Annual Report 2011 Gearing Up - Innovalues Limited€¦ · 14 Performance Summary ... Lexmark,...

Annual Report 2011

Gearing Up For Green Opportunities

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

OurVisionTo be the preferred global partner in precision engineering.

Contents01 Corporate Profile

02 Chairman’s Statement

04 Operations Review

06 Directors’ Profile

08 Key Management Profile

09 Corporate Data

10 Corporate Information

11 Financial Highlights

14 Performance Summary

16 Corporate Structure

17 Financial Contents

CorporateProfile

Capable of high volume and high precisiontolerance manufacturingand surface treatmentservices

Innovalues specializes in the manufacturing of customized precision machined parts and components, assembly of printer rollers, rubber compounding and rubber moulding. The Group also provides surface treatment services such as electroless nickel plating, zinc phosphating and hard anodizing. These products are mainly used in office automation equipment, hard disk drives, automotive, oil and gas industries. Innovalues aims to be the preferred global partner in precision engineering providing full range of value chain processes. The Group’s capabilities include the manufacturing of ultra-high precision parts with high volume manufacturing capacity and a sound team of engineers who are able to work closely with customers from design to mass production phase.

Established in 1997 by founder Mr. Goh Leng Tse, Innovalues has grown aggressively through customer and products diversification and regionalization. From its humble beginnings, the Group has become a major supplier of high-precision parts and components, and is listed on the Mainboard of the Stock Exchange of Singapore. Our major customers include multi-national corporations such as Sensata Technology, Hilite International, Hewlett-Packard, Flextronics, Samsung, Lexmark, Xerox and Foxconn.

Headquartered in Singapore, the Group has operations in Malaysia, Thailand and China. Today, our total staff strength exceeds 1,800 and we occupy manufacturing space of approximately 56,600 sqm. For more information, please visit our website at www.innovalues.com.

01Innovalues

Limited

While restoring profitability will be one

of the primary objectives in FY2012, we also intend

to position ourselves for future growth in

terms of new product development.

Dear Valued Shareholders,

This year’s report comes at a time when the Group braces itself for

unprecedented tough challenges. Although the Group’s 3Q2011

results (reported a net profit of S$724,000 for the 3 months ended

30 September 2011) saw nascent signs of business recovery

and turnaround, severe and unanticipated floods in Thailand in

October 2011 had adversely affected the Group’s performance

for FY2011. As a result, the Group reported a net loss attributable

to shareholders of S$14.2 million in FY2011 (FY2010: net profit of

S$1.3 million).

To mitigate the impact of the flood to our business, we are leveraging

on our Malaysia and China operations to offset the temporary loss

of capacity in Thailand. This is to sustain the supply chains for our

valued customers, thereby minimizing unnecessary disruptions

to their productions. Pertaining to insurance coverage, the

Group’s property, plant and equipment, inventories and business

interruption in Thailand are insured. However, as the insurer’s

assessment is still ongoing, the eventual recoverable amount has

yet to be finalized. The insurance proceeds will be used to fund

the restoration and repair activities which are currently in progress

at our Thailand plant. How our Thailand plant, which has been

a major contributor to Group’s performance, can recover from

impact of the flood, will feature in the Group’s financial performance

in FY2012.

02Annual Report2011

Chairman’s Statement

03Innovalues

Limited

Chairman’s Statement

We are bolstered by the commendable growth of 10.8% year-

on-year in our Automotive segment (“AU”), which contributed

about 53.0% of total revenue in FY2011. In line with the increasing

demand in global markets for components with features such as

“Safety”, “Energy Saving” and “Environment Protection”, we expect

our AU segment to grow and lead the Group’s revenue in FY2012.

On the other hand, the substantial decline in our Office Automation

(“OA”) in FY2011 was not unexpected as our customers constantly

restructure their supply chains. This trend is expected to continue

in FY2012. In view of this, more of the existing machinery used

for the production of OA will be re-deployed to meet the growing

production capacity of our AU operations.

While restoring profitability will be one of the primary objectives

in FY2012, we also intend to position ourselves for future growth

in terms of new product development. Innovations in gearbox

and engine platforms from our Automotive business segment will

be the new products in the pipeline. Commercial production for

these new products will commence in FY2012 and this will in turn

contribute to our revenue growth.

In China, increasing labour costs as well as monetary and fiscal

policy adjustments to curb inflation, continue to pose growing

challenges to our bottom line. As such, we are actively aligning

our strengths and core competencies to achieve greater level of

efficiency and effectiveness in the deployment and utilization of

our resources. We are cognizant of the uncertain and challenging

global business environment and thus, will continue to exercise

financial prudence which has served us well. .

In 2Q2011, the Board had declared an interim dividend of 0.6

cents per ordinary share. This is to reward our shareholders for

their unwavering support. Despite the dividend payment of S$1.9

million, the Group maintained a healthy cash balance of S$10.7

million as at the end of FY2011.

On behalf of the Board of Directors, I wish to take this opportunity

to record our appreciation to our shareholders, bankers, customers

and suppliers for their continued support and confidence in

Innovalues. To the Board, I thank all my fellow Directors for their

invaluable advice, counsel and support. I wish to acknowledge and

commend our staff and management for their perseverance in the

execution of their respective functions amidst a very challenging

year. In the new financial year, we have our tasks all lined up and I

am sure that together we will weather the difficulties ahead.

Mr. Goh Leng Tse

Chairman and Chief Executive Officer

The unprecedented flooding in Thailand had

adversely affected the Group’s performance in

FY2011. As a result, the Group recorded a net

loss attributable to shareholders of approximately

S$14.2 million in FY2011 (FY2010: net profit of

S$1.3 million).

The temporary halt of operations in our Thailand

plant in the fourth quarter of 2011 had brought

a loss of revenue as well as other flood-related

impairment and restoration charges. As the

insurer’s assessment is ongoing and the eventual

recoverable amount has yet to be finalised,

the Group has not recognised any insurance

claim amounts for the financial year ended 31

December 2011. As of to date, S$4.1 million of

interim insurance proceeds had been received

subsequent to the financial year ended 31

December 2011, which will be recognised in

FY2012.

BUSINESS SEGMENT PERFORMANCE

The Group’s revenue in FY2011 was S$87.7 million

which represents a decrease of approximately

S$12.8 million or 12.7% as compared to

S$100.5 million in FY2010. This was mainly due

to the reduced sales orders from our customers

in the OA segment, coupled with the impact of

the temporary halt of operations in our Thailand

plant for the fourth quarter of 2011 as a result of

the severe flood.

Automotive (“AU”) segment continues to grow

steadily in FY2011 and overtook our traditionally

strongest revenue contributor, the OA segment,

contributing about 53.0% of total revenue in FY

2011. Growth in our PRC market drove our AU

revenue to S$46.5 million, an increase of S$4.5

million or 10.8% from S$42.0 million in FY2010.

Revenue contribution from Office Automation

(“OA”) segment decreased by approximately

S$16.7 million or 30.6% to S$37.8 million as

compared to S$54.5 million in the previous

financial year. This was mainly attributable to our

customers from the PRC and Malaysian markets

as they are restructuring their supply chains.

BALANCE SHEET HIGHLIGHTS

Net asset value of the Group in FY2011 stood at

S$40.6 million, a 27.9% decrease from S$56.3

million in FY2010. This was mainly due to the

substantial loss incurred by the Group in FY2011,

predominantly caused by the negative impact of

the flood in Thailand. As a result, net asset value

per ordinary share was 12.74 cents (FY2010:

17.69 cents) as at 31 December 2011.

04Annual Report2011

OperationsReview

05Innovalues

Limited

OperationsReview

Property, plant and equipment decreased by

approximately S$17.9 million from S$51.7 million

as at 31 December 2010 to S$33.8 million as at 31

December 2011 mainly due to depreciation charges

and impairment charge of the Thailand’s plant and

equipment during the year.

Inventories decreased by approximately S$3.7 million from S$18.0 million as at 31 December 2010 to S$14.3 million as at 31 December 2011. The decrease was mainly due to impairment charge of the Thailand’s inventories during the year.

Trade and other receivables decreased by approximately S$0.7 million from S$17.0 million as at 31 December 2010 to S$16.3 million as at 31 December 2011. The decrease in trade receivables was mainly due to lower revenue achieved in the fourth quarter of 2011 and debt collections continued to remain efficient.

CASH FLOW HIGHLIGHTS

Cash and cash equivalents at the end of FY2011 stood at S$10.5 million, which represents a decrease of S$1.4 million as compared to S$11.9 million in FY2010. The decrease in net cash flows was mainly attributable to net cash outflows from investing and financing activities but was cushioned by net cash inflows from operating activities.

Net cash flows used in financing activities was mainly due to net repayments of interest-bearing loans and borrowing and distribution of dividends in September 2011.

Sustaining the emphasis to improve the Group’s gearing, approximately S$7.6 million was used to repay outstanding interest-bearing loans and borrowings in FY2011 as agreed and planned with the bankers. As a result, the Group’s net interest-bearing borrowings had reduced significantly by S$28.3 million from S$54.2 million as at FY2008 to S$25.9 million as at FY2011.

Despite the loss and flood-related charges incurred by the Thailand plant in FY 2011, the Group is able to meet all its financial obligations and will continue to place emphasis on financial prudence.

Directors’ Profile

MR. GOH LENG TSEChairman and Chief Executive OfficerMr. Goh Leng Tse is the Chairman of the Board, a member of the Audit Committee, Remuneration Committee and Nominating Committee of the Company. Mr. Goh founded Innovalues Ltd in April 1997 and was appointed director on 25 April 1997.

He has more than 20 years’ experience in the precision turned-parts industry and has worked for NMB Singapore Pte Ltd and TNH Metal Pte Ltd. Mr. Goh holds a Diploma in Business Management from the Singapore Institute of Management.

MR. PUNG TONG SENGExecutive DirectorMr. Pung Tong Seng was appointed director on 7 June 2008. Mr. Pung joined Innovalues Limited in June 2000 and is responsible for the Group’s marketing and business development functions.

He holds an MSc in Total Quality Management from the Sheffield Hallam University. Mr. Pung has about 20 years experience working with MNC such as Micropolis (S) Ltd and Iomega Pacific Pte Ltd in the electronics and hard disk drives industries prior to taking up his responsibilities in Innovalues.

Mr. Pung was last re-elected as a director at the Annual General Meeting on 27 April 2011.

MR. ONG TIAK BENGNon-executive DirectorMr. Ong Tiak Beng was appointed as Non-Executive Director on 20 May 1997. He holds a Bachelor of Science in Industrial Engineering and Management.

Mr. Ong has more than 19 years’ experience in the precision engineering industry. He provides valuable support, insights and business contacts to the Group.

Mr. Ong was last re-elected as a director at the Annual General Meeting on 28 April 2010.

MR. ONG SIM HOLead Independent DirectorMr. Ong Sim Ho is our lead Independent Director and a member of the Audit Committee, Remuneration Committee and Nominating Committee of the Company. Mr. Ong was appointed as an Independent Director on 9 February 2001. Mr. Ong is a Director at Drew & Napier LLC where he heads the Tax & Private Client Services Group. He is the Non-Executive Chairman of Tokio Marine Life Insurance Singapore Ltd and a member of the Board of Emirates National Oil Company (Singapore) Pte Ltd, Eucon Holding Limited, Sunningdale Tech Limited and Tokio Marine Insurance Singapore Ltd. Mr. Ong also serves as an Advisory Board Member of the School of Accountancy at the Singapore Management University. He is an Advocate and Solicitor of the Supreme Court of Singapore, a Barrister-at-Law of Lincoln’s Inn, a Fellow of the Institute of Certified Public Accountants in Singapore and a member of the Singapore Institute of Directors.

Mr. Ong was last re-elected as a director at the Annual General Meeting on 28 April 2009.

06Annual Report2011

Directors’ Profile

MR. CHOW KOK KEEIndependent Director

Mr. Chow Kok Kee is the Chairman of the Audit and the Remuneration Committees and a member of the Nominating Committee of the Company. Mr. Chow was appointed as an Independent Director on 9 February 2001. Mr. Chow is the Managing Director of ACTA Investment & Services Pte Ltd, a provider of business and financial related services to companies. Mr. Chow is also a director of other Singapore-listed companies namely, Chosen Holdings Ltd, Meiban Group Ltd, Tuan Sing Holdings Ltd, Valuetronics Holdings Ltd and M1 Limited as well as one private company, Transwater Services Pte Ltd.

Mr. Chow worked in the government administrative service for 6 years from 1976, holding management positions in the Ministries of Defence and Education, before joining DBS Bank in 1982. He has 15 years of extensive experience in the financial services industry. A Colombo Plan scholar, he holds a first class honours Bachelor of Engineering degree and a Bachelor of Commerce degree from the University of Newcastle, Australia, and an MBA from the National University of Singapore. Mr. Chow is a Member of the Institute of Engineers, Australia; an Associate of the Institute of Chartered Secretaries and Administrators, United Kingdom, and a Fellow of the Singapore Institute of Directors.

Mr. Chow was last re-elected as a director at the Annual General Meeting on 27 April 2011.

MR. ANTHONY TEO SOON CHYEIndependent Director

Mr. Anthony Teo Soon Chye is the Chairman of the Nominating Committee and a member of the Audit Committee and Remuneration Committee of the Company. Mr. Teo was appointed as an Independent Director on 1 June 2005.

Up to August 2010, he was the Secretary to the University, Nanyang Technological University and concurrently an exofficio member of the Senate and a member of the University Cabinet. Additionally, he is a member of the Management Board of the Middle East Institute and member of the Endowment Fund Committee of the Singapore Symphony Orchestra. In 2010, he was awarded the Chevalier of the French Oder of the Palmes Academiques and in 2009 Visiting Fellow at Wolfson College, Cambridge University.

He was Vice Chairman of the Singapore Chamber of Commerce in Hong Kong and an Emeritus Board of the global Harvard Business School Alumni Board of Governors based in Boston. A graduate from Harvard Business School, his career spans banking, consulting, higher education and own business.

Mr. Teo was last re-elected as a director at the Annual General Meeting on 28 April 2010.

ADVISOR TO THE BOARD OF DIRECTORSMR. KOH BOON HWEEAdvisor

Mr. Koh Boon Hwee is the Advisor to our Board of Directors. Mr. Koh was appointed as Advisor to our Board on 1 June 2005 after he retired as non-executive director on 25 April 2005.

07Innovalues

Limited

Key ManagementProfile

MR. SOO KING TENG

Group Financial Controller

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

He holds a professional accountancy qualification from The Association of Chartered Certified Accountants, UK and is a Certified Public Accountant of the Institute of Certified Public Accountants of Singapore.

MR. ONG KIN HOCK

Director and General Manager, Malaysia operations

Mr. Ong Kin Hock joined the Group in April 2000 and is credited for establishing our manufacturing facilities in Kluang which he has been managing since the start of operation. Mr. Ong Kim Hock was subsequently appointed as plant General Manager for our operation in Pasir Gudang, Malaysia in Nov 2010 where he also responsible in Innovalues Precision Sdn Bhd, including subsidiaries in Innovalues Microtech Sdn Bhd and Nissohatsu Elastomer (M) Sdn Bhd.

Mr. Ong has more than 19 years’ experience in the precision engineering industry. Prior to joining us, he was the Operations Manager of Superpro Precision Engineering in Malaysia, where he worked from 1988 to 1998. He worked for 2 years with Okida Enterprise Sdn Bhd prior to joining Innovalues Group.

MR. TEO KIM POO

General Manager, China operations

Mr. Teo Kim Poo joined Innovalues in March 2004 and is responsible for the Group’s operations in China. He has more than 21 years’ experience in the metal industry and is considered a specialist in plating and surface finishing technology. Besides holding a Diploma in Mechanical Engineering from Singapore Polytechnic, Mr. Teo has to his credits, Professional Certificates in Advance Surface Finishing Technology, Advance Plastic Mould Design and Sheet Metal Forming/ Stamping. He started his career in 1984 with Chartered Industries of Singapore as Senior Engineer heading several projects which included the hard chroming plating line for 5.56mm to 20mm gun barrel and the aluminium anodizing and manganese phosphate plating plant. He left Chartered in 1994 to start SinAsia Technologies Pte Ltd from 1994 to 1997. Prior to joining Innovalues, Mr. Teo was the Business Development Consultant with Jackson Automation (S) Pte Ltd (1997 to1999), Managing Director of MediaMac Pte Ltd and MediaMacPhilippines (1999 to 2002) and Managing Director of Miyoshi Technologies Philippines, Inc. (2002 to 2004).

08Annual Report2011

Corporate Data

ESTABLISHED

April 1997

PRODUCT & SERVICES

Manufacturer of High-precision Turned Parts and Components, Metal Components Machining, EN Plating Services, Assembly of Printer Rollers and Mechanical devices, Rubber Moulding and Compounding

MANUFACTURING PROCESSES

CNC Autolathes, Machining Centres, Centreless Grinding, EN Plating, Super Finishing and Rubber Grinding, Molding and Compounding

CAPABILITIES

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

MANUFACTURING SITES

Malaysia:Innovalues Precision Sdn BhdArea: 11,000 sqmInnovalues Precision (Kluang) Sdn BhdArea: 14,457 sqmInnovalues Precision Microtech Sdn BhdArea: 7,950 sqmNissohatsu Elastomer (M) Sdn BhdArea: 3,900 sqm

09Innovalues

Limited

China:Innovalues Industry (Shanghai) Co., LtdArea: 5,000 sqmInnovalues Technology (Shanghai) Co., LtdArea: 400 sqmInnovalues Auto Precision (Shanghai) Co., LtdArea: 3,500 sqm

Thailand:Innovalues Precision (Thailand) LtdArea: 10,400 sqm

INDUSTRIES SUPPORTED

Automotive, Office Automation (printers, copiers, photographic imaging, plotters), Hard Disk Drives, Oil & Gas, Process Industry, Home Appliances and Infrastructure

QUALITY ACCREDITATIONS

• TS16949• ISO9001/2000• ISO14001

ACCOLADES

• FORBES GLOBAL Best Under A Billion 200 Companies for 2002• SMART INVESTOR Most Admired SESDAQ Companies 2002• FASTEST GROWING 50 Companies in Singapore 2004• Singapore 1000 company 2006 & 2008

Corporate Information

BOARD OF DIRECTORS

Mr. Goh Leng Tse Chairman and Chief Executive Officer

Mr. Pung Tong Seng Executive Director

Mr. Ong Tiak BengNon-Executive Director

Mr. Ong Sim HoLead Independent Director

Mr. Chow Kok KeeIndependent Director

Mr. Anthony Teo Soon ChyeIndependent Director

AUDIT COMMITTEE

Mr. Chow Kok KeeChairman

Mr. Anthony Teo Soon Chye

Mr. Goh Leng Tse

Mr. Ong Sim Ho

NOMINATING COMMITTEE

Mr. Anthony Teo Soon Chye Chairman

Mr. Chow Kok Kee

Mr. Ong Sim Ho

Mr. Goh Leng Tse

Mr. Ong Tiak Beng

REMUNERATION COMMITTEE

Mr. Chow Kok Kee Chairman

Mr. Anthony Teo Soon Chye

Mr. Goh Leng Tse

Mr. Ong Sim Ho

Mr. Ong Tiak Beng

COMPANY SECRETARY

Mr. Soo King Teng CPA (Singapore)

REGISTERED OFFICE

Blk 9 Kallang Place #07-08/09Singapore 339154Tel : (65) 6298-2374Fax : (65) 6298-2375Website : http:// www.innovalues.comRegistration No.199702822E

SHARE REGISTRAR

Boardroom Corporate & Advisory Services Pte. Ltd.50 Raffles Place#32-01Singapore Land TowerSingapore 048623

AUDITORS

RSM Chio Lim LLPCertified Public Accountants8 Wilkie Road,#04-08, Wilkie EdgeSingapore 228095

Audit Partner-in-chargeMr. Peter JacobPartner-in-charge since financial year ended 31 December 2007

PRINCIPAL BANKERS

The Development Bank of Singapore LtdUnited Overseas Bank LimitedOversea-Chinese Banking Corporation LimitedMalayan Banking BerhadCitibank, N.A., Singapore Branch

10Annual Report2011

FinancialHighlights

11Innovalues

Limited

Consolidated Statement of Comprehensive Income (S$ ’000)

For financial year ended 31 December

2007 2008 2009 2010 2011

Revenue 121,984 122,554 96,153 100,458 87,746

Finance costs 2,292 2,559 2,034 1,453 1,145

Earnings Before Interests, Tax, Depreciation andAmortisation (EBITDA) 16,757 13,884 8,823 13,327 (3,348)

Profit/(Loss) before tax and non-controlling Interests 3,546 866 (3,824) 1,741 (13,871)

Profit/(Loss) net of tax and non-controlling Interests 2,519 1,418 (4,266) 1,317 (14,222)

Statements of Financial Position (S$ ’000)

As at 31 December

Cash and cash equivalents 10,922 12,680 18,567 12,054 10,688

Current assets 61,445 71,615 59,604 50,015 44,473

Total Assets 133,173 140,660 118,879 101,685 78,278

Current liabilities 62,037 64,206 48,432 37,566 33,395

Total liabilities 72,094 80,900 63,488 45,411 37,722

Total borrowings 51,437 54,228 42,695 33,840 26,193

Total equity 61,079 59,760 55,391 56,274 40,556

Number of Shares – Issued and fully paid (’000) 318,194 318,194 318,194 318,194 318,214

Number of Shares – Basic (’000) 318,026 318,194 318,194 318,194 318,214

Number of Shares – Fully Diluted (’000) 318,474 318,194 318,194 319,154 318,214

Financial Ratios

ROE (%) 4.1% 2.4% (7.7%) 2.3% (35.1%)

ROA (%) 1.9% 1.0% (3.6%) 1.3% (18.2%)

Dividend paid per share (cents) 2.50 − − − 0.6

EPS (Basic) (cents) 0.81 0.46 (1.34) 0.41 (4.47)

EPS (Diluted) (cents) 0.80 0.46 (1.34) 0.41 (4.47)

NAV per share (cents) 19.20 18.78 17.40 17.69 12.74

Current ratio (times) 0.99 1.12 1.23 1.33 1.33

Quick ratio (times) 0.60 0.59 0.93 0.85 0.90

Net debt/Equity (%) 66.3% 69.5% 43.6% 38.7% 38.2%

EBITDA/Interest Cover (times) 7.31 5.43 4.34 9.17 (2.92)

FinancialHighlights

Current ratio (times)

EPS (cents) - fully diluted

Interest cover (times)

NAV per share (cents)

Net debt to equity (%)

LIQUIDITY & LEVERAGE

10

8

6

4

2

0

-2

-4

20

15

10

5

0

-5

80

60

40

20

0

EPS & NAV

2007

0.99

0.810.46 0.41

(1.34)(4.47)

1.12 1.23 1.33 1.33

7.31

19.20 18.7817.40 17.69

12.74

66.3% 69.5%

43.6%

38.7% 38.2%5.43

4.34

9.17

(2.92)

2007

2008

2008

2009

2009

2010

2010

2011

2011

12Annual Report2011

FinancialHighlights

REVENUE BY BUSINESS SEGMENT

REVENUE BY YEAR In (S$ ’000)

REVENUE BY GEOGRAPHICAL SEGMENT

150,000

120,000

90,000

60,000

30,000

0

2007

87,746

121,984 122,554

96,153 100,458

2008 2009 2010 2011

PRC

Others

Singapore

Mexico

Malaysia

Brazil

Thailand

USA2007 2008

2009 2010 2011

43% 40%

48% 55% 59%

36% 28%

4%

4%

27%

3%

19%17%

2% 1%

2% 5%9% 5%

1% 3% 3% 2% 3%1% 2%

3% 2%2%

6% 1%

17%

12%

3%

16% 16%

Automotive

Others

Hard Disk Drive

Office Automation

2007 2008

2009 2010 2011

70% 68%

71% 54%

53%

23% 26%

25% 42%

43%

5% 3%

3% 3% 4%

2% 3%

1% 1%

13Innovalues

Limited

14Annual Report2011

PerformanceSummary Consolidated Statement of Comprehensive Income

For Year Ended 31 December

Decrease was mainly due to the reduced sales orders from customers in the OA segment, coupled with the impact of the temporary halt of operations in our Thailand plant for the fourth quarter of 2011 as a result of the severe flood.

Lower gross profit margin was mainly due to lower factory orders from our OA customers and impact of severe flood in Thailand which had resulted in the loss of revenue for 4Q11.

Increase was mainly due to bad debts recoverable in respect of other receivables that was written off in FY2010.

Decrease was mainly due to lower delivery costs in line with lower sales activities in FY2011.

Decrease was mainly due to lower payroll-related cost incurred during the year.

This was due to flood-related charges totalling S$13.6 million, which comprised plant and equipment impairment of S$8.3 million, inventories written off of S$5.0 million and repair and restoration expenses of S$0.3 million.

Decrease was mainly due to decrease in current tax expense but offset by the absence of non-recurring over provision of deferred tax expense in respect of prior years.

Decrease was mainly due to lower interest rates and reduction of term loans.

2011 2010

S$’000 S$’000

Revenue 87,746 100,458

Cost of Sales (76,537) (86,315)

Gross Profit 11,209 14,143

Other Items of Income

Interest Income 23 45

Other Credits 1,495 1,376

Other Items of Expense

Marketing and Distribution Costs (2,461) (2,865)

Administrative Expenses (9,189) (9,213)

Finance Costs (1,145) (1,453)

Other Charges (217) (292)

(Loss)/Profit Before the Under Mentioned (285) 1,741

Other Charges - Expenses Due to Floods (13,586) –in Thailand

(Loss)/Profit Before Tax from (13,871) 1,741 Continuing Operations

Income Tax Expense (351) (424)

(Loss)/Profit Net of Tax (14,222) 1,317

Other Comprehensive Income:

Exchange Differences on Translating 240 (605)Foreign Operations, Net of Tax

Other Comprehensive Income/(Loss) for the Year, 240 (605)Net of Tax

Total Comprehensive (Loss)/Income (13,982) 712

15Innovalues

Limited

PerformanceSummaryConsolidated Statement of Comprehensive Income

For Year Ended 31 DecemberStatements of Financial PositionAs At 31 December

Decrease was mainly due to depreciation charges and impairment charge of the Thailand’s plant and equipment during the year.

Decrease was mainly due to impairment charge of the Thailand’s inventories during the year.

Decrease was mainly due to lower revenue achieved in 4Q11 as compared to 4Q10 and debt collections continued to remain healthy.

The decrease was mainly attributable to net cash outflows from investing and financing activities but was cushioned by net cash inflows from operating activities.

Decrease was mainly due to scheduled repayments of term loans during the year.

Decrease was mainly due to lower level of procurement in line with the reduced revenue in 4Q11 as compared to 4Q10.

2010 2011

S$’000 S$’000

ASSETS

Non-current assets

Properties, plant and equipment 51,670 33,805

51,670 33,805

Current assets

Inventories 17,969 14,300

Trade and other receivables 17,026 16,275

Other assets 2,966 3,210

Cash and cash equivalents 12,054 10,688

50,015 44,473

TOTAL ASSETS 101,685 78,278

EQUITY AND LIABILITIES

Equity

Share capital 11,357 11,358

Retained earnings 43,311 27,052

Other reserves 1,606 2,146

Total Equity, Attributable to Owners of 56,274 40,556

the Parent

Non-current liabilities

Deferred tax liabilities 69 117

Other financial liabilities 7,517 4,050

Finance leases 259 160

7,845 4,327

Current liabilities

Trade and other payables 11,502 11,412

Other financial liabilities 25,914 21,853

Finance leases 150 130

37,566 33,395

Total liabilities 45,411 37,722

TOTAL EQUITY AND LIABILITIES 101,685 78,278

Innovalues Precision Sdn Bhd

Innovalues Precision (Kluang)

Sdn Bhd

Innovalues Precision Microtech

Sdn Bhd

Innovalues Technologies

Sdn Bhd

Nissohatsu Elastomer (M)

Sdn Bhd

Innovalues Precision (Thailand) Ltd

Innovalues Industry (Shanghai) Co., Ltd

Innovalues Technology (Shanghai) Co., Ltd

Innovalues Auto Precision (Shanghai) Co., Ltd

Innovalues Precision (Shanghai) Co., Ltd

Shenzhen Innovalues Precision Co., Ltd

Malaysia Thailand China

CorporateStructure

16Annual Report2011

FinancialContents18 Corporate Governance Report

32 Risk Factors

35 Directors’ Report

43 Statement by Directors

44 Independent Auditors’ Report

46 Consolidated Statement of Comprehensive Income

47 Statements of Financial Position

48 Statements of Changes in Equity

50 Consolidated Statement of Cash Flows

51 Notes to the Financial Statements

104 Information on Shareholdings

106 Notice of Annual General Meeting

111 Proxy Form

18

Annual Report

2011

CorporateGovernance Report

The Board of Directors (the “Board”) and its Management are committed to maintaining high standards of corporate conduct,

and place overriding importance on its Corporate Governance practices and systems, so as to ensure transparency and

protection of shareholders interests. The Board adheres to the principles and guidelines set out in the Code of Corporate

Governance 2005 (the “Code”). Where there are deviations from the Code, appropriate explanations are provided.

A. BOARD MATTERS

The Board’s Conduct of its Affairs

Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board

is collectively responsible for the success of the company. The Board works with Management to

achieve this and the Management remains accountable to the Board.

The Company has adopted internal guidelines setting forth matters, such as annual budget and transactions relating to

investment, fi nancing, and legal and corporate secretarial matters which require the Board’s approval. The Board oversees

the processes for evaluating the adequacy of internal controls, risk management, fi nancial reporting and compliance. It also

approves broad policies, group strategies and fi nancial objectives of the Company. Major acquisitions were also approved at

Board level.

The Board is entrusted with the responsibility of the overall management of the Company. The principal role of the Board is to:

(a) Provide entrepreneurial leadership, set strategic aims, and ensure that the necessary fi nancial and human resources

are in place for the company to meet its objectives;

(b) Establish a framework of prudent and effective controls, and oversee the processes of evaluating the adequacy of

internal controls, risk management, fi nancial reporting and compliance;

(c) Approve nominations of Board directors, committee members and key personnel;

(d) Review management performance, approve annual budgets, funding requirements, expansion programs, capital

investment and major acquisitions and divestments proposals;

(e) Set the company’s values and standards, and ensure that the obligations to shareholders and others are understood

and met.

There is an objective decision-making process, which allows each Director to engage in constructive discussion and make

decision in the best interests of the Company. To assist in the execution of its responsibilities, the Board has established three

Board Committees: the Nominating Committee (“NC”), the Remuneration Committee (“RC”) and the Audit Committee (“AC”).

To facilitate effective management, certain functions have been delegated by the Board to various Board Committees. The

Board Committees operate under clearly defi ned terms of reference. Minutes of all Board Committee meetings held are made

available to the Board members.

A schedule of Board and Board Committee meetings to be held for the calendar year is usually provided to the directors in

advance. Besides the scheduled meetings, the Board meets on an ad-hoc basis as warranted by particular circumstance or

as deemed appropriate by the Board members. The Company’s Articles of Association permits meetings of the Directors to be

conducted by telephone or other methods of simultaneous communication by electronic means.


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Innovalues

Limited

A record of the Directors’ attendances at Board and Board Committee meetings during the fi nancial year ended 31 December

2011 is disclosed as follows:

Name of Directors

Board

Audit

Committee

Nominating

Committee

Remuneration

Committee

No. of

meetings Attendance

No. of

meetings Attendance

No. of

meetings Attendance

No. of

meetings Attendance

Mr. Goh Leng Tse 4 4 5 5 1 1 1 1

Mr. Pung Tong Seng

4 4 Not

applicable

Not

applicable

Not

applicable

Not

applicable

Not

applicable

Not

applicable

Mr. Ong Tiak Beng 4 4 Not

applicable

Not

applicable

1 1 1 1

Mr. Ong Sim Ho 4 2 5 3 1 0 1 0

Mr. Chow Kok Kee 4 4 5 5 1 1 1 1

Mr. Anthony Teo Soon Chye 4 4 5 5 1 1 1 1

At meetings and as and when necessary, the Directors are provided with regular updates on changes in the relevant laws and

regulations to enable them to make well-informed decisions. Where possible and when opportunity arises, the Directors will be

invited to locations within the Group’s operating businesses to enable them to obtain a better perspective of the business and

enhance their understanding of the Group’s operations. The Company will consider formulating training programmes, if the

need arises.

Newly appointed Directors undergo an orientation session, which include presentation by Management to familiarize them on

the Group’s businesses, operations and strategic directions. Company will also provide newly appointed directors with a formal

letter setting out the duties and obligations of a director.

Board Composition and Guidance

Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective

judgement on corporate affairs independently, in particular, from Management. No individual or small

group of individuals should be allowed to dominate the Board’s decision making.

The Company endeavors to maintain a strong and independent element on the Board. As at the date of this report, three out

of the six Board members are independent directors, making up more than one-third of the Board. The Board comprises the

following members:

Executive Directors

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

Non-Executive Directors

Mr. Ong Tiak Beng

Mr. Ong Sim Ho (Independent)Mr. Chow Kok Kee (Independent)Mr. Anthony Teo Soon Chye (Independent)

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Annual Report

2011


The independent directors have confi rmed that they do not have any relationship with the Company or its related companies or

its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the director’s independent business

judgment with a view to the best interests of the Company. The Nominating Committee (“NC”) reviews the independence

of each director at the time of appointment and annually. The NC has reviewed and determined that the said directors are

independent.

The Board is of the opinion that its current size of six Board members is both effective and efficient. The Board’s structure, size

and composition is reviewed annually by the Nominating Committee who is of the view that the current size of the Board is

appropriate, taking into account the nature and scope of the Group’s operations, to facilitate effective decision making.

Together, the Board members possess a balanced fi eld of core competencies such as accounting and fi nance, legal, business

and management experience and the requisite industry knowledge to lead the Company. Details of the Board members’

qualifi cations and experience are presented in this Annual Report under the heading “Board of Directors”.

Chairman and Chief Executive Officer

Principle 3: There should be a clear division of responsibilities at the top of the company – the working of the

Board and the executive responsibility of the company’s business – which will ensure a balance of

power and authority, such that no one individual represents a considerable concentration of power.

The Chairman and Chief Executive Officer (“CEO”) of the Company is Mr. Goh Leng Tse. The Board, after careful

consideration, is of the opinion that the need to separate the roles of the Chairman and CEO is not necessary for the time

being. The presence of a strong independent element and the participation of the non-executive as well as independent

directors ensure that Mr. Goh Leng Tse does not have unfettered powers of decision. This has been refl ected in Board and

Committee meetings where the independent Directors and non-executive Director have participated actively in the decision-

making process. The Board has in February 2006 appointed Mr. Ong Sim Ho as the Lead Independent Director to be an

alternative source for shareholders and other directors to raise their concerns which contact through the normal channels of

the Chairman has failed to resolve.

The Chairman’s duties and responsibilities includes:-

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

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

responsibly;

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

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

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

(f) Ensuring effective communication with shareholders through investors’ relationship channels and timely announcements

of Company’s development;

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

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


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Board Membership

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

The Nominating Committee (“NC”) is established for the purposes of ensuring that there is a formal and transparent process

for all Board appointments. The NC comprises the following fi ve members, majority of whom, including the Chairman, are

independent directors:-

Mr. Anthony Teo Soon Chye (Chairman)Mr. Chow Kok Kee (Member)Mr. Goh Leng Tse (Member)Mr. Ong Sim Ho (Member)Mr. Ong Tiak Beng (Member)

The NC has adopted written terms of reference defi ning its membership, administration and duties. Some of the duties and

responsibilities of the NC include:

(a) to make recommendations to the Board on all Board appointments, including development of a set of criteria for director

appointments, which includes qualifi cations of director; ability to exercise sound business judgments, relevance to the

Company and the industry and appropriate personal qualities;

(b) to re-nominate directors having regard to the director’s contribution and performance (e.g. attendance, participation and

critical assessment of issues deliberated upon by the Board) including, if applicable, as an independent director;

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

(d) to decide how the Board’s performance may be evaluated and propose objective performance criteria, such as return

on equity (“ROE”), revenue and profi t growth, share price performance of the Company as well as making comparison

with industry peers to the Board; and

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

Each member of our NC shall abstain from voting on any resolution in respect of his re-nomination as a director.

The search and nomination process for new directors, if any, will be through search companies, contacts and recommendations.

The NC will review and assess candidates before making recommendation to the Board. In recommending new directors to

the Board, the NC takes into consideration the skills and experience required to support the Group’s business activities or

strategies, the current composition and seize of the Board, and strives to ensure that the Board has an appropriate balance of

independent directors as well as directors with the right profi le of expertise, skills, attributes and ability.

The Articles of Association of the Company currently require one-third of the directors to retire and subject themselves to re-

election by the shareholders in every Annual General Meeting (“AGM”). In addition, all directors of the Company (other than

the CEO) shall retire from office at least once every three years. Taking into consideration that the CEO is instrumental to the

Group’s operations, the Company has not adopted the guideline for the retirement of the CEO once in every three years.

The NC has reviewed and is satisfi ed that notwithstanding their multiple board directorships, Mr. Chow Kok Kee and Mr. Ong

Sim Ho have been able to adequately discharge their duties as directors of the Company.

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Annual Report

2011


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

Name of Directors Appointment

Date of Initial

Appointment

Date of Last

Re-election

Directorship in

Listed Companies

Goh Leng Tse Executive 25 April 1997 Not applicable Innovalues Limited

Pung Tong Seng Executive 7 June 2008 27 April 2011 Innovalues Limited

Ong Tiak Beng Non-executive/

Non-independent

20 May 1997 28 April 2010 Innovalues Limited

Ong Sim Ho Independent 9 February 2001 28 April 2009 Innovalues Limited

Eucon Holdings Limited

Sunningdale Tech Ltd

Chow Kok Kee Independent 9 February 2001 27 April 2011 Innovalues Limited

Chosen Holdings Ltd

Meiban Group Ltd

M1 Limited

Tuan Sing Holdings Ltd

Valuetronics Holdings Ltd

Anthony Teo Soon Chye Independent 1 June 2005 28 April 2010 Innovalues Limited

Board Performance

Principle 5: There should be a formal assessment of the effectiveness of the Board as a whole and the

contribution by each Director to the effectiveness of the Board.

The NC has adopted a process for assessing the performance of the Board as a whole instead of individual assessment. The

performance appraisal includes qualitative and quantitative factors including board structure, conduct of meetings, corporate

strategy and planning, risk management and internal control.

Although the Code proposes certain fi nancial indicators as performance criteria, such as the Company’s share price

performance, the Board is of the opinion that the performance criteria should be geared toward evaluating the Board’s

performance in discharging its principal responsibilities, upholding high standards of corporate governance and strategic

oversight of the Company’s business rather than the specifi c performance of its share price and other fi nancial indicators.

For the fi nancial year ended 31 December 2011, the directors had been requested to complete a Board evaluation

questionnaire. The questionnaire is designed to seek each Director’s views on various aspects of the Board’s performance.

The responses are reviewed by NC and discussed with Board members for determining areas of improvement.

The Board and the NC have endeavoured to ensure that Directors appointed to the Board possess the experience, knowledge

and expertise critical to the Group’s business.


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Access to Information

Principle 6: In order to fulfi ll their responsibilities, Board members should be provided with complete, adequate

and timely information prior to Board meetings and on an on-going basis.

The Board is furnished with Board papers prior to any Board meeting. These papers are issued in sufficient time to enable

the Directors to obtain additional information or explanations from the Management, if necessary. The Board papers include

minutes of the previous meeting, reports relating to investment proposals, budgets, fi nancial results announcements and

reports from committees, internal and external auditors.

The directors receive monthly management fi nancial statements and annual budgets to enable them to oversee the Group’s

operational and fi nancial performance. The directors are also informed of any signifi cant developments or events relating to

the Group.

The Directors may communicate directly with the Management team and the Company Secretary on all matters whenever they

deem necessary. The Company Secretary attends all Board meetings and is responsible for recording of the proceedings.

The Company currently does not have a formal procedure for Directors to seek independent professional advice for the

furtherance of their duties. However, directors may, on a case-to-case basis, propose to the Board for such independent

professional advice, the cost of which may be borne by the Company.

The Company has a transparent policy wherein directors are welcomed to request further information or informal discussions

and make recommendations on any aspects of the Company’s operations or business issues.

B. REMUNERATION MATTERS

Procedures for Developing Remuneration Policies

Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration

and for fi xing the remuneration packages of individual directors. No director should be involved in

deciding his own remuneration.

The Remuneration Committee (“RC”) is established for the purposes of ensuring that there is a formal and transparent

process for developing policy and fi xing the remuneration packages of individual directors. The RC comprises the following fi ve

members, majority of whom, including the Chairman, are independent directors:-

Mr. Chow Kok Kee (Chairman)Mr. Anthony Teo Soon Chye (Member)Mr. Goh Leng Tse (Member)Mr. Ong Sim Ho (Member)Mr. Ong Tiak Beng (Member)

Mr. Chow Kok Kee has human resource experience and is knowledgeable in the fi eld of executive compensation. In addition,

the RC may seek professional advice where necessary.

24

Annual Report

2011


The Board recognises that the composition of the RC is not in accordance with the Code’s guidelines that RC should comprise

of entirely non-executive directors. However, the Board is of the view that the membership of Mr. Goh Leng Tse is necessary

to facilitate a more effective discussion on the remuneration packages of the Group’s key executives. Apart from Mr. Goh

Leng Tse, three of the members (including Chairman) are non-executive independent directors while the remaining member

is a non-executive non-independent director. The presence of a strong independent element ensure that no individual has

unfettered powers of decision.

The RC has adopted written terms of reference defi ning its membership, administration and duties. The duties of the RC are as

follows:

(a) to review and recommend to the Board in consultation with senior management a framework of remuneration for

executive directors, CEO and senior management staff;

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

and

(c) to recommend to the Board in consultation with senior management and the Chairman of the Board, the Executive’s

and Employees’ Share Option Schemes or any long term incentive scheme.

No Director shall participate in decisions on his own remuneration.

Level and Mix of Remuneration

Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the directors needed

to run the company successfully but the company should avoid paying more for this purpose. A

signifi cant proportion of executive directors’ remuneration should be structured so as to link rewards

to corporate and individual performance.

The Company has approved the remuneration framework for Executive Director and senior management staff on

recommendation by the RC. The framework will cover directors’ fees, basic salaries, allowances, bonuses, stock options and

benefi ts in kind. In developing the framework, the RC has taken into consideration factors, such as the Company’s performance,

the economic scenario, market practices and the individual’s contributions to the Company.

The RC has adopted a framework to remunerate the non-executive Directors based on their appointments, roles in respective

committees and contributions to the Board and Company. The remuneration packages of non-executive Directors comprise a

basic director retainer fee and additional fees for appointment to Board Committees. While the remuneration frameworks are not

subject to shareholders’ approval, the directors’ fees for non-executive directors will be subject to the approval of shareholders

at AGMs.

The RC has reviewed existing service agreement made between the Company and the executive director.

Additional information is disclosed under principle 9 of this report.


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Disclosure on Remuneration

Principle 9: Each Company should provide clear disclosure of its remuneration policy, level and mix of

remuneration, and the procedure for setting remuneration in the company’s annual report. It should

provide disclosure in relation to its remuneration policies to enable investors to understand the link

between remuneration paid to directors and key executives, and performance.

A breakdown showing the level and mix of each individual director’s remuneration for the fi nancial year ended 31 December

2011 is disclosed in the table below:

Name of Directors

Remuneration

band

(S$)

Salary#

(%)

Variable

Bonus

(%)

Allowance

(%)

Director’s

Fees

(%)

Other

Benefi ts

(%)

Total

(%)

Mr. Goh Leng Tse 600,000 to

699,999

96 0 2 0 2 100

Mr. Pung Tong Seng

300,000 to

399,999

99 0 0 0 1 100

Mr. Ong Tiak Beng

50,000 to

69,999

0 0 0 100 0 100

Mr. Ong Sim Ho 0 0 0 100 0 100

Mr. Chow Kok Kee 0 0 0 100 0 100

Mr. Anthony Teo Soon Chye 0 0 0 100 0 100

Details of share options granted to the directors are set out in the Directors’ Report on page 39 of this annual report.

The Company had entered into a Service Agreement with Mr. Goh Leng Tse on 9 February 2001, which was renewed

automatically in January 2003 pursuant to the terms of the Agreement. The Agreement shall continue for an indefi nite period

unless terminated in writing by either party.

Amongst other clauses in the Service Agreement, Mr. Goh Leng Tse shall be paid a fi xed monthly salary, an annual wage

supplement of an amount equal to 1 month of the last drawn salary and an incentive bonus. In addition to his Service

Agreement with the Company, Mr. Goh Leng Tse is also paid a monthly allowance of RM2,000 (Malaysian Ringgits) by

Innovalues Precision Sdn Bhd for services rendered. The incentive bonus shall be payable if the audited consolidated profi t

before tax of the Group excluding incentive bonus and extraordinary items but after minority interests for the preceding year

exceeds S$2 million.

26

Annual Report

2011


A breakdown showing the level and mix of each key executive’s remuneration for the fi nancial year ended 31 December 2011

is disclosed in the table below:

Name of key executive

Remuneration

band (S$)

Salary#

(%)

Variable

Bonus (%)

Other

Benefi ts (%)

Total

(%)

Mr. Leow Quek Kien^100,000 to

199,999

100 0 0 100

Mr. Teo Kim Poo 95 0 5 100

Mr. Ong Kin Hock0 to

99,999

100 0 0 100

Mr. Soo King Teng* 100 0 0 100

Notes:

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

(^) Mr Leow Quek Kien resigned as Chief Financial Officer (“CFO”) of the Company on 9 December 2011. His remuneration shown in the

above table refl ects the total remuneration received from 1 January 2011 to 9 December 2011.

(*) Mr. Soo King Teng was remunerated as a key executive with effect from 9 December 2011. His remuneration shown in the above table

refl ects the total remuneration received from 1 January 2011 to 31 December 2011.

For the fi nancial year ended 31 December 2011, there was no employee who is an immediate family member of a director or

the CEO whose remuneration exceeded S$150,000 during the fi nancial year.

The Board is of the opinion that the information as disclosed above would be sufficient for shareholders to have an adequate

appreciation of the Company’s compensation policies and practices and therefore does not intend to issue a separate

remuneration report, the contents of which would be largely similar.

The Company had a previous share option scheme known as the “Innovalues Group Share Option Scheme 2001” (the “2001

Scheme”) which expired on 8 February 2011. In view that the said 2001 Scheme had expired, the Company has adopted a new

share option scheme known as the “Innovalues Group Share Option Scheme 2011” (the “Scheme”) on 15 August 2011. The

Scheme, which forms an integral component of the Company’s compensation plan, is designed to reward and retain eligible

participants whose services are vital to the Group’s well-being and success.

The Company recognizes the commitment, support and services of its employees and Directors. The rationale for allowing

participation by the executive director is to encourage loyalty and contribution towards future growth and the development of

the Company.

Under the rules of the Scheme, Executive and Non-Executive Directors and employees of the Group are eligible to participate.

Controlling shareholders or their associates are also eligible to participate in the Scheme subject to the approval of independent

shareholders’ in the form of a separate resolution for each participant. Further, independent shareholders’ approval will also

be required in the form of a separate resolution for each grant of options and the terms thereof to each participant who is a

controlling shareholder or an associate of a controlling shareholder.

The total number of shares over which options may be granted pursuant to the Scheme shall not exceed 15% of the issued

shares of the Company at any time and from time to time during the existence of the Scheme. Based on the total number of

issued shares as at 31 December 2011, 15% of the issued shares of the Company would amount to 47,732,100 shares.


27

Innovalues

Limited

The exercise price of options granted is fi xed at the price (“Market Price”) equal to the average of the last dealt price for a

share on the SGX-ST for the period of 5 consecutive market days immediately prior to the relevant date of grant. The Company

has the discretion to either set the exercise price for options granted at the Market Price or set the exercise price for options

granted at a discount not exceeding 20% of the Market Price.

Options granted with the exercise price set at Market Price shall only be exercisable by a grantee after the fi rst anniversary

of the date of grant of the options in accordance with the terms and vesting period as enumerated in Clause 11 (“Exercise

Period”) of the Scheme.

The schedule below shows options granted by the Company and outstanding as at 31 December 2011.

Offer Date Options Granted Exercise Price Options Outstanding Remarks

11/06/2007 4,000,000 S$0.7200 2,600,000 Exercise price set at Market Price





With the adoption of FRS 102, the compensation expenses relating to both share options and performance shares are taken to

the profi t and loss account over the vesting periods of the grants. The compensation expenses are based on the respective fair

values of shares options computed using Black-Scholes Valuation Model.

C. ACCOUNTABILITY AND AUDIT

Accountability

Principle 10: The Board should present a balanced and understandable assessment of the company’s

performance, position and prospects.

One of the Board’s principal duties is to protect and enhance the long-term value and returns to the shareholders of the

Company. The accountability of the Board to the shareholders is demonstrated through the presentation of the periodic fi nancial

statements as well as timely announcements and news releases of signifi cant corporate developments and activities so that

the shareholders can have a detailed explanation and balanced assessment of the Group’s fi nancial position and prospects.

The Board ensures that the Management maintains a sound system of internal control to safeguard the shareholders’

investment and the Group’s assets. Board papers are given prior to any Board meeting to facilitate effective discussion and

decision making.

The Management presents to the Audit Committee the interim and full-year results. The Audit Committee reviews the results

and recommends them to the Board for approval. The Board approves the results and authorizes the release of the results to

the SGX-ST and the public via SGXNET as required by the SGX-ST Listing Manual.

28

Annual Report

2011


Audit Committee

Principle 11: The Board should establish an Audit Committee (“AC”) with written terms of reference which clearly

set out its authority and duties.

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

Mr. Chow Kok Kee (Chairman)Mr. Anthony Teo Soon Chye (Member)Mr. Goh Leng Tse (Member)Mr. Ong Sim Ho (Member)

The profi le of each member of the AC is set out on pages 6 and 7 of this report. Mr. Chow Kok Kee, Chairman of the AC,

has many years of experience in fi nancial services. Other members of the AC posses experience in fi nance, legal and

business management. At least three members have the appropriate accounting or related fi nancial management experience

or expertise. The Board is of the view that the members of the AC are appropriately qualifi ed, having accounting or related

fi nancial management expertise or experience as the Board interprets such qualifi cation, to discharge their responsibilities.

The Board recognises that the composition of the AC is not in accordance with the Code’s guidelines that the AC should be

made up of entirely non-executive directors. However, for the same reasons stated under Principle 3 of this report, the Board

is of the view that independence is not comprised as majority of the members of the AC, which had exceeded the minimum as

guided under this Principle of the Code, are independent.

As a sub-committee of the Board of Directors, AC assist the Board in discharging their responsibility to safeguard the Group’s

assets, maintain adequate accounting records, and develop and maintain effective systems of internal control, with the overall

objective of ensuring that our management creates and maintains an effective control environment in the Group. The AC also

reviews and supervises the internal audit functions of the Group.

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

audit.

AC has adopted written terms of reference defi ning its membership, administration and duties. Duties and responsibilities of the

AC include:

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

scope of the audit;

(b) review with external auditors, their evaluation of the system of internal controls, the Management Letter and

Management’s response thereon;

(c) discuss problems and concerns, if any, arising from the interim and fi nal audits and any matters that the external

auditors may wish to discuss with the AC in the absence of the Management;

(d) review of the independence and objectivity of the external auditors and nomination of their re-appointment as auditors of

the Company) The review of the adequacy of the Company’s internal controls, and the effectiveness of the Company’s

internal audit function, the internal audit program including the scope and results of the internal audit;


29

Innovalues

Limited

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

(f) review of interim and full year fi nancial results, including review of the signifi cant fi nancial reporting issues and

judgements so as to ensure the integrity of the fi nancial statements of the Company and any formal announcements

relating to the Company’s fi nancial performance; and

(g) any other functions that are requested by the Board, as may be required by statute or the Listing Manual. In discharging

the above duties, the AC confi rms that it has full access to and co-operation from Management and is given full

discretion to invite any Director or executive Director to attend its meetings. In addition, the AC has also been given

reasonable resources to enable it to perform its functions properly.

The AC has conducted an annual review of the volume of non-audit services provided by the external auditors to satisfy it that

the nature and extent of such services will not prejudice the independence and objectivity of the auditors before recommending

their re-nomination to the Board.

During the year, the AC has met at least once with the internal and external auditors, without the presence of Management, in

order to have free and unfettered access to unfi ltered information and feedback.

In the event that any Director has a personal material interest in any contract or proposed contract or arrangement, he will

abstain from reviewing that particular transaction or voting on the particular resolution.

Apart from the duties listed above, the AC shall commission and review the fi ndings of internal investigations into matters

where there is any suspected fraud or irregularity, or failure of internal controls or infringement of any Singapore law, rule or

regulation which has or is likely to have a material impact on our Company’s operating results and/or fi nancial position.

In performing its functions, the AC has explicit authority to investigate any matter within its terms of reference, having full

access to and co-operation by management and full discretion to invite any director or executive officer to attend meetings, and

reasonable resources to enable it to discharge its function properly.

In accordance with the Code, the Company has in place whistle-blowing procedures and arrangements by which staff may, in

confi dence, raise concerns about possible corporate improprieties in matters of fi nancial reporting or other matters to the CEO

or Chairman of the AC.

Internal Controls

Principle 12: The Board should ensure that the Management maintains a sound system of internal controls to

safeguard the shareholders’ investments and the company’s assets.

The Board ensures that Management maintains a sound system of internal controls to safeguard shareholders’ interest and the

Group’s assets, and to manage risks. The Board also acknowledges that no cost effective internal control system will preclude

all errors and irregularities. A system is designed to manage rather than eliminate the risk of failure to achieve business

objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss.

With the assistance of the Internal Auditors and through the Audit Committee, the Board reviews the effectiveness of the

key internal controls, provides its perspective on management control and ensures that the necessary corrective actions

are taken on a timely basis. There are procedures in place for both the internal and external auditors to report independent

conclusions and recommendations to Management and the Audit Committee. Based on the reports submitted by external and

internal auditors, the Board with the concurrence of the Audit Committee, is satisfi ed that the internal control system provides

reasonable assurance that assets are safeguarded and that proper accounting records are maintained.

30

Annual Report

2011


The Board believes that risk management forms an integral part of business management. On an on-going basis, the Board

has considered the key risks faced by the Company in the review of the Company’s internal controls. The Board has also

appointed the internal auditors to assist with the formulation of a risk management framework for the Company. Upon

fi nalization of the framework, the Board will develop and implement appropriate risk management procedures to address the

key risks identifi ed.

Internal Audit

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

audits.

The Audit Committee is aware that internal audit function is essential to assist in obtaining the assurance it requires regarding

the effectiveness of the system of internal control. Accordingly, the Company has outsourced its internal audit function to an

internationally reputable public accounting fi rm to cover the various geographical locations in which the Group is presently

operating.

The internal auditors are able to meet the standards set by nationally or internationally recognized bodies, including the

Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors.

The internal auditors report directly to the Chairman of the Audit Committee although they will also report administratively to

the CEO. The main function of the internal auditors is to review the effectiveness and quality of the systems of control of the

Company and this review is performed with impartiality, profi ciency and due professional care. The internal audit function is

independent of the activities or operations of the Company.

Prior to the commencement of the internal audit, the Audit Committee will discuss with the internal auditors as to the scope of

the internal audit, including deliverables expected by the Audit Committee. This is to ensure that major areas of weakness are

identifi ed and addressed.

Since the implementation of the internal audit, the Audit Committee is satisfi ed that the internal audit on systems and controls

are adequate in view of the current nature and scope of operations of the Company. The AC will continue to assess the

adequacy of internal audit function annually.

Communication with Shareholders

Principle 14: Companies should engage in regular, effective and fair communication with shareholders.

The Company endeavours to communicate regularly, effectively and fairly with its shareholders. Timely, as well as, detailed

disclosure is made to the public in compliance with SGX-ST guidelines. The Company does not practice selective disclosure.

All price sensitive information is announced on the SGXNET on a timely basis.

Shareholders are kept informed of developments and performance of the Group through announcements published via

SGXNET and the press when necessary as well as in the annual report. Other announcements are also made on an ad-hoc

basis where applicable as soon as possible to ensure timely dissemination of the information to shareholders.


31

Innovalues

Limited

Principle 15: Companies should encourage greater shareholder participation at AGMs, and allow shareholders the

opportunity to communicate their views on various matters affecting the Company.

All shareholders of the company receive the annual report of the company and notice of AGM within the mandatory period.

The notice is also published in the local newspaper and made available on the SGXNET. Participation of shareholders is

encouraged at the company’s general meetings. Each item of special business included in the notice of meeting will be

accompanied by the relevant explanatory notes. This is to enable the shareholders to understand the nature and effect of the

proposed resolutions.

To facilitate voting by shareholders, the Company’s Articles of Association allows shareholders to appoint not more than two

proxies to attend and vote at the same general meeting. The Board of Directors (including the Chairman of the respective

Board committees), Management, as well as the external auditors will attend the Company’s AGM to address any questions

that shareholders may have.

D. DEALINGS IN SECURITIES

The Company has devised and adopted its own internal Code of Conduct on dealing in the securities of the Company. Under

the Code, dealing in the Company’s shares are prohibited during the period commencing two weeks prior to the announcement

of the Company’s quarterly results and the period commencing one month prior to the announcement of the Company’s full-

year results.

The Company has complied with the Code for the fi nancial year ended 31 December 2011.

E. INTERESTED PERSON TRANSACTIONS

The Company has adopted internal guidelines in respect of any transactions with interested persons and has set out the

procedures for review and approval of the Company’s interested person transactions. The main objective is to ensure that all

interested person transactions are conducted on arm’s length basis and on normal commercial terms.

The Board had reviewed all interested person transactions for the fi nancial year ended 31 December 2011 and was satisfi ed

that there is no such transaction conducted during the fi nancial year.

F. MATERIAL CONTRACTS

Pursuant to Rule 1207(8) of the Listing Manual, the company confi rms that there was no material contract entered into between

the company and its subsidiaries which involved the interests of any director or controlling shareholder, either still subsisting at

the end of the fi nancial year or if not then subsisting, which was entered into since the end of the previous fi nancial year.

G. AUDITORS

The Company has complied with Rules 712, 715 and 716 of the Listing Manual issued by Singapore Exchange Securities

Trading Limited in relation to its auditors.

H. ADDITIONAL DISCLOSURE

The Company has undertaken to disclose the total remuneration paid to the controlling shareholders and their associates in

its Prospectus dated 21st February 2001. Total remuneration paid to these controlling shareholders for the year under review

amounted to S$684,523.

RiskFactors

32

Annual Report

2011

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

Our operations are subject to natural disasters and other events beyond our control, such as fl oods, earthquakes and

tsunamis. Such events of nature disasters, could cause severe destruction or interruption to our operations and as a

result, adversely affect our operating results and fi nancial condition. During the year, our Thailand plant incurred loss of

revenue as well as other fl ood-related impairment and restoration charges.

To mitigate the impact of natural disasters, we are leveraging our existing production facilities in multiple countries by

reallocating orders in the country where operations are affected by the natural disaster to the plants in other countries.

This will enable us to minimise disruptions to our supply chain, enable us to meet customer demand.

2. Dependence on major customers and their contract manufacturers

We derive a signifi cant portion of our revenue from our major customers, Sensata and its manufacturer (Sen&CM)

and HP and its contract manufacturers (HP&CM). Our revenue from Sen&CM and HP&CM in FY2011 accounted for

approximately 40.5% (FY2010: 29.6%) and 26.3% (FY2010: 33.3%) respectively. The Group has managed to gradually

bring the dependence on HP down over the years and this trend is expected to continue.

We expect our revenue from other automotive customers will continue to grow, thus reducing the reliance on sales to

Sen&CM. Although we have and will continue to diversify our customer base, any signifi cant reduction in orders from

any of our key customers will have a material adverse impact on our earnings.

3. Our operations may be affected should we fail to comply with the conditions stipulated in

permits and/or licenses

We are required to obtain the relevant permits and licenses from the Malaysian, Thai and Chinese government

authorities to operate our respective subsidiaries in these countries. All these permits and licenses stipulate certain

conditions which we are required to comply with.

As such, we will also have to continuously monitor and ensure compliance with all these conditions. The non-renewal or

revocation of the relevant permits due to failure to comply with the conditions will have a material adverse impact on our

operations.

4. We are exposed to foreign currency exchange risk

Our foreign currency exchange risks arise mainly because sales are transacted predominantly in US Dollars while our

overhead expenses and some level of purchases are transacted in the local currencies of the respective countries of

operations. In addition, the Group also has borrowings denominated in US Dollars. Any fl uctuation in the exchange rate

of the United States Dollar against the Singapore Dollar, Malaysian Ringgit, Thai Baht and PRC Renminbi may have an

adverse effect on the Group’s fi nancial performance.

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

Steel products such as free cutting steel and stainless steel are used in the manufacturing of our products. We are

therefore vulnerable to the risk of rising steel prices as affected by the global supply and demand conditions.

Any signifi cant increase in the price of steel products that cannot be passed on to our customers on a timely basis will

have a material adverse effect on our fi nancial results.

RiskFactors

33

Innovalues

Limited

6. We are exposed to interest rate risk

The Company obtains additional fi nancing through bank borrowings and leasing arrangements. Surplus funds are

placed with reputable banks and/or fi nancial institutions. The Company policy is to manage its exposure to interest rate

risk using a mix of fi xed and variable rate debts.

7. Liquidity risk

The Company’s exposure to liquidity risk arises in the general funding of the Company’s business activities on a timely

basis. Liquidity risk is managed by matching the payment and receipts cycle. The Company has sufficient cash from

operations and credit lines from fi nancial institutions to fund its capital investments and working capital requirements.

8. We are subject to credit risks of our customers

From time to time, some of our customers may default on their payments. Although we regularly review our credit

exposure to our customers, including but not limited to, through the application of credit approvals, credit limits and

monitoring procedures, credit risks will nevertheless arise from unanticipated events or circumstances that have an

impact on our customers’ ability to make timely payment such as economic downturn or signifi cant fl uctuations in foreign

currency exchange rates. As a result of our customers defaulting on their payments, we would have to make allowances

for doubtful debts or incur write-offs, which may have an adverse impact on our profi tability.

In certain jurisdictions in which we do business, the laws relating to enforcement of judgements may differ from those

we are familiar with. In addition, the period of time required to realise any order of a court of competent jurisdiction in

relation to the collection of payments may be different to what is generally expected in Singapore.

9. Our business may be affected by global economic downturn or regional political, social

and economic conditions

Our manufacturing facilities are located mainly in Malaysia, Thailand and China. Any unfavourable change in the

political, social, legal, regulatory and economic conditions in these countries or globally such as changes in customs

and import tariffs, restrictions on currency conversions and remittances, devaluation of currencies, etc. may disrupt our

operations or affect our fi nancial performance.

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

As part of the supply chain of our end-customers, we often have to maintain certain level of inventory to satisfy the

demand of these end-customers and reduce our response time in relation to customer orders. This will expose us to the

risk of unanticipated decreases in demand for certain fi nished goods we manufactured for end-customers arising from,

inter alia, products upgrades, changes in the specifi cations of products and end of a product life. In the event that we

are unable to anticipate changes in the demand for our products accurately, we may be exposed to the risk of inventory

obsolescence and this will adversely affect our results of operations and fi nancial position.

RiskFactors

34

Annual Report

2011

11. Our operations will be adversely affected if our banking facilities are withdrawn or are not

renewed

Our Group relies mainly on banking facilities such as term loan, revolving credit facilities and bills payable facilities to

fi nance our operations. If all or a substantial portion of our banking facilities are withdrawn or are not renewed, the

working capital required to fi nance our operations will be adversely affected.

These banking facilities also contain certain covenants and restrictions. These covenants and restrictions may in turn

affect our Group corporate actions, including but not limited to, our ability to declare dividends. In addition, fi nance

charges for these facilities are mainly on a fl oating basis. Given that we rely on these banking facilities to fi nance our

business operations, any increase in interest rates on the facilities extended to us will have an adverse impact on our

profi tability.

12. Our operations may be adversely affected by the current fi nancial crisis

Our Group’s business activities like others in many countries in the region and elsewhere, including Singapore, are

experiencing severe economic difficulties as a consequence of the current turmoil in the world’s fi nancial markets. This

has resulted in fl uctuations in foreign currency exchange rates, volatile stock and commodity markets, uncertainty of the

availability of bank fi nance to suppliers and customers and a slowdown in growth.

The current fi nancial crisis may signifi cantly affect, and may continue to have an adverse impact on the Group’s

business, financial condition, results of operations, cash flows and prospects for the foreseeable future. The

recoverability of the Group’s assets and the ability of the Group to maintain or pay its debts as they mature are

dependent to a large extent on the efficacy of the fi scal and other measures undertaken by these countries to achieve

economic recovery. These measures are beyond the Group’s control.

34

Annual Report

2011

Directors’Report

35

Innovalues

Limited

The directors of the company are pleased to present their report together with the audited fi nancial statements of the company

and of the group for the reporting year ended 31 December 2011.

1. Directors at Date of Report

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

Goh Leng Tse

Pung Tong Seng

Ong Tiak Beng

Chow Kok Kee

Ong Sim Ho

Anthony Teo Soon Chye

2. Arrangements to Enable Directors to Acquire Benefi ts by Means of the Acquisition of

Shares and Debentures

Neither at the end of the reporting year nor at any time during the reporting year did there subsist 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 in the company or any other body corporate except for the options rights mentioned below.

3. Directors' Interests in Shares and Debentures

The directors of the company holding office at the end of the reporting year had no interests in the share capital and

options of the company and related corporations as recorded in the register of directors’ shareholdings kept by the

company under section 164 of the Companies Act, Chapter 50 except as follows:

Direct interest Deemed interest

Name of directors and

companies in which

interests are held

At

beginning

of the year

At end

of the year

At

21 January

2012

At

beginning

of the year

At end

of the year

At

21 January

2012

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

Goh Leng Tse 54,200 62,200 62,200 10,080 2,080 2,080

Ong Tiak Beng 28,127 28,127 28,127 – – –

Chow Kok Kee 560 560 560 – – –

Ong Sim Ho 60 60 60 340 340 340

Pung Tong Seng 642 642 642 1,797 1,797 1,797

By virtue of section 7 of the Companies Act, Chapter 50, Goh Leng Tse is deemed to have an interest in the company

and in all the related corporations of the company.

Directors’Report

36

Annual Report

2011

4. Contractual Benefi ts of Directors

Since the beginning of the reporting year, no director of the company has received or become entitled to receive

a benefi t which is required to be disclosed under section 201(8) of the Companies Act, Chapter 50, by reason of a

contract made by the company or a related corporation with the director or with a fi rm of which he is a member, or with

a company in which he has a substantial fi nancial interest except as disclosed in the fi nancial statements.

5. Options to Take Up Unissued Shares

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

granted except as follows:

The company has two employee share option schemes. They are the “Innovalues Group Share Option Scheme 2001”

and “Innovalues Group Share Option Scheme 2011” (known collectively as the “Scheme”). With the expiry of the

Innovalues Group Share Option Scheme 2001 on 8 February 2011, the company has adopted the Innovalues Group

Share Option Scheme 2011 on 15 August 2011. The Scheme, which forms an integral component of its compensation

plan, is designed to reward and retain eligible participants whose services are vital to its well being and success. It

provides eligible participants who have contributed to the success and development of the company with an opportunity

to participate and also increase the dedication and loyalty of these participants and motivate them to perform better.

Under the rules of the Scheme, all directors and employees of the company are eligible to participate in the Scheme.

Controlling shareholders or their associates are also eligible to participate in the Scheme subject to the approval of

independent shareholders in the form of separate resolutions for each participant. Further, independent shareholders’

approval is also required in the form of separate resolutions for each grant of options and the terms thereof, to each

participant who is a controlling shareholder or his associate.

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

company at any time.

The Remuneration Committee is charged with the administration of the Scheme in accordance with the rules of the

Scheme. The Remuneration Committee consists of 5 directors appointed by the board of directors of the company.

They are Goh Leng Tse, Chow Kok Kee, Ong Sim Ho, Ong Tiak Beng and Anthony Teo Soon Chye. The number

of options to be offered to a participant shall be determined at the discretion of the Remuneration Committee who

shall take into account criteria such as the rank, performance, seniority, potential for future development and length of

service of the participant. The Innovalues Group Share Option Scheme 2001 provides that: - (a) the total number of

shares which may be offered to any participant during the entire operation of the Scheme (including adjustments under

the rules) shall not exceed 25% of the shares in respect of which the company may grant options; (b) the aggregate

number of shares which may be offered to participants who are controlling shareholders and their associates during the

entire operation of the Scheme (including adjustments under the rules) shall not exceed 25% of the shares in respect of

which the company may grant options; and (c) the number of shares which may be offered to each participant who is a

controlling shareholder or his associate during the entire operation of the Scheme shall not exceed 10% of the shares

in respect of which the company may grant options. The Innovalues Group Share Option Scheme 2011 provides that,

the aggregate number of shares over which the Committee may offer to grant options to the controlling shareholders

and their associates under the option scheme, shall not exceed 25% of the shares available under the option scheme,

provided always that the number of shares available to each controlling shareholder or each of his associates shall not

exceed 10% of the shares available under the option scheme.

Directors’Report

37

Innovalues

Limited

5. Options to Take Up Unissued Shares (Cont’d)

The exercise price for each share in respect of which an option is exercisable shall be determined by the Remuneration

Committee at its absolute discretion and fi xed by the Committee at: - (a) where the options are offered to a grantee

prior to the date of the listing and quotation of the shares, a price equal to the price per share offered to the public at

the initial public offering of the shares, that is $0.35; (b) where the options are offered after the listing date (i) a price

(the “Market Price”) equal to the average of the last dealt prices for a share on the SGX-ST for the period of fi ve (5)

consecutive Market Days immediately prior to the relevant offer date; or (ii) a price which is set at a discount to the

Market Price, provided that the maximum discount shall not exceed 20 per cent of the Market Price.

Options must be exercised before the expiry of 6 and 5 years for the Innovalues Group Share Option Scheme 2001 and

the Innovalues Group Share Option Scheme 2011 respectively, from the date of the offer or such earlier date as may

be determined by the Remuneration Committee. There are special provisions dealing with the lapsing or permitting the

earlier exercise of options under certain circumstances including termination, bankruptcy, and death of the participant.

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

Date of grant

Balance as

at

01.01.2011

Granted/

(exercised)

Options

lapsed/

cancelled

Balance as

at

31.12.2011

Exercise

price

Exercise

period

11.06.2007 2,600,000 – – 2,600,000 $0.720 12.06.2008 to

11.06.2013

29.10.2007 3,000,000 – – 3,000,000 $0.450 30.10.2008 to

29.10.2013

01.06.2009 2,240,000 (20,000) (600,000) 1,620,000 $0.080 02.06.2010 to

01.06.2015

03.08.2010 2,180,000 – (320,000) 1,860,000 $0.166 04.08.2011 to

03.08.2016

15.08.2011 – 3,750,000 – 3,750,000 $0.100 16.08.2012 to

15.08.2016

Directors’Report

38

Annual Report

2011


The table below summarises the number of options that were outstanding, their weighted average exercise price as at

the end of the year as well as the movements during the year.

Total share options

Weighted average

exercise price

2011

No:’000

2010

No:’000

2011 2010

Balance at 1 January 10,020 8,320 $0.376 $0.427

Granted 3,750 2,270 $0.029 $0.036

Exercised (20) – – –

Expired/Cancelled (920) (570) $0.080 $0.287

Balance at 31 December 12,830 10,020 $0.315 $0.376

During the year, 920,000 (2010: 570,000) share options granted to employees that had not yet vested were cancelled.

The grant date fair value of the options as originally priced and not yet charged to the income statement has been taken

immediately to the income statement.

During the year no option was granted at a discount.

Directors’Report

39

Innovalues

Limited


The following table summarises information about directors’ share options outstanding at 31 December 2011:

Participants

Directors and controlling

shareholders of the company

Grants in

2011

No:’000

Grants from

start of

Scheme to

end of

2011

No:’000

Exercised/

lapsed from

start of

Scheme to

end of

2011

No:’000

Balance at

31.12.2011

No:’000

Goh Leng Tse – 3,000 – 3,000(a)

– 360(e) (360) –

1,500 1,500 – 1,500(g)

Sub-total 1,500 4,860 (360) 4,500

Directors of the company

Ong Tiak Beng – 300 – 300(b)

– 720(e) (720) –

– 200 – 200(c)

– 100 – 100(d)

150 150 – 150(g)

Chow Kok Kee – 300 – 300(b)

– 200 – 200(c)

– 100 – 100(d)

150 150 – 150(g)

Ong Sim Ho – 300 – 300(b)

– 200 – 200(c)

– 100 – 100(d)

150 150 – 150(g)

Anthony Teo Soon Chye – 300 – 300(b)

– 200 – 200(c)

– 100 – 100(d)

150 150 – 150(g)

Pung Tong Seng – 376(f) (376) –

– 1,000 – 1,000(b)

– 200 – 200(c)

– 300 – 300(d)

750 750 – 750(g)

Total 2,850 11,206 (1,456) 9,750

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

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

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

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

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

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

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

Directors’Report

40

Annual Report

2011


No participant has received 5% or more of the total number of the options available under the Scheme.

The following table summarises information about share options outstanding at 31 December 2011:

Exercise price

Number

outstanding

No:’000

Number

exercisable

No:’000

Remaining

life (years)

$0.450 3,000 2,625 1.83

$0.720 2,600 2,600 1.50

$0.080 1,620 800 3.50

$0.166 1,860 232 4.67

$0.100 3,750 – 4.67

12,830 6,257

During the reporting year, there were no shares of the company or any corporation in the group issued by virtue of the

exercise of an option to take up unissued shares except as disclosed above.

At the end of the reporting year, there were no unissued shares of the company or any subsidiary under option except

for those disclosed above.

6. Independent Auditors

The independent auditors, RSM Chio Lim LLP, have expressed their willingness to accept re-appointment.

7. Audit Committee

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

Chow Kok Kee – Chairman of Audit Committee and Independent Director

Goh Leng Tse – Executive Director

Ong Sim Ho – Independent Director

Anthony Teo Soon Chye – Independent Director

Directors’Report

41

Innovalues

Limited

7. Audit Committee (Cont’d)

The audit committee performs the functions specifi ed by section 201B(5) of the Companies Act. Among others, it

performed the following functions:

Reviewed with the independent external auditors their audit plan;

Reviewed with the independent external auditors their evaluation of the company’s internal accounting control,

and their report on the fi nancial statements and the assistance given by the company’s officers to them;

Reviewed with the internal auditors the scope and results of the internal audit procedures;

Reviewed the fi nancial statements of the group and the company prior to their submission to the directors of the

company for adoption; and

Reviewed the interested person transactions (as defi ned in Chapter 9 of the Listing Manual of SGX).

Other functions performed by the audit committee are described in the report on corporate governance included in the

annual report. It also includes an explanation of how independent auditor objectivity and independence is safeguarded

where the independent auditors provide non-audit services.

The audit committee has recommended to the board of directors that the independent auditors, RSM Chio Lim LLP, be

nominated for re-appointment as independent auditors at the next annual general meeting of the company.

Directors’Report

42

Annual Report

2011

8. Subsequent Developments

There are no signifi cant developments subsequent to the release of the group’s and the company’s preliminary fi nancial

statements, as announced on 29 February 2012, which would materially affect the group’s and the company’s operating

and fi nancial performance as of the date of this report.

On Behalf of The Directors

....................................................... .......................................................

Goh Leng Tse Ong Tiak Beng

Director Director

12 March 2012

42

Annual Report

2011

Statement byDirectors

43

Innovalues

Limited

In the opinion of the directors,

(a) the accompanying consolidated statement of comprehensive income, statements of fi nancial position, statements of

changes in equity, consolidated statement of cash fl ows, and 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 2011 and of the results and cash fl ows

of the group and changes in equity of the company and of the group for the reporting 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.

The board of directors approved and authorised these fi nancial statements for issue on 12 March 2012.

On Behalf of The Directors

....................................................... .......................................................

Goh Leng Tse Ong Tiak Beng

Director Director

12 March 2012

Independent Auditors’Reportto the Members of INNOVALUES LIMITED

(Registration No: 199702822E)

44

Annual Report

2011

Report on the Financial Statements

We have audited the accompanying fi nancial statements of Innovalues Limited (the company) and its subsidiaries (the

group), which comprise the statements of fi nancial position of the group and the company as at 31 December 2011, and the

consolidated statement of comprehensive income, statement of changes in equity and statement of cash fl ows of the group,

and statement of changes in equity of the company for the reporting year then ended, and a summary of signifi cant accounting

policies and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation of the fi nancial statements that give a true and fair view in accordance with

the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards, and for

devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets

are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they

are recorded as necessary to permit the preparation of true and fair statement of comprehensive income and statements of

fi nancial position and to maintain accountability of assets.

Auditor’s 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 about 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 auditor’s 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 auditor

considers internal control relevant to the entity’s preparation of fi nancial statements that give a true and fair view in order to

design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used

and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the

fi nancial statements.

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

Independent Auditors’Report

to the Members of INNOVALUES LIMITED

(Registration No: 199702822E)

45

Innovalues

Limited

Opinion

In our opinion, the consolidated fi nancial statements of the group and the statement of fi nancial position and statement of

changes in equity of the company are properly drawn up in accordance with the provisions of the Act and Singapore Financial

Reporting Standards so as to give a true and fair view of the state of affairs of the group and of the company as at 31

December 2011 and the results, changes in equity and cash fl ows of the group and the changes in equity of the company for

the reporting year ended on that date.

Report on Other Legal and Regulatory Requirements

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

accordance with the provisions of the Act.

RSM Chio Lim LLP

Public Accountants and

Certifi ed Public Accountants

Singapore

12 March 2012

Partner in charge of audit: Peter Jacob

Effective from year ended 31 December 2007

The accompanying notes form an integral part of these fi nancial statements.

Consolidated Statement ofComprehensive IncomeYear Ended 31 December 2011

46

Annual Report

2011

Notes

Group

2011

$’000

2010

$’000

Revenue 5 87,746 100,458

Cost of Sales (76,537) (86,315)

Gross Profi t 11,209 14,143

Other Items of Income


Other Credits 6 1,495 1,376

Other Items of Expense

Marketing and Distribution Costs (2,461) (2,865)

Administrative Expenses 8A (9,189) (9,213)

Finance Costs 7 (1,145) (1,453)

Other Charges 6 (217) (292)

(Loss)/Profi t Before the Under Mentioned (285) 1,741

Other Charges - Expenses Due to Floods in Thailand 6 (13,586) –

(Loss)/Profi t Before Tax from Continuing Operations (13,871) 1,741

Income Tax Expense 9 (351) (424)

(Loss)/Profi t Net of Tax (14,222) 1,317

Other Comprehensive Income:

Exchange Differences on Translating Foreign Operations, Net of Tax 240 (605)

Other Comprehensive Income/(Loss) for the Year, Net of Tax 240 (605)

Total Comprehensive (Loss)/Income (13,982) 712

(Loss)/Earnings Per Share

(Loss)/Earnings per Share Currency Unit Cents Cents

Basic 11 (4.47) 0.41

Diluted 11 (4.47) 0.41

46

Annual Report

2011


Statements ofFinancial Position

As at 31 December 2011

47

Innovalues

Limited

Group Company

Notes 2011 2010 2011 2010

$’000 $’000 $’000 $’000

ASSETS

Non-Current Assets

Properties, Plant and Equipment 12 33,805 51,670 148 213

Investments in Subsidiaries 13 – – 31,385 31,385

Total Non-Current Assets 33,805 51,670 31,533 31,598

Current Assets

Inventories 14 14,300 17,969 163 321

Trade and Other Receivables 15 16,275 17,026 15,632 15,946

Other Assets 16 3,210 2,966 63 61

Cash and Cash Equivalents 17 10,688 12,054 4,197 3,783

Total Current Assets 44,473 50,015 20,055 20,111

Total Assets 78,278 101,685 51,588 51,709

EQUITY AND LIABILITIES

Equity

Share Capital 18 11,358 11,357 11,358 11,357

Retained Earnings 27,052 43,311 4,356 1,432

Other Reserves 20 2,146 1,606 1,687 1,515

Total Equity, Attributable to Owners of

the Parent 40,556 56,274 17,401 14,304

Non-Current Liabilities

Deferred Tax Liabilities 9 117 69 – –

Other Financial Liabilities 21 4,050 7,517 3,508 6,311

Finance Leases 22 160 259 128 232

Total Non-Current Liabilities 4,327 7,845 3,636 6,543

Current Liabilities

Trade and Other Payables 23 11,412 11,502 15,034 12,054

Other Financial Liabilities 21 21,853 25,914 15,400 18,667

Finance Leases 22 130 150 117 141

Total Current Liabilities 33,395 37,566 30,551 30,862

Total Liabilities 37,722 45,411 34,187 37,405

Total Equity and Liabilities 78,278 101,685 51,588 51,709


Statements ofChanges in EquityYear Ended 31 December 2011

48

Annual Report

2011

Group

Total

Equity

$’000

Attributable

to Parent

Sub-total

$’000

Share

Capital

$’000

Capital

Reserve

$’000

Share

Option

Reserve

$’000

Translation

Reserve

$’000

Statutory

Reserve

$’000

Retained

Earnings

$’000

Current Year:

Opening Balance at 1 January 2011 56,274 56,274 11,357 1,212 1,515 (2,403) 1,282 43,311

Movements in Equity:

Share-Based Payments (Note 19C) 172 172 – – 172 – – –

Total Comprehensive (Loss)/Income

for the Year (13,982) (13,982) – – – 240 – (14,222)

Equity Shares Issued 1 1 1 – – – – –

Dividends Paid (Note 28) (1,909) (1,909) – – – – – (1,909)

Statutory Reserve (Note 20) – – – – – – 128 (128)

Closing Balance at 31 December 2011 40,556 40,556 11,358 1,212 1,687 (2,163) 1,410 27,052

Previous Year:

Opening Balance at 1 January 2010 55,391 55,391 11,357 1,212 1,344 (1,798) 1,225 42,051


Share-Based Payments (Note 19C) 171 171 – – 171 – – –

Total Comprehensive Income/(Loss)

for the Year 712 712 – – – (605) – 1,317

Statutory Reserve (Note 20) – – – – – – 57 (57)

Closing Balance at 31 December 2010 56,274 56,274 11,357 1,212 1,515 (2,403) 1,282 43,311


Statements ofChanges in Equity

Year Ended 31 December 2011

49

Innovalues

Limited

Company

Total

Equity

$’000

Share

Capital

$’000

Share

Option

Reserve

$’000

Retained

earnings

$’000

Current Year:

Opening Balance at 1 January 2011 14,304 11,357 1,515 1,432


Share-Based Payments (Note 19C) 172 – 172 –

Total Comprehensive Income for the Year 4,833 – – 4,833

Equity Shares Issued 1 1 – –

Dividends Paid (Note 28) (1,909) – – (1,909)

Closing Balance at 31 December 2011 17,401 11,358 1,687 4,356

Previous Year:

Opening Balance at 1 January 2010 16,485 11,357 1,344 3,784


Share-Based Payments (Note 19C) 171 – 171 –

Total Comprehensive Loss for the Year (2,352) – – (2,352)

Closing Balance at 31 December 2010 14,304 11,357 1,515 1,432


Consolidated Statement ofCash FlowsYear Ended 31 December 2011

50

Annual Report

2011

Group

2011

$’000

2010

$’000

Cash Flows From Operating Activities

(Loss)/Profi t Before Tax (13,871) 1,741

Interest Income (23) (45)

Interest Expense 1,145 1,453

Depreciation of Properties, Plant and Equipment 9,378 10,133

Gain on Disposal of Plant and Equipment (7) (18)

Plant and Equipment Written Off 68 13

Share-Based Payments 172 171

Impairment Loss on Plant and Equipment 8,320 –

Net Effect of Exchange Rate Changes in Consolidating Subsidiaries 884 (1,562)

Operating Cash Flows before Changes in Working Capital 6,066 11,886

Inventories 3,669 (3,435)

Trade and Other Receivables 942 7,740

Other Assets (244) (1,424)

Trade and Other Payables 391 (9,226)

Net Cash Flows From Operations Before Interest and Tax 10,824 5,541

Income Tax Paid (224) (227)

Net Cash Flows From Operating Activities 10,600 5,314

Cash Flows From Investing Activities

Disposal of Plant and Equipment 179 88

Purchase of Plant and Equipment (Note 17B) (1,167) (2,396)

Interest Received 23 45

Net Cash Flows Used in Investing Activities (965) (2,263)

Cash Flows From Financing Activities

Decrease In Cash Restricted in Use 5 158

Decrease in Borrowings (7,612) (7,983)

Finance Leases Repayments (336) (128)

Interest Paid (1,145) (1,453)

Dividends Paid (1,909) –

Equity Shares Issued 1 –

Net Cash Flows Used in Financing Activities (10,996) (9,406)

Net Decrease in Cash and Cash Equivalents (1,361) (6,355)

Cash and Cash Equivalents, Statement of Cash Flow, Beginning Balance 11,878 18,233

Cash and Cash Equivalents, Statement of Cash Flow, Ending Balance (Note 17A) 10,517 11,878

50

Annual Report

2011

Notes to the FinancialStatements

31 December 2011

51

Innovalues

Limited

1. General

The company is incorporated in Singapore with limited liability. The fi nancial statements are presented in Singapore

dollars and they cover the parent and the group’s subsidiaries.

The board of directors approved and authorised these fi nancial statements for issue on 12 March 2012.

The company’s principal activities are those of manufacturing, assembly, sub-assembly of precision turned machining

parts, components and electronic and mechanical devices.

The subsidiaries’ principal activities are disclosed in Note 13 to the fi nancial statements.

The company is listed on the Main Board of the Singapore Exchange Securities Trading Limited.

The registered office address of the company is 9 Kallang Place #07-08/09 Singapore 339154. The company is situated

in Singapore.

2. Summary of Signifi cant Accounting Policies

Accounting Convention

The fi nancial statements have been prepared in accordance with the Singapore Financial Reporting Standards (“FRS”)

and the related Interpretations to FRS (“INT FRS”) as issued by the Singapore Accounting Standards Council and the

Companies Act, Chapter 50. The fi nancial statements are prepared on a going concern basis under the historical cost

convention except where an FRS requires an alternative treatment (such as fair values) as disclosed where appropriate

in these fi nancial statements.

Basis of Presentation

The consolidation accounting method is used for the consolidated fi nancial statements that include the fi nancial

statements made up to the end of the reporting year of the company and all of its directly and indirectly controlled

subsidiaries. Consolidated fi nancial statements are the fi nancial statements of the group presented as those of a

single economic entity. The consolidated fi nancial statements are prepared using uniform accounting policies for like

transactions and other events in similar circumstances. All signifi cant intragroup balances and transactions, including

profi t or loss items and dividends are eliminated in full on consolidation. The results of the investees acquired or

disposed of during the reporting year are accounted for from the respective dates of acquisition or up to the dates of

disposal which is the date on which effective control is obtained of the acquired business until that control ceases.

Changes in the group’s ownership interest in a subsidiary that do not result in the loss of control are accounted for

within equity. When the group loses control of a subsidiary it derecognises the assets and liabilities and related

equity components of the former subsidiary. Any gain or loss is recognised in profi t or loss. Any investment retained

in the former subsidiary is measured at its fair value at the date when control is lost and is subsequently accounted as

available-for-sale fi nancial assets in accordance with FRS 39.

The company's fi nancial statements have been prepared on the same basis, and as permitted by the Companies Act,

Chapter 50, no statement of comprehensive income is presented for the company.

Notes to the FinancialStatements31 December 2011

52

Annual Report

2011

2. Summary of Signifi cant Accounting Policies (Cont’d)

Basis of Preparation of Financial Statements

The preparation of fi nancial statements in conformity with generally accepted accounting principles requires the

management to make estimates and assumptions that affect the reported amounts of assets and liabilities and

disclosure of contingent assets and liabilities at the date of the fi nancial statements and the reported amounts of

revenues and expenses during the reporting year. Actual results could differ from those estimates. The estimates

and assumptions are reviewed on an ongoing basis. Apart from those involving estimations, management has made

judgements in the process of applying the entity’s accounting policies. The areas requiring management’s most

difficult, subjective or complex judgements, or areas where assumptions and estimates are signifi cant to the fi nancial

statements, are disclosed at the end of this footnote, where applicable.

Revenue Recognition

The revenue amount is the fair value of the consideration received or receivable from the gross infl ow of economic

benefi ts during the reporting year arising from the course of the activities of the entity and it is shown net of sales

tax, estimated returns, discounts and volume rebates. Revenue from the sale of goods is recognised when signifi cant

risks and rewards of ownership are transferred to the buyer, there is neither continuing managerial involvement to the

degree usually associated with ownership nor effective control over the goods sold, and the amount of revenue and the

costs incurred or to be incurred in respect of the transaction can be measured reliably. Interest is recognised using the

effective interest method.

Employee Benefi ts

Contributions to defi ned contribution retirement benefi t plans are recorded as an expense as they fall due. The entity's

legal or constructive obligation is limited to the amount that it agrees to contribute to an independently administered fund

which is the Central Provident Fund in Singapore (a government managed retirement benefi t plan). For employee leave

entitlement the expected cost of short-term employee benefi ts in the form of compensated absences is recognised in

the case of accumulating compensated absences, when the employees render service that increases their entitlement

to future compensated absences; and in the case of non-accumulating compensated absences, when the absences

occur. A liability for bonuses is recognised where the entity is contractually obliged or where there is constructive

obligation based on past practice.

Share-Based Compensation

For the equity-settled share-based compensation transactions, the fair value of the employee services received in

exchange for the grant of the options is recognised as an expense. The total amount to be expensed on a straight-line

basis over the vesting period is determined by reference to the fair value of the options granted excluding the effect

of non-market conditions such as profi tability and sales growth targets. Non-market vesting conditions are included in

assumptions about the number of options that are expected to become exercisable. The fair value is measured using

the Black-Scholes Pricing Model. The expected lives used in the model are adjusted, based on management’s best

estimates, for the effects of non-transferability, exercise restrictions and behavioural considerations. At each end of

the reporting year, a revision is made of the number of options that are expected to become exercisable. It recognises

the impact of the revision of original estimates, if any, in the profi t or loss, with a corresponding adjustment to equity.

The proceeds received net of any directly attributable transaction costs are credited to share capital when the options

are exercised. Cancellations of grants of equity instruments during the vesting period (other than a grant cancelled by

forfeiture when the vesting conditions are not satisfi ed) are accounted for as an acceleration of vesting, therefore the

unrecognised remaining amount is recognised immediately in the profi t or loss.


31 December 2011

53

Innovalues

Limited


Income Tax

The income taxes are accounted using the asset and liability method that requires the recognition of taxes payable or

refundable for the current year and deferred tax liabilities and assets for the future tax consequence of events that have

been recognised in the fi nancial statements or tax returns. The measurements of current and deferred tax liabilities and

assets are based on provisions of the enacted or substantially enacted tax laws; the effects of future changes in tax

laws or rates are not anticipated. Income tax expense represents the sum of the tax currently payable and deferred tax.

Current and deferred income taxes are recognised as income or as an expense in profi t or loss unless the tax relates to

items that are recognised in the same or a different period outside profi t or loss. For such items recognised outside profi t

or loss the current tax and deferred tax are recognised (a) in other comprehensive income if the tax is related to an item

recognised in other comprehensive income and (b) directly in equity if the tax is related to an item recognised directly

in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same income tax

authority. The carrying amount of deferred tax assets is reviewed at each end of the reporting year and is reduced, if

necessary, by the amount of any tax benefi ts that, based on available evidence, are not expected to be realised. A

deferred tax amount is recognised for all temporary differences, unless the deferred tax amount arises from the initial

recognition of an asset or liability in a transaction which (i) is not a business combination; and (ii) at the time of the

transaction, affects neither accounting profi t nor taxable profi t (tax loss). A deferred tax liability or asset is recognised

for all taxable temporary differences associated with investments in subsidiaries except where the reporting entity is

able to control the timing of the reversal of the taxable temporary difference and it is probable that the taxable temporary

difference will not reverse in the foreseeable future or for deductible temporary differences, they will not reverse in the

foreseeable future and they cannot be utilised against taxable profi ts.

Foreign Currency Transactions

The functional currency is the Singapore dollar as it refl ects the primary economic environment in which the entity

operates. Transactions in foreign currencies are recorded in the functional currency at the rates ruling at the dates of the

transactions. At each end of the reporting year, recorded monetary balances and balances measured at fair value that

are denominated in non-functional currencies are reported at the rates ruling at the end of the reporting year and fair

value dates respectively. All realised and unrealised exchange adjustment gains and losses are dealt with in profi t or

loss except when recognised in other comprehensive income and if applicable deferred in equity such as for qualifying

cash fl ow hedges. The presentation is in the functional currency.

Translation of Financial Statements Foreign Entities

Each entity in the group determines the appropriate functional currency as it reflects the primary economic

environment in which the entity operates. In translating the fi nancial statements of such an entity for incorporation

in the consolidated fi nancial statements in the presentation currency the assets and liabilities denominated in other

currencies are translated at end of the reporting year rates of exchange and the profi t and loss items are translated at

average rates of exchange for the reporting year. The resulting translation adjustments (if any) are recognised in other

comprehensive income and accumulated in a separate component of equity until the disposal of that relevant entity.


54

Annual Report

2011


Borrowing Costs

All borrowing costs that are interest and other costs incurred in connection with the borrowing of funds that are directly

attributable to the acquisition, construction or production of a qualifying asset that necessarily take a substantial period

of time to get ready for their intended use or sale are capitalised as part of the cost of that asset until substantially all

the activities necessary to prepare the qualifying asset for its intended use or sale are complete. Other borrowing costs

are recognised as an expense in the period in which they are incurred. The interest expense is calculated using the

effective interest rate method.

Properties, Plant and Equipment

Depreciation is provided on a straight-line basis to allocate the gross carrying amounts of the assets less their residual

values over their estimated useful lives of each part of an item of these assets. The annual rates of depreciation are as

follows:

Freehold land – Not depreciated

Construction in progress – Not depreciated

Leasehold land and buildings – Over the remaining lease period of 20 to 21 years

Plant and equipment – 10% – 331/3 %

An asset is depreciated when it is available for use until it is derecognised even if during that period the item is idle.

Fully depreciated assets still in use are retained in the fi nancial statements.

Properties, plant and equipment are carried at cost on initial recognition and after initial recognition at cost less any

accumulated depreciation and any accumulated impairment losses. The gain or loss arising from the derecognition of

an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and

the carrying amount of the item and is recognised in profi t or loss. The residual value and the useful life of an asset is

reviewed at least at each end of the reporting year and, if expectations differ signifi cantly from previous estimates, the

changes are accounted for as a change in an accounting estimate, and the depreciation charge for the current and

future periods are adjusted.

Cost also includes acquisition cost, borrowing cost capitalised and any cost directly attributable to bringing the asset

or component to the location and condition necessary for it to be capable of operating in the manner intended by

management. Subsequent costs are recognised as an asset only when it is probable that future economic benefi ts

associated with the item will fl ow to the entity and the cost of the item can be measured reliably. All other repairs and

maintenance are charged to profi t or loss when they are incurred.


31 December 2011

55

Innovalues

Limited


Leases

Whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date,

that is, whether (a) fulfi lment of the arrangement is dependent on the use of a specifi c asset or assets (the asset);

and (b) the arrangement conveys a right to use the asset. Leases are classifi ed as fi nance leases if substantially all

the risks and rewards of ownership are transferred to the lessee. All other leases are classifi ed as operating leases. At

the commencement of the lease term, a fi nance lease is recognised as an asset and as a liability in the statement of

fi nancial position at amounts equal to the fair value of the leased asset or, if lower, the present value of the minimum

lease payments, each determined at the inception of the lease. The discount rate used in calculating the present

value of the minimum lease payments is the interest rate implicit in the lease, if this is practicable to determine, the

lessee’s incremental borrowing rate is used. Any initial direct costs of the lessee are added to the amount recognised

as an asset. The excess of the lease payments over the recorded lease liability are treated as fi nance charges which

are allocated to each reporting year during the lease term so as to produce a constant periodic rate of interest on

the remaining balance of the liability. Contingent rents are charged as expenses in the reporting years in which they

are incurred. The assets are depreciated as owned depreciable assets. Leases where the lessor effectively retains

substantially all the risks and benefi ts of ownership of the leased assets are classifi ed as operating leases. For

operating leases, lease payments are recognised as an expense in profi t or loss on a straight-line basis over the term of

the relevant lease unless another systematic basis is representative of the time pattern of the user's benefi t, even if the

payments are not on that basis. Lease incentives received are recognised in profi t or loss as an integral part of the total

lease expense. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying

amount of the leased asset and recognised on a straight-line basis over the lease term.

Segment Reporting

The group discloses fi nancial and descriptive information about its reportable segments. Reportable segments are

operating segments or aggregations of operating segments that meet specifi ed criteria. Operating segments are

components about which separate fi nancial information is available that is evaluated regularly by the chief operating

decision maker in deciding how to allocate resources and in assessing performance. Generally, fi nancial information

is reported on the same basis as is used internally for evaluating operating segment performance and deciding how to

allocate resources to operating segments.

Subsidiaries

A subsidiary is an entity including unincorporated and special purpose entity that is controlled by the group. Control

is the power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities

accompanying a shareholding of more than one half of the voting rights or the ability to appoint or remove the

majority of the members of the board of directors or to cast the majority of votes at meetings of the board of directors.

The existence and effect of potential voting rights that are currently exercisable or convertible are considered when

assessing whether the group controls another entity.

In the company’s own separate fi nancial statements, an investment in a subsidiary is stated at cost less any allowance

for impairment in value adjusted for any changes in contingent consideration. Impairment loss recognised in profi t

or loss for a subsidiary is reversed only if there has been a change in the estimates used to determine the asset’s

recoverable amount since the last impairment loss was recognised. The net book value of a subsidiary is not necessarily

indicative of the amounts that would be realised in a current market.


56

Annual Report

2011


Business Combinations

Business combinations are accounted for by applying the acquisition method. There were none during the reporting

year.

Non-controlling Interests

The non-controlling interests in the net assets and net results of a consolidated subsidiary are shown separately

in the appropriate components of the consolidated fi nancial statements. For each business combination, any non-

controlling interest in the acquiree (subsidiary) is initially measured either at fair value or at the non-controlling

interest’s proportionate share of the acquiree’s identifi able net assets. Where the non-controlling interest is measured

at fair value, the valuation techniques and key model inputs used are disclosed in the relevant note. Profi t or loss and

each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling

interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even

if this results in the non-controlling interests having a defi cit balance.

Inventories

Inventories are measured at the lower of cost (fi rst in fi rst out method and standard cost which approximates actual

cost) and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business

less the estimated costs of completion and the estimated costs necessary to make the sale. A write down on cost is

made where the cost is not recoverable or if the selling prices have declined. Cost includes all costs of purchase, costs

of conversion and other costs incurred in bringing the inventories to their present location and condition. In the case

of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal

operating capacity.

Impairment of Non-Financial Assets

Irrespective of whether there is any indication of impairment, an annual impairment test is performed at the same time

every year on an intangible asset with an indefi nite useful life or an intangible asset not yet available for use. The

carrying amount of other non-fi nancial assets is reviewed at each end of the reporting year for indications of impairment

and where an asset is impaired, it is written down through profi t or loss to its estimated recoverable amount. The

impairment loss is the excess of the carrying amount over the recoverable amount and is recognised in profi t or loss

unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation

decrease. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell

and its value in use. 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. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are

separately identifi able cash fl ows (cash-generating units). At each end of the reporting year non-fi nancial assets other

than goodwill with impairment loss recognised in prior periods are assessed for possible reversal of the impairment. An

impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount

that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.


31 December 2011

57

Innovalues

Limited


Financial Assets

Initial recognition and measurement and derecognition of fi nancial assets:

A fi nancial asset is recognised on the statement of fi nancial position when, and only when, the entity becomes a

party to the contractual provisions of the instrument. The initial recognition of fi nancial assets is at fair value normally

represented by the transaction price. The transaction price for fi nancial asset not classifi ed at fair value through profi t

or loss includes the transaction costs that are directly attributable to the acquisition or issue of the fi nancial asset.

Transaction costs incurred on the acquisition or issue of fi nancial assets classifi ed at fair value through profi t or loss are

expensed immediately. The transactions are recorded at the trade date.

Irrespective of the legal form of the transactions performed, fi nancial assets are derecognised when they pass the

“substance over form” based on the derecognition test prescribed by FRS 39 relating to the transfer of risks and rewards

of ownership and the transfer of control.

Subsequent measurement:

Subsequent measurement based on the classifi cation of the fi nancial assets in one of the following four categories

under FRS 39 is as follows:

1. Financial assets at fair value through profi t or loss: As at end of the reporting year date there were no fi nancial

assets classifi ed in this category.

2. Loans and receivables: Loans and receivables are non-derivative fi nancial assets with fi xed or determinable

payments that are not quoted in an active market. Assets that are for sale immediately or in the near term are

not classifi ed in this category. These assets are carried at amortised costs using the effective interest method

(except that short-duration receivables with no stated interest rate are normally measured at original invoice

amount unless the effect of imputing interest would be signifi cant) minus any reduction (directly or through the

use of an allowance account) for impairment or uncollectibility. Impairment charges are provided only when there

is objective evidence that an impairment loss has been incurred as a result of one or more events that occurred

after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the

estimated future cash fl ows of the fi nancial asset or group of fi nancial assets that can be reliably estimated. The

methodology ensures that an impairment loss is not recognised on the initial recognition of an asset. Losses

expected as a result of future events, no matter how likely, are not recognised. For impairment, the carrying

amount of the asset is reduced through use of an allowance account. The amount of the loss is recognised in

profi t or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after

the impairment loss was recognised. Typically the trade and other receivables are classifi ed in this category.

3. Held-to-maturity fi nancial assets: As at end of the reporting year date there were no fi nancial assets classifi ed in

this category.

4. Available-for-sale fi nancial assets: As at end of the reporting year date there were no fi nancial assets classifi ed in

this category.


58

Annual Report

2011


Cash and Cash Equivalents

Cash and cash equivalents include bank and cash balances, on demand deposits and any highly liquid debt instruments

purchased with an original maturity of three months or less. For the statement of cash fl ows the item includes cash and

cash equivalents less cash subject to restriction and bank overdrafts payable on demand that form an integral part of

cash management.

Financial Liabilities

Initial recognition and measurement:

A fi nancial liability is recognised on the statement of fi nancial position when, and only when, the entity becomes a

party to the contractual provisions of the instrument and it is derecognised when the obligation specifi ed in the contract

is discharged or cancelled or expires. The initial recognition of fi nancial liability is at fair value normally represented

by the transaction price. The transaction price for fi nancial liability not classifi ed at fair value through profi t or loss

includes the transaction costs that are directly attributable to the acquisition or issue of the fi nancial liability. Transaction

costs incurred on the acquisition or issue of fi nancial liability classifi ed at fair value through profi t or loss are expensed

immediately. The transactions are recorded at the trade date. Financial liabilities including bank and other borrowings

are classifi ed as current liabilities unless there is an unconditional right to defer settlement of the liability for at least 12

months after the end of the reporting year.

Subsequent measurement:

Subsequent measurement based on the classifi cation of the fi nancial liabilities in one of the following two categories

under FRS 39 is as follows:

1. Liabilities at fair value through profi t or loss: As at end of the reporting year date there were no fi nancial liabilities

classifi ed in this category.

2. Other fi nancial liabilities: All liabilities, which have not been classifi ed as in the previous category fall into this

residual category. These liabilities are carried at amortised cost using the effective interest method. Trade and

other payables and borrowings are usually classifi ed in this category. Items classifi ed within current trade and

other payables are not usually re-measured, as the obligation is usually known with a high degree of certainty

and settlement is short-term.

Financial Guarantees

A fi nancial guarantee contract requires that the issuer makes specifi ed payments to reimburse the holder for a loss

when a specifi ed debtor fails to make payment when due. Financial guarantee contracts are initially recognised at fair

value and are subsequently measured at the greater of (a) the amount determined in accordance with FRS 37 and (b)

the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with FRS 18.


31 December 2011

59

Innovalues

Limited


Fair Value of Financial Instruments

The carrying values of current fi nancial instruments approximate their fair values due to the short-term maturity of

these instruments. Disclosures of fair value are not made when the carrying amount of current fi nancial instruments

is a reasonable approximation of fair value. The fair values of non-current fi nancial instruments may not be disclosed

separately unless there are signifi cant differences at the end of the reporting year and in the event the fair values

are disclosed in the relevant notes. The maximum exposure to credit risk is the fair value of the fi nancial instruments

at the end of the reporting year. The fair value of a fi nancial instrument is derived from an active market or by using

an acceptable valuation technique. The appropriate quoted market price for an asset held or liability to be issued is

usually the current bid price without any deduction for transaction costs that may be incurred on sale or other disposal

and, for an asset to be acquired or for liability held, the asking price. If there is no market, or the markets available

are not active, the fair value is established by using an acceptable valuation technique. The fair value measurements

are classifi ed using a fair value hierarchy of 3 levels that refl ects the signifi cance of the inputs used in making the

measurements, that is, Level 1 for the use of quoted prices (unadjusted) in active markets for identical assets or

liabilities; Level 2 for the use of inputs other than quoted prices included within Level 1 that are observable for the asset

or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and Level 3 for the use of inputs for the

asset or liability that are not based on observable market data (unobservable inputs). The level is determined on the

basis of the lowest level input that is signifi cant to the fair value measurement in its entirety. Where observable inputs

that require signifi cant adjustment based on unobservable inputs, that measurement is a Level 3 measurement.

Equity

Equity instruments are contracts that give a residual interest in the net assets of the company. Ordinary shares are

classifi ed as equity. Equity instruments are recognised at the amount of proceeds received net of incremental costs

directly attributable to the transaction. Dividends on equity are recognised as liabilities when they are declared. Interim

dividends are recognised when declared by the directors.

Provisions

A liability or provision is recognised when there is a present obligation (legal or constructive) as a result of a past event,

it is probable that an 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 made using best estimates of the amount

required in settlement and where the effect of the time value of money is material, the amount recognised is the present

value of the expenditures expected to be required to settle the obligation using a pre-tax rate that refl ects current market

assessments of the time value of money and the risks specifi c to the obligation. The increase in the provision due to

passage of time is recognised as interest expense. Changes in estimates are refl ected in profi t or loss in the reporting

year they occur.


60

Annual Report

2011


Critical Judgements, Assumptions and Estimation Uncertainties

The critical judgements made in the process of applying the accounting policies that have the most signifi cant effect

on the amounts recognised in the fi nancial statements and the key assumptions concerning the future, and other key

sources of estimation uncertainty at the end of the reporting year, that have a signifi cant risk of causing a material

adjustment to the carrying amounts of assets and liabilities within the next reporting year are discussed below. These

estimates and assumptions are periodically monitored to ensure they incorporate all relevant information available at the

date when fi nancial statements are prepared. However, this does not prevent actual fi gures differing from estimates.

Allowance for doubtful trade accounts:

An allowance is made for doubtful trade accounts for estimated losses resulting from the subsequent inability of the

customers to make required payments. If the fi nancial conditions of the customers were to deteriorate, resulting in an

impairment of their ability to make payments, additional allowances may be required in future periods. Management

generally analyses trade receivables and analyses historical bad debts, customer concentrations, customer

creditworthiness, and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful

trade receivables. To the extent that it is feasible impairment and uncollectibility is determined individually for each

item. In cases where that process is not feasible, a collective evaluation of impairment is performed. At the end of

the reporting year, the trade receivables carrying amount approximates the fair value and the carrying amounts might

change materially within the next reporting year but these changes would not arise from assumptions or other sources

of estimation uncertainty at the end of the reporting year.

Net realisable value of inventories:

A review is made periodically on inventory for excess inventory and declines in net realisable value below cost and

an allowance is recorded against the inventory balance for any such declines. The review requires management to

consider the future demand for the products. In any case the realisable value represents the best estimate of the

recoverable amount and is based on the acceptable evidence available at the end of the reporting year and inherently

involves estimates regarding the future expected realisable value. The usual considerations for determining the amount

of allowance or write-down include ageing analysis, technical assessment and subsequent events. In general, such an

evaluation process requires signifi cant judgement and materially affects the carrying amount of inventories at the end of

the reporting year. Possible changes in these estimates could result in revisions to the stated value of the inventories.

The carrying amount of inventories at the end of the reporting year was $14,300,000.

Income tax expense:

The entity recognises tax liabilities and assets tax based on an estimation of the likely taxes due, which requires

signifi cant judgement as to the ultimate tax determination of certain items. Where the actual amount arising from these

issues differs from these estimates, such differences will have an impact on income tax and deferred tax amounts in the

period when such determination is made.


31 December 2011

61

Innovalues

Limited


Critical Judgements, Assumptions and Estimation Uncertainties (Cont’d)

Deferred tax asset estimation:

Management judgement is required in determining the amount of current and deferred tax recognised as income or

expense and the extent to which deferred tax assets can be recognised. A deferred tax asset is recognised if it is more

likely than not that sufficient taxable income will be available in the future against which the temporary differences and

unused tax losses can be utilised. Management also considers future taxable income and tax planning strategies in

assessing whether deferred tax assets should be recognised in order to refl ect changed circumstances as well as

tax regulations. As a result, due to their inherent nature, it is likely that deferred tax calculation relates to complex fact

patterns for which assessments of likelihood are judgemental and not susceptible to precise determination.

Determination of functional currency:

The group measures foreign currency transactions in the respective functional currencies of the company and its

subsidiaries. In determining the functional currencies of the entities in the group, judgement is required to determine the

currency that mainly infl uences sales prices for goods and services and of the country whose competitive forces and

regulations mainly determine the sales prices of its goods and services. The functional currencies of the entities in the

group are determined based on management’s assessment of the economic environment in which the entities operate

and the entities’ process of determining sales prices.

Useful lives of plant and equipment:

The estimates for the useful lives and related depreciation charges for plant and equipment is based on commercial and

other factors which could change signifi cantly as a result of innovations and competitor actions in response to market

conditions. The depreciation charge is increased where useful lives are less than previously estimated lives, or the

carrying amounts written off or written down for technically obsolete items or assets that have been abandoned or sold.

It is impracticable to disclose the extent of the possible effects. It is reasonably possible, based on existing knowledge,

that outcomes within the next reporting year that are different from assumptions could require a material adjustment to

the carrying amount of the balances affected. The carrying amount of the specifi c asset (or class of assets) at the end

of the reporting year affected by the assumption is $23,349,000.

Estimated impairment of subsidiary or associate:

Where a subsidiary or associate is in net equity defi cit and has suffered losses a test is made whether the investment in

the investee has suffered any impairment, in accordance with the stated accounting policy. This determination requires

signifi cant judgement. An estimate is made of the future profi tability of the investee, and the fi nancial health of and near-

term business outlook for the investee, including factors such as industry and sector performance, and operational and

fi nancing cash fl ow. The amount of the relevant investment is $9,779,000 at the end of the reporting year.


62

Annual Report

2011

3. Related Party Relationships and Transactions

FRS 24 defi nes a related party as a person or entity that is related to the reporting entity and it includes (a) A person

or a close member of that person’s family if that person: (i) has control or joint control over the reporting entity; (ii) has

signifi cant infl uence over the reporting entity; or (iii) is a member of the key management personnel of the reporting

entity or of a parent of the reporting entity. (b) An entity is related to the reporting entity if any of the following conditions

apply: (i) The entity and the reporting entity are members of the same group. (ii) One entity is an associate or joint

venture of the other entity. (iii) Both entities are joint ventures of the same third party. (iv) One entity is a joint venture

of a third entity and the other entity is an associate of the third entity. (v) The entity is a post-employment benefi t plan

for the benefi t of employees of either the reporting entity or an entity related to the reporting entity. (vi) The entity is

controlled or jointly controlled by a person identifi ed in (a). (vii) A person identifi ed in (a)(i) has signifi cant infl uence over

the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

3.1 Related companies:

Related companies in these fi nancial statements include the members of the company’s group of companies.

There are transactions and arrangements between the reporting entity and members of the group and the effect

of these on the basis determined between the parties are refl ected in these fi nancial statements. The current

intercompany balances are unsecured without fi xed repayment terms and interest unless stated otherwise.

Intragroup transactions and balances that have been eliminated in these consolidated fi nancial statements are

not disclosed as related party transactions and balances.

3.2 Key management compensation:

2011

$’000

2010

$’000

Salaries and other short-term employee benefi ts 1,486 1,475

Directors’ fees 225 225

Share-based payments 172 171

The above amounts are included under employee benefi ts expense. Included in the above amounts are the

following items:

2011

$’000

2010

$’000

Remuneration of directors of the company 998 985

Remuneration of directors of the subsidiaries 274 276

Fees to directors of the company 225 225


31 December 2011

63

Innovalues

Limited

3. Related Party Relationships and Transactions (Cont’d)

3.2 Key management compensation (Cont’d):

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

governance.

Key management personnel are directors and those persons having authority and responsibility for planning,

directing and controlling the activities of the company, directly or indirectly. The above amounts for key

management compensation are for all the directors and other key management personnel.

3.3 Other receivables from and other payables to related parties:

The trade transactions and the trade receivables and payables balances arising from sales and purchases of

goods and services are disclosed elsewhere in the notes to the fi nancial statements.

4. Financial Information by Segments

4A. Information about Reportable Segment Profi t or Loss, Assets and Liabilities

The group discloses fi nancial and descriptive information about its reportable segments. Reportable segments

are operating segments or aggregations of operating segments that meet specifi ed criteria. Operating segments

are components about which separate fi nancial information is available that is evaluated regularly by the chief

operating decision maker in deciding how to allocate resources and in assessing performance. Generally,

fi nancial information is reported on the same basis as is used internally for evaluating operating segment

performance and deciding how to allocate resources to operating segments.

For management purposes, the group is currently organised into four major strategic operating segments that

offer different products and services:

Office automation (“OA”): Shafts and rollers for various types of printers;

Hard disk drive (“HDD”): Components for hard disk drives;

Automotive (“AU”): Precision machined parts and components for vehicles;

Others: Components for other industries.

It represents the basis on which the management reports the primary segment information. They are managed

separately because each business requires different strategies.

Inter-segment sales are measured on the basis that the entity actually used to price the transfers. Internal

transfer pricing policies of the group are as far as practicable based on market prices. The accounting policies of

the operating segments are the same as those described in the summary of signifi cant accounting policies.

Unallocated assets and liabilities are analysed below. Unallocated profi t or loss items comprise interest income,

fi nance costs, marketing and distribution costs, administrative expenses, other credits/(charges) and income

tax expense. The information to allocate these amounts by business segments is not available and the cost to

develop it would be excessive.


64

Annual Report

2011

4. Financial Information by Segments (Cont’d)

4B. Profi t or Loss from Continuing Operations and Reconciliations

These segments are the basis on which the group reports its primary segment information. Segment information

about these businesses is presented below:

OA HDD AU Others Group Total

2011

$’000

2010

$’000

2011

$’000

2010

$’000

2011

$’000

2010

$’000

2011

$’000

2010

$’000

2011

$’000

2010

$’000

Revenue by segment

External Revenue 37,833 54,478 261 1,004 46,502 41,958 3,150 3,018 87,746 100,458

Results:

Segment Result 2,745 8,750 (363) (644) 8,584 5,869 243 168 11,209 14,143


Finance Costs (1,145) (1,453)


Marketing and

Distribution Costs (2,461) (2,865)

Administrative Expenses (9,189) (9,213)


(Loss)/Profit Before the

Under Mentioned (285) 1,741

Other Charges - Expenses

Due to Floods in

Thailand (13,586) –

(Loss)/Profit Before Tax

from Continuing

Operations (13,871) 1,741

Income Tax Expense (351) (424)

(Loss)/Profit Net of Tax (14,222) 1,317


31 December 2011

65

Innovalues

Limited


4C. Assets and Reconciliations

OA

$’000

HDD

$’000

AU

$’000

Others

$’000

Unallocated

$’000

Group

Total

$’000

2011

Total assets for reportable

segments 28,106 2 29,147 3,930 – 61,185

Unallocated:

Properties, plant and equipment – – – – 8,336 8,336

Trade and other receivables – – – – 489 489

Other assets – – – – 2,327 2,327

Cash and cash equivalents – – – – 5,941 5,941

Total group assets 28,106 2 29,147 3,930 17,093 78,278

2010

Total assets for reportable

segments 39,660 3,573 37,631 4,029 – 84,893

Unallocated:

Properties, plant and equipment – – – – 10,735 10,735

Trade and other receivables – – – – 342 342

Other assets – – – – 861 861

Cash and cash equivalents – – – – 4,854 4,854

Total group assets 39,660 3,573 37,631 4,029 16,792 101,685


66

Annual Report

2011


4D. Liabilities and Reconciliations

OA

$’000

HDD

$’000

AU

$’000

Others

$’000

Unallocated

$’000

Group

Total

$’000

2011

Total liabilities for reportable

segments – – – – – –

Unallocated:

Deferred and current tax

liabilities – – – – 117 117

Income tax payable – – – – 93 93

Other fi nancial liabilities – – – – 25,903 25,903

Finance leases – – – – 290 290

Trade and other payables – – – – 11,319 11,319

Total group liabilities – – – – 37,722 37,722

2010

Total liabilities for reportable

segments – – – – – –

Unallocated:

Deferred and current tax

liabilities – – – – 69 69

Income tax payable – – – – 14 14

Other fi nancial liabilities – – – – 33,431 33,431

Finance leases – – – – 409 409

Trade and other payables – – – – 11,488 11,488

Total group liabilities – – – – 45,411 45,411

4E. Other Material Items and Reconciliations

OA

$’000

HDD

$’000

AU

$’000

Others

$’000

Unallocated

$’000

Group

Total

$’000

Capital expenditure:

2011 469 – 1,619 8 220 2,316

2010 952 22 1,222 32 209 2,437

Depreciation:

2011 3,368 604 3,857 587 962 9,378

2010 3,771 674 3,960 678 1,050 10,133

Impairment loss on plant and

equipment:

2011 219 1,954 5,167 590 390 8,320

2010 – – – – – –

Inventories written off:

2011 20 600 4,239 126 – 4,985

2010 – – – – – –


31 December 2011

67

Innovalues

Limited


4F. Geographical Information

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

The following table provides an analysis of the revenue by geographical market, irrespective of the origin of the

goods:

Revenue by

geographical segments

2011

$’000

2010

$’000

Singapore 1,325 1,917

Malaysia 15,000 18,904

Thailand 499 2,185

PRC 51,564 55,650

USA 14,418 15,955

Brazil 1,355 568

Mexico 2,522 2,343

Others 1,063 2,936

Total 87,746 100,458

The following is an analysis of the carrying amount of segment assets, and additions to properties, plant and

equipment, analysed by the geographical area in which the assets are located:

Carrying amount of

segment assets

Additions to properties,

plant and equipment

2011

$’000

2010

$’000

2011

$’000

2010

$’000

Singapore 15,902 17,318 19 43

Malaysia 24,500 27,165 486 139

Thailand 10,068 23,812 1,560 917

PRC 27,808 33,390 251 1,338

Total 78,278 101,685 2,316 2,437

4G. Information About Major Customers

2011

$’000

2010

$’000

Revenue:

Top 1 customer in AU segment 18,281 15,743

Top 2 customers in AU and OA segments 28,515 27,202

Top 3 customers in AU and OA segments 38,345 37,013


68

Annual Report

2011

5. Revenue

Group

2011

$’000

2010

$’000

Sale of goods 87,746 100,458

6. Other Credits and (Charges)

Group

2011

$’000

2010

$’000

Allowance for impairment on trade receivables – (10)

Bad debts written off (2) –

Expenses due to fl oods in Thailand (*)

- Impairment loss on plant and equipment (8,320) –

- Inventories written off (4,985) –

- Accruals for fl ood related repair and restoration (281) –

Foreign exchange adjustment losses (147) (269)

Plant and equipment written off (68) (13)

Bad debts recovered 116 –

Gain on disposal of plant and equipment 7 18

Sale of waste materials 1,335 1,314

Other income 37 44

Net (12,308) 1,084

Presented in profi t or loss as:



Other Charges - expenses due to fl oods in Thailand (13,586) –

(12,308) 1,084

(*) No insurance recoverable amount has been recognised in the current year as the insurer’s assessment is ongoing and the

eventual recoverable amount has yet to be fi nalised.

7. Finance Costs

Group

2011

$’000

2010

$’000

Interest expense 1,145 1,453


31 December 2011

69

Innovalues

Limited

8A. Administrative Expenses

The major components include the following:

Group

2011

$’000

2010

$’000

Employee benefi ts expense 5,635 5,965

Rental – office and equipment 161 136

Depreciation expense 1,201 477

8B. Employee Benefi ts Expense

Group

2011

$’000

2010

$’000

Employee benefi ts expense 17,052 19,704

Contributions to defi ned contribution plan 2,241 2,378

Share-based payments 172 171

Other benefi ts 99 74

Total employee benefi ts expense 19,564 22,327


70

Annual Report

2011

9. Income Tax

9A. Components of tax expense recognised in profi t or loss include:

Group

2011

$’000

2010

$’000

Current tax expenses

Current tax expenses 341 434

Over adjustments of current tax in respect of prior periods (38) –

Subtotal 303 434

Deferred tax expense

Deferred tax 47 80

Under/(Over) adjustment of prior years’ unutilised tax credits 1 (90)

Subtotal 48 (10)

Total income tax expense 351 424

The reconciliation of income taxes below is determined by applying the Singapore corporate tax rate where the

parent is domiciled. The income tax in profi t or loss varied from the amount of income tax determined by applying

the Singapore income tax rate of 17% (2010: 17%) to profi t or loss before income tax as a result of the following

differences:

Group

2011

$’000

2010

$’000

(Loss)/Profi t before tax (13,871) 1,741

Income tax (income)/expense at the above rate (2,358) 296

Non-deductible items 579 111

Income not subject to tax (937) (36)

Deferred tax assets unrecognised 5,124 29

Effect of different tax rates in different countries (1,983) 227

Tax exemptions (a) (37) (142)

Overprovision of tax in respect of previous periods (37) (90)

Other items less than 3% each – 29

Total income tax expense 351 424

(a) Tax exemptions relate to tax incentives granted by the relevant authorities on subsidiaries’ profi ts. The

Board of Investment of Thailand has granted the subsidiary, Innovalues Precision (Thailand) Limited,

promotional privileges under the Promotion Investment Act, BE2520. With these incentives, Innovalues

Precision (Thailand) Limited enjoys a tax exemption for a period of 7-8 years.

Innovalues Technology (Shanghai) Co., Ltd and Innovalues Auto Precision (Shanghai) Co., Ltd have been

granted income tax exemption for the two years commencing from the fi rst profi table year (after deducting

losses carried forward) in 2007 and a 50% tax reduction for the succeeding three years.


31 December 2011

71

Innovalues

Limited

9. Income Tax (Cont’d)

9B. Deferred tax expense/(income) recognised in profi t or loss include:

2011

$’000

2010

$’000

Excess of net book value of plant and equipment over tax values (232) (252)

Excess of tax values over net book value of plant and equipment (13) 417

Tax loss carryforwards (5,379) (235)

Unutilised tax credits 558 31

Other temporary differences (15) 38

Provisions 5 (38)

Deferred tax unrecognised 5,124 29

Total deferred income tax (income)/expense recognised in profi t or loss 48 (10)

9C. Deferred tax balance in the statement of fi nancial position:

2011

$’000

2010

$’000

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

Excess of net book value of plant and equipment over tax values (1,936) (2,168)

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

Tax loss carryforwards 7,225 1,846

Unutilised tax credits 3,190 3,748

Other temporary differences (23) (38)

Provisions – 5

Deferred tax unrecognised (8,586) (3,462)

Total (117) (69)

Presented in the statement of fi nancial position as follows:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Deferred tax liabilities (117) (69) – –

Deferred tax assets – – – –

Net balance (117) (69) – –

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

The realisation of the future income tax benefi ts from tax loss carryforwards and temporary differences from

capital allowances is available for an unlimited future period subject to the conditions imposed by law including

the retention of majority shareholders as defi ned.

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

Temporary differences arising in connection with interests in subsidiaries are insignifi cant.


72

Annual Report

2011

10. Items In the Statement of Comprehensive Income

In addition to the charges and credits disclosed elsewhere in the notes to the fi nancial statements, the profi t or loss

includes the following charges:

Group

2011

$’000

2010

$’000

Audit fees to independent auditors included under administrative expenses:

- Company’s auditors 77 70

- Other auditors 107 99

Other fees to independent auditors included under administrative expenses:

- Company’s auditors 38 39

- Other auditors 35 37

11. Earnings/(Loss) Per Share

The following table illustrates the numerators and denominators used to calculate basic and diluted (loss)/earnings per

share of no par value:

2011

$’000

2010

$’000

A. Numerators: (loss)/earnings attributable to equity:

Continuing operations: attributable to owners (14,222) 1,317

2011

No:’000

2010

No:’000

B. Denominators: weighted average number of equity shares

Basic 318,214 318,194

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

The basic earnings per share ratio is based on the weighted average number of ordinary shares outstanding during

each reporting year. The diluted earnings per share is based on the weighted average number of ordinary shares and

dilutive ordinary share equivalents outstanding during each reporting year. The ordinary share equivalents included in

these calculations are ordinary shares issuable upon assumed exercise of share options which would have a dilutive

effect. There is no dilutive effect in respect of the share options during the year.


31 December 2011

73

Innovalues

Limited

12. Properties, Plant and Equipment

Group

Freehold

land

$’000

Leasehold

land

$’000

Leasehold

properties

$’000

Plant and

equipment

$’000

Construction

in progress

$’000

Total

$’000

Cost:

At 1 January 2010 3,420 692 8,887 94,068 4 107,071

Exchange adjustments (22) 16 247 27 – 268

Additions – – – 2,437 – 2,437

Disposals – – – (392) – (392)

Written off – – – (115) – (115)

Transfer from/(to) – – – 4 (4) –

At 31 December 2010 3,398 708 9,134 96,029 – 109,269

Exchange adjustments (126) (17) (291) (591) – (1,025)

Additions – – 131 2,185 – 2,316

Disposals – – – (2,381) – (2,381)

Written off – – – (27,608) – (27,608)

At 31 December 2011 3,272 691 8,974 67,634 – 80,571

Accumulated depreciation:

At 1 January 2010 – 216 1,384 46,196 – 47,796

Exchange adjustments – 5 25 64 – 94

Depreciation for the year – 34 430 9,669 – 10,133

Disposals – – – (322) – (322)

Written off – – – (102) – (102)

At 31 December 2010 – 255 1,839 55,505 – 57,599

Exchange adjustments – (6) (56) (400) – (462)

Depreciation for the year – 33 416 8,929 – 9,378

Disposals – – – (529) – (529)

Written off – – – (19,220) – (19,220)

At 31 December 2011 – 282 2,199 44,285 – 46,766

Net book value:

At 1 January 2010 3,420 476 7,503 47,872 4 59,275

At 31 December 2010 3,398 453 7,295 40,524 – 51,670

At 31 December 2011 3,272 409 6,775 23,349 – 33,805


74

Annual Report

2011

12. Properties, Plant and Equipment (Cont’d)

Company

Plant and

equipment

$’000

Cost:

At 1 January 2010 1,612

Additions 43

Disposals (81)

Written off (65)

At 1 January 2011 1,509

Additions 19

Disposals (109)

Written off (108)

At 31 December 2011 1,311

Accumulated depreciation:

At 1 January 2010 1,328

Depreciation for the year 91

Disposals (58)

Written off (65)

At 1 January 2011 1,296

Depreciation for the year 79

Disposals (104)

Written off (108)

At 31 December 2011 1,163

Net book value:

At 1 January 2010 284

At 31 December 2010 213

At 31 December 2011 148


31 December 2011

75

Innovalues

Limited

12. Properties, Plant and Equipment (Cont’d)

The depreciation expense is charged as follows:

Group

2011

$’000

2010

$’000

Cost of sales 8,177 9,656

Administrative expenses 1,201 477

9,378 10,133

Certain items are under fi nance lease agreements (see Note 22).

Freehold land and leasehold property of the Thailand subsidiary at a net book value of Thai Baht 170,438,000 (or

S$7,012,000 equivalent) (2010: Thai Baht 454,158,456 (or S$19,432,000 equivalent) are subject to a negative pledge for

bank facilities (see Note 21).

Details of properties owned by the group are as follows:

Description/Location Total gross land

and/or fl oor area

Tenure of land/last

valuation date

Thailand:

83 Moo 2, Hi-Tech Industrial Estate, Bannlen,

Bangpa-In, Ayutthaya

47,200 sqm Freehold property.

Not revalued.

Malaysia:

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

4,413 sqm Freehold property.

Not revalued.

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

Johor

18,220 sqm Leasehold property 21 years from

2 October 2003. Not revalued.


76

Annual Report

2011

13. Investments in Subsidiaries

Company

2011

$’000

2010

$’000

Unquoted shares at cost 31,957 31,957

Less allowance for impairment (572) (572)

Total at cost 31,385 31,385

Net book value of subsidiaries 54,843 73,668

Analysis of above amount denominated in non-functional currency:

Malaysian Ringgit 2,118 2,118

Thai Baht 8,885 8,885

United States Dollar 20,954 20,954

Movements in allowance for impairment:

Balance at beginning of the year 572 572

Charged to profi t or loss included under other charges – –

Balance at end of the year 572 572

The subsidiaries held by the company are listed below:

Name of Subsidiaries, Country of Incorporation,

Place of Operations and Principal Activities and

(Independent Auditors)

Cost in Books of

Company

Effective Percentage

of Equity held

by the Company

2011 2010 2011 2010

$’000 $’000 % %

Innovalues Precision Sdn Bhd (1)

Malaysia

Manufacture and sale of precision machined parts, components

and sub-assemblies

(Crowe Horwath)

211 211 100 100

Innovalues Microtech Sdn Bhd (1)

Malaysia

Electroless plating

(Crowe Horwath)

730 730 100 100

Innovalues Precision (Kluang) Sdn Bhd (1)

Malaysia

Manufacture and sale of precision machined parts, components

and sub-assemblies

(Crowe Horwath)

214 214 100 100


31 December 2011

77

Innovalues

Limited

13. Investments in Subsidiaries (Cont’d)


Place of Operations and Principal Activities and

(Independent Auditors)

Cost in Books of

Company


of Equity held

by the Company

2011 2010 2011 2010

$’000 $’000 % %

Innovalues Technologies Sdn Bhd (1)

Malaysia

Assembly of rollers

(Crowe Horwath)

46 46 100 100

Nissohatsu Elastomer (Malaysia) Sdn Bhd (1)

Malaysia

Rubber compounding, moulding and other rubber-related

products

(Crowe Horwath)

917 917 100 100

Innovalues Precision (Thailand) Limited (1)

Thailand

Manufacture and sale of precision machined parts,

components and sub-assemblies

(Ernst & Young Office Limited)

8,885 8,885 100 100

Innovalues Precision (Shanghai) Co., Ltd (1)

People’s Republic of China (“PRC”)

Manufacture and sale of precision machined parts,

components and sub-assemblies

(BDO China Shu Lun Pan CPA)

894 894 100 100

Innovalues Industry (Shanghai) Co., Ltd (1)


Precision engineering and manufacture of turned parts


7,292 7,292 100 100

Innovalues Technology (Shanghai) Co., Ltd (1)




1,394 1,394 100 100

Innovalues Auto Precision (Shanghai) Co., Ltd (1)




11,374 11,374 100 100


78

Annual Report

2011

13. Investments in Subsidiaries (Cont’d)

The subsidiary held by a subsidiary company is listed below


Place of Operations and Principal Activities

Cost in Books of

Group


of Equity held

by the Group

2011 2010 2011 2010

RMB’000 RMB’000 % %

Innovalues Industry (Shanghai) Co., Ltd

Shenzhen Innovalues Precision Co., Ltd (1)


Precision engineering, manufacturing and sale of precision

engineered turned parts and machinery


1,000 1,000 100 100

(1) Other independent auditors. Audited by fi rms of accountants other than member fi rms of RSM International of which RSM Chio

Lim LLP in Singapore is a member. Their names are indicated above.

As is required by Rule 716 of the Listing Manual of The Singapore Exchange Securities Trading Limited, the audit

committee and the board of directors of the company have satisfi ed themselves that the appointment of different

auditors for its overseas subsidiaries would not compromise the standard and effectiveness of the audit of the group.

14. Inventories

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Finished goods and goods for resale 6,683 6,826 – 11

Work in progress 3,288 5,185 – –

Raw materials and consumables 4,329 5,958 163 310

14,300 17,969 163 321

Inventories are stated after allowance.

Movements in allowance:

Balance at beginning of the year 334 427 10 10

(Reversed)/charged to profi t or loss included

in cost of sales (34) (93) 29 –

Balance at end of the year 300 334 39 10


31 December 2011

79

Innovalues

Limited

14. Inventories (Cont’d)

The reversal of the allowance is for goods with estimated increases in net realisable value.

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

The write-downs of inventories (reversed)/charged

to profi t or loss included in cost of sales (34) (93) 29 –

Changes in inventories of fi nished goods and work

in progress decrease/(increase) 2,040 (3,938) 11 4

Raw materials and consumables used 41,331 47,380 – –

There are no inventories pledged as security for liabilities.

15. Trade and Other Receivables

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Trade receivables:

Outside parties 15,619 16,937 11,352 12,993

Less allowance for impairment (70) (109) – (38)

Subsidiaries (Note 3) – – 4,007 2,727

Subtotal 15,549 16,828 15,359 15,682

Other receivables:

Other receivables 726 198 – –

Subsidiaries (Note 3) – – 273 264

Subtotal 726 198 273 264

Trade and other receivables 16,275 17,026 15,632 15,946

Movements in the above allowance:

Balance at beginning of the year (109) (244) (38) (38)

Charged for trade receivables to income

statement included in other charges – (10) – –

Used 38 144 38 –

Foreign exchange adjustment 1 1 – –

Balance at end of the year (70) (109) – (38)

The allowance is based on individual accounts that are determined to be impaired at the year end date. These are not

secured.

Included in trade and other receivables are factored receivables of $1,637,000 (2010: $3,294,000). Since those

receivables did not meet the FRS39 derecognition requirements, they were recognised as receivables even though

they were legally sold without recourse. Amongst other clauses there is a deferred purchase price clause, under which

a portion of transferred receivables are paid to the company only upon full collection of the receivables. This resulted in

substantial risks and rewards not being transferred to the transferee and therefore the FRS39 derecognition criteria was

not met.


80

Annual Report

2011

16. Other Assets

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Deposits to secure services 2,175 1,755 14 14

Prepayments 807 958 49 47

Income tax recoverable 228 253 – –

3,210 2,966 63 61

17. Cash and Cash Equivalents

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Not restricted in use 10,517 11,878 4,197 3,783

Restricted in use (a) 171 176 – –

Cash at end of year 10,688 12,054 4,197 3,783

Interest earning balances 171 176 – –

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

The rate of interest for the cash on interest earning balances was between 0.05% and 1.40% (2010: 0.04% and 1.30%)

per annum.

17A. Cash and Cash Equivalents in the Statement of Cash Flows:

Group

2011

$’000

2010

$’000

As shown above 10,688 12,054

Cash restricted in use over 3 months (171) (176)

Cash and cash equivalents for statement of cash fl ows purposes at end of

the year 10,517 11,878

17B. Non-Cash Transactions:

During 2011 there were acquisitions of plant and equipment with a total cost of $1,149,000 (2010: $41,000)

acquired by means of fi nance leases.


31 December 2011

81

Innovalues

Limited

18. Share Capital

Number of

share

No:’000

Share

capital

$’000

Balance at beginning of the year 1 January 2010 318,194 11,357

Balance at end of the year 31 December 2010 318,194 11,357

Employee share option scheme – proceeds from share issue 20 1

Balance at end of the year 31 December 2011 318,214 11,358

During the year, 20,000 ordinary shares with an exercise price of $0.080 were issued under the “Innovalues Group

Share Option Scheme 2001”. The new shares rank pari passu in all respects with the existing shares of the company.

The ordinary shares of no par value carry no right to fi xed income and are fully paid.

Capital management:

The objectives when managing capital are: to safeguard the reporting entity’s ability to continue as a going concern,

so that it can continue to provide returns for owners and benefi ts for other stakeholders, and to provide an adequate

return to owners by pricing the sales commensurately with the level of risk. The management sets the amount of capital

to meet its requirements and the risk taken. There were no changes in the approach to capital management during

the reporting year. The management manages the capital structure and makes adjustments to it where necessary or

possible in the light of changes in conditions and the risk characteristics of the underlying assets. In order to maintain

or adjust the capital structure, the management may adjust the amount of dividends paid to owners, return capital to

owners, issue new shares, or sell assets to reduce debt.

The only externally imposed capital requirement is that, for the company to maintain its listing on the Singapore Stock

Exchange, it has to have share capital with at least a free fl oat of 10% of the shares. The company met the capital

requirement on its initial listing and the rules limiting treasury share purchases mean it will automatically continue to

satisfy that requirement, as it did throughout the year. Management receives a report from the registrars monthly on

substantial share interests showing the non-free fl oat and it demonstrated continuing compliance with the 10% limit

throughout the year.

The management does not set a target level of gearing but uses capital opportunistically to add value for shareholders.

The key discipline adopted is to widen the margin between the return on capital employed and the cost of that capital.


82

Annual Report

2011

18. Share Capital (Cont’d)

The management monitors the capital on the basis of the debt-to-adjusted capital ratio. This ratio is calculated as net

debt/adjusted capital. Net debt is calculated as total borrowings (as shown in the statement of fi nancial position) less

cash and cash equivalents. Adjusted capital comprises all components of equity (i.e. share capital, other reserves and

retained earnings).

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Net debt:

All current and non-current other fi nancial

liabilities including fi nance leases 26,193 33,840 19,153 25,351

Less cash and cash equivalents (10,688) (12,054) (4,197) (3,783)

Net debt 15,505 21,786 14,956 21,568

Adjusted capital:

Equity 40,556 56,274 17,401 14,304

Debt-to-adjusted capital ratio 38.23% 38.71% 85.95% 150.78%

The group’s debt-to-adjusted capital ratio remained relatively constant.

19. Share-Based Payments

19A. Share Options – The Scheme:

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

was granted except as follows:

The company has two employee share option schemes. They are the “Innovalues Group Share Option Scheme

2001” and “Innovalues Group Share Option Scheme 2011” (known collectively as the “Scheme”). With the

expiry of the Innovalues Group Share Option Scheme 2001 on 8 February 2011, the company has adopted

the Innovalues Group Share Option Scheme 2011 on 15 August 2011. The Scheme, which forms an integral

component of its compensation plan, is designed to reward and retain eligible participants whose services are

vital to its well being and success. It provides eligible participants who have contributed to the success and

development of the company with an opportunity to participate and also increase the dedication and loyalty of

these participants and motivate them to perform better.

Under the rules of the Scheme, all directors and employees of the company are eligible to participate in the

Scheme. Controlling shareholders or their associates are also eligible to participate in the Scheme subject

to the approval of independent shareholders in the form of separate resolutions for each participant. Further,

independent shareholders’ approval is also required in the form of separate resolutions for each grant of options

and the terms thereof, to each participant who is a controlling shareholder or his associate.

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

of the company at any time.


31 December 2011

83

Innovalues

Limited

19. Share-Based Payments (Cont’d)

19A. Share Options – The Scheme (Cont’d):

The Remuneration Committee is charged with the administration of the Scheme in accordance with the rules

of the Scheme. The Remuneration Committee consists of 5 directors appointed by the board of directors of the

company. They are Goh Leng Tse, Chow Kok Kee, Ong Sim Ho, Ong Tiak Beng and Anthony Teo Soon Chye.

The number of options to be offered to a participant shall be determined at the discretion of the Remuneration

Committee who shall take into account criteria such as the rank, performance, seniority, potential for future

development and length of service of the participant. The Innovalues Group Share Option Scheme 2001 provides

that: - (a) the total number of shares which may be offered to any participant during the entire operation of the

Scheme (including adjustments under the rules) shall not exceed 25% of the shares in respect of which the

company may grant options; (b) the aggregate number of shares which may be offered to participants who are

controlling shareholders and their associates during the entire operation of the Scheme (including adjustments

under the rules) shall not exceed 25% of the shares in respect of which the company may grant options; and (c)

the number of shares which may be offered to each participant who is a controlling shareholder or his associate

during the entire operation of the Scheme shall not exceed 10% of the shares in respect of which the company

may grant options. The Innovalues Group Share Option Scheme 2011 provides that, the aggregate number of

shares over which the Committee may offer to grant options to the controlling shareholders and their associates

under the option scheme, shall not exceed 25% of the shares available under the option scheme, provided

always that the number of shares available to each controlling shareholder or each of his associates shall not

exceed 10% of the shares available under the option scheme.

The exercise price for each share in respect of which an option is exercisable shall be determined by the

Remuneration Committee at its absolute discretion and fi xed by the Committee at:- (a) where the options are

offered to a grantee prior to the date of the listing and quotation of the shares, a price equal to the price per

share offered to the public at the initial public offering of the shares, that is $0.35; (b) where the options are

offered after the listing date (i) a price (the “Market Price”) equal to the average of the last dealt prices for a share

on the SGX-ST for the period of fi ve (5) consecutive Market Days immediately prior to the relevant offer date but;

or (ii) a price which is set at a discount to the Market Price, provided that the maximum discount shall not exceed

20% of the Market Price.

Options must be exercised before the expiry of 6 and 5 years for the Innovalues Group Share Option Scheme

2001 and the Innovalues Group Share Option Scheme 2011 respectively, from the date of the offer or such

earlier date as may be determined by the Remuneration Committee. There are special provisions dealing with

the lapsing or permitting the earlier exercise of options under certain circumstances including termination,

bankruptcy, and death of the participant.


84

Annual Report

2011


19B. Activities under the Share Option Scheme:

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

Date of grant

Balance as

at

01.01.2011

Granted/

(exercised)

Options

lapsed/

cancelled

Balance as

at

31.12.2011

Exercise

price

Exercise

period

11.06.2007 2,600,000 – – 2,600,000 $0.720 12.06.2008 to

11.06.2013

29.10.2007 3,000,000 – – 3,000,000 $0.450 30.10.2008 to

29.10.2013

01.06.2009 2,240,000 (20,000) (600,000) 1,620,000 $0.080 02.06.2010 to

01.06.2015

03.08.2010 2,180,000 – (320,000) 1,860,000 $0.166 04.08.2011 to

03.08.2016

15.08.2011 – 3,750,000 – 3,750,000 $0.100 16.08.2012 to

15.08.2016

The table below summarises the number of options that were outstanding, their weighted average exercise price

as at the end of the year as well as the movements during the year.

Total share options

Weighted average

exercise price

2011

No:’000

2010

No:’000

2011 2010

Balance at 1 January 10,020 8,320 $0.376 $0.427

Granted 3,750 2,270 $0.029 $0.036

Exercised (20) – – –

Expired/Cancelled (920) (570) $0.080 $0.287

Balance at 31 December 12,830 10,020 $0.315 $0.376

During the year, 920,000 (2010: 570,000) shares options granted to employees that had not yet vested were

forfeited. The grant date fair value of the options as originally priced and not yet charged to the income statement

has been taken immediately to the income statement.

During the year no option was granted at a discount.


31 December 2011

85

Innovalues

Limited


19B. Activities under the Share Option Scheme (Cont’d):

The following table summarises information about directors’ share options outstanding at 31 December 2011:

Participants

Directors and controlling

shareholders of the company

Grants in

2011

No:’000

Grants from

start of

Scheme to

end of

2011

No:’000

Exercised/

lapsed from

start of

Scheme to

end of

2011

No:’000

Balance at

31.12.2011

No:’000

Goh Leng Tse – 3,000 – 3,000(a)

– 360(e) (360) –

1,500 1,500 – 1,500(g)

Sub-total 1,500 4,860 (360) 4,500

Directors of the company

Ong Tiak Beng – 300 – 300(b)

– 720(e) (720) –

– 200 – 200(c)

– 100 – 100(d)

150 150 – 150(g)

Chow Kok Kee – 300 – 300(b)

– 200 – 200(c)

– 100 – 100(d)

150 150 – 150(g)

Ong Sim Ho – 300 – 300(b)

– 200 – 200(c)

– 100 – 100(d)

150 150 – 150(g)

Anthony Teo Soon Chye – 300 – 300(b)

– 200 – 200(c)

– 100 – 100(d)

150 150 – 150(g)

Pung Tong Seng – 376(f) (376) –

– 1,000 – 1,000(b)

– 200 – 200(c)

– 300 – 300(d)

750 750 – 750(g)

Total 2,850 11,206 (1,456) 9,750

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

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

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

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

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

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

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

No participant has received 5% or more of the total number of the options available under the Scheme.


86

Annual Report

2011


19C. Accounting for the Share Options:

The company has an employee share option scheme (the “Scheme”) more fully disclosed in Note 19A above.

Activities under the Scheme are summarised in Note 19B above.

The following table summarises information about employee and director stock options outstanding at 31

December 2011:

Exercise price

Number

outstanding

No:’000

Number

exercisable

No:’000

Remaining

life (years)

$0.450 3,000 2,625 1.83

$0.720 2,600 2,600 1.50

$0.080 1,620 800 3.50

$0.166 1,860 232 4.67

$0.100 3,750 – 4.67

12,830 6,257

Group and company

2011

$’000

2010

$’000

Share option reserve:

At beginning of the year 1,515 1,344

Expense recognised in profi t or loss 172 171

At end of the year 1,687 1,515

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

Administrative expenses 172 171

During 2011 the total charge to profi t or loss amounted to $172,000 (2010: $171,000). Included in 2011’s amount

was $30,000 (2010: $7,000) recorded in the profi t or loss immediately because of the forfeiture of share options

(See Note 19B).

These expensed amounts are also disclosed in employee benefi ts expense (Note 8B).

The estimate of the grant date fair value of each option issued is based on the Black-Scholes Pricing Model.

In order to approximate the expectations that would be refl ected in a current market or negotiated exchange

price for these options, the calculation takes into consideration factors like behavioural considerations and non-

transferability of the options granted.


31 December 2011

87

Innovalues

Limited


19C. Accounting for the Share Options (Cont’d):

Inputs to the model for options granted in 2011 included:

2011 2010

Share price # $0.098 $0.165

Exercise price * $0.100 $0.166

Dividend yield expected – –

Risk-free annual interest rates 1.125% 1.375%

Volatility expected - determined by calculating the historical volatility of the

company’s share price over the previous 4 years 58.58% 63.16%

Expected option term of years, based on management’s best estimate, for the

effects of non-transferability, exercise restrictions and behavioural

considerations 5 5

# Market price (last done price) of shares on date of grant.

* The exercise price of the options granted is equal to the average of the last dealt prices for a share of the company on

the Singapore Exchange Securities Limited (SGX-ST) for the period of fi ve consecutive market days immediately prior to

the date of grant.

20. Other Reserves

Other reserves classifi ed on the face of the statement of fi nancial position include the capital reserve, share option

reserve, translation reserve and statutory reserve.

(a) The capital reserve represents retained earnings of Innovalues Industry (Shanghai) Co., Ltd amounting to RMB

6,077,214 (or S$1,212,000 equivalent) which were capitalised as part of the paid up capital of this subsidiary.

(b) The share option reserve represents the equity-settled options granted to employees (Note 19). The reserve

is made up of the cumulative value of services received from employees recorded over the vesting period

commencing from the grant date of equity-settled share options, and is reduced by the expiry, forfeiture or

exercise of the share options.

(c) The currency translation reserve accumulates all foreign exchange differences on translating the results and net

assets of foreign operations during the year that the group controls.


88

Annual Report

2011

20. Other Reserves (Cont’d)

(d) The statutory reserve comprises the following:

(i) Under section 102 of the Thai Civic and Commercial code, 1,250,000 Thai Baht (or S$50,700 equivalent)

is not distributable as dividends and cannot be used to offset against defi cits.

(ii) The subsidiaries incorporated in the PRC are required by the relevant PRC regulations and the articles

of association to appropriate, where applicable, a certain percentage of profi t after tax (after offsetting

all recognised tax losses carried forward from previous fi nancial years) arrived at in accordance with

the PRC GAAP each year to statutory reserves. The appropriation to statutory reserves must be made

before distribution of dividends to shareholders. Subject to certain restrictions, part of the reserve may

be converted to increase share capital. These statutory reserves are not distributable in the form of cash

dividends. The amount of retained earnings under restriction amounts to RMB 6,760,072 (or S$1,358,800

equivalent).

All reserves classifi ed on the face of the statement of fi nancial position as retained earnings represents past

accumulated earnings and are distributable. The other reserves are not available for cash dividends unless realised.

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

21. Other Financial Liabilities

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Non-current:

Bank loans (Note 21B) 4,050 7,517 3,508 6,311

Non-current, total 4,050 7,517 3,508 6,311

Current:

Bank loans (Note 21B) 15,125 19,285 10,618 14,375

Bills payable to banks (Note 21A) 6,728 6,629 4,782 4,292

Current, total 21,853 25,914 15,400 18,667

Total 25,903 33,431 18,908 24,978

The non-current portion is repayable as follows:

Due within 2 to 5 years 4,050 7,517 3,508 6,311

Total non-current portion 4,050 7,517 3,508 6,311

All the amounts are at fl oating interest rates except

the following that are on fi xed interest rates:

Bank loans 5,939 11,020 5,939 11,020


31 December 2011

89

Innovalues

Limited

21. Other Financial Liabilities (Cont’d)

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

The range of fl oating rate interest rates paid were

as follows:

Bank loans 2.03% to

5.25%

2.03% to

5.25%

2.03% to

3.28%

2.03% to

3.72%

Bills payable to banks 1.73% to

2.72%

1.80% to

2.50%

1.73% to

2.72%

1.80% to

2.25%

The range of fi xed rate interest rates paid were

as follows:

Bank loans 3.73% to

5.25%

3.73% to

5.00%

3.73% to

5.00%

3.73% to

5.00%

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

values.

21A. Bank Overdrafts and Bills Payable to Banks

The bank overdrafts and other credit facilities of the subsidiaries are covered by corporate guarantees given by

the company (Note 27) and the negative pledge on freehold land and leasehold property of a subsidiary (Note

12).


90

Annual Report

2011

21. Other Financial Liabilities (Cont’d)

21B. Bank Loans

The bank loans of subsidiaries are covered by a corporate guarantee from the company (Note 27) and the

negative pledge on freehold land and leasehold property of a subsidiary (Note 12).

The bank loans are listed as follows:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

(a) 6-year bank loan of Thai Baht

100,000,000 repayable by 60 equal

monthly instalments commencing June

2008

1,366 2,064 – –

(b) 3-year bank loan of SGD 5,000,000

repayable by 20 quarterly instalments

commencing March 2008

1,250 2,250 1,250 2,250

(c) 3-year bank loan of USD 5,000,000


commencing March 2008

1,625 2,898 1,625 2,898

(d) 3-year bank loan of SGD 5,000,000


commencing November 2008

2,000 3,000 2,000 3,000

(e) 3-year bank loan of SGD 2,500,000


commencing May 2009

– 1,100 – 1,100

(f) 4-year bank loan of SGD 2,500,000


commencing December 2009

1,064 1,772 1,064 1,772

(g) 3-year bank loan of SGD 1,600,000


commencing April 2009

133 666 133 666

(h) 3-year bank loan of SGD 2,000,000


commencing February 2011

1,389 – 1,389 –

(i) 30-month bank loan of SGD 2,000,000

repayable by 30 equal monthly

instalments commencing August 2011

1,665 – 1,665 –

(j) Other short-term bank loans 8,683 13,052 5,000 9,000

Total 19,175 26,802 14,126 20,686


31 December 2011

91

Innovalues

Limited

22. Finance Leases Liabilities

Group Company

Minimum

payments

$’000

Finance

charges

$’000

Present

value

$’000

Minimum

payments

$’000

Finance

charges

$’000

Present

value

$’000

2011

Minimum lease payments payable:

Due within one year 148 (18) 130 133 (16) 117

Due within 2 to 5 years 181 (21) 160 146 (18) 128

Total 329 (39) 290 279 (34) 245

Net book value of plant and

equipment under fi nance leases 369 64

Minimum

payments

$’000

Finance

charges

$’000

Present

value

$’000

Minimum

payments

$’000

Finance

charges

$’000

Present

value

$’000

2010

Minimum lease payments payable:

Due within one year 171 (21) 150 161 (20) 141

Due within 2 to 5 years 296 (37) 259 265 (33) 232

Total 467 (58) 409 426 (53) 373

Net book value of plant and

equipment under fi nance leases 423 82

It is the group’s policy to lease certain of its plant and equipment under fi nance leases. The average lease term is 3-7

years. The rate of interest for fi nance leases is between 3.58% to 6.01% (2010: 3.58% to 6.01%) during the year. There

is an exposure to fair value interest risk because the interest rates are fi xed at the contract date. All leases are on a

fi xed repayment basis and no arrangements have been entered into for contingent rental payments. Lease obligations

are denominated in Singapore dollars and Japanese Yen. The obligations under fi nance leases are secured by the

lessor’s charge over the leased assets.

The fair value of the lease liabilities approximates the carrying amounts.


92

Annual Report

2011

23. Trade and Other Payables

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Trade payables:

Outside parties and accrued liabilities 10,252 10,134 1,979 3,299

Subsidiaries (Note 3) – – 12,821 8,605

Subtotal 10,252 10,134 14,800 11,904

Other payables:

Other payables 1,067 1,354 234 102

Subsidiaries (Note 3) – – – 48

Income tax payable 93 14 – –

Subtotal 1,160 1,368 234 150

Trade and other payables 11,412 11,502 15,034 12,054

24. Financial Instruments: Information on Financial Risks

24A. Classifi cation of Financial Assets and Liabilities

The following table summarises the carrying amount of fi nancial assets and liabilities recorded at the end of the

year by FRS 39 categories:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Financial assets:

Cash and cash equivalents 10,688 12,054 4,197 3,783

Loans and receivables 16,275 17,026 15,632 15,946

At end of the year 26,963 29,080 19,829 19,729

Financial liabilities:

Measured at amortised cost:

- Other fi nancial liabilities and

fi nance leases 26,193 33,840 19,153 25,351

- Trade and other payables 11,319 11,488 15,034 12,054

At end of the year 37,512 45,328 34,187 37,405

Further quantitative disclosures are included throughout these fi nancial statements.

There are no signifi cant fair value measurements recognised in the statements of fi nancial position.


31 December 2011

93

Innovalues

Limited

24. Financial Instruments: Information on Financial Risks (Cont’d)

24B. Financial Risk Management

The main purpose for holding or issuing fi nancial instruments is to raise and manage the fi nances for the entity’s

operating, investing and fi nancing activities. The main risks arising from the entity’s fi nancial instruments are

credit risk, interest risk, liquidity risk, foreign currency risk and market price risk comprising interest rate and

currency risk exposures. The management has certain practices for the management of fi nancial risks. The

guidelines set up the short and long term objectives and action to be taken in order to manage the fi nancial

risks. The major guidelines are the following:

1. Minimise interest rate, currency, credit and market risk for all kinds of transactions.

2. Maximise the use of “natural hedge”: favouring as much as possible the natural off-setting of sales and

costs and payables and receivables denominated in the same currency and therefore put in place hedging

strategies only for the excess balance. The same strategy is pursued with regard to interest rate risk.

3. Enter into derivatives or any other similar instruments solely for hedging purposes.

4. All fi nancial risk management activities are carried out and monitored by senior management staff.

5. All fi nancial risk management activities are carried out following good market practices.

6. May consider investing in shares or similar instruments.

The group fi nancial controller who monitors the procedures reports to the board of directors.

24C. Credit Risk on Financial Assets

Financial assets that are potentially subject to concentrations of credit risk and failures by counterparties to

discharge their obligations in full or in a timely manner consist principally of cash balances with banks, cash

equivalents and receivables. The maximum exposure to credit risk is: the total of the fair value of the fi nancial

instruments; the maximum amount the entity could have to pay if the guarantee is called on; and the full amount

of any loan payable commitment at the end of the reporting year. Credit risk on cash balances is limited because

the counter-parties are banks with acceptable credit ratings. For credit risk on receivables an ongoing credit

evaluation is performed of the debtors’ fi nancial condition and a loss from impairment is recognised in profi t or

loss. The exposure to credit risk is controlled by setting limits on the exposure to individual customers and these

are disseminated to the relevant persons concerned and compliance is monitored by management. There is

no signifi cant concentration of credit risk, as the exposure is spread over a large number of counter-parties and

customers unless otherwise disclosed in the notes to the fi nancial statements.

Cash and cash equivalents represent short-term deposits with less than 90 days maturity except for cash

restricted in use (Note 17).


94

Annual Report

2011


24C. Credit Risk on Financial Assets (Cont’d)

The credit period generally granted to non-related trade receivable customers is about 30 days to 60 days (2010:

30 days to 60 days). But some customers take a longer period to settle the amounts.

(a) The table below illustrates the ageing analysis:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Trade receivables:

Less than 30 days 7,275 7,682 5,446 6,290

31-60 days 5,971 6,439 4,153 4,809

61-90 days 2,095 2,264 1,606 1,871

91-120 days 278 185 147 23

Over 120 days – 367 – –

At end of the year 15,619 16,937 11,352 12,993

(b) Ageing analysis of the age of trade receivables amounts that are past due as at the end of reporting year

but not impaired:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Trade receivables:

31-60 days 212 395 207 246

61-90 days 2,216 2,404 1,706 2,025

Over 90 days 57 388 – 51

At end of the year 2,485 3,187 1,913 2,322


31 December 2011

95

Innovalues

Limited


24C. Credit Risk on Financial Assets (Cont’d)

(c) Ageing analysis as at the end of reporting year of trade receivables amounts that are impaired:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Trade receivables:

Over 90 days 70 109 – 38

At end of the year 70 109 – 38

The allowances which are disclosed in the note on trade receivables are based on individual accounts

totalling $70,000 (2010: $109,000) and $ nil (2010: $38,000) for the group and company respectively that

are determined to be impaired at the end of the reporting year. These are not secured.

Other receivables are normally with no fi xed terms and therefore there is no maturity.

Concentration of trade receivable customers:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Top 1 customer 2,187 2,156 2,187 2,156

Top 2 customers 4,273 3,996 3,239 3,996

Top 3 customers 5,326 5,393 4,289 5,393


96

Annual Report

2011


24D. Liquidity Risk

The following table analyses the non-derivative fi nancial liabilities by remaining contractual maturity (contractual

and undiscounted cash fl ows):

Less than 1 year

$’000

1 – 3 years

$’000

Total

$’000

Non-derivative fi nancial liabilities:

Group

2011:

Other fi nancial liabilities and fi nance leases 22,875 4,358 27,233

Trade and other payables 11,319 – 11,319

At end of the year 34,194 4,358 38,552


Group

2010:



At end of the year 38,789 8,195 46,984

Less than 1 year

$’000

1 – 3 years

$’000

Total

$’000


Company

2011:



At end of the year 31,151 3,754 34,905


Company

2010:



At end of the year 31,748 6,925 38,673


31 December 2011

97

Innovalues

Limited


24D. Liquidity Risk (Cont’d)

The above amounts disclosed in the maturity analysis are the contractual undiscounted cash fl ows and such

undiscounted cash fl ows differ from the amount included in the statement of fi nancial position. When the

counterparty has a choice of when an amount is paid, the liability is included on the basis of the earliest date on

which it can be required to pay.

Financial guarantee contracts – For fi nancial guarantee contracts the maximum earliest period in which the

guarantee could be called is used. At the end of the reporting year no claims on the fi nancial guarantees are

expected. The following table shows the maturity analysis of the contingent liabilities:

Less than 1 year

$’000

1 – 3 years

$’000

Total

$’000

Company

2011:

Financial guarantee contracts

– in favour of subsidiaries’ banking facilities 5,895 1,366 7,261


– in favour of subsidiaries’ tenancy agreements 188 256 444

At end of the year 6,083 1,622 7,705

Company

2010:


– in favour of subsidiaries’ banking facilities 7,247 1,206 8,453


– in favour of subsidiaries’ tenancy agreements 21 – 21

At end of the year 7,268 1,206 8,474

The liquidity risk is managed on the basis of expected maturity dates of the fi nancial liabilities. The average

credit period taken to settle non-related trade payables is about 90 days (2010: 90 days). The other payables are

with short-term durations. The classifi cation of the fi nancial assets is shown in the statement of fi nancial position

as they may be available to meet liquidity needs and no further analysis is deemed necessary.

The liquidity risk refers to the difficulty in meeting obligations associated with fi nancial liabilities that are settled

by delivering cash or another fi nancial asset. It is expected that all the liabilities will be paid at their contractual

maturity. In order to meet such cash commitments the operating activity is expected to generate sufficient cash

infl ows.


98

Annual Report

2011


24D. Liquidity Risk (Cont’d)

Bank facilities:

2011

$’000

2010

$’000

Undrawn borrowing facilities 16,649 14,671

Unused bank guarantees 735 752

The undrawn borrowing facilities are available for operating activities and to settle other commitments. Borrowing

facilities are maintained to ensure funds are available for the operations. A monthly schedule showing the

maturity of fi nancial liabilities and unused borrowing facilities is provided to the directors to assist them in

monitoring the liquidity risk.

24E. Interest Rate Risk

The interest rate risk exposure is mainly from changes in fi xed rate and fl oating interest rates. The interest from

fi nancial assets including cash balances is not signifi cant. The following table analyses the breakdown of the

fi nancial liabilities (excluding derivatives) by type of interest rate:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000


Fixed rate 6,229 11,429 6,184 11,393

Floating rate 19,964 22,411 12,969 13,958

At end of the year 26,193 33,840 19,153 25,351

The fl oating rate debt obligations are with interest rates that are re-set regularly at one, three or six month

intervals. The interest rates are disclosed in the respective notes.


31 December 2011

99

Innovalues

Limited


24E. Interest Rate Risk (Cont’d)

Sensitivity analysis:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000


A hypothetical variance in interest rates by

50 basis points with all other variables held

constant, would have an increase/decrease

in pre-tax profi t/(loss) for the year by 100 112 65 70

The analysis has been performed separately for fi xed interest rate liabilities and fl oating interest rate fi nancial

liabilities. The impact of a change in interest rates on fi xed interest rate fi nancial instruments has been assessed

in terms of changing of their fair value. The impact of a change in interest rates on fl oating interest rate fi nancial

instruments has been assessed in terms of changing of their cash fl ows and therefore in terms of the impact on

net expenses. The hypothetical changes in basis points are not based on observable market data (unobservable

inputs).


100

Annual Report

2011


24F. Foreign Currency Risks

Analysis of amounts denominated in non-functional currency:

2011 2010

Group

Financial assets:

Cash

$’000

Receivables

$’000

Total

$’000

Cash

$’000

Receivables

$’000

Total

$’000

At 31 December:

US dollars 5,948 14,389 20,337 7,231 16,364 23,595

China Renminbi 1,512 1,225 2,737 2,602 454 3,056

Malaysian Ringgit 1,704 71 1,775 742 52 794

Thai Baht 662 544 1,206 500 81 581

Euro – 3 3 – 55 55

9,826 16,232 26,058 11,075 17,006 28,081

2011 2010

Group


Borrowings

$’000

Payables

$’000

Total

$’000

Borrowings

$’000

Payables

$’000

Total

$’000

At 31 December:

US dollars 11,411 3,772 15,183 12,937 3,790 16,727

China Renminbi – 1,841 1,841 – 2,351 2,351

Malaysian Ringgit – 1,982 1,982 – 2,000 2,000

Thai Baht 1,991 2,495 4,486 2,743 2,213 4,956

Japanese Yen 210 – 210 290 – 290

Euro – 9 9 – 22 22

13,612 10,099 23,711 15,970 10,376 26,346

2011 2010

Company

Financial assets:

Cash

$’000

Receivables

$’000

Total

$’000

Cash

$’000

Receivables

$’000

Total

$’000

At 31 December:

US dollars 3,359 12,917 16,276 2,810 14,083 16,893

Euro – – – – 31 31

3,359 12,917 16,276 2,810 14,114 16,924

2011 2010

Company


Borrowings

$’000

Payables

$’000

Total

$’000

Borrowings

$’000

Payables

$’000

Total

$’000

At 31 December:

US dollars 6,406 9,365 15,771 7,190 5,179 12,369

Japanese Yen 210 – 210 290 – 290

Euro – 9 9 – 21 21

6,616 9,374 15,990 7,480 5,200 12,680


31 December 2011

101

Innovalues

Limited


24F. Foreign Currency Risks (Cont’d)

There is exposure to foreign currency risk as part of its normal business. In particular, there is signifi cant

exposure to US$ currency risk due to the large value of sales made in this currency.

Sensitivity analysis for signifi cant items:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

A hypothetical 10% depreciation in the

exchange rate of the functional currency

against the US$ would have a favourable/

(adverse) effect on profi t/(loss) before tax of 515 687 51 452



against the China Renminbi would have a

favourable/(adverse) effect on profi t/(loss)

before tax of 90 71 – –



against the Malaysian Ringgit would have

a favourable/(adverse) effect on profi t/(loss)

before tax of (21) (121) – –



against the Thai Baht would have a

favourable/(adverse) effect on profi t/(loss)

before tax of (328) (438) – –

The analysis above has been carried out on the basis that there are no hedged transactions.

In management’s opinion, the above sensitivity analysis is unrepresentative of the inherent foreign exchange

risks as the year end exposures do not refl ect the exposures during the year.


102

Annual Report

2011

25. Capital Commitments

Estimated amounts committed at the end of the reporting year for future capital expenditure but not recognised in the

fi nancial statements are as follows:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Commitments to purchase property, plant and

equipment 10,081 514 – –

26. Operating Lease Payments Commitments

At the end of the reporting year the total of future minimum lease payments under non-cancellable operating leases are

as follows:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Not later than one year 10,081 746 91 117

Later than one year and not later than fi ve years 419 580 45 135

Rental expense for the year 1,085 1,334 117 117

Operating lease payments represent rentals payable for certain of its rented factory properties, and plant and equipment.

The lease rental terms are negotiated for an average term of three years and rentals are subject to an escalation clause

but the amount of the rent increase is not to exceed a certain percentage.

27. Contingent Liabilities

Company

2011

$’000

2010

$’000

Guarantees in favour of subsidiaries’ banking facilities 7,261 8,453

Guarantees in favour of subsidiaries’ tenancy agreements 444 21

28. Dividend

Group and company

2011

$’000

2010

$’000

Interim exempt (1-tier) dividend paid of 0.6 cents 1,909 –


31 December 2011

103

Innovalues

Limited

29. Changes and Adoption of Financial Reporting Standards

For the reporting year ended 31 December 2011 the following new or revised Singapore Financial Reporting Standards

were adopted. The new or revised standards did not require any material modifi cation of the measurement methods or

the presentation in the fi nancial statements.

FRS No. Title

FRS 1 Presentation of Financial Statements Disclosures (Amendments to)

FRS 24 Related Party Disclosures (revised)

FRS 27 Consolidated and Separate Financial Statements (Amendments to)

FRS 32 Classifi cation Of Rights Issues (Amendments to) (*)

FRS 34 Interim Financial Reporting (Amendments to)

FRS 103 Business Combinations (Amendments to)

FRS 107 Financial Instruments: Disclosures (Amendments to)

FRS 107 Financial Instruments: Disclosures (Amendments to) - Transfers of Financial Assets (*)

INT FRS 113 Customer Loyalty Programmes (Amendments to) (*)

INT FRS 114 Prepayments of a Minimum Funding Requirement (revised) (*)

INT FRS 115 Agreements for the Construction of Real Estate (*)

INT FRS 119 Extinguishing Financial Liabilities with Equity Instruments (*)

(*) Not relevant to the entity.

30. Future Changes in Financial Reporting Standards

The following new or revised Singapore Financial Reporting Standards that have been issued will be effective in future.

The transfer to the new or revised standards from the effective dates is not expected to result in material adjustments to

the fi nancial position, results of operations, or cash fl ows for the following year.

FRS No. Title

Effective date for

periods beginning on

or after

FRS 1 Amendments to FRS 1 – Presentation of Items of Other Comprehensive

Income

1 Jul 2012

FRS 12 Deferred Tax (Amendments to ) – Recovery of Underlying Assets (*) 1 Jan 2012

FRS 19 Employee Benefi ts 1 Jan 2013

FRS 27 Consolidated and Separate Financial Statements (Amendments to) 1 Jul 2011

FRS 27 Separate Financial Statements 1 Jan 2013

FRS 28 Investments in Associates and Joint Ventures (*) 1 Jan 2013

FRS 107 Financial Instruments: Disclosures (Amendments to) - Transfers of Financial

Assets (*)

1 Jul 2011

FRS 110 Consolidated Financial Statements 1 Jan 2013

FRS 111 Joint Arrangements (*) 1 Jan 2013

FRS 112 Disclosure of Interests in Other Entitles 1 Jan 2013

FRS 113 Fair Value Measurements 1 Jan 2013

(*) Not relevant to the entity.

Information onShareholdingsAs at 23 March 2012

104

Annual Report

2011

Issued and fully paid capital : SGD11,358,184

Number of shares : 318,214,000

Class of shares : ordinary shares

Voting rights : one vote per share

Distribution of shareholdings

Size of Shareholdings Shareholders % No. of Shares %

1 – 999 1 0.05 480 0.00

1,000 – 10,000 702 32.53 5,042,120 1.59

10,001 – 1,000,000 1,430 66.26 107,241,400 33.70

1,000,001 and above 25 1.16 205,930,000 64.71

TOTAL: 2,158 100.00 318,214,000 100.00

Shareholding held by the public

Based on the information available to the Company as at 23 March 2012, approximately 54.59% of the issued ordinary shares

of the Company is held by the public and, therefore, Rule 723 of the Listing Manual issued by the Singapore Exchange

Securities Trading Limited is complied with.

Substantial shareholders

Direct Interest Deemed Interest

Name of shareholders No. of shares % of shares No. of shares % of shares

Atlantis Capital Holdings Limited – – 24,925,000 7.83

Goh Leng Tse 62,200,000 19.55 2,080,000(1) 0.65

Ong Tiak Beng 28,127,000 8.84 – –

Koh Boon Hwee 22,000,000 6.91 – –

Note:

(1) The deemed interest of Mr Goh Leng Tse arises from shares held by his nominee and spouse.

Information onShareholdings

As at 23 March 2012

105

Innovalues

Limited

Top twenty shareholders

No. Name No. of Shares %

1 Goh Leng Tse 62,200,000 19.55

2 Ong Tiak Beng 28,127,000 8.84

3 Koh Boon Hwee 22,000,000 6.91

4 DBS Nominees Pte Ltd 17,616,000 5.54

5 Citibank Nominees Singapore Pte Ltd 13,671,000 4.30

6 United Overseas Bank Nominees Pte Ltd 7,027,000 2.21

7 Tan Hock Heng 6,598,000 2.07

8 DBS Vickers Securities (Singapore) Pte Ltd 4,980,000 1.56

9 Hia Cher Bee 4,689,000 1.47

10 HSBC (Singapore) Nomineess Pte Ltd 4,564,000 1.43

11 Robin Ng Zhi Peng 3,830,000 1.20

12 OCBC Nominees Singapore Pte Ltd 3,465,000 1.09

13 Loo Tian Sze Melvin 3,000,000 0.94

14 Maybank Kim Eng Securities Pte Ltd 2,957,000 0.93

15 Lee Kwang Hwee 2,598,000 0.82

16 Tan Thiam Beng 2,550,000 0.80

17 Phillip Securities Pte Ltd 2,278,000 0.72

18 Teo Siew Ngor 2,218,000 0.70

19 Koh Beow Ko 2,112,000 0.66

20 Bank Of Singapore Nominees Pte Ltd 2,062,000 0.65

TOTAL: 198,542,000 62.39

Notice ofAnnual General Meeting

106

Annual Report

2011

NOTICE IS HEREBY GIVEN that the 2012 Annual General Meeting of the shareholders of the Company will be held at 8 Wilkie

Road #03-01 Wilkie Edge Singapore 228095 on 19 April 2012 at 3.00 p.m. to transact the following businesses:

AS ORDINARY BUSINESS

1. To receive and consider the audited fi nancial statements of the Company and Reports of the

Directors and Auditors for the year ended 31 December 2011.

2. To re-elect the following Director retiring pursuant to the Company’s Articles of Association:

Mr Ong Sim Ho (Article 106)

[Note: Mr Ong Sim Ho shall, upon re-election as Director of the Company, remain as members

of the Audit, Remuneration and Nominating Committees. Mr Ong Sim Ho shall be considered

independent for the purpose of Rule 704(8) of the Listing Manual of the Singapore Exchange

Securities Trading Limited.]

3. To re-elect the following Director retiring pursuant to the Company’s Articles of Association:

Mr Ong Tiak Beng (Article 106)

4. To approve the Directors’ fees of S$225,000 for the year ended 31 December 2011.

5. To re-appoint RSM Chio Lim LLP as the Company’s Auditors and to authorise the Directors to fi x

their remuneration.

Resolution 1

Resolution 2

Resolution 3

Resolution 4

Resolution 5


107

Innovalues

Limited

AS SPECIAL BUSINESS

To consider and, if thought fi t, to pass the following Resolutions as Ordinary Resolutions, with or without amendments:

6. Proposed Share Issue Mandate

“That pursuant to Section 161 of the Companies Act, Cap. 50. and Rule 806 of the Listing Manual

of the Singapore Exchange Securities Trading Limited (“SGX-ST”), the Directors of the Company be

authorized and empowered to:

(a) (i) issue shares in the Company (“shares”) whether by way of rights, bonus or otherwise;

and/or

(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or

would require shares to be issued, including but not limited to the creation and issue

of (as well as adjustments to) options, warrants, debentures or other instruments

convertible into shares,

at any time and upon such terms and conditions and for such purposes and to such persons

as the Directors of the Company may in their absolute discretion deem fi t; and

(b) (notwithstanding the authority conferred by this Resolution may have ceased to be in

force) issue shares in pursuance of any Instrument made or granted by the Directors of the

Company while this Resolution was in force,

provided that:

(1) the aggregate number of shares (including shares to be issued in pursuance of the

Instruments, made or granted pursuant to this Resolution) to be issued pursuant to this

Resolution shall not exceed fi fty per centum (50%) of the total number of issued shares

(excluding treasury shares) in the capital of the Company (as calculated in accordance with

sub-paragraph (2) below), of which the aggregate number of shares and Instruments to be

issued other than on a pro rata basis to existing shareholders of the Company shall not

exceed twenty per centum (20%) of the total number of issued shares (excluding treasury

shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2)

below);

(2) (subject to such calculation as may be prescribed by the SGX-ST) for the purpose of

determining the aggregate number of shares that may be issued under sub-paragraph (1)

above, the total number of issued shares (excluding treasury shares) shall be based on the

total number of issued shares (excluding treasury shares) in the capital of the Company at

the time of the passing of this Resolution, after adjusting for:

(a) new shares arising from the conversion or exercise of any convertible securities;

Resolution 6


108

Annual Report

2011

(b) new shares arising from exercising share options or vesting of share awards which

are outstanding or subsisting at the time of the passing of this Resolution; and

(c) any subsequent bonus issue, consolidation or subdivision of shares;

(3) in exercising the authority conferred by this Resolution, the Company shall comply with

the provisions of the Listing Manual of the SGX-ST for the time being in force (unless

such compliance has been waived by the SGX-ST) and the Articles of Association of the

Company; and

(4) unless revoked or varied by the Company in a general meeting, such authority shall continue

in force until the conclusion of the next Annual General Meeting of the Company or the date

by which the next Annual General Meeting of the Company is required by law to be held

whichever is earlier.”

[See Explanatory Note (i)]

7. Authority to offer and grant options and issue shares in accordance with the Innovalues

Group Share Option Scheme 2011

“That approval be and is hereby given to the Directors of the Company to offer and grant options in

accordance with the provisions of the Innovalues Group Share Option Scheme 2011 (“the Scheme”),

and pursuant to Section 161 of the Companies Act, Cap. 50, to allot and issue from time to time

such number of ordinary shares in the Company as may be required to be issued pursuant to the

exercise of the options under the Scheme provided always that the aggregate number of ordinary

shares to be issued pursuant to the Scheme shall not exceed 15 per cent of the total issued shares

excluding treasury shares of the Company at any time and from time to time.”

[See Explanatory Note (ii)]

Resolution 7


109

Innovalues

Limited

8. And to transact any other business which may be properly transacted at an Annual General

Meeting.

Explanatory Notes:

(i) The proposed Resolution 6 above, if passed, will empower the Directors of the Company,

effective until the conclusion of the next Annual General Meeting of the Company, or the

date by which the next Annual General Meeting of the Company is required by law to be

held or such authority is varied or revoked by the Company in a general meeting, whichever

is the earlier, to issue shares, make or grant instruments convertible into shares and to issue

shares pursuant to such instruments, up to a number not exceeding, in total, 50% of the total

number of issued shares (excluding treasury shares) in the capital of the Company, of which

up to 20% may be issued other than on a pro-rata basis to shareholders.

(ii) The Ordinary Resolution proposed in item 7 above, if passed, will empower the Directors

of the Company to offer and grant options under the Scheme and to allot and issue shares

pursuant to the exercise of options under the Scheme, subject to the terms of the resolution.

BY ORDER OF THE BOARD

Soo King Teng

Company Secretary

Date: 3 April 2012

Notes:

(a) A member entitled to attend and vote at this meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a member of the Company.

(b) If a proxy is to be appointed, the form must be deposited at the registered office of the Company at 9 Kallang Place #07-08/09 Singapore

339154 not less than 48 hours before the meeting.

(c) The form of proxy must be signed by the appointor or his attorney duly authorised in writing.

(d) In the case of joint shareholders, all holders must sign the form of proxy.

This page has been intentionally left blank.

INNOVALUES LIMITED Registration No. 199702822E

(Incorporated in Singapore)

PROXY FORM

I/We

of

being a member(s) of INNOVALUES LIMITED (the “Company”), hereby appoint:

Name Address

NRIC/Passport

Number

Proportion of

Shareholdings

and/or (delete as appropriate)

Name Address

NRIC/Passport

Number

Proportion of

Shareholdings

as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and if necessary, to demand a poll at the 2012 Annual

General Meeting of the Company to be held at 8 Wilkie Road #03-01 Wilkie Edge Singapore 228095 on Thursday, 19 April

2012 at 3.00 p.m. and at any adjournment thereof.

(Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the resolutions as

set out in the Notice of Annual General Meeting. In the absence of specifi c directions, the proxy/proxies will vote or abstain as

he/they may think fi t, as he/they will on any other matter arising at the Annual General Meeting.)

No. Resolutions For Against

1 Directors’ Report and Audited Accounts for the year ended 31 December 2011

2 To re-elect Mr Ong Sim Ho as Director

3 To re-elect Mr Ong Tiak Beng as Director

4 To approve Directors’ fees for the year ended 31 December 2011

5 To re-appoint RSM Chio Lim LLP as Auditors and authorise the Directors to fi x their

remuneration

6 To authorise the Directors to allot and issue shares and convertible securities

7 To authorise the Directors to offer and grant options and issue shares in accordance

with the Innovalues Group Share Option Scheme 2011

Dated this day of 2012

Signature(s) of member(s) or common seal

IMPORTANT: PLEASE READ NOTES OVERLEAF

IMPORTANT

1. This Annual Report is also forwarded to investors who have used their CPF monies to buy shares in the Company at the request of their CPF Approved Nominees, and is sent solely for their information only.

2. The Proxy form is, therefore, not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

Total number of Shares held

1st fold here

2nd fold here

Company SecretaryInnovalues Limited Block 9, #07-08/09

Kallang PlaceSingapore 339154

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), you should insert that number of shares. If you have shares registered in your name in the Register of Members, you should insert that number of shares. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares. If no number is inserted, this form of proxy will be deemed to relate to all the shares held by you.

2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint not more than two proxies to attend and vote on his behalf. A proxy need not be a member of the Company.

3. Where a member appoints more than one proxy, he shall specify the proportion of his shareholding to be represented by each proxy. 4. The instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorised in writing. Where the

instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its common seal or under the hand of its attorney or duly authorised officer.

5. A corporation which is a member of the Company 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 Annual General Meeting, in accordance with its Articles of Association and Section 179 of the Companies Act, Chapter 50.

6. The instrument appointing a proxy or proxies, together with the power of attorney or other authority (if any) under which it is signed, or notarially certifi ed copy thereof, must be deposited at the registered office of the Company at Block 9 Kallang Place #07-08/09 Singapore 339154 not later than 48 hours before the time set for the Annual General Meeting.

7. 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 members of the Company whose shares are entered against their names in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if such members are not shown to have shares entered against their names in the Depository Register at 48 hours before the time appointed for holding the Annual General Meeting as certifi ed by The Central Depository (Pte) Limited to the Company.

Affix

Postage

Stamp

Innovalues LimitedRegistration No. 199702822E

9 Kallang Place #07-08/09

Singapore 339154

Tel: [65] 6298 2374

Fax: [65] 6298 2375

www.innovalues.com

Date post:	05-Jun-2018
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