGM.

STEVEN GLENN CAMPBELLExecutive Non-Independent Director and Chief Executive Officer

Steven Glenn Campbell, 53, is an Executive Non-Independent Director and Chief Executive Offi cer of InnoTek Limited. He was appointed CEO and Director on July 26, 2002, was re-elected at the 2005 Annual General Meeting (“AGM”) and is due for re-election by rotation as a Director at this AGM. Prior to joining InnoTek, he served two years as Senior Vice President of Engineering for DataPlay Corporation. Prior to DataPlay, Mr Campbell spent over 12 years with Western Digital Corporation. During his tenure with Western Digital, he held several executive positions including, General Manager of the Desktop Solutions Line of Business, Senior VP of Engineering, VP of New Product Introduction and Chief Quality Offi cer. Mr Campbell has over 30 years of experience in the electronics and disk drive industries, including more than 24 years in the data storage industry. His experience also includes managerial and engineering positions with Quantum Corporation, Honeywell Corporation and Hewlett-Packard Corporation. Mr Campbell also currently serves as the Managing Director of Multitech Systems Inc. and Director of Daylight Solutions Inc. and Exerion Precision Technology Holding B.V. He holds three USA patents in the area of magnetic storage and received his Bachelor of Science degree in Mechanical Engineering from the University of Arizona.

YONG KOK HOONExecutive Non-Independent Director and Chief Financial Officer

Yong Kok Hoon, 51, is an Executive Non-Independent Director and Chief Financial Offi cer of InnoTek Limited. He was appointed to the Board on February 18, 2002. Mr Yong is a Certifi ed Public Accountant and is a Fellow of the Association of Chartered Certifi ed Accountants. Prior to joining the Group, he was the Group Financial Controller of QAF Group and was a partner in Moore Stephens, an international accounting fi rm. Mr Yong started his accounting career with KPMG and subsequently spent more than ten years in Ernst & Young specializing in auditing and advisory services for companies in various industries ranging from medium size enterprises to large MNCs, Big-Cap listed companies and conglomerates. He also acted as reporting accountant for multi-million-dollar IPOs and M&A transactions. He was a member of the fi nancial statements review committee and was also a member of the China committee of the Institute of Certifi ed Public Accountants of Singapore. He holds a Master of Business Administration degree from the International Management Centre, Buckingham, United Kingdom. Mr Yong was re-elected as a Director at the 2006 AGM.

BOARD OF DIRECTORS


DR ONG CHIT CHUNGNon-Executive Independent Director

Dr Ong Chit Chung, 59, is a Non-Executive Independent Director of the Company since December 10, 1997 and is the Chairman of the Audit Committee. Dr Ong has experience in both the public and private sectors, having worked in several government ministries and held directorships in companies engaged in the property, construction, engineering, hospitality and food industries. Amongst his previous appointments, he was President of China Development Corporation Limited and Deputy Group Managing Director of QAF Limited. He is presently the Chairman of Inventa Technologies (S) Pte Ltd. Dr Ong holds a Ph.D. in International History from the London School of Economics of the University of London, a Master of Arts degree in Military History from the Duke University of the United States of America and a Bachelor of Arts (1st Class Honours) degree in History from the University of Singapore. Dr Ong is also a Member of Parliament for the Jurong GRC. He is a Fellow of the Singapore Institute of Directors. Dr Ong was re-elected as a Director at the 2006 AGM.

PROFESSOR LOW TECK SENGNon-Executive Independent Director

Professor Low Teck Seng, 53, is a Non-Executive Independent Director of InnoTek Limited appointed on March 5, 2004. Prof Low is the Principal and CEO of Republic Polytechnic, Singapore. He graduated with the Bachelor of Science (1st Class) and Ph.D, in 1978 and 1982 from Southampton University, United Kingdom. Prof Low joined NUS in 1983 and founded the Magnetics Technology Centre in 1992. In 1998, he returned to NUS as Dean of the Faculty of Engineering. Prof Low is a Fellow of the Institute of Electrical and Electronics Engineer. He is actively involved in research and his technical interests are in computational electromagnetics, nanomagnetics and data storage technologies. Prof Low sits on the boards of several companies as well as the Health Sciences Authority and chairs Singapore’s A*STAR’s (Agency for Science, Technology and Research) TSRP (Thematic Strategic Research Programmes) and the Singapore’s National Thematic Program on Nanoelectronics. Prof Low was re-elected as a Director of the Company at the 2007 AGM.

Board of Directors


KEY EXECUTIVE MANAGEMENT

(1) STEVEN GLENN CAMPBELL

(2) YONG KOK HOON

(3) HARRY TO WAI HUNGPresident of Mansfield Manufacturing Company Ltd

Mr Harry To Wai Hung is the President of the Mansfi eld Manufacturing Company Limited, the Precision Metal Components Division of the Group. He is the co-founder of Mansfi eld Manufacturing and has more than 30 years of experience in the metal stamping and tool making industries. Mr To is the Honorary Fellow of the Professional Validation Council of Hong Kong Industries and actively engaged in the industries. Currently, he also serves as the General Committee Member of Federation of Hong Kong Industries, Chairman of Hong Kong Mould and Die Council, Honorary Chairman of Suzhou Mould and Die Association and the Vice Chairman of The Hong Kong Metals Manufacturers Association. In January 2008, he was awarded the Dongguan Honorary Citizenship by Dongguan government.


LEVERAGING ON OUR PEOPLE’S CAPABILITIES


INNOTEK LIMITED1 Finlayson Green #15-02 Singapore 049246Tel : (65) 6535 0689 Fax : (65) 6533 2680

MANSFIELD MANUFACTURING COMPANY LIMITED1/F, Che Wah Industrial Building, 1-7 Kin Hong Street, Kwai Chung, NT,Hong KongTel : (852) 2489 1968Fax : (852) 2481 0946

DONGGUAN TANGXIA LINCUN SUN MANSFIELD PLANTPlant IXin Yang Road, New Sun Industrial City, Lincun, Tangxia, Dongguan, Guangdong, ChinaPC : 523711Tel : (86) 769-87929299Fax : (86) 769-87928993

Plant IINo.18, New Asia Industrial Zone, Lincun, Tangxia, Dongguan, Guangdong, ChinaPC : 523711Tel : (86) 769-87849969Fax : (86) 769-87849986

DONGGUAN MANSFIELD METAL FORMING LIMITEDBlock 103, Xin Yang Road, New Sun Industrial City, Lincun, Tangxia, Dongguan, Guangdong, ChinaPC : 523711Tel : (86) 769-87933602Fax : (86) 769-87933609

MANSFIELD (SUZHOU) MANUFACTURING COMPANY LIMITED79 Lu Shan Road, Feng Qiao Industrial Park, Suzhou New District, Suzhou, Jiangsu, ChinaPC : 215129Tel : (86) 512-66617083Fax : (86) 512-66617760

MANSFIELD MANUFACTURING (DALIAN)COMPANY LIMITEDBlock #10, Tooling Industrial Park, #26 Dalian Economic & Technical Development Zone, Dalian, Liaoning, ChinaPC : 116600Tel : (86) 411-87614288Fax : (86) 411-87614266

FENG CHUAN TOOLING COMPANY LIMITED1/F, Che Wah Industrial Building, 1-7 Kin Hong Street, Kwai Chung, NT, Hong KongTel : (852) 2489 1968Fax : (852) 2481 0946

FENG CHUAN TOOLING (DONGGUAN) COMPANY LIMITED55 Xiang Xin East Road, Yantian, Fenggang, Dongguan, Guangdong, ChinaPC : 523700Tel : (86) 769-87513998Fax : (86) 769-87512008

MAGIX MECHATRONICS COMPANY LIMITED1/F, Che Wah Industrial Building, 1-7 Kin Hong Street, Kwai Chung, NT, Hong KongTel : (852) 2427 2218Fax : (852) 2427 2696

MAGIX MECHATRONICS (DONGGUAN) COMPANY LIMITEDPlant IZhen Tian South Road, Yantian, Fenggang, Dongguan, Guangdong, ChinaPC : 523698Tel : (86) 769-87771571Fax : (86) 769-87771572

MAGIX OEM FACTORYRoad 2, Bulong Industrial Zone, Yantian, Fenggang, Dongguan, Guangdong, ChinaPC : 523702Tel : (86) 769-82039188Fax : (86) 769-82039100

EXERION PRECISION TECHNOLOGY HOLDING B.V.De Hogenkamp 16, 7071 EC Ulft, The Netherlands Tel : (31) 315-689-555Fax : (31) 315-630-888

EXERION PRECISION TECHNOLOGY OLOMOUC CZ, S.R.OZeleznicni 6, Olomouc, Czech Republic.PC : 77260Tel : (420) 585-311-310Fax : (420) 585-313-843

INNOTEK LOCATIONS

CORPORATE GOVERNANCE


The Board of Directors (“Board”) and the Management of InnoTek Limited (“InnoTek” or the “Company”) and its subsidiaries (the “Group”) believe that establishing good corporate governance is not a one-time action. Good corporate governance evolves over time and in response to new regulations, standards and market conditions. A good and transparent corporate governance ensures that a company is responsibly managed and supervised with an aim to creating sustainable long-term growth and enhancing shareholder value.

At InnoTek, we are committed to continuously develop and uphold the high standards of our corporate governance principles.

This Report describes the Company’s corporate governance framework and practices, with specifi c reference to the principles and guidelines set out in the Code of Corporate Governance 2005 (“Code”). In areas where the Company deviates from the Code, the rationale is provided. Unless otherwise stated, these practices were in place for the entire fi nancial year.

BOARD MATTERS

The Board’s Conduct of AffairsPrinciple 1: Effective Board to lead and control the Company

InnoTek is led by an effective Board working closely with Management for the success of the Company and the Group. The Board’s primary role is to protect and enhance long-term shareholder value and ensure that there is an effective Management with integrity, experience and competency. The Board reviews Management performance, directs the Company’s value and standards, and objectively takes decisions in the best interest of the Company. Apart from statutory duties and responsibilities, the Board’s responsibilities include the following:-

(a) approve the annual budget;

(b) approve key business and fi nancial strategies;

(c) approve major corporate and fi nancial restructuring;

(d) approve major transactions including acquisitions, divestments, investments and capital expenditures;

(e) approve quarterly and full year results announcements;

(f) approve the annual report and audited fi nancial statements;

(g) ensure internal controls are in place and functional;

(h) oversee risk management strategies;

(i) review and provide guidance to executive management; and

(j) ensure adequacy of necessary fi nancial and human resources to meet the Group’s objectives.

The Board delegates specifi c responsibilities to the Audit Committee (“AC”), Nominating Committee (“NC”) and the Remuneration Committee (“RC”). Specifi c description of these Board Committees is set out in this Report. The NC annually reviews the effectiveness of the Board, AC and RC and each individual Director, while the full Board reviews the effectiveness of the NC.

Board meetings are held quarterly to review the Group’s performance of the business, fi nancial status, acquisitions and disposals, compliance with corporate governance, report from the Board Committees and to approve the release of the quarterly and full year results. The Board holds additional meetings when necessary to deliberate on signifi cant transactions and issues.



The Directors also engage in discussions, as and when necessary by broadcast email correspondence which allows all to participate and to share their views. Where a decision has to be made before a Board meeting is convened, a Directors’ resolution in writing is circulated in accordance with the Articles of Association of the Company and the Directors are provided with all relevant information to allow them to make informed decisions.

The attendance of the Directors at meetings of the Board and Board Committees during the fi nancial year is as follows:

Directors’ Attendance at Board & Board Committee Meetings

Board of Directors

Audit Committee

Nominating Committee

Remuneration & ESOP

Committee

No. of Meetings Held 4 4 2 5

Name of Directors

Mr Robert S. Lette 4 4 2 5

Mr Steven G. Campbell 4 - - -

Mr Yong Kok Hoon 4 4 - -

Dr Ong Chit Chung 4 4 2 5

Prof Low Teck Seng 4 4 2 5

Mr Leong Swee Sum * 1 - - -

*Mr Leong Swee Sum retired as a director after the Annual General Meeting of the Company on 27 April 2007. He relinquished his duties as committee member of the AC, RC and NC from 1 January 2007.

Each Director of the Company has been appointed on the strength of his experience, competence and stature. All the Directors bring with them independent judgment on issues of risk, performance, compliance and resources. The Company therefore believes that it would be too narrow a view to judge a director’s contribution to the Company and its businesses based only on attendance at meetings.

The Board delegates the day to day management and running of the Group to management while reserving certain key issues and policies for its approval. At the same time, the Board reviews the adequacy of the internal controls and fi nancial authority limits regularly to ensure that while there is delegation of authority, suffi cient checks and balances are in place to monitor such delegation.

Management closely monitors changes to regulations and accounting standards. Where such changes have a signifi cant bearing on the Company’s or Director’s disclosure obligations, the Directors are kept informed either during Board meetings or via circulated updates and materials.

Though no new Director has been appointed for the last few years, the Company has an induction process in place for all newly appointed Directors of the Group. New Directors will be briefed by Management on the Group’s business, directions and governance policies. New Directors will also be given a letter of appointment setting out the Director’s duties and obligations to the Company. From time to time, the Company organizes overseas plant visits for Directors to familiarize themselves with the operations of the Group’s activities.



Board Composition and GuidancePrinciple 2: Strong and independent element on the Board

The Board is able to exercise objective judgment on corporate affairs independently as there is a strong and independent element on the Board, with independent Directors making 60% of the Board.

The Board comprises the following members:-

1) Mr Robert S. Lette (Chairman) Non-Executive and Independent2) Mr Steven G. Campbell (CEO) Executive and Non-Independent3) Mr Yong Kok Hoon (CFO) Executive and Non-Independent4) Dr Ong Chit Chung Non-Executive and Independent5) Prof Low Teck Seng Non-Executive and Independent

The independence of each Director is reviewed annually by the Nominating Committee based on the guidelines set out in the Code. For the fi nancial year ended 31 December 2007, the Non-Executive Directors were considered independent as they do not have any business relationship with the Group and neither are they related to any of the substantial shareholders of the Group.

The Board believes that the size of fi ve members on the Board is adequate for it to perform its functions effectively taking into account the nature and scope of the Group’s current business and operations.

Chairman and Chief Executive Offi cerPrinciple 3: Clear division of responsibilities

The Company believes there must be a clear separation between the roles and responsibilities of the Chairman of the Board and the Chief Executive Offi cer (“CEO”) in order to provide effective oversight. The Chairman is a Non-Executive Director while the CEO is an Executive Director and both are not related.

The Chairman is responsible for the management of the Board and he is free to act independently in the best interest of the Company and its shareholders. The CEO has full executive responsibilities in the business directions and operational effi ciency of the Group.

The Chairman leads the Board and in consultation with the CEO, the Chairman approves meeting schedules of the Board, agenda for board meetings and ensures that the members of the Board work together with Management to foster effective communication with shareholders. The proceedings of the Board meetings are conducted by the Chairman who encourages constructive relations between the Board and Management.

Board MembershipPrinciple 4: Formal and transparent process for appointment of new Directors

Nominating Committee

The Nominating Committee (“NC”) comprises three Non-Executive and Independent Directors, namely Prof Low Teck Seng (Chairman of NC), Mr Robert S. Lette and Dr Ong Chit Chung.

Members of the NC comprise persons of stature, integrity and accountability, who would be able to exercise independent judgment in the performance of their duties.



The NC is guided by its Terms of Reference, which sets out its responsibilities. Its principal functions are to review and make recommendations to the Board on all board appointments, to review all nominations for the appointment and re-appointment of Directors, to evaluate the effectiveness and performance of the Board as a whole and each individual Director and to review the independence of each Director annually.

The NC works with the Board to determine the appropriate characteristics, skills and experience for the Board as a whole as well as its individual members. Upon the review and recommendation of the NC for the appointment of Directors, new Directors will be appointed by way of a board resolution. Such new Directors must submit themselves for re-election at the next Annual General Meeting (“AGM”) of the Company immediately following his appointment.

At least one-third of the Directors retire at each AGM, and the Articles of Association of the Company allow the retiring Directors to offer themselves for re-election. All of the Directors are subject to re-election at least once every three years.

The NC has adopted a policy to review the chairmanship of the Company’s various committees every fi ve (5) years for rotation purposes. This is to provide an opportunity for any Director who has the capabilities to chair a committee, to familiarize himself of the various committees and for transparency purposes. As such, the chairman of the Audit Committee, Dr. Ong Chit Chung will relinquish his chairmanship in the AC to Prof. Low Teck Seng who will hand-over his chairman position in the NC to Dr. Ong Chit Chung after the forthcoming AGM of the Company.

Board PerformancePrinciple 5: Formal assessment of the effectiveness of the Board and contributions by each Director

The evaluation of Board performance is based on objective performance criteria, and includes Directors’ attendance, contributions and participation during Board meetings and Committee meetings, ability to make informed decisions and level of comprehension of legal, accounting and regulatory requirements affecting the Group.

The NC is satisfi ed that each Director is able to and has been adequately performing his duties as a Director of the Company, devoting suffi cient time and attention to the affairs of the Company.

Access To InformationPrinciple 6: Board members to have complete, adequate and timely information

The Company recognized the importance of providing the Board with timely and complete information prior to its meetings and as and when the need arises.

In order to ensure that the Board is able to fulfi ll its responsibilities, the Management provides the Board with monthly fi nancial reports, forecasts/budgets and other relevant information of the Group. In addition, the Management provides adequate and timely information to the Board on affairs and issues that require the Board’s decision.

The Board has separate and independent access to the senior management including the Company Secretary, who attends all Board meetings. The role of the Company Secretary is clearly defi ned and includes responsibility for ensuring that board procedures are followed and that applicable rules and regulations are complied with. The Company Secretary ensures good information fl ows within the Board and its committees, and between Senior Management and Non-Executive Directors.



Board members are aware that they, whether as a group or individually, can have independent professional advice as and when necessary to enable them to discharge their responsibilities effectively. The cost of such professional advice will be borne by the Company.

REMUNERATION MATTERS

Procedures for developing remuneration policiesPrinciple 7: Formal and transparent procedure

Remuneration Committee

The Remuneration Committee (“RC”) which is also the Share Option Plan Committee comprises three Non-Executive and Independent Directors, namely Mr Robert S. Lette (Chairman of RC), Dr Ong Chit Chung and Prof Low Teck Seng.

The RC is guided by its Terms of Reference, which sets out its responsibilities. The primary function of the RC is to advise the Board on compensation issues generally, and in particular, in relation to Directors and key management executives, bearing in mind that a meaningful portion of Management’s compensation should be contingent upon fi nancial performance in order to foster the creation of long-term shareholder value.

The responsibilities of the RC include the following:

(a) advise the Board of Directors on compensation theory and practice, as well as best practice with regard to non-cash compensation and trends;

(b) review Management’s appraisal on current market situation as it relates to compensation and Management’s recommendation of the overall aggregate adjustments to be made at the annual review of compensation for all staff, Management and Directors, including stock options and other equity incentive schemes;

(c) recommend to the Board compensation packages for Executive and Non-Executive Directors, CEO and the CFO;

(d) responsible for the grant of options and other equity incentives, if any, to Directors, Management and staff based on the recommendations by the Management;

(e) review and assess performance of Management and adopt appropriate measures to assess performance; and

(f) ensure that appropriate structures for management succession and career development are adopted.

Level and mix of remunerationPrinciple 8: Level of remuneration

In setting remuneration packages, the RC considers the level of remuneration to attract, retain and motivate Executive Directors and Senior Management and to align their interests with those of shareholders. A proportion of Executive Directors’ remuneration is structured to link rewards to the performance of the Group as a whole, as well as individual performance.

The remuneration of Non-Executive Directors is set at a competitive level, appropriate to their level of contributions, taking into account attendance and time spent at meetings, their participations and contributions and their respective responsibilities.



Service contract for the CEO is for a fi xed appointment period and is not excessively long.

The Company had a long term incentive scheme under the InnoTek Employees’ Share Option Plan (“Plan”). Executive Directors and employees who were eligible were granted with options under the Plan. The Plan had run its full duration of fi ve years from the fi rst date of grant and had expired on 7 February 2006. The expiration of the Plan however did not affect options which had been granted and accepted by the participants of the Plan whether such options have been exercised or not.

Disclosure on remunerationPrinciple 9: Clear Disclosure of remuneration

The remuneration policy of the Company is based on an annual appraisal system using the criteria of core values, competencies, key result areas, performance rating and potential. Rewards are linked with corporate and individual performance. The Board is of the view that it is not necessary to present its remuneration policy before shareholders for approval at the Annual General Meeting.

Following are details of the Directors and the top 5 key executives (who are not also Directors) remuneration.

Directors’ Remuneration Fee

(%)

Salary

(%)

Bonus

(%)

Other Benefi ts

(%)

Compensation & Other Payment

on disposal of MPT

(%)

Total

(%)

$3,250,000 to below $3,500,000 Steven G. Campbell - 18 28 28 26 100

$1,500,000 to below $1,750,000 Yong Kok Hoon - 23 13 8 56 100

Below $250,000 Robert S. Lette Dr Ong Chit Chung Leong Swee Sum (Resigned on 27 April 2007) Prof Low Teck Seng

100100100100

----

----

----

----

100100100100

Details of the share option plan are set out in the Report of the Directors while disclosure on Directors’ remunerations are in the notes to the fi nancial statements.

The names of our top 5 key executives who are not also Directors of the Company are omitted in the following table which shows a group-wide cross-section of key executives’ remuneration within bands of $250,000, so as to maintain confi dentiality of each employee’s remuneration.

Key Management Executives’ Remuneration Year 2007 Year 2006

$2,500,000 to below $2,750,000 1 -

$1,500,000 to below $1,750,000 - -

$1,000,000 to below $1,250,000 - 2

$750,000 to below $1,000,000 4 1

$500,000 to below $750,000 - 1

$250,000 to below $500,000 - 1

Note: Disclosure for MPT executives is up to Oct 31, 2007



ACCOUNTABILITY & AUDIT

AccountabilityPrinciple 10: Accountability to the Board and Shareholders

The Directors are provided with management reports on a monthly basis and have separate and independent access to the Management of the Group. The Division President reports to the Board every quarter highlighting the performance, business conditions, new businesses and outlook of the Division and each subsidiary respectively. The Directors have separate and independent access to the Chief Financial Offi cer, who is also an Executive Director of the Company. In addition, information on major transactions are discussed and circulated to Directors as and when they arise.

The Company Secretary administers, attends and prepares minutes of all Board and Board Committee meetings which are circulated to all Directors for approval before confi rmation at the next meeting.

The Company adopts best practices as a means to build an excellent business for our shareholders. The Company released its quarterly results within 45 days from the end of each quarter and its full-year results within 60 days from its fi nancial year-end.

Audit CommitteePrinciple 11: Establishment of Audit Committee with written Terms of Reference

The Audit Committee (“AC”), in accordance with its written terms of reference, which clearly sets out its authority and duties, reviews the scope and results of the internal and external audit and the cost effectiveness, signifi cant fi nancial reporting issues, and adequacy of the Company’s internal controls, as well as the effectiveness of the Company’s internal audit function.

To ensure that corporate governance is effectively practised, the Directors have established self-regulatory and monitoring mechanisms, including the establishment of the AC, which comprises three Non-Executive and Independent Directors namely, Dr Ong Chit Chung (Chairman of AC), Prof Low Teck Seng and Mr Robert S. Lette.

The Company has adopted the Best Practices Guide and the Code in relation to the roles and responsibilities of the AC. The Terms of Reference provides for a minimum of four meetings a year, and at such other times as required.

The AC primary function is to provide assistance to the Board of Directors in fulfi lling its responsibility relating to corporate accounting and auditing, reporting practices of the Company, the quality and integrity of the fi nancial reports of the Company, and the Company’s systems of internal controls regarding fi nance, accounting and legal compliance established by the Management and the Board.

The AC met four times in 2007.

The responsibilities of the AC include the following:

(a) review Quarterly Group consolidated balance sheet and income statement and submitting them to the Board;

(b) review and critically assess management processes, including but not limited to, strategic planning, operations, performance measurement and reporting to resist over-ambitious forecast;

(c) consider, in consultation with external auditors, the audit scope and plan of external auditors to assure completeness of coverage and effective use of audit resources;



(d) review with the external auditors, their audit reports;

(e) review the internal audit plan, the effectiveness of the internal audit functions and evaluate the level of risks and the adequacy of the Company’s internal controls;

(f) inquire from Management and external auditors about signifi cant risks or exposures and assess steps taken by Management to minimize or control Company’s exposure to such risks;

(g) in addition to reviewing the quarterly, half-yearly and annual fi nancial statements and announcement of results and media release, the AC reviews the signifi cant fi nancial reporting issues before submission to the Board for approval;

(h) recommend the appointment or discharge of external auditors (subject to shareholders’ approval) and in this connection, consider the independence and objectivity of the external auditors, review and recommend to the Board the compensation of the external auditors. Where the auditors also supply a substantial volume of non-audit services to the Company, review the nature and extent of such services, with the objective of balancing the maintenance of auditor’s objectivity against cost effectiveness;

(i) meet with the external auditors in separate session to discuss any matters that the AC believes should be discussed privately and establish a practice to meet with the external auditors without the presence of Management at least once annually; and

(j) review interested person transactions falling within the scope of the Singapore Exchange Securities Trading Limited Listing Manual (“SGX”).

The AC has full access to the external and internal auditors and has full authority to invite any Director or executive offi cer to its meetings. The AC is authorized to have full and unrestricted access and co-operation of the Company’s Management, personnel, records and other information as required to discharge its responsibilities.

For FY2007, the AC has undertaken a review of the audit and non-audit fees paid to Ernst & Young and concluded that the nature and volume of the non-audit services provided will not prejudice the independence and objectivity of the external auditors.

Internal ControlsInternal AuditPrinciple 12: Sound system of internal ControlsPrinciple 13: Setting up independent internal audit function

The Company has in place, a system of internal controls of its procedures and processes to safeguard shareholders’ investments and assets of the Company. The system of internal controls is designed to manage rather than to eliminate the risk of failure to achieve business objectives.

The Board believes that, in the absence of any evidence to the contrary, the system of internal control provides reasonable assurance that assets are safeguarded, proper accounting records are maintained and the fi nancial information and compliance controls are reliable.

The Group has an Internal Audit Director (“IAD”) who is a Certifi ed Internal Auditor of the Singapore Branch of the Institute of Internal Auditors Inc. (“IIA”). The IAD is assisted by suitably qualifi ed staff at the Group’s subsidiary in China and Hong Kong. The IAD subscribes to, and is guided by the standards for the professional practice of Internal Auditing developed by the IIA and has incorporated these standards into its audit practices.The focus of the Internal Audit function is to strengthen the internal control structure and risk management of the Group through the conduct of independent and objective reviews. The IAD also conducts tests to



verify the Group’s assets and liabilities and to check on compliance with the Group’s system of internal controls including fi nancial, operational and compliance controls.

Apart from the internal audits, the external auditors, Ernst & Young, also contribute an independent perspective on relevant internal controls arising from their audit and report their fi ndings to the AC.

Although the IAD reports directly to the AC, administratively he reports to the CEO and the CFO on a regular basis.

The Board has been kept informed of the AC’s review of Internal Audit’s reports and management controls and is satisfi ed on the adequacy of the internal controls of the Group.

Whistle-Blowing Policy

The Group has in place a whistle-blowing policy and procedures which provides employees an avenue for reporting suspected fraud, corruption, dishonest practices or other similar matters. All reports are channeled to the IAD who will treat the matter with utmost confi dentiality. The aim of this policy is to encourage the reporting of such matters in good faith, with the confi dence that employees making the report will, to the extent possible, be protected from reprisal.

COMMUNICATION WITH SHAREHOLDERS

Principle 14: Regular, effective and fair communication with ShareholdersPrinciple 15: Shareholders’ participation at Annual General Meetings (“AGMs”)

The Company communicates regularly and effectively with its shareholders, conveying material price sensitive and other pertinent information on a timely basis. Dialogues are held with investors, analysts, fund managers and the press. Material information is simultaneously disseminated to SGX and posted on the Company’s website at www.innotek.com.sg

Annually, at the Company’s Annual General Meeting, shareholders are given opportunity to communicate their views on matters relating to the Group, with the Board members, Board Committees, as well as the external auditors in attendance.

All shareholders of the Company receive the Annual Report and Notice of the AGM. The notice is also advertised in the newspaper.

DEALINGS IN SECURITIES

The Company has adopted its own internal compliance code modeled after the Best Practices Guide issued by SGX to provide guidance for both Directors and employees on their dealings in the Company’s securities.

Directors and employees are not allowed to deal in the Company’s shares during the period commencing two weeks before the announcement of the Company’s quarterly results and one month before the announcement of the Company’s full year results. Additionally, they are not allowed to deal in the Company’s shares while in possession of price sensitive information. The Directors are required to report to the Company Secretary whenever they deal in the Company’s shares and the Company Secretary will make the necessary announcements. The Company will continually review and update its internal compliance code with any changes to the Listing Manual .



INTERESTED PERSON TRANSACTION POLICY

The Company has adopted an internal policy in respect of any transactions with interested persons and has procedures established for the review and approval of the Company’s interested person transactions.

The aggregate values of the transactions conducted during the fi nancial year are as follows:-

Nature and Name of Interested Person Aggregate value of all interested person transactions during the fi nancial year under review (excluding transactions less than $100,000 and transactions conducted under shareholders’ mandate pursuant to Rule 920)

Techno Front Inc. (Provision of strategic marketing and consultancy services)

US $6,000.00 (S$9,203)

VQBN Holdings Pte Ltd(Provision of services relating to telecommunication i.e. the maintenance of computer servers for the Group including the

management of network services)

S $38,394.00

The contract with Techno Front Inc expired in February 2007 and was not renewed.

The Company does not have any shareholders’ mandate for interested person transactions.

MATERIAL CONTRACTS

During the fi nancial year, there were no material contracts entered into by the Company or any of its subsidiary companies involving the interests of the CEO, any Director or the controlling shareholder of the Company.

STATEMENT OF COMPLIANCE

The Board of Directors confi rms that during the fi nancial year ended 31 December 2007, the Company has complied with its policies and practices based on the Code of Best Practices on Securities Transactions and the Code of Corporate Governance 2005.

RISK MANAGEMENT

InnoTek acknowledges that appropriate management of the risks accompanying its business is vital to prevent losses and damages in today’s fast-changing business environment. From time to time Management would review the key material risks so as to identify the specifi c areas of risk that may have a material impact on its profi t and loss and balance sheet.



Management would use its best endeavour to manage areas of signifi cant strategic, business and fi nancial risks and to ensure that timely identifi cation, mitigation, control and management of key material risks are in place. The Group manages risk under an overall risk management framework determined by the Board and supported by the Audit Committee and Internal Audit. Management periodically reviews the past performance of, and profi les the current and future risks facing the Group.

DIRECTORS' REPORT


The directors present their report to the members together with the audited consolidated fi nancial statements of InnoTek Limited (formerly known as Magnecomp International Limited) (the “Company”) and its subsidiaries (the “Group”) and the balance sheet and statement of changes in equity of the Company for the fi nancial year ended 31 December 2007.

Directors

The directors of the Company in offi ce at the date of this report are :-

Robert Sebastiaan Lette (Chairman)Steven Glenn CampbellYong Kok HoonDr Ong Chit ChungProfessor Low Teck Seng

Change of name during the year

On 14 November 2007, the Company changed its name from Magnecomp International Limited to InnoTek Limited

Arrangements to enable directors to acquire shares and debentures

Except as described in this report, neither at the end of, nor at any time during the fi nancial year was the Company a party to any arrangement whose object is to enable the directors of the Company to acquire benefi ts by means of the acquisition of shares or debentures of the Company or any other body corporate.

Directors’ Interests in shares, share options and debentures

The following directors, who held offi ce at the end of the fi nancial year, had, according to the register of directors’ shareholdings required to be kept under section 164 of the Singapore Companies Act, Cap. 50, an interest in shares and share options of the Company and related corporations (other than wholly-owned subsidiaries) as stated below:

The Company Holding in the name of the Director

InnoTek Limited(formerly known as Magnecomp International Limited)

(Ordinary shares)At beginning of the

fi nancial yearAt end of the fi nancial

year

Steven G. Campbell 750,000 1,625,000

Yong Kok Hoon 300,000 500,000

Prof. Low Teck Seng 40,000 40,000

DIRECTORS' REPORT


Directors’ Interests in shares, share options and debentures (cont’d)

Options to subscribe for ordinary shares in the Company

Directors At beginning of the year

At end of the year

Exercise PricePer Share

Date of Grant

Steven G. Campbell 125,000 Nil $0.16 7 March 2003125,000 Nil $0.17 31 March 2003

500,000 250,000 $0.69* 8 March 2004

500,000 125,000 $0.49 18 August 2004

Yong Kok Hoon 50,000 Nil $0.16 7 March 2003100,000 Nil $0.17 31 March 2003

150,000 100,000 $0.69* 8 March 2004

200,000 200,000 $0.97 18 August 2005

256,000 256,000 $1.23 18 January 2006

*Granted at a 20% discount

Options to subscribe for ordinary shares in Magnecomp Precision Technology Public Company Limited (“MPT”), a former subsidiary of the Company were cancelled following the Group’s disposal of MPT during the year.

There was no change in any of the above-mentioned interests between the end of the fi nancial year and 21 January 2008.

Except as disclosed in this report, no director who held offi ce at the end of the fi nancial year had interests in shares, share options of the Company, or of related corporations, either at the beginning of the fi nancial year, or date of appointment if later, or at the end of the fi nancial year.

Directors’ contractual benefi ts

Since the end of the previous fi nancial year, no director of the Company has received or become entitled to receive any benefi ts by reason of a contract made by the Company or a related corporation with the directors, or with a fi rm of which the director is a member, or with a company in which the director has a substantial fi nancial interest, except as disclosed in this report and the accompanying fi nancial statements.

DIRECTORS' REPORT


Options

InnoTek Limited - Employees’ Share Option Plan

1. InnoTek Employees’ Share Option Plan (the “Plan”) was approved by the shareholders at an extraordinary general meeting held on 18 September 2000.

2. The Plan is administered by the Remuneration Committee whose members are:-

Robert S. Lette (Chairman)Dr Ong Chit ChungProf Low Teck Seng

3. No options were granted during the year as the Plan expired in February 2006.

4. The Company did not implement any new employees share option plan after the expiration of the Plan. However, the expiration of the Plan shall not affect options which have been granted and accepted whether or not such options have been fully or partially exercised.

5. Details of the options to subscribe for ordinary shares of the Company granted to directors of the Company pursuant to the InnoTek Employees’ Share Option Plan are as follows:-

Director

Aggregate options granted since

commencement of Plan

Aggregate options cancelled since


Aggregate options exercised since


Aggregate options outstanding as at

end of fi nancial yearYong Kok Hoon 1,656,000 (400,000) (700,000) 556,000Steven G Campbell 2,500,000 (500,000) (1,625,000) 375,000

6. The unissued ordinary shares of the Company under the Plan as at 31 December 2007

comprises:-

Date of Grant

No.ofOptions Granted

No.ofOptions

Exercised

No.ofOptions

Cancelled

No.ofOptions

OutstandingSubscription Price/ share

ExercisePeriod

8 Feb 01 3,390,000 (66,000) (3,304,000) 20,000 S$0.75 8/2/2002 to 8/2/2010

28 Aug 01 284,000 Nil (284,000) Nil S$0.52 28/8/2002 to 28/8/2010

6 Mar 02 4,318,000 (54,000) (4,258,000) 6,000 S$0.39* 6/3/2004 to 6/3/2012

5 Sept 02 500,000 Nil (500,000) Nil S$0.24 5/9/2003 to 5/9/2011

7 Mar 03 5,386,000 (4,144,000) (1,175,000) 67,000 S$0.16 7/3/2004 to 7/3/2012

31 Mar 03 6,946,000 (5,317,500) (1,508,500) 120,000 S$0.17 31/3/2004 to 31/3/2012

30 May 03 60,000 Nil (60,000) Nil S$0.32 30/5/2004 to 30/5/2012

27 Aug 03 508,000 (100,000) (232,000) 176,000 S$0.71 27/8/2004 to 27/8/2012

8 Mar 04 5,098,000 (1,546,000) (2,087,000) 1,465,000 S$0.69* 8/3/2006 to 8/3/2014

18 Aug 04 660,000 (441,000) (4,000) 215,000 S$0.49 18/8/2005 to 18/8/2013

18 Aug 05 2,100,000 Nil (180,000) 1,920,000 S$0.97 18/8/2006 to 18/8/2014

18 Jan 06 2,500,000 Nil (176,000) 2,324,000 S$1.23 18/1/2007 to 18/1/2015

Total 31,750,000 (11,668,500) (13,768,500) 6,313,000

* Granted at a discount, therefore vesting date is two years after Date of Grant

DIRECTORS' REPORT


Options (cont’d)

7. The options may be exercised only after the fi rst anniversary of the Date of Grant of options with the exception of options granted at a discount. The options are vested in four equal instalments with the fi rst 25% of the options granted exercisable on the fi rst anniversary of the Date of Grant.

No option has been granted during the fi nancial year.

Apart from the following who have in aggregate received 5% or more of the total number of options available under the Plan, none of the other executive directors and employees of the Group who participated in the Plan has received 5% or more of the total number of options available under the Plan:-

Total Options Granted

Total % of Options Under the Plan

Mr Steven G. Campbell 2,000,000 8.39%

Mr Yong Kok Hoon 1,256,000 5.27%

Mr To Wai Hung 1,240,000 5.20%

8. Pursuant to the Option Agreements provided by Advantec Holding SA (“Advantec”), certain selected key executives of the Group were granted options to acquire 6,925,000 ordinary shares in the capital of the Company by Advantec. During the year, a total of 162,500 options were exercised. Following this exercise, there were no more options outstanding as all options granted by Advantec were either cancelled or fully exercised. These share options are exercisable within 10 years after 7 January 1998 at an exercise price of US$0.275 per ordinary share. This scheme has since expired on 7 January 2008.

DIRECTORS' REPORT


Magnecomp Precision Technology Public Company Limited (“MPT”) – Warrants (Share Option) Plans (“warrants”)

1. The following MPT’s Warrant Plans (the “Plans”) were approved by the shareholders:

- ESOP #2 at an Annual General Meeting held on 26 April 2001- ESOP #3 at an Annual General Meeting held on 25 April 2003- ESOP #4 at an Extraordinary Shareholders’ Meeting held on 22 June 2005

2. The Plan is administered by the MPT’s Remuneration Committee whose members are:-

Dr. Kulpatra Sirodom (Chairman) Mr. Chackchai Panichapat Mr. Prakit Pradipasen

3. No warrants have been granted to the controlling shareholders of the Company, MPT and their associates.

4. No participant , other than the following MPT Directors, has received 5% or more of the total warrants issued under the plans:

Names No. of warrants(MPT ESOP #4)

Mr Steven G. Campbell * 9,500,000Mr Yong Kok Hoon * 5,000,000Mr Albert Ong Kim Guan * 8,500,000

* The above warrants held by 3 directors were cancelled upon the completion of the disposal of MPT on 7 November 2007.

5. No warrants have been granted to Directors of the Company and MPT, employees of the parent company and its subsidiaries other than the below :

Director

Aggregate options

granted since commencement

of Plan

Aggregate options

cancelledsince


Aggregate options

exercisedsince


Aggregate options

outstandingas at

7 November2007

Steven G. Campbell 9,500,000 ( 9,500,000) − − Yong Kok Hoon 5,000,000 (5,000,000) − − Albert Ong Kim Guan 8,500,000 (8,500,000) − − Chakchai Panichapat 600,000 − − 600,000Timothy Chia Chee Ming

(Resigned on 12 April 2007)

600,000 (360,000) (240,000) −

Prakit Pradipasen 600,000 − (240,000) 360,000Kulpatra Sirodom 600,000 − − 600,000

DIRECTORS' REPORT


Options (cont’d)

No warrants that entitle the holder to participate, by virtue of the warrants, in any share issue of any other corporation have been granted; and

No warrants have been granted at a discount.

4. The unissued ordinary shares of MPT under the Plan as at 7 November 2007 comprises:-

Date of Grant

No.of Warrants Granted

No.of Warrants Exercised

No.of Warrants Cancelled

No. ofWarrants

OutstandingSubscriptionPrice/ share

Exercise Period

ESOP#21 July 2002

12,961,500 (522,500) (2,578,500) 9,860,500 4 Baht for employees who were employed before 31 December 2000 and 25 day average trading price prior to the date of employment of employees who were employed from 1 January 2001 onwards

Last day of each month from 1/1/2004 to 30/6/2012

1 July 2003 2,850,000 − − 2,850,000 1/1/2005 to 30/6/2013

1 July 2004 1,050,000 (600,000) − 450,000 * 31/1/2005 to 30/6/2014

Subtotal 16,861,500 (1,122,500) (2,578,500) 13,160,500

ESOP#3 1 January 2004

5,549,999 (2,074,000) − 3,475,999 2.24 Baht Last day of every month from31/1/2005 to 31/12/2008

ESOP#4 16 February 2006

95,000,000 (674,000) (38,703,000) 55,623,000 3.31 Baht Weekly from20/3/2006 to 15/1/2011

Total 117,411,499 (3,870,500) (41,281,500) 72,259,499

The options for ESOP#2 may be exercised 18 months after each date of grant. For ESOP#3, the options may be exercised 1 year after each date of grant. Warrants issued for ESOP #4 pursuant to the Plan are vested on an instalment basis of 40%:30%:30%. The fi rst 40% is exercisable from 20 March 2006, 30% on 20 March 2007 and the remaining 30% on 20 March 2008.

* Arising from the merger with MPT, the ESOP#2 which was granted on 1 July 2004 has been modifi ed whereby all warrants are vested by 31 January 2005.

DIRECTORS' REPORT


Audit Committee

The Audit Committee comprises three board members, all of whom are Non-Executive Independent Directors. The members of the Audit Committee during the fi nancial year and at the date of this report are:-

Dr. Ong Chit Chung (Chairman)Prof. Low Teck SengRobert Sebastiaan Lette

The Audit Committee has held four meetings during the fi nancial year and discharged its responsibilities in accordance with its Terms of Reference.

The functions of the Audit Committee are as laid down in Section 201B(5) of the Singapore Companies Act. The Audit Committee reviewed the audit scope and strategies of both the internal and external auditors and met with the auditors and executive management to review and discuss the results of their audit examinations including their evaluation of the system of internal controls.

The Audit Committee also reviewed the fi rst quarter results, the half-year interim results, the third quarter results, the fi nal consolidated fi nancial statements of the Group and balance sheet and statement of changes in equity of the Company for the fi nancial year ended 31 December 2007 as well as the auditors’ report thereon, and the impact of the various new accounting standards on the operating results and fi nancial position of the Company and of the Group.

In addition, the Audit Committee reviewed the Interested Persons Transactions for the fi nancial year ended 31 December 2007 and reviewed all non-audit services provided by the external auditors to determine if the provision of such services would affect the independence of the auditors and to obtain confi rmation of independence of the auditors.

The Audit Committee recommended to the Board of Directors the nomination of Ernst & Young as auditors of the Company to be approved at the forthcoming Annual General Meeting of the Company.

Auditors

Ernst & Young have expressed their willingness to accept re-appointment as auditors.

On behalf of the Board,

Steven Glenn CampbellDirector

Yong Kok HoonDirector

Singapore18 March 2008

STATEMENT BY DIRECTORS


We, Steven Glenn Campbell and Yong Kok Hoon, being two of the directors of InnoTek Limited, do hereby state that, in the opinion of the directors:

(a) the accompanying balance sheets, statements of changes in equity, consolidated profi t and loss account and consolidated cash fl ow statement together with the notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2007 and of the results of the business, changes in equity and cash fl ows of the Group and changes in equity of the Company for the year then ended; and

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

On behalf of the Board of Directors

Steven Glenn CampbellDirector

Yong Kok HoonDirector


INDEPENDENT AUDITORS' REPORT


We have audited the accompanying fi nancial statements of InnoTek (formerly known as Magnecomp International Limited) (the “Company”) and its subsidiaries (collectively, the “Group”) set out on pages 38 to 114, which comprise the balance sheets of the Group and the Company as at 31 December 2007, the statements of changes in equity of the Group and the Company, the profi t and loss account and cash fl ow statement of the Group for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes.

Directors’ responsibility for the fi nancial statements

The Company’s directors are responsible for the preparation and fair presentation of these fi nancial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of fi nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility

Our responsibility is to express an opinion on these fi nancial 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 whether the fi nancial statements are free from material misstatement.

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

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

To the Members of InnoTek Limited

INDEPENDENT AUDITORS’ REPORT


Opinion

In our opinion,

(i) the consolidated fi nancial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the Act) and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2007 and the results, changes in equity and cash fl ows of the Group and changes in equity of the Company for the fi nancial year ended on that date; and

(ii) 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.

ERNST & YOUNGCertifi ed Public Accountants


To the Members of InnoTek Limited

CONSOLIDATED PROFIT AND LOSS ACCOUNT


Group

Note2007$’000

2006$’000

CONTINUING OPERATIONS

Revenue and other income

Sale of goods 4 448,935 319,745

Other income 5 4,441 1,347

Total revenue and other income 453,376 321,092

Costs and expenses

Raw materials and production overheads 302,158 218,544

Salaries and employee benefi ts 6 76,891 48,909

Depreciation 12 15,430 12,284

Foreign currency loss 1,951 1,781

Other operating expenses 7 27,865 22,125

Total costs and expenses 424,295 303,643

Operating profi t from continuing operations 29,081 17,449

Finance costs 8 (4,017) (3,157)

Share of results of associates (15) (737)

Profi t from continuing operations before tax 25,049 13,555

Income tax expense 9 (3,303) (2,258)

Profi t from continuing operations, net of tax 21,746 11,297

DISCONTINUED OPERATIONProfi t/(loss) from discontinued operation, net of tax 10 47,089 (40,322)

Profi t/(loss) net of tax 68,835 (29,025)

Attributable to:

Equity holders of the Company 73,720 (21,305)

Minority Interest (4,885) (7,720)

68,835 (29,025)

Basic earnings/(loss) per share (cents) attributable to equity holders of the Company 11

– continuing operations 6.97 3.36

– discontinued operations 23.73 (12.32)

30.70 (8.96)

Diluted earnings/(loss) per share (cents) attributable to equity

holders of the Company 11

– continuing operations 6.95 3.36

– discontinued operations 23.69 (12.32)

30.64 (8.96)

The accompanying accounting notes and policies form an integral part of the fi nancial statements.

for the year ended 31 December 2007

BALANCE SHEETS


Group Company

Note2007$’000

2006$’000

2007$’000

2006$’000

Non-current assetsProperty, plant and equipment 12 97,518 306,460 121 165Intangible assets 13 140 17,430 − 704Subsidiaries 14 − − 14,120 155,048Investment in associates 15 194 − − − Investment in joint venture 16 357 − − − Deferred tax assets 17 3,017 − − − Other investments 18 3,116 2,105 3,116 2,105

Current AssetsCash and cash equivalents 19 158,452 43,901 125,194 1,677Trade receivables 20 100,081 147,561 956 4,366Other receivables 21 26,649 23,556 7,426 480Investment securities 14 22,968 − 22,968 − Prepayments 22 1,081 2,683 − − Tax recoverable − 613 − − Inventories 23 36,734 46,627 − − Loans to subsidiaries 24 − − 10,690 7,500

345,965 264,941 167,234 14,023Current LiabilitiesInterest-bearing loans and borrowings 25 45,019 91,084 − 4,383

Trade payables 26 75,997 85,873 − − Other payables and accruals 27 38,335 55,263 5,389 488Provisions 28 6,902 3,697 6,902 − Derivative fi nancial instrument − 1,360 − − Tax payable 2,203 592 1,568 56

168,456 237,869 13,859 4,927Net Current Assets 177,509 27,072 153,375 9,096

Non-Current LiabilitiesInterest-bearing loans and borrowings 25 27,760 116,245 − −

Derivative fi nancial instrument − 2,640 − − Deferred tax liabilities 17 2,314 3,959 194 1,122Net Assets 251,777 230,223 170,538 165,996

Equity Share capital 29(a) 96,648 94,508 96,648 94,508Treasury shares 29(b) (6,381) − (6,381) − Reserves 141,493 88,945 80,271 71,488Attributable to Equity Holders of the Company 231,760 183,453 170,538 165,996

Minority interest 20,017 46,770 − − Total Equity 251,777 230,223 170,538 165,996


as at 31 December 2007

STATEMENT OF CHANGES IN EQUITY


The CompanySharecapital

Treasuryshares

Sharepremium

Share option reserve

Retainedearnings

Other reserves

Totalequity

$’000 $’000 $’000 $’000 $’000 $’000 $’000(Note 29(a))(Note 29(b))

2006Balance at 1 January

2006 23,573 − 69,607 2,047 83,807 85,854 179,034Loss for the year − − − − (12,942) (12,942) (12,942)Total recognised income

and expenses for the year − − − − (12,942) (12,942) (12,942)

Transfer of share premium reserve to share capital account 69,607 − (69,607) − − − −

New shares issued from Employees Share Option Plan 775 − − − − − 775

Share option expenses accrued − − − 1,508 − 1,508 1,508

Transfer of share option reserve to share capital upon exercise of Employee Share Option Plan 553 − − (553) − (553) −

Dividends on ordinary shares (Note 40) − − − − (2,379) (2,379) (2,379)

At 31 December 2006 94,508 − − 3,002 68,486 71,488 165,996

2007Balance at 1 January

2007 94,508 − − 3,002 68,486 71,488 165,996Profi t for the year − − − − 32,877 32,877 32,877Total recognised income

and expenses for the year − − − − 32,877 32,877 32,877

New shares issued from Employees Share Option Plan 1,396 − − − − − 1,396

Expiry of Employee share option − − − (20) 20 − −

Share option expenses accrued − − − 811 − 811 811

Transfer of share option reserve to share capital upon exercise of Employee Share Option Plan 744 − − (744) − (744) −

Purchase of treasury shares − (6,381) − − − − (6,381)

Dividends on ordinary shares (Note 40) − − − − (24,161) (24,161) (24,161)

At 31 December 2007 96,648 (6,381) − 3,049 77,222 80,271 170,538





Attributable to equity holders of the Company

The Group

Share Share

capitalcapital

ShareShare

premiumpremium

Share Share

optionoption

reservereserve

Retained Retained

earningsearnings

Foreign Foreign

currency currency

translation translation

reservereserve

Statutory Statutory

reservereserve

HedgingHedging

reservereserve

TotalTotal

other other

reservesreserves Total Total

Minority Minority

interestinterest

TotalTotal

equityequity

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

2006 (Note 29(a)) (Note 31)

At 1 January 2006 23,573 69,607 2,047 116,407 (4,153) 721 − 115,022 208,202 55,597 263,799

Foreign currency

translation − − − − (6,498) − − (6,498) (6,498) (233) (6,731)

Net loss on fair

value changes − − − − − − (3,126) (3,126) (3,126) (874) (4,000)

Recognised in the

profi t and loss

account − − − − − − 600 600 600 − 600

Loss for the year − − − (21,305) − − − (21,305) (21,305) (7,720) (29,025)

Total recognised

income and

expense − − − (21,305) (6,498) − (2,526) (30,329) (30,329) (8,827) (39,156)

Transfer of share

premium to share

capital 69,607 (69,607) − − − − − − − − −

Transfer of share

option reserve

to share capital

upon exercise of

Employee Share

Option Plan 553 − (553) − − − − (553) − − −

New shares issued

from Employee

Share Option Plan 775 − − − − − − − 775 − 775

Share Option

expense accrued − − 7,184 − − − − 7,184 7,184 − 7,184

Dividends on

ordinary shares

(Note 40) − − − (2,379) − − − (2,379) (2,379) − (2,379)

At 31 December

2006 94,508 − 8,678 92,723 (10,651) 721 (2,526) 88,945 183,453 46,770 230,223




Attributable to equity holders of the Company

The GroupShareSharecapitalcapital

Treasury Treasury sharesshares

Share Share option option reservereserve

Retained Retained earningsearnings

Foreign Foreign currency currency

translation translation reservereserve

Statutory Statutory reservereserve

HedgingHedgingreservereserve OthersOthers

Total Total other other

reservesreserves Total Total Minority Minority interestinterest

Total Total equityequity

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

2007(Note 29(a))

(Note 29(b)) (Note 31)

At 1 January 2007 94,508 − 8,678 92,723 (10,651) 721 (2,526) − 88,945 183,453 46,770 230,223

Foreign currency translation − − − − (1,855) − − − (1,855) (1,855) (510) (2,365)

Net loss on fair value changes during the year − − − − − − − (327) (327) (327) (127) (454)

Reversed to the profi t and loss account − − − − − − (600) − (600) (600) − (600)

Profi t for the year − − − 73,720 − − − − 73,720 73,720 (4,885) 68,835

Total recognised income and expense − − − 73,720 (1,855) − (600) (327) 70,938 70,938 (5,522) 65,416

Disposal of subsidiary − − (7,151) − 8,721 (721) 3,126 327 4,302 4,302 (21,359) (17,057)

Minority interest from acquisition of subsidiary − − − − − − − − − − 1,903 1,903

Dividend to a minority shareholder of a subsidiary − − − − − − − − − − (199) (199)

Acquisition of additional interest in a subsidiary − − − − − − − (73) (73) (73) (1,576) (1,649)

Transfer of share option reserve to share capital upon exercise of Employee Share Option Plan 744 − (744) − − − − − (744) − − −

New shares issued from Employee Share Option Plan 1,396 − − − − − − − − 1,396 − 1,396

Expiry of employee share options − − (20) 20 − − − − − − − −

Purchase of treasury shares − (6,381) − − − − − − − (6,381) − (6,381)

Share Option expense accrued − − 2,286 − − − − − 2,286 2,286 − 2,286

Dividends on ordinary shares (Note 40) − − − (24,161) − − − − (24,161) (24,161) − (24,161)

At 31 December 2007 96,648 (6,381) 3,049 142,302 (3,785) − − (73) 141,493 231,760 20,017 251,777



CONSOLIDATED CASH FLOW STATEMENT


Note2007$’000

2006$’000

Cash fl ows from operating activities :Profi t/(loss) before tax and minority interests (“MI”) from- continuing operations 25,049 13,555- discontinued operation 48,823 (41,434)

Total group profi t/(loss) before tax and MI 73,872 (27,879)Adjustments for :Gain on acquisition of a subsidiary (1,681) − Share of results of associates 15 737Depreciation expense 66,929 58,197Gain on disposal of property, plant and equipment (105) (1,061)Gain on disposal of subsidiary (72,292) − Fair value gains on investment held for trading (10,666) − Gain on dilution of holdings in MPT − (69) Impairment loss of property, plant and equipment 17,479 18,052Property, plant and equipment written off 6,208 23Stock options expense 2,286 7,184Inventory written back − (900)Amortisation of intangible assets 290 1,293Fair value changes on derivative (600) 600Fair value changes on other reserve (454) − Allowance for doubtful debt 612 1,654Write back of doubtful debts (1,108) − Impairment loss on investment in associate and loan to associate − 2,094

Impairment loss on club memberships 28 − Impairment loss on other investment 1,223 − Interest expense 11,687 11,053Interest income (1,554) (688)Provision for obsolete inventories (3,059) 6,306Currency realignment (1,712) (1,408)

Operating cash fl ows before changes in working capital 87,398 75,188Increase in trade and other receivables 427 (20,038)Decrease/(increase) in inventories 450 (1,731)Increase in trade and other payables 27,226 12,634Decrease in prepayment 155 4,232(Decrease)/increase in provision 5,596 1,819Cash fl ows generated from operations 121,252 72,104


CONSOLIDATED CASH FLOW STATEMENT


Note 2007$’000

2006$’000

Interest paid (11,687) (11,053)

Interest received 1,554 688

Taxes paid (2,327) (2,635)

Refund of income taxes paid in prior years − 256

Net cash fl ows from operating activities 108,792 59,360

Cash fl ow from investing activities

Purchase of property, plant and equipment (104,811) (138,387)

Proceeds from sale of property, plant and equipment 240 2,390

Advances to associate − (1,108)

Increase in intangible assets − (85)

Increase in joint venture (357) −

Increase in other investments (5,227) (2,105)

Deposit for capital commitment in respect of investment in subsidiary − (3,944)

Net cash infl ow for acquisition of a new subsidiary 14 267 −

Net cash consideration on disposal of subsidiary 14 146,617 −

Net cash from/(used in) investing activities 36,729 (143,239)

Cash fl ows from fi nancing activities :

Dividends paid on ordinary shares by the Company (24,161) (2,380)

Purchase of treasury shares (6,381) −

Dividends paid to subsidiary shareholder (199) −

Fixed deposits (pledged) − 369Proceeds from issuance of shares by subsidiary to minority shareholders − 1,842

Proceeds from issuance of ordinary shares 1,396 775

Proceeds from loan and borrowings 56,751 137,924

Repayment of loans and borrowings (60,786) (92,406)

Repayment of fi nance lease obligations (796) (1,076)

Net cash (used in)/from fi nancing activities (34,176) 45,048

Net increase/(decrease) in cash and cash equivalents 111,345 (38,831)

Cash and cash equivalents at beginning of year 42,574 81,405

Cash and cash equivalents at end of year (Note 19) 153,919 42,574



NOTES TO THE FINANCIAL STATEMENTS


1. CORPORATE INFORMATION

InnoTek Limited (formerly known as Magnecomp International Limited) is a limited liability company which is incorporated in Singapore and listed on the Stock Exchange of Singapore.

The registered offi ce and principal place of business of the Company is located at 1 Finlayson Green #15-02, Singapore 049246.

The principal activity of the Company is that of investment holding.

The principal activities of the subsidiaries are those of manufacturing and sale of metal stamping and sub-assembly of stamped components, frame components, tooling and die making, investment holding and general trading. Details of these subsidiaries are disclosed in Note 3 to the fi nancial statements. During the year the Company disposed of the subsidiaries relating to the manufacturing and sales of suspension assemblies. There have been no other signifi cant changes in the nature of these activities during the year.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of preparation

The consolidated fi nancial statements of the Group and the balance sheet and statement of changes in equity of the Company have been prepared in accordance with Singapore Financial Reporting Standards (FRS).

The fi nancial statements have been prepared on a historical cost basis except for derivative fi nancial instruments and investment securities held for trading that have been measured at their fair values.

The accounting policies have been consistently applied by the Company and the Group and are consistent with those used in the previous fi nancial year except as disclosed in Note 2.2 below.

The fi nancial statements are presented in Singapore Dollars ($) and all values are rounded to the nearest thousand ($’000) except when otherwise indicated.

2.2 Changes in accounting policies

(a) Adoption of FRS 107, Financial Instruments: Disclosures and amendment to FRS 1 (revised), presentation of fi nancial statements (Capital Disclosures)

On 1 January 2007, the Group adopted FRS 107 and the amendment to FRS 1 which is effective for annual periods beginning on or after 1 January 2007.

FRS 107 introduces new disclosures to improve the information about fi nancial instruments. It requires the disclosure of qualitative and quantitative information about the Group’s exposure to risks arising from fi nancial instruments, as well as specifi ed minimum disclosures about credit risk, liquidity risk and market risk, sensitivity analysis to market risk. The amendment to FRS 1 requires the Group to make new disclosures to enable users of the fi nancial statements to evaluate the Group’s objectives, policies and processes for managing capital.



2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

2.2 Changes in accounting policies (cont’d)

(b) FRS and INT FRS not yet effective

The Group and the Company have not adopted the following FRSs and INT FRSs that have been issued but not yet effective:

Effective date(Annual periods

beginningon or after)

FRS 23 : Amendment to FRS 23, Borrowing Costs 1 January 2009FRS 108 : Operating Segments 1 January 2009INT FRS 111 : Group and Treasury Share Transactions 1 March 2007INT FRS 112 : Service Concession Arrangements 1 January 2008

The directors expect that the adoption of the above pronouncements will have no material impact to the fi nancial statements in the period of initial application, except for FRS 108 and FRS 23 as indicate below.

FRS108, Operating Segments

FRS108 requires entities to disclose segment information based on the information reviewed by the entity’s chief operating decision maker. The impact of this standard on the other segment disclosures is still to be determined. As this is a disclosure standard, it will have no impact on the fi nancial position or fi nancial performance of the Group when implemented in 2009.

FRS23 Amendment to FRS 23, Borrowing Costs

FRS 23 Borrowing costs has been revised to require capitalisation of borrowing costs when such costs relate to a qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. In accordance with the transitional requirements in the Standard, the Group will adopt this as a prospective change. Accordingly, borrowing costs will be capitalised on qualifying assets with a commencement date after 1 January 2009. No changes will be made for borrowing costs incurred to this date that have been expensed.

2.3 Signifi cant accounting estimates and judgements

Estimates, assumptions concerning the future and judgements are made in the preparation of the fi nancial statements. They affect the application of the Group’s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances.



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

2.3 Signifi cant accounting estimates and judgements (cont’d)

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are discussed below.

(a) Income taxes

The Group has exposure to income taxes in numerous jurisdictions. Signifi cant judgement is involved in determining the Group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the fi nal tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amount of the Group’s tax payables, deferred tax assets and deferred tax liabilities as at 31 December 2007 were $2,203,000 (2006: $592,000), $3,017,000 (2006: $Nil) and $2,314,000 (2006: $3,959,000) respectively. The carrying amount of the Company’s tax payables and deferred tax liabilities as at 31 December 2007 were $1,568,000 (2006: $56,000) and $194,000 (2006: $1,122,000) respectively.

(b) Depreciation of machinery and equipment

The costs of machinery and equipment for the Group’s manufacturing activities are depreciated on a straight-line basis over the useful lives of the machinery and equipment. Management estimates the useful lives of the machinery and equipment to be within 1 to 10 years. These are common life expectancies applied in the industry. The carrying amount of the Group’s machinery and equipment at 31 December 2007 was stated in Note 12 to the fi nancial statements. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.

(c) Impairment of loans and receivables

The Group assesses at each balance sheet date whether there is any objective evidence that a loan or receivable is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or signifi cant fi nancial diffi culties of the debtor and default or signifi cant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash fl ows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s loan and receivable at the balance sheet date is disclosed in Note 20 to the fi nancial statements.




2.4 Functional and foreign currency

(a) Foreign currency transactions

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in the profi t and loss account except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign subsidiaries, which are recognised initially in a separate component of equity as foreign currency translation reserve in the consolidated balance sheet and recognised in the consolidated profi t and loss account on disposal of the subsidiary. In the Company’s separate fi nancial statements, such exchange differences are recognised in the profi t and loss account.

(b) Foreign currency translation

The results and fi nancial position of foreign operations are translated into SGD using the following procedures:

Assets and liabilities for each balance sheet presented are translated at the rate ruling at that balance sheet date; and

Income and expenses for each profi t and loss account are translated at average exchange rates for the year, which approximate the exchange rates at the dates of the transactions.

All resulting exchange differences are recognised in a separate component of equity as foreign currency translation reserve.

On disposal of a foreign operation, the cumulative amount of exchange differences deferred in equity relating to that foreign operation is recognised in the profi t and loss account as a component of the gain or loss on disposal.

2.5 Basis of consolidation

The consolidated fi nancial statements comprise the fi nancial statements of the Company and its subsidiaries as at the balance sheet date. The fi nancial statements of the subsidiaries used in the preparation of the consolidated fi nancial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.




2.5 Basis of consolidation (cont’d)

All intra-group balances, transactions, income and expenses and profi ts and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full.

Acquisitions of subsidiaries are accounted for using the purchase method. Identifi able assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

Any excess of the cost of business combination over the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities represents goodwill. The goodwill is accounted for in accordance with the accounting policy for goodwill stated in Note 2.11(a).

Any excess of the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities over the cost of business combination is recognised in the profi t and loss account on the date of acquisition.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

2.6 Subsidiaries A subsidiary is an entity over which the Group has the power to govern the fi nancial and operating policies so as to obtain benefi ts from its activities. The Group generally has such power when it, directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors.

In the Company’s separate fi nancial statements, investments in subsidiaries are accounted for at cost less impairment losses.

2.7 Associates

An associate is an entity, not being a subsidiary or a joint venture, in which the Group has signifi cant infl uence. This generally coincides with the Group having 20% or more of the voting power, or has representation on the board of directors.

The Group’s investments in associates are accounted for using the equity method. Under the equity method, the investment in associate is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associate. The Group’s share of the profi t or loss of the associate is recognised in the consolidated profi t and loss account. Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of such changes. After application of the equity method, the Group determines whether it is necessary to recognise any impairment loss with respect to the Group’s net investment in the associate. The associate is equity accounted for from the date the Group obtains signifi cant infl uence until the date the Group ceases to have signifi cant infl uence over the associate.




2.7 Associates (cont’d)

Goodwill relating to an associate is included in the carrying amount of the investment.

Any excess of the Group’s share of the net fair value of the associate’s identifi able assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group’s share of the associate’s profi t or loss in the period in which the investment is acquired.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

The fi nancial statements of the associate are prepared as of the same reporting date as the Company. Consistent accounting policies are applied for like transactions and events in similar circumstances.

In the Company’s separate fi nancial statements, investments in associates are accounted for at cost less impairment losses.

2.8 Joint ventures

A joint venture is an entity set up by contractual agreement, whereby the Group and other parties undertake an economic activity. The joint venture operates as a separate entity in which the Group and the other parties have an interest.

The joint venture agreement between the venturers stipulates the capital contributions of the joint venture parties, the duration of the joint venture entity and the basis on which the assets are to be realized upon its dissolution. The profi ts and losses from the joint venture’s operations and any distributions of surplus assets are shared by the venturers, either in proportion to their respective capital contributions, or in accordance with the terms of the joint venture agreement.

A joint venture is treated as a jointly-controlled entity if the Group does not have unilateral control, but has joint control, directly or indirectly, over the joint venture.

2.9 Jointly controlled entities

A jointly-controlled entity is a joint venture that is subject to joint control, resulting in none of the participating parties having unilateral control over the economic activity of the jointly-controlled entity.




2.9 Jointly controlled entities (cont’d)

The Group’s interest in a jointly-controlled entity is stated in the consolidated balance sheet at the Group’s share of net assets using the equity method, less any impairment losses. The Group’s share of the post-acquisition results and reserves of a jointly-controlled entity is included in the consolidated profi t and loss account and statement of changes in equity, respectively. Unrealised gains and losses resulting from transactions between the Group and its jointly-controlled entity are eliminated to the extent of the Group’s interest in the jointly-controlled entity, except where unrealised losses provide evidence of an impairment of the assets transferred.

The fi nancial statements of the jointly controlled entity are prepared as of the same reporting date as the Company. Consistent accounting policies are applied for like transactions and events in similar circumstances.

2.10 Property, plant and equipment

All items of property, plant and equipment are initially recorded at cost. Subsequent to recognition, property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Freehold land has an unlimited useful life and therefore is not depreciated. Depreciation of an asset begins when it is available for use and is computed on a straight-line basis over the estimated useful life of the asset as follows:

Leasehold land and buildings - 25 yearsFreehold properties - 20 yearsMachinery and equipment - 5 to 10 yearsTools and dies - 1 to 3 yearsFurniture, fi ttings and offi ce equipment - 3 to 10 yearsMotor vehicles - 5 yearsLeasehold improvements - 5 to 20 years

Assets under construction-in-progress are not depreciated as these assets are not yet available for use.

Fully depreciated assets are retained in the fi nancial statements until they are no longer in use and no further charge for depreciation is made in respect of these assets.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

The residual values, useful life and depreciation method are reviewed at each fi nancial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefi ts embodied in the items of property, plant and equipment.




2.10 Property, plant and equipment (cont’d)

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefi ts are expected from its use or disposal. Any gain or loss arises on derecognition of the asset is included in the profi t and loss account in the year the asset is derecognised.

2.11 Intangible assets

(a) Goodwill

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefi t from the synergies of the combination.

A cash-generating unit (or group of cash-generating units) to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the unit may be impaired, by comparing the carrying amount of the unit, including the goodwill, with the recoverable amount of the unit. Where the recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount, an impairment loss is recognised in the profi t and loss account.

Where goodwill forms part of a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operations disposed of and the portion of the cash-generating unit retained.

The Group does not reverse in a subsequent period, any impairment loss recognised for goodwill.

(b) Other intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair values as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either fi nite or indefi nite. Intangible assets with fi nite useful lives are amortised on a straight-line basis over the estimated economic useful lives




2.11 Intangible assets (cont’d)

(b) Other intangible assets (cont’d)

and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a fi nite useful life are reviewed at each fi nancial year-end. The amortisation expense on intangible assets with fi nite useful lives is recognised in the profi t and loss account.

Intangible assets with indefi nite useful lives are tested for impairment annually or more frequently if the events or changes in circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefi nite useful life is reviewed annually to determine whether the useful life assessment continues to be supportable.

(i) Research and development cost

All research costs are charged to the profi t and loss account as incurred.

Expenditure incurred on projects to develop new products is capitalised and deferred only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefi ts, the availability of resources to complete the project and the ability to measure reliably the expenditure during the development. Product development expenditure which does not meet these criteria is expensed when incurred.

Deferred development costs are stated at cost less any impairment losses and are amortised using the straight-line basis over the commercial lives of the underlying products not exceeding fi ve years, commencing from the date when the products are put into commercial production.

(ii) Licence fee

Licence fee is stated at cost less impairment losses and is amortised on a straight-line basis over the licence period of fi ve years.

(iii) Club memberships

This is stated at cost and less impairment losses. The club membership has indefi nite useful life and assessment for impairment is performed annually.




2.12 Financial assets

Financial assets are classifi ed as either fi nancial assets at fair value through profi t or loss, held-to-maturity investments, loans and receivables or available-for-sale fi nancial assets, as appropriate. Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the fi nancial instrument.

When fi nancial assets are recognised initially, they are measured at fair value, plus, in the case of fi nancial assets not at fair value through profi t or loss, directly attributable transaction costs. The Group determines the classifi cation of its fi nancial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at each fi nancial year-end.

(a) Loans and receivables

Non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market are classifi ed as loans and receivables. Such assets are carried at amortised cost using the effective interest method less impairment losses. Gains and losses are recognised in profi t and loss account when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

(b) Available-for-sale fi nancial assets

The Group classifi es its investment securities as available-for-sale fi nancial assets.

Available-for-sale fi nancial assets are those non-derivative fi nancial assets that are designated as available-for-sale or are not classifi ed in any of the other categories. After initial recognition, available-for-sale fi nancial assets are measured at fair value with gains or losses being recognised in the fair value adjustment reserve until the investment is derecognised or until the investment is determined to be impaired at which time the cumulative gain or loss previously reported in equity is included in the profi t and loss account.

The fair value of investments that are actively traded in organised fi nancial market is determined by reference to the relevant Exchange’s quoted market bid prices at the close of business on the balance sheet date. For investments where there is no active market, fair value is determined using valuation techniques.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less impairment losses.




2.12 Financial assets (cont’d)

(c) Financial assets at fair value through profi t or loss

Financial assets at fair value through profi t or loss are fi nancial assets classifi ed as held for trading. Financial assets classifi ed as held for trading are derivatives (including separated embedded derivatives) or are acquired principally for the purpose of selling or repurchasing it in the near term.

Subsequent to initial recognition, fi nancial assets at fair value through profi t or loss are measured at fair value. Any gains or losses arising from changes in fair value of the fi nancial assets are recognised in the profi t and loss account. Net gains or net losses on fi nancial assets at fair value through profi t or loss include exchange differences, interest and dividend income.

2.13 Leases

(a) As lessee

Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the fi nance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to the profi t and loss account. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Operating lease payments are recognised as an expense in the profi t and loss account on a straight-line basis over the lease term. The aggregate benefi t of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

(b) As lessor

Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classifi ed as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income (Note 2.21(e)).




2.14 Impairment

(a) Impairment of fi nancial assets

The Group assesses at each balance sheet date whether there is any objective evidence that a fi nancial asset or a group of fi nancial assets is impaired.

(i) Assets carried at amortised cost

If there is objective evidence that an impairment loss on fi nancial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the fi nancial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised in the profi t and loss account.

When the asset becomes uncollectible, the carrying amount of impaired fi nancial assets is reduced directly or if an amount was changed to the allowance account, the amounts charged to the allowance account are written off against the carrying value of the fi nancial asset.

To determine whether there is objective evidence that an impairment loss on fi nancial assets has been incurred, the Group considers factors such as the probability of insolvency or signifi cant fi nancial diffi culties of the debtor and default or signifi cant delay in payments.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the profi t and loss account, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

(ii) Assets carried at cost

If there is objective evidence that an impairment loss on a fi nancial asset carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the current market rate of return for a similar fi nancial asset. Such impairment losses are not reversed in subsequent periods.




2.14 Impairment (cont’d)

(b) Impairment of non-fi nancial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment assessment for an asset is required, the Group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash infl ows that are largely independent of those from other assets or groups of assets. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses are recognised in the profi t and loss account as ‘impairment losses’.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses recognised for an asset may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss 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. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Reversal of an impairment loss is recognised in the profi t and loss account. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

2.15 Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and demand deposits. These also include bank overdrafts that form an integral part of the Group’s cash management.

2.16 Inventories

Inventories are stated at the lower of cost and net realisable value.

Cost of raw materials comprises purchase costs and other direct attributable costs on a fi rst-in-fi rst-out basis. Cost of fi nished goods and work-in-progress comprise direct labour, materials and an appropriate proportion of production overhead expenditure.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.




2.17 Financial liabilities

Financial liabilities include trade and other payables (which are normally settled on 30-90 day terms), payables to subsidiaries and interest bearing loans and borrowings. Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the fi nancial instrument. Financial liabilities are initially recognised at fair value of consideration received less directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method, except for derivatives, which are measured at fair value.

A fi nancial liability is derecognised when the obligation under the liability is extinguished. For fi nancial liabilities other than derivatives, gains and losses are recognised in the profi t and loss account when the liabilities are derecognised or impaired, and through the amortisation process. Any gains or losses arising from changes in fair value of derivatives are recognised in the income statement. Net gains or losses on derivatives include exchange differences.

2.18 Borrowing costs

Borrowing costs are recorded as expenses in the period in which they are incurred.

2.19 Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) where, as a result of a past event, it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Provisions are reviewed at each balance sheet date and adjusted to refl ect the current best estimate. If it is no longer probable that an outfl ow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that refl ects, where appropriate, the risks specifi c to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a fi nance cost.

2.20 Employee benefi ts

(a) Defi ned contribution plans

The Group participates in the national pension schemes as defi ned by the laws of the countries in which it has operations. In particular, the Company makes contributions to the Central Provident Fund scheme in Singapore, a defi ned contribution pension scheme.

Contributions to national pension schemes are recognised as an expense in the period in which the related service is performed.




2.20 Employee benefi ts (cont’d)

(b) Employee leave entitlement

Employee entitlements to annual leave are recognised as a liability when they accrue to employees. The estimated liability for leave is recognised for services rendered by employees up to balance sheet date.

(c) Termination benefi ts

Termination benefi ts are payable when employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefi ts. The Group recognises termination benefi ts when it is demonstrably committed to either terminate the employment of current employees according to a detailed plan without possibility of withdrawal; or providing termination benefi ts as a result of an offer made to encourage voluntary redundancy. In the case of an offer made to encourage voluntary redundancy, the measurement of termination benefi ts is based on the number of employees expected to accept the offer. Benefi ts falling due more than 12 months after balance sheet date are discounted to present value.

(d) Employee share option plans

Employees (including senior executives) of the Group receive remuneration in the form of share options as consideration for services rendered (‘equity settled transactions’).

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which the share options are granted. In valuing the share options, no account is taken of any performance conditions, other than conditions linked to the price of the shares of the company (‘market conditions’), if applicable.

The cost of equity-settled transactions is recognised in the profi t and loss account, together with a corresponding increase in the employee share option reserve, over the period in which the performance and/or service conditions are fulfi lled, ending on the date on which the relevant employees become fully entitled to the award (‘the vesting date’). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date refl ects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The profi t or loss charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective of whether or not the market condition is satisfi ed, provided that all other performance conditions are satisfi ed. The employee share option reserve is transferred to retained earnings upon expiry of the share options. When the options are exercised, the employee share option reserve is transferred to share capital upon the issuance of new shares.




2.20 Employee benefi ts (cont’d)

(d) Employee share option plans (cont’d)

Where the terms of an equity-settled award are modifi ed, as a minimum an expense is recognised as if the terms had not been modifi ed. In addition, an expense is recognised for any modifi cation, which increases the total fair value of the share-based payment arrangement, or is otherwise benefi cial to the employee as measured at the date of modifi cation.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modifi cation of the original award, as described in the previous paragraph.

2.21 Revenue recognition

Revenue is recognised to the extent that is probable that the economic benefi ts will fl ow to the Group and the revenue can be reliably measured.

(a) Sale of goods

Revenue is recognised upon the transfer of signifi cant risk and rewards of ownership of the goods to the customer, which generally coincides with delivery and acceptance of the goods sold. Revenue is not recognised to the extent where there are signifi cant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

(b) Dividend income

Dividend income is recognised when the Company’s right to receive payment is established.

(c) Interest income

Interest income is recognised as interest accrues (using the effective interest method) unless collectibility is in doubt.

(d) Management fees

Management fees are recognised when services are rendered.




2.21 Revenue recognition (cont’d)

(e) Rental income

Rental income is accounted for on a straight-line basis over the leased terms on ongoing leases. The aggregate cost of incentives provided to lessees is recognised as a reduction of rental income over the lease term on a straight-line basis.

2.22 Income taxes

(a) Current tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Current tax is recognised in the profi t and loss account except that tax relating to items recognised directly in equity is recognised directly in equity.

(b) Deferred tax

Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for fi nancial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

Where the deferred tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profi t nor taxable profi t or loss; and

In respect of temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled by the Group and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences (other than those mentioned above), carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profi t will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profi t will allow the deferred tax asset to be recovered.




2.21 Income taxes (cont’d)

(b) Deferred tax (cont’d)

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Deferred tax relating to items recognised directly in equity is recognised directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

(c) Sales tax

Revenues, expenses and assets are recognised net of the amount of sales tax except:

Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

Receivables and payables that are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

2.23 Derecognition of fi nancial assets and liabilities

(a) Financial assets

A fi nancial asset (or, where applicable a part of a fi nancial asset or part of a Group of similar fi nancial assets) is derecognised where:

• The contractual rights to receive cash fl ows from the asset have expired; or

• The Group retains the contractual rights to receive cash fl ows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or

• The Group has transferred its rights to receive cash fl ows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.




2.23 Derecognition of fi nancial assets and liabilities (cont’d)

(a) Financial assets (cont’d)

Where the Group has transferred its rights to receive cash fl ows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Where continuing involvement takes the form of a written and/or purchased option on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that in the case of a written put option on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

On derecognition of a fi nancial asset in its entirety, the difference between the carrying amount and the sum of (a) the consideration received (including any new asset obtained less any new liability assumed) and (b) any cumulative gain or loss that has been recognised directly in equity is recognised in the profi t and loss account.

(b) Financial liabilities

A fi nancial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

Where an existing fi nancial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modifi ed, such an exchange or modifi cation is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the profi t and loss account.

2.24 Derivative fi nancial instruments and hedging activities

The Group uses derivative fi nancial instruments such as forward currency contracts and interest rate swaps to hedge its risks associated with foreign currency and interest rate fl uctuations. Such derivative fi nancial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivative fi nancial instruments are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

Any gains or losses arising from changes in fair value on derivative fi nancial instruments that do not qualify for hedge accounting are taken to the profi t and loss account for the year.




2.24 Derivative fi nancial instruments and hedging activities (cont’d)

The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profi les. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.

For the purpose of hedge accounting, hedges are classifi ed as:

- Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised fi rm commitment, that is attributable to a particular risk and could affect profi t or loss;

- Cash fl ow hedges when hedging exposure to variability in cash fl ows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction and could affect profi t or loss; or

- Hedges of a net investment in a foreign operation.

At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identifi cation of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash fl ows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash fl ows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the fi nancial reporting periods for which they were designated.

Cash fl ow hedge

For cash fl ow hedges, the effective portion of the gain or loss on the hedging instrument is recognised directly in the hedging reserve, while the ineffective portion is recognised in the profi t and loss account.

Amounts taken to hedging reserve are transferred to the profi t and loss account when the hedged transaction affects profi t or loss, such as when hedged fi nancial income or fi nancial expense is recognised or when a forecast sale or purchase occurs. Where the hedged item is the cost of a non-fi nancial asset or liability, the amounts taken to hedging reserve are transferred to the initial carrying amount of the non-fi nancial asset or liability.

If the forecast transaction is no longer expected to occur, amounts previously recognised in hedging reserve are transferred to the profi t and loss account. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in hedging reserve remain in hedging reserve until the forecast transaction occurs. If the related transaction is not expected to occur, the amount is taken to the profi t and loss account.




2.24 Derivative fi nancial instruments and hedging activities (cont’d)

Fair value hedge

For fair value hedges, the carrying amount of the hedged item is adjusted for gains and losses attributable to the risk being hedged, the derivative is remeasured at fair value and gains and losses from both are taken to the profi t and loss account.

For fair value hedges relating to items carried at amortised cost, the adjustment to carrying value is amortised through the profi t and loss account over the remaining term to maturity. Any adjustment to the carrying amount of a hedged fi nancial instrument for which the effective interest method is used is amortised to the profi t and loss account.

Amortisation begins as soon as an adjustment exists but no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.

When an unrecognised fi rm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the fi rm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in the profi t and loss account. The changes in the fair value of the hedging instrument are also recognised in the profi t and loss account.

The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, the hedge no longer meets the criteria for hedge accounting or the Group revokes the designation. Any adjustment to the carrying amount of a hedged fi nancial instrument for which the effective interest method is used is amortised to the profi t and loss account. Amortisation begins as soon as an adjustment exists but no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.

2.25 Transactions with minority interests

Minority interests represent the portion of profi t or loss and net assets in subsidiaries not held by the Group and are presented separately in the consolidated profi t and loss account and within equity in the consolidated balance sheet, separately from parent shareholders’ equity. Transactions with minority interests are accounted for using the entity concept method, whereby, transactions with minority interests are accounted for as transactions with equity holders. On acquisition of minority interests, the difference between the consideration and book value of the share of the net assets acquired is refl ected as being a transaction between owners and recognised directly in equity. Gain or loss on disposal to minority interest is recognised directly in equity.

2.26 Discontinued operation

A component of the Group is classifi ed as a ‘discontinued operation’ when the criteria to be classifi ed as held for sale have been met or it has been disposed of and such a component represents a separate major line of business or geographical area of operations or is part of a single co-ordinated major line of business or geographical area of operations. A component is deemed to be held for sale if its carrying amounts will be recovered principally through a sale transaction rather than through continuing use.




2.26 Discontinued operation (cont’d)

Upon classifi cation as held for sale, non-current assets and disposal groups are not depreciated and are measured at the lower of carrying amount and fair value less costs to sell. Any differences are recognised in the profi t and loss account.

Prior period comparatives are re-presented so that the disclosures relate to all operations that have been discontinued by the balance sheet date of the current fi nancial year.

2.27 Segment reporting

A business segment is a distinguishable component of the Group that is engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component of the Group that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments.

2.28 Share capital and share issue expenses

Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly attributable to the issuance of ordinary shares are deducted against share capital.

2.29 Treasury shares

When shares recognised as equity are reacquired, the amount of consideration paid is recognised directly in equity. Reacquired shares are classifi ed as treasury shares and presented as a deduction from total equity. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of treasury shares.

2.30 Contingencies

A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confi rmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group.

Contingent liabilities and assets are not recognised on the balance sheet of the Group.



3. GROUP COMPANIES

The subsidiary and associated companies as at 31 December 2007 are :

Name of Company (Country of incorporation)

Principal activities(Place of business)

Cost of investments by the Company

Effectiveinterest heldby the Group

2007 2006 2007 2006

Subsidiary companies $’000 $’000 % %

Directly held by the Company

Mansfi eld ManufacturingCompany Limited(Hong Kong)(“Mansfi eld”) 1

Metal stamping and sub-assembly of stamped components, tooling and die making (Hong Kong)

14,120 14,120 83.33 83.33

Magnecomp PrecisionTechnologies Public Company(Thailand) (“MPT”) 2

Manufacturing and sale of suspensions assemblies (Thailand)

– 140,928 – 74.32

14,120 155,048

Indirectly held through subsidiary companies

Mansfi eld

Go Smart DevelopmentLimited 1

(Hong Kong)

Property investment and trading of electrical appliances(Hong Kong)

# # 83.33 83.33

Me ElectronicProducts Limited 1

(Hong Kong)

Research development (Hong Kong)

# # 83.33 83.33

Lens Tool & Die(H.K.) Limited 1

(Hong Kong)

Property investment(Hong Kong)

# # 83.33 83.33

Magix MechatronicsCompany Limited 1

(Hong Kong)

Sale of AssemblyComponents(Hong Kong)

# # 75.00 64.58

Feng Chuan ToolingCompany Limited 1

(Hong Kong)

Sales of precisiontools and dies(Hong Kong)

# # 83.33 83.33







2007 2006 2007 2006


Indirectly held through subsidiary companies (cont’d)

Feng Chuan Tooling(Dongguan)Company Limited 1

(People’s Republic of China)

Manufacturing of precision tools anddies(People’s Republicof China)

# # 83.33 83.33

Mansfi eld (Suzhou)Manufacturing CompanyLimited 1 (People’s Republic of China)

Metal stamping, tooling and die making(People’s Republicof China)

# # 83.33 83.33

Magix Mechatronics(Dongguan) CompanyLimited 1 (People’s Republic of China)

Assembly of components(People’s Republic of China)

# # 75.00 64.58

Dongguan Mansfi eldMetal FormingCompany Limited 1 (People’s Republic of China)

Metal stamping, tooling and die making(People’s Republicof China)

# # 83.33 83.33

Go Smart Technologies(Shenzhen) Co Ltd 1 (People’s Republic of China)

Trading of electrical appliances

# # 83.33 83.33

Magix Industrial Company Limited 1 (Hong Kong)

Contract manufacturing in China and general trading (Hong Kong)

# # 75.00 64.58

Mansfi eld Industrial Company Limited 1 (Hong Kong)

Investment holding and general trading (Hong Kong)

# # 45.83 45.83

Mansfi eld Manufacturing (Dalian) Company Limited 1

(People’s Republic of China)

Metal stamping (People’s Republic of China)

# # 45.83 45.83

Exerion Precision Technology Holdings BV 1 ( The Netherlands)

Investment holding # − 62.50 −

3. GROUP COMPANIES (cont’d)







2007 2006 2007 2006


Indirectly held through subsidiary companies (cont’d)

Exerion Precision Technology Ulft NL BV 1 ( The Netherlands)

Electrical appliance sub-assembly

# − 62.50 −

Exerion Precision Technology Olomouc CZ s.r.o.1

( Cezh Republic)

Electrical appliance sub-assembly

# − 62.50 −

Associated company

Held by the Company

nanoPrecision Products, Inc3

(USA) Development and commercialisation of nano scale precision manufacturing process and resultant products(USA)

* 48.00

Indirectly held through subsidiary companies

Wong Exerion Precision Technology Sdn Bhd 4

48.80 -

1 Audited by member fi rms of Ernst & Young Global in the respective countries 2 Disposed of during the year3 Not required to be audited by the law of its country of incorporation4 Audited by other fi rm

# Cost of investment in the sub-subsidiaries of the Group are reflected in the financial

statements of their respective holding companies

* Effective interest held diluted to 6.00% subsequent to the restructuring of nanoPrecision Products,

Inc. (see Notes 15 and 18 for more details)

3. GROUP COMPANIES (cont’d)



4. SALE OF GOODS

Sale of goods of the Group represents the aggregate of net invoiced value of goods sold, after allowances for goods returned and trade discounts, and excludes intra-group transactions.

5. OTHER INCOME

Group2007 2006$’000 $’000

Interest income from banks 1,356 326Rental income 539 489

Gain on disposal of property, plant and equipment 27 − Others 838 532 Excess over the cost of business combination (Note 14) 1,681 −

4,441 1,347

6. SALARIES AND EMPLOYEE BENEFITS

Salaries and employee benefi ts for continuing operation includes the following:

Group2007 2006$’000 $’000

Directors’ emoluments- Directors of the Company- Fees 211 192- Employee share option plan expense 123 214- Other emoluments 1,819 1,165

- Directors of subsidiaries- Employee share option plan expense 83 141- Other emoluments 929 818

Contributions to state pension schemes and CPF contributions 884 654

Employee share options plan expense 676 888



7. OTHER OPERATING EXPENSES

The following items have been included in arriving at the profi t before tax from continuing operations :

Group2007 2006$’000 $’000

Non-audit fees- auditors of the Company 70 58- other auditors 26 56Property, plant and equipment written off 58 − Amortisation of intangible assets 190 409Operating lease expenses 9,059 6,918Impairment of investment in associates − 986Impairment of other investments 1,223 − Impairment of club membership 28 − Allowance for doubtful trade receivables 612 399Allowance for doubtful other receivables − 1,108Write-back of allowance for doubtful other receivables (1,108) − Provision for obsolete inventories 722 273

8. FINANCE COSTS

Group2007 2006$’000 $’000

Interest expense

- Bank loans and borrowings 4,017 3,157



9. INCOME TAX

Group

2007 2006$’000 $’000

Major components of income tax expense are :-

Current – continuing operationsSingapore 1,618 40Foreign 2,106 1,552

Deferred – continuing operations

Origination and reversal of temporary differences (761) 6342,963 2,226

Under provision for current income tax in respect of previous years 340 32

Income tax attributable to continuing operations 3,303 2,258Income tax attributable to discontinued operation (Note10) 1,734 (1,112)Income tax expense recognised in the profi t and loss account 5,037 1,146

A reconciliation between the tax expense and the product of accounting profi t multiplied by the applicable tax rate for the years ended 31 December is as follows :-

Group2007 2006$’000 $’000

Profi t from continuing operations before tax 25,049 13,555Profi t/(loss) from discontinued operation before tax 48,823 (41,434)Accounting profi t/(loss) before tax 73,872 (27,879)

Tax income at the domestic rates applicable to profi ts in the countries where the Group operates (10,666) (14,090)Adjustments :-Non-taxable income and credits (7,432) (6,991)Non-deductible expenses 13,957 7,230Tax effect on benefi ts arising from deductible temporary differences not recognised 9,651 15,684Benefi ts from previously unrecognised tax losses (2,984) (273)Others 692 (328)(Over)/under provision of tax in prior years 1,819 (86)Tax expense recognised in the profi t and loss account 5,037 1,146

The above reconciliation is prepared by aggregating separate reconciliations of each national jurisdiction.

The corporate income tax rate applicable to Singapore companies of the Group was reduced to 18% for the year of assessment 2008 onwards from 20% for year of assessment 2007.



9. INCOME TAX (cont’d)

Certain subsidiaries of the Group established in the People’s Republic of China (“PRC”) were exempted from PRC corporate income tax (“CIT”) for their fi rst two profi t-making years of operations and thereafter are eligible for a 50% relief from PRC CIT for the following three years under the PRC tax laws. For some other companies, corporate taxes have been calculated on the estimated assessable profi ts for the year at the rate of 27% (2006: 27%).

For the companies operating in the Netherlands, corporate taxes have been calculated on the estimated assessable profi ts for the year at rates ranging from 24.5% to 25.5%.

A subsidiary group in Thailand was granted promotional privileges granted under the Investment Promotion Act in Thailand. As part of the privileges, certain profi ts of these subsidiaries are not subject to tax for a period ranging from 3 to 7 years commencing from 1 September 2002, 30 June 2004, 1 April 2005, 2 February 2006, 1 April 2006 and 2 October 2006 respectively. The subsidiary group was disposed off on 7 November 2007.

As at 31 December 2007, the Group had unutilised tax losses of approximately $8,922,000(2006: $144,266,000) which are available for offset against future taxable profi ts of the companies in which the losses arose, for which no deferred tax asset is recognised due to uncertainty of its recoverability. The use of these tax losses is subject to the agreement with the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the Group operates. No deferred tax asset is recognised on these losses in accordance with the Group’s accounting policy as set out in Note 2.22(b).

10. DISCONTINUED OPERATION

On 29 August 2007, the Company publicly announced the decision of its Board of Directors to discontinue and dispose of its subsidiary, Magnecomp Precision Technologies Public Company (“MPT”), a public listed company on the Stock Exchange of Thailand and its subsidiaries. The sale transaction was completed on 7 November 2007.

The results of MPT and its subsidiaries (“MPT Group”) for period from 1 January 2007 to the date of disposal and the net gain on disposal are presented separately on the profi t and loss account as “Profi t/(loss) from discontinued operations, net of tax”. The results are as follows:

Group2007 2006$’000 $’000

Revenue 337,140 406,131Expenses 1 (363,604) (439,669)Loss from operations (26,464) (33,538)Finance costs (7,671) (7,896)Net gain on partial disposal 2 (Note 14) 72,292 − Fair value change on investment held for trading 3 (Note 14) 10,666 − Gain/(loss) from discontinued operation before taxation 48,823 (41,434)Tax related to loss from discontinued operations (1,734) 1,112

Profi t/(loss) from discontinued operations, net of tax 47,089 (40,322)



10. DISCONTINUED OPERATION (cont’d)

Cash fl ow statement disclosures

The cash fl ows attributable to MPT are as follows:

Group2007 2006$’000 $’000

Operating 62,956 33,397Investing (58,362) (109,946)Financing (16,855) 42,926

Net cash outfl ows (12,261) (33,623)

1 Included in the expenses are restructuring charge of approximately S$23 million for the year ended 31 December 2007 due to earlier-than-expected end of life of certain products and the reduction of China, USA and Thailand operations as follows :

Group2007 2006$’000 $’000

Impairment loss / written-off for machinery and equipment 20,787 12,722Allowance for stock obsolescence – 8,763Relocation of factory and offi ce – 3,495Severance payment 1,898 1,946

22,685 26,926

2 This gain relates to disposal of 64.3% shareholding stake in MPT after provision for undertakings given to TDK Corporation (“TDK”)

3 Fair value change relates to balance of the 10% shareholding stake on MPT amounting to 208,486,179 shares in MPT under the Put and Call Option agreement with TDK.

11. EARNINGS/(LOSS) PER SHARE

(1) Continuing operations

(a) Basic earnings/(loss) per share amounts are calculated by dividing the net profi t from continuing operations attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year.



11. EARNINGS/(LOSS) PER SHARE (cont’d)

(1) Continuing operations (cont’d)

The following table refl ects the profi t and loss data used in the computation of the basic and diluted earnings/(loss) per share for the years ended 31 December:

Group2007 2006$’000 $’000

Net profi t/(loss) attributable to ordinary equity holders for basic earnings per share 73,720 (21,305)

(Profi t)/loss from discontinued operation, net of tax, attributable to ordinary equity holders of the Company (47,089) 40,322

Minority interest from discontinued operation (9,906) (11,051)

Less: (Profi t)/loss from discontinued operation, net of tax & minority interests, attributable to ordinary equity holders of the Company (56,995) 29,271

Net profi t from continuing operations attributable to ordinary equity holders of the Company used in the computation of basic and diluted earning per share 16,725 7,966

Weighted average number of ordinary shares on issue applicable to basic earnings per share (’000) 240,102 237,593

(b) Diluted earnings per share amounts are calculated by dividing the net profi t from continuing operations attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue for the fi nancial year, after adjusting for the effect of dilutive options under the InnoTek Employees’ Share Option Plan as follows :

2007 2006No. of shares No. of shares

’000 ’000

Number of ordinary shares in issue (used in the calculation of basic earnings per share) 240,102 237,593

Number of unissued shares under option 477 − Weighted average number of ordinary shares for diluted earnings per share computation 240,579 237,593



11. EARNINGS/(LOSS) PER SHARE (cont’d)

(1) Continuing operations (cont’d)

(c) 4,244,000 (2006: 2,444,000) of shares options granted to employees under the existing employee share option plans have not been included in the calculation of diluted earnings per share because they are anti-dilutive for the current and previous fi nancial periods presented.

(d) Since the end of the year, the employees have exercised the option to acquire 295,000 (2006: 61,000) ordinary shares. There have been no other transactions involving ordinary shares or potential ordinary shares since the reporting date and before the completion of these fi nancial statements.

(2) Discontinued operation

The basic and diluted earnings/(loss) per share from discontinued operation are calculated by dividing the “Profi t/(loss) from discontinued operation, net of tax & minority interests, attributable to ordinary equity holders of the Company’ by the ‘Weighted average number of ordinary shares on issue applicable to basic earnings per share computation’ and ‘Weighted average number of ordinary shares for diluted earnings per share calculation’ respectively. These profi t and loss account and share data are presented above in caption 1(a) of this Note.



12. PROPERTY, PLANT AND EQUIPMENT

Group Leasehold Leasehold buildingsbuildings

Leasehold Leasehold landland

Freehold Freehold landland

Freehold Freehold propertiesproperties

Machinery Machinery and and

equipmentequipmentToolsTools

and diesand dies

Furniture Furniture fi ttings, fi ttings,

and offi ce and offi ce equipmentequipment

Motor Motor vehiclesvehicles

Leasehold Leasehold improvementsimprovements

Construction Construction in-progressin-progress TotalTotal

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

CostAt 1 January 2006 3,997 1,822 6,964 5,956 284,474 19,722 25,109 1,639 56,533 50,069 456,285Reclassifi cation (187) − (6) 25,974 54,267 (276) (23) 1 (25,480) (54,270) − Additions 996 − − − 50,008 18,237 4,820 266 5,315 60,236 139,878Disposals − − − − (7,765) (6,117) (1,018) − (218) − (15,118)Written off − − − − (42) (2) (187) − (36) − (267)Currency realignment 135 (148) 344 (375) (7,988) (1,020) (956) (60) (686) (2,675) (13,429)At 31 December 2006

and 1 January 2007 4,941 1,674 7,302 31,555 372,954 30,544 27,745 1,846 35,428 53,360 567,349Reclassifi cation 615 − − 2,525 38,433 491 1,016 (224) 7,856 (50,712) − Additions 1,950 704 − 272 34,418 14,281 4,865 346 13,408 34,440 104,684Acquisition of

subsidiary 457 − − − 2,982 1,214 2,363 − − 4 7,020Disposals − − − − (1,221) (17) (533) (133) (5,295) (204) (7,403)Disposal of subsidiary (2,467) − (7,317) (34,282) (333,086) (42,746) (17,765) (695) (16,317) (30,660) (485,335)Written off − − − − (8,016) (1,172) (1,048) − (16) (1,164) (11,416)Currency realignment (185) (104) 15 (70) (4,739) (705) (787) (56) (1,714) 3,667 (4,678)At 31 December 2007 5,311 2,274 − − 101,725 1,890 15,856 1,084 33,350 8,731 170,221

Accumulated depreciation and impairment lossAt 1 January 2006 2,748 447 − 1,170 144,952 11,322 16,681 1,154 25,557 − 204,031Reclassifi cation (829) − − 10,509 1,758 (1,043) (13) 2 (10,384) − − Impairment − − − − 14,532 2,860 − − 660 − 18,052Charge for the year- Continuing Operation 110 44 − − 6,209 182 1,626 89 4,024 − 12,284Charge for the year –Discontinued operations 30 − − 1,807 30,833 9,865 2,149 88 1,129 12 45,913Disposals − − − − (6,507) (6,095) (970) − (217) − (13,789)Written off − − − − (32) (55) (120) − (37) − (244)Currency realignment (156) (37) − (71) (2,947) (754) (589) (44) (748) (12) (5,358)At 31 December 2006 and 1 January 2007 (as restated) 1,903 454 − 13,415 188,798 16,282 18,764 1,289 19,984 − 260,889Reclassifi cation 615 − − (383) 1,450 (1,399) (376) (214) 307 − − Acquisition of subsidiary 182 − − − 2,504 320 1,257 − − − 4,263Impairment − − − − 15,329 1,903 29 − 2 216 17,479Charge for the year – Continuing Operation 184 42 − − 7,902 504 1,933 159 4,706 − 15,430Charge for the year – Discontinuing Operation 7 − − 1,465 31,357 15,153 1,978 35 1,504 − 51,499Disposals − − − − (1,087) (26) (523) (133) (5,296) (204) (7,269)Disposal of subsidiary (263) − − (14,489) (206,552) (30,129) (11,102) (625) (4,175) − (267,335)Written off − − − − (3,269) (772) (1,159) − (8) − (5,208)Currency realignment (110) (33) − (8) 5,317 (674) (553) (35) (937) (12) 2,955At 31 December 2007 2,518 463 − − 41,749 1,162 10,248 476 16,087 − 72,703

Net book valueAt 31 December 2007 2,793 1,811 − − 59,976 728 5,608 608 17,263 8,731

97,518

At 31 December 2006 3,038 1,220 7,302 18,140 184,156 14,262 8,981 557 15,444 53,360 306,460



12. PROPERTY, PLANT AND EQUIPMENT (cont’d)

(i) Impairment loss relates to certain subsidiaries discontinuing certain production lines, earlier-than-expected end of life of certain products and the related assets amounting to approximately $17,479,000 (2006: $18,052,000) was charged to profi t and loss and in line item “expenses” in Note 10.

Company Computer

Furniture, fi ttings

and offi ce equipment

Motor vehicles Total

$’000 $’000 $’000 $’000CostAt 1 January 2006 164 124 298 586Additions − 4 − 4At 31 December 2006 and 1 January 2007 164 128 298 590

Additions 56 5 − 61Written off (136) (25) − (161)

At 31 December 2007 84 108 298 490Accumulated depreciationAt 1 January 2006 146 103 89 338Charge for the year 18 25 44 87At 31 December 2006 and 1 January 2007 164 128 133 425

Charge for the year 56 5 44 105Written off (136) (25) − (161)

At 31 December 2007 84 108 177 369Net book valueAt 31 December 2007 − − 121 121

At 31 December 2006 − − 165 165

(a) Assets held under fi nance leases

The carrying amount of machinery and equipment held under fi nance leases as at 31 December 2007 was approximately $1,210,000 (2006: $1,694,000).

Leased assets are pledged as security for the related fi nance lease liabilities.



13. INTANGIBLE ASSETS

Group

Club member-

ships GoodwillDeferred

expenditure Patents Total$’000 $’000 $’000 $’000 $’000

CostBalance at 1 January 2006 267 15,484 6,040 4,283 26,074Additions 85 − − − 85Currency realignment (19) 833 (334) (358) 122Balance at 31 December 2006 and 1 January 2007 333 16,317 5,706 3,925 26,281

Written off − − (2,047) − (2,047)Disposal of subsidiary (206) (16,374) (3,659) (3,926) (24,165)Currency realignment 41 57 − 1 99

At 31 December 2007 168 − − − 168

Accumulated amortisation and impairment loss

At 1 January 2006 − − 4,292 3,892 8,184Amortisation for the year − − 1,032 261* 1,293Currency realignment − − (294) (332) (626)Balance at 31 December 2006 and 1 January 2007 − − 5,030 3,821 8,851

Amortisation for the year − − 190 100* 290Impairment loss 28 − − − 28Written off − − (1,561) − (1,561)Disposal of subsidiary − − (3,659) (3,923) (7,582)Currency realignment − − − 2 2

At 31 December 2007 28 − − − 28Net book valueAt 31 December 2007 140 − − − 140

At 31 December 2006 333 16,317 676 104 17,430

* Amortisation of patents relates to research and development expenditure has been included in the “raw materials and production overheads” line item in the profi t and loss account.



13. INTANGIBLE ASSETS (cont’d)

CompanyClub

membershipsDeferred

expenditure Total$’000 $’000 $’000

CostAt 1 January 2006 and 31 December 2006 and 1 January 2007 28 2,047 2,075

Written off − (2,047) (2,047)

Balance at 31 December 2007 28 − 28

Accumulated amortisationAt 1 January 2006 − 962 962Amortisation for the year − 409 409At 31 December 2006 and 1 January 2007 − 1,371 1,371Amortisation for the year − 190 190Impairment loss 28 − 28Written off − (1,561) (1,561)

At 31 December 2007 28 − 28

Net book valueAt 31 December 2007 − − −

At 31 December 2006 28 676 704

• Deferred expenditure represents license fee payable under cross licensing/licensing agreements for use of certain patents. The remaining deferred expenditure was written off as it relates to patents pertaining to MPT operations which was disposed off on 7 November 2007.

• Patents represent costs of developing intellectual property relating to patents on new products and process technologies.

14. SUBSIDIARIES

Company2007 2006$’000 $’000

Investment in subsidiaries, at cost 163,054 163,054Less : Impairment loss − (8,006)Less : Disposal of subsidiary (148,934) −

14,120 155,048Analysis of impairment loss :Balance at beginning of year 8,006 − Charged to profi t and loss account − 8,006Written-back to profi t and loss account on disposal of subsidiary (8,006) −

Balance at end of year − 8,006

Please see Note 3 for details of subsidiaries.



14. SUBSIDIARIES (cont’d)

Disposal of Magnecomp Precision Technologies Public Company (“MPT”) The Company disposed of 64.3% equity interest in MPT on 7 November 2007 for a cash consideration of US$106.5 million ($153.1 million).

The Company entered into a put and call option agreement with TDK Corporation (“TDK”) in respect of its remaining 10% equity interest in MPT. As the terms and conditions of the put and call options differ, the Company has redesignated the 10% equity interest investment as “held-for-trading” and accounted for it at fair value as at year end.

In addition, the Company also received US$5.0 million ($7.2 million) from the change of name of the Company from “Magnecomp International Limited” to “InnoTek Limited” and the provisions of other undertakings under the undertaking agreement with TDK. The undertaking agreement provided, inter alia, for the Company to assist TDK to procure the remaining equity interest in MPT for a maximum amount of US$5.0 million. As at 31 December 2007, TDK had attained 98.93% equity interest in MPT and an amount of US$4.8 million ($6.9 million) was recognised as income. The Company made a provision of S$6.9 million in respect of undertakings given pursuant to the sale and purchase agreement.

The disposal of MPT results in a gain on sale of MPT amounting to $72,292,000 and the value of assets and liabilities of MPT pertaining to the 64.3% equity interest in MPT recorded in the consolidated fi nancial statements as at 7 November 2007, and the cash fl ow effect of MPT disposal were :

Group

2007

$’000

Current assets 59,303Cash and cash equivalent 5,300Non-current assets 205,459Current liabilities (104,150)Non-current liabilities (71,525)Minority Interest (18,484)Reserves 3,722Carrying values of net assets 79,625Gain on disposal of MPT (Note 10) 72,292Consideration from disposal, net of expense 151,917Less: Cash and cash equivalents disposed (5,300)

Net Proceeds from sale of MPT 146,617




The Group also recorded a gain from the fair value change for the balance of the 10% shareholding in MPT representing 208,486,179 MPT shares held under the put and call option agreement with TDK as follows :

Group and Company

2007

$’000

Investment Securities

Market price of the 208,486,179 MPT shares as at 31 December 2007 22,968Fair value change for investment held for trading (Note 10) 10,666

Acquisition of subsidiary

On 2 January 2007, the Group’s subsidiary, Mansfi eld Manufacturing Company Limited acquired 75% equity interest in Exerion Precision Technology Holding B.V. (“Exerion”). Exerion is engaged in engineering, production and assembly of complex frame structures and functional modules primarily of document-processing and medicinal appliance and equipment. The purchase consideration was in the form of the conversion of a convertible loan of S$3,944,000 extended to Exerion in the previous year and cash of $81,000.




The fair values of the identifi able assets and liabilities of Exerion as at the date of acquisition were :

Fair value recognised on

acquisition

Carrying amount before

combination$’000 $’000

Property, plant and equipment 2,757 2,757Investment in associate 214 214Deferred tax assets 2,823 2,823Inventories 8,442 8,442Trade receivables 3,623 3,623Other receivables 693 693Cash and bank balances 348 348Interest-bearing loans and borrowings (2,003) (2,003)Trade payables (7,458) (7,458)Other payables and accruals (1,830) (1,830)Minority interests (1,903) (1,903)

Net identifi able assets 5,706 5,706Excess over the cost of acquisition recognised in the profi t and loss account (Note 5) (1,681)

Consideration for acquisition 4,025

Satisfi ed by :Cash 81Conversion of convertible loan* 3,944

4,025

* The convertible loan was classifi ed as deposit as at 31 December 2006.

The effect of acquisition on cash fl ows is as follows:

$’000

Total consideration for 75% equity interest acquired 4,025Less: Non-cash consideration (3,944)Consideration settled in cash 81Cash and bank balance of newly acquired subsidiary (348)

Net cash infl ow on acquisition (267)

The subsidiary acquired during the year contributed $43.2 million to the Group’s continuing operation’s revenue and a loss after tax before minority interest from continuing operations of $0.8 million.

Had acquisition taken place at the beginning of the year, the revenue and the profi t after tax from continuing operations for the year would have been S$448.9 million and S$21.7 million respectively.




Acquisition of minority interest

On 31 July 2007, the Company’s subsidiary, Mansfi eld Manufacturing Company Limited acquired an additional 12.5% equity interest in Magix Mechatronics Company Limited from its minority interest for a cash consideration of $2.0 million (HK$10.1 million). The difference between the carrying amount of the interest acquired ($2,703,000) and the consideration is refl ected in equity as other reserve on acquisition of minority interest.

15. INVESTMENT IN ASSOCIATES

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Unquoted shares at cost 4,036 2,599 3,822 2,599Share of post-acquisition loss (1,566) (1,550) − − Impairment loss (1,049) (1,049) (2,599) (2,599)Currency realignment (4) − − − Transfer to other investment (Note 18) (1,223) − (1,223) −

194 − − −

The summarised fi nancial information of the associates, net adjusted for the proportion of ownership interest held by the Group, are as follows:

Group2007 2006$’000 $’000

Assets and liabilities:Total assets 732 503Total liabilities (317) (1,586)

Results:Revenue 599 − Loss for the year

(31) (1,384)



16. INVESTMENT IN JOINT VENTURE

Group 2007$’000

Share of net assets 357

Particulars of the jointly-controlled entity are as follows:

NamePlace of incorporation

and operation

Nominal value of issued common

stock

Percentage of equity

attributable to Group

Principal activity

Mayax, IncSan Diego County,

California USA US$2,000,000 41.67% Inactive

The above investment in the jointly-controlled entity is indirectly held through a wholly-owned subsidiary of the Group.

The aggregate amounts of the current assets, non-current assets, current liabilities, income and expenses related to the Group’s interest in the jointly-controlled entity are as follows :

Group2007$’000

Share of jointly-controlled entity are as follows:Current assets 3,975

Non-current assets 315

Current liabilities (3,933)

Net assets 357

Results:Revenue −

Expenses −

17. DEFERRED TAX

Group2007

$’000

Deferred tax assets

Unutilised tax losses 2,625

Currency realignment 392

3,017



17. DEFERRED TAX (cont’d)

GroupConsolidated profi t and loss account Company

2007 2006 2007 2006 2007 2006$’000 $’000 $’000 $’000 $’000 $’000

Deferred tax liabilitiesDifferences in depreciation 2,120 2,837 167 634 − − Foreign income not remitted 194 1,122 (928) − 194 1,122

2,314 3,959 (761) 634 194 1,122

Unrecognised temporary differences relating to investment in subsidiaries

At 31 December 2007, there was no signifi cant unrecognised deferred tax liability (2006: Nil) for taxes that would be payable on the unremitted earnings of the subsidiary of the Group, as the Group has no liability to additional tax should such amounts be remitted.

Tax consequences of proposed dividends

There are no income tax consequences (2006: Nil) attached to the dividends to the shareholders proposed by the Company but not recognised as a liability in the fi nancial statement.

18. OTHER INVESTMENTS

Group and Company2007 2006$’000 $’000

Unquoted shares at cost:Balance at beginning of year 2,105 − Additions 1,011 2,105Transferred from investment in associates (Note 15) 1,223 − Impairment loss (1,223) −

Balance at end of year 3,116 2,105

The Company invested into a non-listed company in California (United States), Daylight Solutions Inc. in 2006. The principal activities of Daylight Solutions Inc. include developing, manufacturing and selling unique molecular detection and imaging instrumentation that offers signifi cant advancement in the areas of medical diagnostics, homeland security, military applications and industrial controls. The Company increased the investment in Daylight Solution from 9.8% to 14.4% during the year.

The Company transferred investment in associates of $1,223,000 to other investment as the Company’s interest in this entity has diluted from 48% in the year 2006 to 6% in the year 2007 due to a capital restructuring exercise conducted by this entity. The Directors do not expect the investments to be recoverable and a full provision for the same amount has been made accordingly. This impairment loss is included in the line item “other operating expenses” in the profi t and loss account.



19. CASH AND CASH EQUIVALENTS

Cash and cash equivalents as at 31 December were as follows:

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Cash and bank balances 34,321 41,834 1,063 509Fixed deposits (pledged)* − 850 − − Fixed deposits 124,131 1,217 124,131 1,168

158,452 43,901 125,194 1,677Bank overdrafts (Note 25) (4,533) (477) − − Less : Fixed deposits pledged − (850) − −

153,919 42,574 125,194 1,677

Cash at banks earns interest at fl oating rates based on daily bank deposit rates ranging from 0.00% to 0.04% (2006: 0.00% to 0.12%) per annum. Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. The weighted average effective interest rate of short term deposits is 6.80% (2006: 3.86%) per annum.

Bank overdrafts are included in the determination of cash and cash equivalents because they form an integral part of the Group’s cash management.

Bank overdrafts are repayable on demand and have a weighted average effective interest rate of 6.92% (2006: 6.76%) p.a.

* This relates to fi xed deposits pledged in connection with bank overdrafts drawn down (Note 25).

20. TRADE RECEIVABLES

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Trade receivables 101,424 148,845 − − Amounts due from subsidiaries − − 956 4,366

101,424 148,845 956 4,366Allowance for doubtful trade receivables (1,343) (1,284) − −

100,081 147,561 956 4,366



20. TRADE RECEIVABLES (cont’d)

Trade receivables The above balances are non-interest bearing and are generally on 30 to 90 days’ terms. They are recognised at their original invoice amounts which represents their fair values on initial recognition.

Included in trade receivables are amount due from minority shareholders of subsidiaries of $45,565,000 (2006: $22,311,000).

Amount due from subsidiaries

The above balances are unsecured, non-interest bearing, and are repayable on demand. The amounts will be settled in cash.

As at 31 December 2007, the following amounts are included in trade receivables of the Group and the Company:

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

- Singapore dollars − − 503 827- United States dollars 43,401 78,164 453 3,123- Euro 4,087 97 − − - Renminbi 21,123 9,065 − − - Thai Baht − 51,826 − 416- Hong Kong dollars 29,663 8,409 − − - Others 1,807 − − −

100,081 147,561 956 4,366

Allowance for doubtful trade receivables

For the year ended 31 December 2007, an impairment loss of $612,000 (2006: $ 546,000) was recognised in the profi t and loss account subsequent to a debt recovery assessment performed on trade receivables as at 31 December 2007. The impairment loss is recognised in the “other income” line item.



20. TRADE RECEIVABLES (cont’d)

The Group’s trade receivables that are impaired at the balance sheet date and the movement of the allowance accounts are as follows:

Group2007 2006$’000 $’000

Movement in allowance accounts :At 1 January (1,284) (738)Charge for the year (612) (546)Written off 553 −

At 31 December (1,343) (1,284)

The above represents a provision for individually impaired trade receivables whose carrying values aggregate $1,343,000 (2006: $1,284,000) as at year end. The individually impaired trade receivables relate to customers that were in fi nancial diffi culties and the receivables are not expected to be recovered. The Group does not hold collateral or other credit enhancements over these balances.

Receivables that are past due but not impaired

The Group has trade receivables amounting to $21,000,000 (2006 : $11,339,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows:

Group2007 2006$’000 $’000

Trade receivables past due :Less than 30 days 16,338 8,85130 to 60 days 1,829 1,46361-90 days 1,398 36691-120 days 630 305More than 120 days 805 354

21,000 11,339



21. OTHER RECEIVABLES

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Deposits 14,123 15,646 105 82Loan to associate − 1,108 − 1,108Amount due from disposal of plant and machinery − 2,762 − −

Others 12,526 5,148 7,321 39826,649 24,664 7,426 1,588

Allowance for doubtful other receivables − (1,108) − (1,108)

26,649 23,556 7,426 480

Included in deposits is an amount of $1,776,000 (2006: $Nil) that is paid for more than 12 months after year-end.

As at 31 December 2007, the following amounts are included in other receivables of the Group and the Company:

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

- Singapore dollars 525 480 524 480- Thai Baht − 4,641 − − - United States dollars 8,487 420 6,902 − - Hong Kong dollars 2,423 4,627 − − - Euro 918 3,944 − − - Renminbi 13,951 9,217 − − - Others 345 227 − −

26,649 23,556 7,426 480

Allowance for doubtful other receivables The provision for impairment loss of $1,108,000 made in year 2006 was written back in year 2007 to cost of investment in associates due to a capital restructuring exercise by the associate to convert the loan into share capital.

22. PREPAYMENTS

Included in prepayments is an amount of $670,000 (2006: $1,962,000) that relates to amount prepaid for more than 12 months after year-end. This amount represents unamortized prepaid rental for leasing factory and offi ce premises.



23. INVENTORIES

Group2007 2006$’000 $’000

Finished goods 15,278 21,551Work-in-progress 6,700 6,947Raw materials 14,756 18,028Goods-in-transit at cost − 101

Total inventories at lower of cost and net realisable value 36,734 46,627

During the year, the Group wrote down approximately $1,524,000 (2006: $6,306,000) of inventories which is recognised as expense in the profi t and loss account in the “raw material and production overhead” line item, and the “expenses” line item in Note 10.

24. LOANS TO SUBSIDIARIES

Loans to subsidiaries disbursed by the Company are unsecured, repayable on demand and are to be settled in cash. Interest bearing loans bear interest ranging from 3.44% to 5.88% (2006: ranged from 3.37% to 4.90%) per annum. The loans are to be settled in cash and are repayable on demand.



25. INTEREST-BEARING LOANS AND BORROWINGS

Weighted average effective interest

rate Group Company (p.a.) Maturity 2007 2006 2007 2006

Current: $’000 $’000 $’000 $’000Obligations under

fi nance lease, secured (Note 30) 4.19% 2008 288 663 − −

Bank loans:-United States dollars − − − 26,392 − 383-Hong Kong dollars 6.10% 2008 21,811 13,186 − − -Thai Baht − − − 24,562 − − -Euro − − − 4,000 − 4,000Amounts owing to bankers 6.78% 2008 18,387 21,804 − −

Bank overdrafts (Note 19) 6.92% 2008 4,533 477 − −

45,019 91,084 − 4,383

Obligations under fi nance lease, secured (Note 30) 4.19% 2009-2010 130 155 − − Bank loans:-Hong Kong dollars 6.10% 2009-2011 27,630 30,121 − − -Thai Baht 6.90% 2011 − 85,969 − −

27,760 116,245 − −

The bank overdrafts, amounts owing to bankers and bank loans are secured by Corporate guarantee of approximately $101,328,000 (2006: $392,000,000) from the Company and approximately $5,000,000 (2006: $27,272,000) from one subsidiary to the Company.

Obligations under fi nance leases

These obligations are secured by a charge over the leased assets (Note 12).

Amounts owing to bankers

An amount of $1,194,000 (2006: Nil) relates to factoring loans. In year 2006, a subsidiary issued two promissory notes to two local commercial banks for approximately $12,752,000 (Thai Baht 300 million), which were repaid in January 2007 and March 2007. The remaining amounts of $17,193,000 (2006: S$9,052,000) relates to trust receipts payable to banks.



25. OTHER RECEIVABLES (cont’d)

Bank loans

(i) granted a fi ve year term loan on 26 April 2005 for which the full amount of S$10.7 million (HK$50.0 million) had been drawn down. The loan is repayable at an amount of S$537,000 (HK$2.5 million) on a equal quarterly instalment basis. The loan balance as at 31 December 2007 was S$4.6 million ( HK$25.0 million).

(ii) granted a fi ve year term loan on 29 July 2004 for the amount of S$13.8 million (HK$70.0 million ). The loan is repayable by 16 quarterly instalments of S$863,000 (HK$4.4 million). The loan balance as at 31 December 2007 was S$6.5 million (HK$35.1 million).

(iii) granted a four year term loan of S$17.2 million (HK$80.0 million) on 25 October 2005. This amount is repayable at an amount of S$1.15 million (HK$5.3 million) in 14 equal quarterly instalments basis. The loan balance as at 31 December 2007 was S$7.9 million (HK$42.7 million).

(iv) granted a three year term loan of S$9.9 million (HK$50.0 million) on 6 June 2006 by a commercial bank. The loan balance as at 31 December 2007 was S$8.4 million (HK$45.5 million).

(v) drew down a fi ve years term loan of S$9.2 million (HK$50.0 million) granted on 23 April 2007. The loan is repayable on 16 equal quarterly instalments commencing 15 months from May 2007.

26. TRADE PAYABLES

Trade payables balance are non-interest bearing and are normally settled on 30 – 90 day terms. As at 31 December 2006, the following amounts are included in trade payables for the Group:

Group2007 2006$’000 $’000

- United States dollars 30,941 40,764- Euro 4,788 5- Thai Baht − 17,487- Renminbi 8,340 8,725- Hong Kong dollars 29,935 17,977- Others 1,993 915

75,997 85,873



27. OTHER PAYABLES AND ACCRUALS

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Payables for purchase of property, plant and equipment − 9,147 − −

Accrued operating expenses 30,413 28,058 4,823 488Deposits from customers − 1,427 − − Other payables 7,922 16,631 566 −

38,335 55,263 5,389 488

Other payables are non-interest bearing and are normally settled on 30 to 90 day terms.

As at 31 December 2007, the following currency denominated amounts are included in other payables and accrual for the Group and the Company.

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

- Singapore dollars 2,537 490 2,537 488- United States dollars 5,950 9,520 2,852 − - Thai Baht − 13,554 − − - Hong Kong dollars 10,537 17,152 − − - Euro 1,313 − − − - Renminbi 14,765 14,324 − − - Others 3,233 223 − −

38,335 55,263 5,389 488



28. PROVISIONS

GroupProvision for

severance benefi ts

Provision for undertakings

Provision for retirement

benefi tsProvision for

relocation Total$’000 $’000 $’000 $’000 $’000

Balance as at 1 January 2006 342 − 1,536 − 1,878

Arising during the year 2,269 − − 3,495 5,764

Utilised (2,489) − (158) (1,318) (3,965)Translation differences 20 − − − 20

Balance as at 31 December 2006 and 1 January 2007 142 − 1,378 2,177 3,697

Arising during the year 3,053 6,902 − 591 10,546

Utilised (2,482) − − (2,351) (4,833)Translation differences (46) − − (71) (117)

Disposed during the year (667) − (1,378) (346) (2,391)

Balance as at 31 December 2007 − 6,902 − − 6,902

Company2007

Balance as at 1 January 2007 −Arising during the year 6,902

Balance as at 31 December 2007 6,902

The provision arose from the undertaking of warranties to TDK pursuant to the MPT sale and purchase agreement.



29. SHARE CAPITAL AND TREASURY SHARES

(a) Share Capital

Group and Company2007 2006

No. of shares’000 $’000

No. of shares ’000 $’000

Issued and fully paid At 1 January 238,360 94,508 235,727 23,573Issued for cash (Note 32) 4,488 1,396 2,633 775 Transfer of share option reserve to share capital upon exercise of Employee Share Option Plan − 744 − 553

Transfer of share premium reserve to share capital − − − 69,607

At 31 December 242,848 96,648 238,360 94,508

The holders of ordinary shares (except treasury shares) are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions.

The Group has two employee share option plans (Note 32) under which options to subscribe for the Company’s ordinary shares have been granted to employees.

In accordance with the Companies (Amendment) Act 2005, on 30 January 2006, the shares of the Company ceased to have a par value and the amount standing in the share premium reserve became part of the Company’s share capital.

(b) Treasury Shares

Group and Company2007 2006

No. of shares’000 $’000

No. of shares ’000 $’000

Issued and fully paid At 1 January − − − − Acquired during the year 7,602 6,381 − −

At 31 December 7,602 6,381 − −

Treasury shares relate to ordinary shares of the Company that is held by the Company.

The Company acquired 7,602,000 (2006: Nil) shares in the Company through purchases on the Singapore Exchange during the fi nancial year. The total amount paid to acquire the shares was S$6,381,000 (2006: Nil) and this was presented as a component within shareholders’ equity.



30. FINANCE LEASE COMMITMENTS

The Group has fi nance leases for certain item of plant and equipment (Note 12). These leases are classifi ed as fi nance leases and expire over the next fi ve years. The average discount rate implicit in the leases is 4.19% (2006: 5%) per annum. These leases have terms of renewal but no purchase options and escalation clauses. There are no restrictions placed upon the Group by entering into these leases.

Future minimum lease payments under fi nance leases together with the present value of the net minimum lease payments are as follows :

Group

MinimumPayments

Presentvalue of

paymentsMinimumpayments

Presentvalue of

payments

2007 2007 2006 2006$’000 $’000 $’000 $’000

(Note 25) (Note 25)

Within one year 293 288 695 663After one year but not more than

fi ve years 132 130 161 155Total minimum lease payments 425 418 856 818Less: Amounts representing

fi nance charges (7) − (38) −

418 418 818 818

31. STATUTORY RESERVE

Under the provision of the Civil and Commercial Code of Thailand, Magnecomp Precision Technologies Public Company (“MPT”) is required to set aside as legal reserve at least 5% of annual net income (after deduction of the defi cit brought forward, if any) until the reserve reaches 10% of the company’s authorised capital. The statutory reserve cannot be used for dividend payment. During the year, this subsidiary was disposed of and the statutory reserve was accordingly reversed out to the net carrying value of MPT in the determination of the gain on disposal.

32. EMPLOYEE SHARE OPTIONS PLAN

(a) InnoTek Employees’ Share Option Plan

The InnoTek Employees’ Share Option Plan (the “Plan”) was approved by the shareholders of the Company at an Extraordinary General Meeting held on 18 September 2000.

The principal terms of the Plan were set out in the Circular to Shareholders dated 2 September 2000.



32. EMPLOYEE SHARE OPTIONS PLAN (cont’d)

(a) InnoTek Employees’ Share Option Plan (cont’d)

The Plan is administered by the Remuneration Committee which approves the dates of grant after the announcement of the half year and full year results of the Group. The bulk of the options allocated for grant each year are given out after announcement of the full year results. The second grant in the year is mainly given to eligible employees who join the Group during the year and who were left out in the earlier grant.

The unissued ordinary shares of the Company under the plan as at 31 December 2007 can be found under Section “Options” of the Directors’ Report.

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year:

No. WAEP($) No. WAEP($)2007 2007 2006 2006

Outstanding at beginning of year 1 12,472,000 0.51 13,443,000 0.50

Granted during the year 2 − − 2,500,000 1.23Forfeited during the year (1,671,000) 0.69 (838,000) 0.54Exercised during the year 3

(Note29(a)) (4,488,000) 0.31 (2,633,000) 0.29

Outstanding at end of year 4 6,313,000 0.95 12,472,000 0.69

Exercisable at end of year 1,491,500 0.71 2,467,875 0.51

1 Included within these balances are equity-settled options that have not been recognised in accordance with FRS102 as these equity-settled options were granted on or before 22 November 2002. These options have not been subsequently modifi ed and therefore do not need to be accounted for in accordance with FRS102.

2 The weighted average fair value of options granted in year 2006 was $0.49.3 The weighted average share price at the date of exercise for the options exercised was $0.87 (2006:

$1.30).4 The range of exercise prices for options outstanding at the end of the year was $0.16 to $1.23 (2006:

$0.16 to $1.23). The weighted average remaining contractual life for these options is 7.2 years (2006: 7.5 years).

The fair value of share options as at the date of grant is estimated by an external valuer using a Trinomial Option Pricing Model, taking into account the terms and conditions upon which the options were granted. The inputs to model used for the years ended 31 December 2006 are shown below. There were no options granted for the year ended 31 December 2007.




2006

Dividend per share (year) ($) 0.01Expected volatility (%) 53%Risk-free interest rate (%) 1.0569% - 3.542%Expected life of option (years) 3 – 6 yearsClosing share prices ($) $0.130 - $1.170

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility refl ects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of the option grants were incorporated into the measurement of fair value.

(b) Magnecomp Precision Technology Public Company Limited (“MPT”) – Warrants (Share Option Plan)

The MPT warrants plan (the “Plan”) was approved by the shareholders of the MPT at Annual General Meeting held on 26 April 2001 and 25 April 2003 for ESOP#2 and ESOP#3 respectively. For ESOP#4, the plan was approved by the shareholders of MPT at the Extraordinary Shareholders’ Meeting held on 22 June 2005.

The principal terms of the Plan were set out in the Circular to the Shareholders dated 6 November 2000, 25 April 2003 and 22 June 2005 for ESOP#2, ESOP#3 and ESOP#4 respectively.

The Plan is administered by the Remuneration Committee which approves the dates of grant.

The unissued ordinary shares of MPT under the Plan as at 7 November 2007 (date of disposal of MPT) can be found under Section “options” of the Directors’ Report.




The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the period from 1 January 2007 to 7 November 2007 (date of completion of disposal of MPT) for MPT:

No.WAEP(Baht) No.

WAEP(Baht)

2007 2007 2006 2006

Outstanding at point of acquisition 1 104,403,499 253.38 16,636,499 3.74

Granted during the period/year 2 − − 95,000,000 3.31

Forfeited during the period/year (32,144,000) 3.31 (6,559,000) 3.31

Exercised during the period/year 3 − − (674,000) 3.31

Outstanding at end of period/year 4 72,259,499 3.41 104,403,499 3.38

Exercisable at 7 November 2007 55,062,007 3.47 52,710,499 3.45

1 These balances are equity-settled options that have not been recognised in accordance with FRS102 as these equity-settled options were fully vested before acquisition. These options have not been subsequently modifi ed and therefore do not need to be accounted for in accordance with FRS102.

2 The weighted average fair value of options granted in year 2006 was Baht 2.09. There were no options granted for the period from 1 January 2007 to 7 November 2007.

3 The weighted average share price at the date of exercise for the options exercised in year 2006 was 5.14. There were no options exercised for the period from 1 January 2007 to 7 November 2007.

4 The range of exercise prices for options outstanding on 7 November 2007 was Baht 2.18 to Baht 5.86. The weighted average remaining contractual life for these options is 3.38 years.

The fair value of share options as at the date of grant, is estimated by an external valuer using a Trinomial Option Pricing Model, taking into account the terms and conditions upon which the options were granted. The inputs to model used for the years ended 31 December 2006 are shown below. There were no options granted during the period from 1 January 2007 to 7 November 2007.

2006

Dividend per share (year) Baht 0.047Expected volatility (%) 60%Risk-free interest rate (%) 4.207% - 4.777%Expected life of option (years) 0.5 – 2.5 yearsClosing share prices ($) Baht 4.84




The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility refl ects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of the option grants were incorporated into the measurement of fair value.

33. SEGMENT INFORMATION

Reporting format The primary segment reporting format is determined to be business segments as the Group’s risks and rates of return are affected predominantly by differences in the products and services produced. Secondary information is reported geographically. The operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets.

Business segments

The MPT segment offers suspension assemblies to disk drive manufacturers. This segment has been classifi ed as a discontinued operation during the fi nancial year.

The Mansfi eld segment offers components for offi ce automation machines like copier, printer and other electrical and electronic products. This segment also provides die making services to manufacturers of such equipment.

The corporate and other segments include general corporate income and expense items.

Geographical segments

The Group’s geographical segments are based on the location of the Group’s assets. Sales to external customers disclosed in geographical segments are based on the geographical location of its customers.

Allocation basis and transfer pricing

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, income tax and deferred tax assets and liabilities, interest-bearing loans and related expenses.



33. SEGMENT INFORMATION (cont’d)

Allocation basis and transfer pricing (cont’d)

Transfer prices between business segments are set on an arm’s length basis in a manner similar to transactions with third parties. Segment revenue, expenses and results include transfers between business segments. These transfers are eliminated on consolidation.

The Group generally accounts for inter-segment sales and transfers as if the sales or transfers were to third parties at current market prices. Revenues are attributed to geographical areas based on the location of the assets producing the revenues. Segment assets consist primarily of fi xed assets, current assets, intangibles and exclude investment in associates and joint ventures. Segment liabilities comprise mainly of operating liabilities and exclude income tax liabilities.

The following tables present revenue and profi t information regarding business and geographical segments for the fi nancial years ended 31 December 2007 and 2006 and certain asset and liability information regarding business segments and certain asset information regarding geographical segments at 31 December 2007 and 2006.




Continuing OperationsDiscontinued

Operation

Mansfi eldCorporate and

others Elimination Total MPT Consolidated

2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Business segments

Segment revenue and income

Sales to external customer 448,935 319,745 − − − − 448,935 319,745 334,130 401,871 783,065 721,616

Management fee − − 3,527 3,514 (3,527) (3,514) − − − − − −

Intercompany interest income − − 234 137 (234) (137) − − − − − −

Other income 3,251 1,147 1,190 200 − − 4,441 1,347 3,010 4,260 7,451 5,607

Total revenue and other income 452,186 320,892 4,951 3,851 (3,761) (3,651) 453,376 321,092 337,140 406,131 790,516 727,223

Segment results 32,590 23,581 (564) (3,237) (2,945) (2,895) 29,081 17,449 (26,464) (33,538) 2,617 (16,089)

Finance cost (4,172) (3,212) (79) (82) 234 137 (4,017) (3,157) (7,671) (7,896) (11,688) (11,053)

Share of loss of unconsolidated associates (15) − − (737) − − (15) (737) − − (15) (737)

Net gain on partial disposal − − − − − − − − 72,292 − 72,292 −

Fair value change for investment held for trading − − − − − − − − 10,666 − 10,666 −

Profi t/(loss) before tax 25,049 13,555 48,823 (41,434) 73,872 (27,879)

Tax expense (3,303) (2,258) (1,734) 1,112 (5,037) (1,146)

Profi t/(loss) for the year 21,746 11,297 47,089 (40,322) 68,835 (29,025)

Segment assets 290,931 213,789 158,825 5,131 − − 449,756 218,920 − 372,016 449,756 590,936

Investment in associates and joint ventures 551 − − − − − 551 − − − 551 −

Total assets 291,482 213,789 158,825 5,131 − − 450,307 218,920 − 372,016 450,307 590,936

Segment liabilities 108,943 78,819 12,291 488 − − 121,234 79,307 − 69,526 121,234 148,833

Unallocated liabilities − − − − − − 77,296 61,084 − 150,796 77,296 211,880

Total liabilities 108,943 78,819 12,291 488 − − 198,530 140,391 − 220,322 198,530 360,713

Capital expenditure 44,763 24,677 61 5 − − 44,824 24,682 59,860 115,196 104,684 139,878

Depreciation 15,326 12,197 104 87 − − 15,430 12,284 51,499 45,913 66,929 58,197

Impairment loss on club membership − − 28 − − − 28 − − − 28 −

Impairment loss on property, plant and equipment − − − − − − − − 17,479 18,052 17,479 18,052

Impairment loss on other investment − − 1,223 − − − 1,223 − 1,223 −

Amortisation of intangible assets − − 190 409 − − 190 409 100 884 290 1,293




Geographical segments

Thailand Hong Kong/PRC/Singapore

USA Europe Elimination Consolidated

2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006

$’000 $’000 $’000 $’000 S’000 S’000 S’000 S’000 $’000 $’000 $’000 $’000

Revenue and income from continuing operation

Sales to external customer − − 405,709 319,745 − − 43,226 − − − 448,935 319,745

Management fee − − 3,527 3,514 − − − − (3,527) (3,514) − −

Intercompany interest income − − 234 137 − − − − (234) (137) − −

Other income − − 4,441 1,347 − − − − − − 4,441 1,347

Total revenue and income − − 413,911 324,743 − − 43,226 − (3,761) (3,651)453,376 321,092

Add : Revenue and income attributable to discontinued operation

Sales to external customer 298,974 247,483 34,973 151,979 183 2,409 − − − − 334,130 401,871

Other income 2,270 3,692 588 260 152 308 − − − − 3,010 4,260

Total revenue and income 301,244 251,175 35,561 152,239 335 2,717 − − − − 337,140 406,131

Segment revenue and income

Sales to external customer 298,974 247,483 440,682 471,724 183 2,409 43,226 − − − 783,065 721,616

Management fee − − 3,527 3,514 − − − − (3,527) (3,514) − −

Intercompany interest income − − 234 137 − − − − (234) (137) − −

Other income 2,270 3,692 5,029 1,607 152 308 − − − − 7,451 5,607

Total revenue and income 301,244 251,175 449,472 476,982 335 2,717 43,226 − (3,761) (3,651)790,516 727,223

Other segment information:

Segment assets − 261,676 433,500 314,691 − 14,569 16,256 − − − 449,756 590,936

Investment in associates and joint ventures − − − − − − 551 − − − 551 −

Total assets − 261,676 433,500 314,691 − 14,569 16,807 − − − 450,307 590,936

Capital expenditure 56,043 88,038 44,937 45,418 1,640 6,422 2,064 − − − 104,684 139,878



34. COMMITMENTS AND CONTINGENCIES

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

(a) Capital expenditure not provided for in the fi nancial statements:Commitments in respect of

additional investment in other investment − 1,022 − 1,022

Commitment in respect of capital contribution to a joint-venture entity 4,027 − − −

Commitments in respect of purchase of property, plant and equipment 7,803 13,648 − −

(b) The Company and its subsidiaries have issued corporate guarantees amounting to approximately $101 million (2006: $419 million) in favour of certain fi nancial institutions for banking facilities extended to the subsidiaries in the Group, of which $61 million (2006: $203 million) was utilised as at 31 December 2007.

35. OPERATING LEASE COMMITMENTS

(a) As lessee

The Group leases certain properties and motor vehicles under lease agreements that are non-cancellable within a year. Leases for properties are negotiated for various terms up to 50 years, and those for motor vehicles are leased for 2 years with no renewal option or escalation clauses included in the contracts. There are no restrictions placed upon the Group or the Company by entering into these leases. Future minimum lease payments for all leases with initial or remaining terms of one year or more are as follows :-

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Within one year 8,032 9,792 344 394After one year but not more than fi ve years 16,349 17,484 61 405More than fi ve years 7,455 6,562 − −

31,836 33,838 405 799



35. OPERATING LEASE COMMITMENTS (cont’d)

(b) As lessor

The Group sub-leases certain of its offi ce properties under operating lease arrangements, with leases negotiated up to 3 years. The terms of the leases generally also require the tenants to pay security deposits and provide for periodic rent adjustments according to the then prevailing market conditions.

At 31 December 2007, the Group had total future minimum lease receivables under non-cancellable operating leases with its tenants falling due as follows:

Group2007 2006$’000 $’000

Within one year 87 444 After one year but not more than fi ve years − 88

87 532

36 RELATED PARTY TRANSACTIONS

In addition to the related party information disclosed elsewhere in the fi nancial statements, the following signifi cant transactions between the Group and related parties who are not members of the Group took place during the year at terms agreed between the parties:

(a) Sales and purchases of goods and services

Group2007 2006$’000 $’000

Sale of fi nished goods to a company related to a director of a subsidiary 44,168 31,403

Provision of services (48) (225)

Company related to a director of a subsidiary

One of the directors of a subsidiary of Mansfi eld Group is also a director of a company to which the subsidiary has sold goods relating to offi ce automation and television parts.



36. RELATED PARTY TRANSACTIONS (cont’d)

Compensation of key management personnel (b)

Group2007 2006$’000 $’000

Directors’ fees 211 192Short-term employee benefi ts 5,759 5,665Central Provident Fund contributions 38 46Employee share option plan expense 901 2,699Termination benefi ts 1,741 − Compensation and other payment on disposal of MPT 2,680 −

Total compensation paid to key management personnel 11,330 8,602Comprise amounts paid to:

Directors of the Company 5,053 3,411Other key management personnel 6,277 5,191

11,330 8,602

The remuneration of key management personnel are determined by the remuneration committee having regard to the performance of individuals and market trends.

Interest of key management personnel in employee share option plan

(a) At 1 January 2007 the key management personnel held options to purchase ordinary shares of the Company under the InnoTek Employees’ Share Option Plan (the “Plan”) (Note 32) as follows:

475,000 (2006: 650,000) ordinary shares at a price of $0.16 (2006: $0.16) each, exercisable between 7 March 2004 and 7 March 2012; and 560,000 (2006: 800,000) ordinary shares at a price of $0.17 (2006: $0.17) each, exercisable between 31 March 2004 and 31 March 2012500,000 (2006: 500,000) ordinary shares at a price of $0.49 (2006: $0.49) each, exercisable between 18 August 2005 and 18 August 20131,295,000 (2006: 1,350,000) ordinary shares at a price of $0.69 (2006: $0.69) each, exercisable between 8 March 2006 and 8 March 201450,000 (2006: 50,000) ordinary shares at a price of $0.71 ($0.71) each, exercisable between 27 August 2004 and 27 August 2012.440,000 (2006: 440,000) ordinary shares at a price of $0.97 (2006: $0.97) each, exercisable between 18 August 2006 and 18 August 2014.556,000 (2006: Nil) ordinary shares at a price of $1.23 (2006: Nil) each, exercisable between 18 January 2007 and 18 August 2015.

During the year ended 31 December 2007,These key management personnel exercised options over 1,745,000 ordinary shares (2006: 700,000 ordinary shares) at prices from S$0.16 to S$0.71 each (2006: $0.16 to $0.69 each), with a total consideration received by the Company from these key management personnel of $725,100 (2006: $141,750), in cash.285,000 unvested options at a price of $0.69 each held by key management personnel were cancelled on 7 November 2007 upon disposal of MPT. The related expenses for these options for the remaining period to their vesting dates were accelerated and recognised in the profi t and loss account in accordance with the Company’s accounting policies.



36. RELATED PARTY TRANSACTIONS (cont’d)

No share options have been granted to the Company’s non-executive directors.

(b) Magnecomp Precision Technology Public Company Limited Share Option Plan

The expense at fair value for warrants under ESOP#4 was taken up to 7 November 2007, the date of completion for the disposal of MPT.

37. DIRECTORS’ REMUNERATION

Number of directors in remuneration bands :-

2007 2006

$500,000 and above 2 2$250,000 to $499,999 − − Below $250,000* 4 4

66

* Includes a director who resigned on 27 April 2007.

38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s principal fi nancial instruments, other than derivative fi nancial instruments and investment securities, comprise bank loans and overdraft, fi nance leases and hire purchase contracts, and cash and fi xed deposits. The main purpose of these fi nancial instruments is to fi nance the Group’s operations. The Group has various other fi nancial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

The Group also enters into derivative transactions, including principally interest rate swaps and forward currency contracts. The purpose is to manage the interest rate risks arising from the Group’s operations and its sources of fi nancing.

It is, and has been throughout the year under review, the Group’s policy that no trading in derivative instruments shall be undertaken.

The main risks arising from the Group’s fi nancial instruments are market risk, interest rate risk, liquidity risk, foreign currency risk and credit risk. The board reviews and agrees policies for managing each of these risks and they are summarised below. The Group’s accounting policies in relation to derivative fi nancial instruments are set out in Note 2.24.

Market price risk

Market price risk is the risk that the fair value of future cash fl ows of the Group’s fi nancial instruments will fl uctuate because of changes in market prices (other than interest or exchange rates). The Group is exposed to equity price risk arising from its investment in quoted equity instruments. These instruments are quoted on the Stock Exchange of Thailand (SET) and are classifi ed as held for trading fi nancial assets.



38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d)

It is the Group’s policy not to hold and manage investment in quoted equity instruments for speculative purposes. Any deviation from this policy is required to be approved by the Board of Directors and Audit Committee. As at year end, the Group’s investment in quoted equity instruments represents the 10% shareholding investment in MPT.

At the balance sheet date, if the SET had been 4% higher/lower with all other variable held constant, the Group’s profi t net of tax would have been $890,000 higher/lower, arising as a result of higher/lower fair value gains on held for trading investments in equity instruments. Interest rate risk

Interest rate risk is the risk that the fair value or future cash fl ows of the Group’s and the Company’s fi nancial instruments will fl uctuate because of changes in market interest rates. The Group’s and the Company’s exposure to interest rate risk arises primarily from their interest-bearing loans and borrowings and cash and cash equivalents. The Group’s and the Company’s fi nancial assets and liabilities at fl oating rates are contractually repriced at intervals of less than 3 months from the balance sheet date. The Group’s policy is to obtain the most favourable interest rates available without increasing its exposure to foreign currency.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s and the Company’s profi t before tax (through the impact on fl oating rate loans and borrowings and bank balances and fi xed deposit):

Group Company

Increase/ (decrease)


in profi t before tax


Increase/ (decrease) in profi t before

tax % $’000 % $’000

2007Hong Kong dollars 1 (658) − − Singapore dollars 1 − 1 34United States dollars 1 1,221 1 1,317

Hong Kong dollars (1) 658 − − Singapore dollars (1) − (1) (34)United States dollars (1) (1,221) (1) (1,317)

2006Hong Kong dollars 1 (638) 1 − Singapore dollars 1 − 1 34United States dollars 1 (312) 1 10Thai Baht 1 (1,238) − −

Hong Kong dollars (1) 638 − −

Singapore dollars (1) − (1) (34)United Stated dollars (1) 312 (1) (10)Thai Baht (1) 1,238 − −




Foreign currency risk

The Group has transactional currency exposures. Such exposures arise from sales or purchases by operating units in currencies other than the units’ functional currencies to which it relates which are in Singapore dollar, Euro, Hong Kong dollar and Renminbi. The Group manages its transactional currency exposures by matching as far as possible, its receipt and payment in each individual currency. The Group monitors the foreign currency exchange rates closely so as to minimise potential material adverse effects from these exposure in a timely manner. The Group primarily utilises forward exchange contracts with maturities of less than twelve months to hedge foreign currency denominated fi nancial assets, liabilities and fi rm commitments. Foreign exchange differences arising from translation of fi nancial statements of foreign subsidiaries are taken to translation reserve, a component of equity.

The Group and the Company also hold cash and cash equivalents denominated in foreign currencies for working capital purposes. At the balance sheet date, such foreign currency balances (mainly in USD) amount to $136,210,000 and $124,200,000 (2006: $10,225,000 and $1,050,000) for the Group and the Company respectively.

The following table demonstrates the sensitivity at the balance sheet date to a reasonably possible change in the exchange rate of United States dollar and Thai Baht, with all other variables held constant, of the Group’s profi t before tax (due to changes in the fair value of monetary assets and liabilities).

2007 2006

GroupIncrease/ (decrease)


in profi t before tax


Increase/ (decrease) in profi t before

tax % $’000 % $’000

Thai Baht − − 5.0 1,085United States dollars 0.5 871 0.5 338

Thai Baht − − (5.0) (1,085)United States dollars (0.5) (871) (0.5) (338)

Credit risk

The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verifi cation procedures. In addition, receivable balances are monitored on an ongoing basis and the Group’s exposure to bad debts is not signifi cant. For transactions that are not denominated in the functional currency of the relevant operating unit, the Group does not offer credit terms without specifi c approval of the Vice President of Marketing and Operations Department.

The credit risk of the Group’s other fi nancial assets, which comprise bank balances and other receivables, arises from default of the counterparty, with a maximum exposure equal to the carrying amounts of these instruments. The Group is also exposed to credit risk through the granting of fi nancial guarantees, further details of which are disclosed in Note 34 to the fi nancial statements.

Further quantitative data in respect of the Group’s exposure to credit risk arising from trade receivables are disclosed in Note 20 to the fi nancial statements.




Liquidity risk

Liquidity risk is the risk of not having access to suffi cient funds to meet the Group’s obligation as they become due. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturity of fi nancial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and fl exibility through the use of stand-by credit facilities.

The maturity profi le of the Group’s fi nancial liabilities as at the balance sheet date, based on the contractual undiscounted payments, was as follows :

Group

On Demand Less than

3 months

3 to less than 12 months

1 to 5 years Total

$’000 $’000 $’000 $’000 $’0002007Finance lease payables − 212 76 130 418Interest-bearing loans and borrowings 4,533 25,301 14,897 27,630 72,361

Trade payables − 73,648 2,349 − 75,997Financial liabilities included in other payables and accruals and provisions 9,357 21,624 4,615 6,949 42,545

13,890 120,785 21,937 34,709 191,321

2006Finance lease payables − 238 425 155 818Interest-bearing loans and borrowings 19,291 39,341 31,789 116,090 206,511

Trade payables − 83,251 2,622 − 85,873Financial liabilities included in other payables and accruals and provisions 4,688 48,828 1,651 271 55,438

23,979 171,658 36,487 116,516 348,640

Company

2007Financial liabilities included in other payables and accruals and provisions − 5,389 − 6,902 12,291

2006Interest-bearing bank and other borrowings − 4,383 − − 4,383

Financial liabilities included in other payables and accruals − 488 − − 488

− 4,871 − − 4,871



39. FINANCIAL INSTRUMENTS

The carrying amounts of each of the categories of fi nancial instruments as at the balance sheet are as follows :

Group Company

Loans and receivables Loans and receivables2007 2006 2007 2006$’000 $’000 $’000 $’000

Financial Assets

Trade receivables 100,081 147,561 956 4,366Other receivables 26,649 23,556 7,426 480Loans to subsidiary − − 10,690 7,500Cash and cash equivalents 158,452 43,901 125,194 1,677

285,182 215,018 144,266 14,023

Group Company2007 2006 2007 2006

Financial Liabilities $’000 $’000 $’000 $’000

Financial liabilities at amortised cost:Trade payables 75,997 85,873 − − Other payables and accruals 38,335 55,263 5,389 488Interest-bearing loans and borrowings 72,779 207,329 − 4,383

187,111 348,465 5,389 4,871

The fair value of a fi nancial instrument is the amount at which the instrument could be exchanged or settled between knowledgeable and willing parties in an arm’s length transaction, other than in a forced or liquidation sale.

Financial instruments whose carrying amount approximate fair value

The carrying amounts of cash and short term deposits, current trade and other receivables, bank overdrafts, current trade and other payables, amounts due from subsidiaries and associates and loans and borrowings, based on their notional amounts, reasonably approximate their fair values because these are mostly short term in nature or are repriced frequently.

Financial instruments carried at other than fair value

Unquoted investment carried at cost have no market prices and the fair value cannot be reliably measured using valuation techniques.

Quoted Financial instruments Fair value is determined directly by reference to their published market bid price at the balance sheet date.



40. DIVIDENDS ON ORDINARY SHARES

Group and Company2007 2006$’000 $’000

Declared and paid during the year Dividends on ordinary shares:- Interim tax exempt (one-tier) dividend 24,161 2,379

41. CAPITAL MANAGEMENT

The primary objective of the Group’s capital management is to safeguard the Group’s ability to continue as a going concern and to maintain healthy capital ratios in order to support its business and maximise shareholder’s value.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Group is not subject to any externally imposed capital requirements. No changes were made in the objectives, policies or processes during the years ended 31 December 2007 and 31 December 2006.

The Group monitors capital using a gearing ratio, which is net debt divided by total capital. Net debt, is defi ned as total interest-bearing loans and borrowings less cash and cash equivalents. Capital is defi ned as equity attributable to the equity holders of the Company. The Group’s policy is to keep the gearing ratio below 1.

Group2007 2006$’000 $’000

Interest-bearing loans and borrowings (Note 25) 72,779 207,329Less: Cash and cash equivalents (Note 19) (158,452) (43,901)Net debt (85,673) 163,428

Equity attributable to the equity holders of the Company 231,760 183,453

Gearing ratio * 0.89

* Not applicable as the Group is not in net debt position.



42. SUBSEQUENT EVENTS

(1) On 14 March 2008, the Company entered into a sale and purchase agreement with Mr. To Wai Hung, a minority shareholder of its subsidiary, Mansfi eld Manufacturing Company Limited (“Mansfi eld”), to acquire the remaining 21,347 ordinary shares of Mansfi eld, which represents approximately 16.67% of the paid-up share capital of Mansfi eld.

The consideration for this purchase comprises:

(a) the sum of $2,966,611 payable in cash (“Cash Consideration”); and

(b) the allotment by the Company to Mr. To Wai Hung of 15,787,000 ordinary shares of the Company, representing approximately 6.5% of the issued share capital of the Company (including treasury shares) as at 14 March 2008 (“Share Consideration”).

The Share Consideration comprises treasury shares that the Company purchased pursuant to the InnoTek share purchase mandate approved by its shareholders at the Extraordinary General Meeting held on 1 November 2007 and held as treasury shares.

(2) On 25 February 2008, the Company proposed a fi nal tax exempt (one-tier) dividend of 10.0 cents per ordinary share which amounts to approximately $24.3 million. The proposed dividend is subject to shareholders’ approval at the AGM.

43. AUTHORISATION OF FINANCIAL STATEMENTS

The fi nancial statements for the year ended 31 December 2007 were authorised for issue in accordance with a resolution of the directors on 18 March 2008.

STATISTICS OF SHAREHOLDINGS


No. of issued shares - 243,143,428No. of issued shares (excluding treasury shares) - 227,356,428No./Percentage of treasury shares - 15,787,000 (6.94%)Class of shares - ordinary sharesVoting rights (excluding treasury shares) - 1 vote per share

DISTRIBUTION OF SHAREHOLDINGS

NO. OF

SHAREHOLDERS % NO. OF SHARES %

1 - 999 11 0.69 1,261 0.001,000 - 10,000 1,194 75.19 5,193,405 2.2910,001 - 1,000,000 372 23.43 26,239,702 11.541,000,001 AND ABOVE 11 0.69 195,922,060 86.17

TOTAL 1,588 100.00 227,356,428 100.00

TOP TWENTY LARGEST SHAREHOLDERS

NAME NO. OF SHARES %

1 HSBC (SINGAPORE) NOMINEES PTE LTD 88,418,300 38.892 RAFFLES NOMINEES PTE LTD 55,113,000 24.243 CITIBANK NOMINEES SINGAPORE PTE LTD 17,808,900 7.834 UNITED OVERSEAS BANK NOMINEES PTE LTD 11,207,000 4.935 DBS NOMINEES PTE LTD 10,379,200 4.576 EE HOCK LEONG LAWRENCE 4,130,000 1.827 MERRILL LYNCH (SINGAPORE) PTE LTD 2,472,260 1.098 ESTATE OF GOPALA ACHUTA MENON, DECEASED 2,472,000 1.099 STEVEN GLENN CAMPBELL 1,625,000 0.7110 DBSN SERVICES PTE LTD 1,242,900 0.5511 DB NOMINEES (S) PTE LTD 1,053,500 0.4612 CIMB BANK NOMINEES (S) SDN BHD 1,000,000 0.4413 DAIWA SECURITIES SMBC SINGAPORE 993,000 0.4414 HONG LEONG FINANCE NOMINEES PTE LTD 792,000 0.3515 KUANG MING INVESTMENTS PTE LIMITED 791,000 0.3516 MORGAN STANLEY ASIA (SINGAPORE) SECURITIES PTE LTD 731,774 0.3217 PHILLIP SECURITIES PTE LTD 699,000 0.3118 KIM ENG SECURITIES PTE. LTD. 563,000 0.2519 CITIBANK CONSUMER NOMINEES PTE LTD 553,000 0.2420 YONG KOK HOON 500,000 0.22

TOTAL 202,544,834 89.10

AS AT 18 MARCH 2008

SUBSTANTIAL SHAREHOLDERS


Percentage of Shareholding in Public’s Hands

Based on information available to the Company as of 18 March 2008, approximately 42.08% of the issued ordinary shares are held in the hands of the public. Accordingly, the Company has complied with Rule 723 of the Listing Manual of the SGX-ST.

Substantial Shareholders(As recorded in the Register of Substantial Shareholders)

Direct % Deemed % Interest Interest

Advantec Holding S.A. 83,382,300 36.67 -

Trustee of Chandaria Trust I - - *83,832,300 36.87

Thai Focused Equity Fund Ltd. - - **45,687,000 20.09

Notes:

* The Trustee of Chandaria Trust I is deemed to have an interest in 83,832,300 shares, comprising of 83,382,300 shares held by Advantec Holding S.A. and 450,000 shares held by Metchem Engineering S.A., both wholly-owned by the Trust.

** Thai Focused Equity Fund Ltd is deemed to have an interest in 45,687,000 shares held by Raffl es Nominees Pte Ltd.

NOTICE OF ANNUAL GENERAL MEETING


NOTICE IS HEREBY GIVEN that the Annual General Meeting of INNOTEK LIMITED (“the Company”) will be held at The Casuarina Suite A, Level 3, Raffl es Hotel, 1 Beach Road, Singapore 189673 on Wednesday, 30 April 2008 at 9.00 a.m. for the following purposes:

AS ORDINARY BUSINESS

1. To receive and adopt the Directors’ Report and the Audited Accounts of the Company for the year ended 31 December 2007 together with the Auditors’ Report thereon.

(Resolution 1)

2. To declare a fi nal tax-exempt (one-tier) dividend of 10 cents per share in respect of the year ended 31 December 2007. (2006: Nil) (Resolution 2)

3 To re-appoint the following Directors retiring pursuant to Article 103 of the Company’s Articles of Association :

Mr Robert Sebastiaan Lette [See Explanatory Note (i)] (Resolution 3) Mr Steven Glenn Campbell (Resolution 4) 4. To approve the payment of Directors’ fees of S$211,225 for the year ended 31 December 2007

(2006: S$192,000). (Resolution 5)

5 To re-appoint Ernst & Young as the Company’s Auditors and to authorise the Directors to fi x their remuneration. (Resolution 6)

6. To transact any other ordinary business which may properly be transacted at an Annual General Meeting.

AS SPECIAL BUSINESS

7. Authority to allot and issue shares up to 50 per centum (50%) of the issued shares, excluding treasury shares, in the capital of the Company

That pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806(2) of the Listing Manual of the Singapore Exchange Securities Trading Limited, the Directors be empowered to allot and issue shares in the capital of the Company at any time and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fi t provided that the aggregate number of shares to be allotted and issued pursuant to this Resolution shall not exceed fi fty per centum (50%) of the total number of issued shares, excluding treasury shares, in the capital of the Company at the time of the passing of this Resolution, of which the aggregate number of shares to be issued other than on a pro rata basis to all 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 and that such authority shall, unless revoked or varied by the Company in general meeting, continue in force until the conclusion of the Company’s next Annual General Meeting 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 (ii)] (Resolution 7)



8. Authority to allot and issue shares under the InnoTek Employees’ Share Option Plan

That pursuant to Section 161 of the Companies Act, Cap. 50, the Directors be empowered to allot and issue from time to time such number of shares as may be required to be issued pursuant to the exercise of the options under the InnoTek Employees’ Share Option Plan (the “Plan”) provided always that the aggregate number of shares to be issued pursuant to the Plan shall not exceed ten per centum (10%) of the total number of issued shares, excluding treasury shares, in the capital of the Company for the time being and that such authority shall, unless revoked or varied by the Company in general meeting, continue in force until the conclusion of the Company’s next Annual General Meeting, 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 (iii)] (Resolution 8)

By Order of the Board

Linda Sim Hwee AiCompany Secretary

Singapore, 15 April 2008



Explanatory Notes:

(i) Mr Robert Sebastiaan Lette will, upon re-election as a Director of the Company, remain as Chairman of the Remuneration Committee and member of the Audit Committee and Nominating Committee and will be considered independent for the purposes of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited.

(ii) The Ordinary Resolution 7 proposed in item 7 above, if passed, will empower the Directors from the date of this Meeting until the date of the next Annual General Meeting, or the date by which the next Annual General Meeting is required by law to be held or when varied or revoked by the Company in general meeting, whichever is the earlier, to allot and issue shares in the Company. The number of shares that the Directors may allot and issue under this resolution would not exceed fi fty per centum (50%) of the total number of issued shares, excluding treasury shares, in the capital of the Company at the time of the passing of this resolution. For issue of shares other than on a pro rata basis to all shareholders, the aggregate number of shares to be issued shall not exceed twenty per centum (20%) of the total number of issued shares, excluding treasury shares, in the capital of the Company.

For the purpose of this resolution, the percentage of issued shares, is based on the Company’s total number of issued shares, excluding treasury shares, at the time this proposed Ordinary Resolution is passed after adjusting for new shares arising from the exercise of share options or the vesting of share awards outstanding or subsisting at the time when this proposed Ordinary Resolution is passed and any subsequent consolidation or subdivision of shares.

(iii) The Ordinary Resolution 8 proposed in item 8 above, if passed, will empower the Directors of the Company, from the date of the above Meeting until the next Annual General Meeting, or the date by which the next Annual General Meeting 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 allot and issue shares in the Company of up to a number not exceeding in total ten per centum (10%) of the total number of issued shares, excluding treasury shares, in the capital of the Company from time to time pursuant to the exercise of the options under the Plan.

Notes:

1. A Member entitled to attend and vote at the Annual General Meeting (the “Meeting”) is entitled to appoint a proxy to attend and vote in his/her stead. A proxy need not be a Member of the Company.

2. The instrument appointing a proxy must be deposited at the Registered Offi ce of the Company at 1 Finlayson Green #15-02 Singapore 049246 not less than forty-eight (48) hours before the time appointed for holding the Meeting.

This page has been intentionally left blank.

INNOTEK LIMITEDCompany Registration No. 199508431Z

(Incorporated In The Republic Of Singapore)

PROXY FORM(Please see notes overleaf before completing this Form)

I/We, (Name)

Of (Address)

Being a member/members of INNOTEK LIMITED (the “Company”), hereby appoint:

Name Address NRIC/PassportNumber

Proportion ofShareholdings (%)

And /or (delete as appropriate)

Name Address NRIC/PassportNumber

Proportion ofShareholdings (%)

or failing him/her, the Chairman of the meeting as my/our proxy to vote for me/us on my/our behalf and, if necessary, demand for a poll at the Annual General Meeting of the Company to be held on Wednesday, 30 April 2008 at 9.00 a.m. and at any adjournment thereof. The proxy is to vote on the business before the meeting as indicated below. If no specifi c direction as to voting is given, the proxy will vote or abstain from voting at his/her discretion, as he/she will on any other matter arising at the Meeting:

No. Resolutions relating to: For Against

1 Directors’ Report and Accounts for the year ended 31 December 2007

2 Payment of a fi nal tax-exempt (one-tier) dividend of 10 cents per share

3 Re-appointment of Mr Robert Sebastiaan Lette

4 Re-appointment of Mr Steven Glenn Campbell

5 Approval of Directors’ fees amounting to S$211,225

6 Re-appointment of Ernst & Young as Auditors

7 Authority to allot and issue new shares

8 Authority to allot and issue shares under the InnoTek Employees’ Share Option Plan

(Please indicate with a cross [X] in the space provided whether you wish your vote to be cast for or against the Resolutions as set out in the Notice of the Meeting.)

Dated this day of 2008

Total number No. of Shares

(a)CDP Register

(b)Register of Members

Signature of Shareholder(s) or, Common Seal of Corporate Shareholder

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 defi ned in Section 130A of the Companies Act, Chapter 50 of Singapore), 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 entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.

2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote instead of him/her. A proxy need not be a member of the Company.

3. Where a member appoints two proxies, the appointments shall be invalid unless he/she specifi es the proportion of his/her shareholding (expressed as a percentage of the whole) to be represented by each proxy.

4. The instrument appointing a proxy or proxies must be deposited at the Registered Offi ce of the Company at 1 Finlayson Green #15-02 Singapore 049246 not less than forty-eight (48) hours before the time appointed for the Annual General Meeting.

5. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an offi cer or attorney duly authorised.

6. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fi t to act as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore.

General:

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 specifi ed in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have Shares entered against his name in the Depository Register as at forty-eight (48) hours before the time appointed for holding the Meeting, as certifi ed by The Central Depository (Pte) Limited to the Company. NOTICE OF BOOKS CLOSURE Notice is hereby given that, subject to the approval of the members to the fi nal tax-exempt (one-tier) dividend at the Annual General Meeting, the Share Transfer Books and Register of Members of the Company will be closed from 5.00 p.m. on 9 May 2008 to 12 May 2008 (both dates inclusive) for the preparation of dividend warrants.

Duly completed registrable transfers of the ordinary shares in the capital of the Company (“Shares”) received by the Company’s Share Registrar, Boardroom Corporate & Advisory Services Pte. Ltd. at 3 Church Street #08-01 Samsung Hub Singapore 049483 up to 5.00 p.m. on 9 May 2008 will be registered in the Register of Members and the Transfer Books of the Company to determine members’ entitlements to the dividend.

Members whose Securities Accounts with The Central Depository (Pte) Limited are credited with Shares at 5.00 p.m. on 9 May 2008 will be entitled to the dividend. The dividend, if approved at the Annual General Meeting, will be paid on 22 May 2008.

2007 IN REVIEW 03 FINANCIAL HIGHLIGHTS 08 CORPORATE STRUCTURE 10

BOARD OF DIRECTORS 12 KEY EXECUTIVE MANAGEMENT 14 INNOTEK LOCATIONS 16 CORPORATE GOVERNANCE 17 DIRECTORS’ REPORT 28 STATEMENT BY DIRECTORS 35 INDEPENDENT AUDITORS’ REPORT 36

CONSOLIDATED PROFIT AND LOSS ACCOUNT 38 BALANCE SHEETS 39 STATEMENT OF CHANGES IN EQUITY 40 CONSOLIDATED CASH FLOW STATEMENT 43 NOTES TO THE FINANCIAL STATEMENTS 45

STATISTICS OF SHAREHOLDINGS 115 NOTICE OF ANNUAL GENERAL MEETING 117 PROXY FORM

03 082007 IN REVIEW FINANCIAL HIGHLIGHTS

INNOVATION

CONTENTS

DIRECTORSRobert Sebastiaan Lette (Chairman)Steven Glenn CampbellYong Kok HoonDr Ong Chit ChungLeong Swee Sum (Resigned on 27 April 2007)Prof Low Teck Seng

AUDIT COMMITTEEDr Ong Chit Chung (Chairman) Prof Low Teck SengMr Robert Sebastiaan Lette

REMUNERATION COMMITTEE/SHARE OPTION PLAN COMMITTEEMr Robert Sebastiaan Lette (Chairman) Dr Ong Chit Chung Prof Low Teck Seng

NOMINATING COMMITTEEProf Low Teck Seng (Chairman) Mr Robert Sebastiaan LetteDr Ong Chit Chung

SECRETARIESLinda Sim Hwee Ai Susie Low Geok Eng

REGISTRAR AND SHARE TRANSFER AGENTBoardroom Corporate & Advisory Services Pte Ltd3 Church Street #08-01Samsung HubSingapore 049483

AUDITORS Ernst & YoungOne Raffl es QuayNorth Tower, Level 18Singapore 048583Partner-in-Charge: Nagaraj Sivaram(from 2007)

PRINCIPAL BANKERS The Hongkong and Shanghai Banking CorporationBank of ChinaThe Bank of Tokyo-Mitsubishi UFJ, LtdDBS BankUnited Overseas Bank

REGISTERED ADDRESS 1 Finlayson Green #15-02Singapore 049246Tel: (65) 6535-0689Fax: (65) 6533-2680Website: www.innotek.com.sg

CORPORATE INFORMATION

I N N O VAT I N G

ANNUAL REPORT 2007

For Tomorrow

INNOTEK Limited1 Finlayson Green #15-02 Singapore 049246Tel : (65) 6535 0689 Fax : (65) 6533 2680www.innotek.com.sgCo. Reg. No.199508431Z

I N N O VAT I N G

ANNUAL REPORT 2007

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For Tomorrow

Documents

Innotek AR2007 reviewsinnotek.listedcompany.com/misc/ar2007.pdf2007 in review 03 financial highlights 08 corporate structure 10 board of directors 12 key executive management 14 innotek