Chairman's Statement

Dear Valued Shareholders, Compared to 2009, Innovalues entered the year 2010 with greater confidence. The Group's continuing efforts to refine cost structure, enhance operating efficiencies and maintain financial prudence had enabled it to weather the challenging operating landscape. Global economic recovery in 2010 had assisted the Group to turnaround in performance. As a result, revenue and net profitability were higher than a year ago.

I am heartened to report that the Group's revenue had returned to the pre-global financial crisis level of above the SGD100M mark. This robust performance was mainly attributed to the Automotive Segment.

Net profitability of SGD1.3M for 2010 was a sharp reversal of the Group's net loss suffered in 2009. In fact, net profit could have been higher if not for the unavoidable impact caused by the weakened US Dollar during the year. To mitigate the effect of such a similar occurrence, the Group has started working actively with customers to find an amicable solution to this pressing issue.

Going forward, we expect revenue growth to continue to come from the Automotive Segment with revenue from the Office Automation Segment stabilizing. We do not expect any significant investments in new fixed assets to cater to the expected growth in the Automotive Segment.

On the balance sheet, I am delighted to report that bank loans continued to decrease from SGD54M in 2008 to SGD33M in 2010. As a result, the Group was in a much healthier net gearing position, de-scaling from 70% in 2008 to 39% in 2010.

The Group will continue its compact management strategy and further strive to ratchet up its technical capability and operational efficiency. The Group will continue to consolidate its resources and focus on refining its business processes to raise productivity, in all markets which we operate.To this end, we will spare no effort to foster closer rapport and strengthen our bonds with our suppliers and customers.

At the same time, financial prudence will continue to be our mantra.

As much uncertainties still prevail in the operating environment, we have continued to adopt our conservative stance of preserving cash. Just like last year, after much deliberation, the Board has decided not to declare a dividend.

On behalf of the Board of Directors, I would like to take this opportunity to acknowledge and thank all our shareholders, customers, employees, bankers and business associates for their continued support and contributions. My sincere appreciation to our staff members and management team for their dedication and to my fellow Board members for their invaluable guidance. I look forward to receiving all of you at our AGM on 27 April 2011.