Chairman's Statement

Dear Valued Shareholders, Like many companies Innovalues was severely affected by the world economic slowdown in 2009. All our segments of business suffered declines. This slowdown which impacted us in the second half of 2008, gave us advanced warning to stay lean and nimble in how we conduct our business in 2009. We continue to refine our cost structure, enhance our operating efficiencies, and maintain financial prudence to weather the difficult operating landscape. With this strategy, I am happy to report that, although the Group suffered a year of losses amounting to S$4.3 million, the latter part of 4Q09 saw nascent signs of business recovery and turnaround.

We are hopeful that this recovery will continue in the major segments of Automotive and Office Automation and in major markets the Group operates in. Plans by major Automakers towards energy saving cars and transportation safety bode well for us. Office Automation is also seeing major structuring revamp in the operations of our major customers and we are hopeful to benefit from such changes.

In the year, operating efficiencies in terms of capacity utilization continue to be rigorously implemented. Procurement policies and procedures were rationalized. Our operations in Malaysia, Thailand and China are now leaner. We maintain the previously adopted policy of no increase in capital expenditure. Measures to reign in cost had continued unabated. Our Inventory saw declines from S$34.0M as at end of FY08 to S$14.5M as at end of FY09. Bank borrowings declined from S$54.1M as at end of FY08 to S$42.2M as at end of FY09. Cash position increased from S$12.7M as at end of FY08 to S$18.6M as at end of FY09. The Group's bankers continue to support our business.

Our marketing and procurement teams were on overdrive maintaining good rapport with customers and suppliers. They had been appreciative of the business difficulties and continue to offer much valuable advice and support for the Group's business. As our result, our value chain had been strengthened, and will prepare us for sustainable business growth in future.

As we had maintained financial prudence, we will continue to adopt a conservative stance of preserving cash to face any unforeseen turbulence in business environment.Your board of directors is fully aware of rewarding shareholders for their commitment and support with adequate dividend payouts.

But given our FY2009 performance and the challenging environment ahead of us, after much deliberation, we have decided not to declare dividend for another year.

I would like to take this opportunity to express my sincere appreciation to our shareholders, customers, employees, bankers and business associates for their continued support and contributions. The economic crisis have strengthened our bonds and relationships. To my fellow directors, thank you once again for your valuable contributions and guidance especially during such difficult times. I look forward to receiving you at our AGM on 28 April 2010.