Group Performance

I am pleased to present the annual report for the financial year ended 31 December 2008 (FY2008).

For FY2008, the Group posted a turnover of about $510.6 million. This was a creditable 7% increase when compared to the corresponding period for the financial year ended 31 December 2007 (FY2007). The turnover increase was achieved on a backdrop of a global fi nancial and economic crisis, which dampened demand for electronic products, especially in the fourth quarter of FY2008.

For FY2008, net profit of about $6.0 million was achieved as compared to a profi t of about $7.3 million in FY2007. The FY2007 net profi t included a gain of about $7.1 million on disposal of the entire 10.7% interests in Wintech Microelectronics Co., Ltd, a company listed on the Taiwan Stock Exchange. No similar gains were recorded in FY2008. In addition, the Group made a fair value gain on investment properties of about $0.9 million in FY2007 as compared to $0.1 million in FY2008. Excluding these gains, the Group had performed well operationally in FY2008 under an extremely difficult environment, affected by the global fi nancial and economic crisis. The Group continued to focus on cost effi ciency and was able to reduce total expenses (excluding provisions for trade and other receivables and currency loss) as a percentage of turnover from about 9% in FY2007 to about 8% in FY2008.

For FY2008, net cash from operating activities rose by more than 410% to about $17.7 million from about $3.5 million in FY2007. The Group’s cash and cash equivalents as at 31 December 2008 was about $15.4 million and bank borrowings declined to about $30.4 million from about $37.4 million as at 31 December 2007.

Based on the issued share capital as at the end of 2008, net assets backing per ordinary share for FY2008 was 13.40 cents as compared with 13.26 cents the previous year. On a fully diluted basis, net earnings per ordinary share was 1.00 cent. Semiconductors/components distribution remains the Group’s core business and experienced growth in majority of the regions we operate in.

The North Asia region, which comprises Greater China, South Korea, and Taiwan, posted a 5% growth in turnover. This was largely due to increase in customers’ base, new products’ lines and increased products’ range.

Our operations in South and South East Asia registered a 19% increase in turnover when compared with the figure for FY2007, due largely to the increased sales volume in Philippines, Thailand and India.

The semiconductors/components distribution business posted a net profi t of $6.6 million as compared to a net profi t of $0.2 million in FY2007. The better performance by the semiconductors/ components distribution business was attributable mainly to higher gross profi t earned because of higher turnover and higher gross profi t margin. Average gross profi t margin increased from 8.7% in FY2007 to 9.1% in FY2008 as the Group focused more effort on the sale of high margin products. The continuing competitive environment in the markets the Group operated in coupled with worsening economic environment, however negated the impact of the gross margin increase.

Serial Microelectronics Pte Ltd (SMPL), a wholly owned subsidiary posted a 22% increase in turnover to $135.7 million. Both its South and South East Asia and transferred businesses from its South Korean entities registered strong growth from increase in customers’ base and increased products’ range. SMPL recorded a net profi t attributable to shareholders of $3.0 million as compared to a loss of $1.8 million in FY2007. The better performance was mainly attributable to higher gross profi t from higher turnover and higher gross profit margin.

Serial Microelectronics (HK) Limited, a 91% Hong Kong subsidiary and its wholly owned subsidiary, Serial Microelectronics (Shenzhen) Co., Ltd (SMHK Group) chalked up another year of sterling performance. The SMHK Group recorded net profit attributable to shareholders of $3.9 million on a turnover of $274.1 million. FY2007 net profit and turnover were $2.1 million and $256.5 million respectively. The higher profit was a result of higher gross profit and lower expenses as it begun to reap the benefit from better cost efficiency and effectiveness in FY2008. In May 2008, SMHK incorporated a wholly owned Hong Kong subsidiary, New Trend Technology Development Limited.

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