Innotek Ltd Annual Report 2013

8/12/2019 Innotek Ltd Annual Report 2013

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STRIVING FOR EFFICIENCY


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Mission Statement

Our mission is to provide innovative products, technologies and business solutions for our customers to help them

achieve their operating and business goals. We will continuously invest in technology and develop an operational

structure that allows our customers to meet their cost targets while simultaneously assuring a good return to our

shareholders. We always respect the value of our employees and invest in them, our most important asset, as

they are the fuel for our growth as an organization.

Contents

Core Values _____________________________________________________________________________________ 1

Corporate Information____________________________________________________________________________

4

Letter To Shareholders_____________________________________________________________________________

5

InnoTek Locations_______________________________________________________________________________

10

Board Of Directors_______________________________________________________________________________

11

Senior Management_____________________________________________________________________________

13

Corporate Structure

______________________________________________________________________________

15

Financial Highlights______________________________________________________________________________

20

Corporate Governance Report___________________________________________________________________

21

Directors Report_________________________________________________________________________________

36

Statement By Directors___________________________________________________________________________

40

Independent Auditors Report_____________________________________________________________________

41

Consolidated Statement Of Comprehensive Income________________________________________________

42

Balance Sheets_________________________________________________________________________________

44

Statement Of Changes In Equity__________________________________________________________________

45

Consolidated Cash Flow Statement_______________________________________________________________

48

Notes To Financial Statements____________________________________________________________________

50

Statistics Of Shareholdings_______________________________________________________________________

115

Notice Of Annual General Meeting_______________________________________________________________

117

Proxy Form

InnoTek Annual Report 2013


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Core Values

Achievement Drive towards excellence in all that we do. Growth in profitability and shareholder value are our measures of success. Respect is earned, not granted, regardless of position.

Communication

Dont be defensive assume good intentions from others. Reveal your issues no hidden agendas and dont keep problems internally. Be a good listener attack the problem, not the person.

Teamwork

Zero tolerance for political behaviour. Be vested in the success of our subordinates, peers and superiors. Build consensus as much as possible without hindering decision making. Respect for the individual, as all team members provide something of value.

Balance

If its not fun, change it we are probably not doing it right. Respect for the family as well as the business.

Realise the equal value of all functions within the organization. Balance the organizational success with the caring of people.

Commitment

Do what you say you will do, in all relationships. Continuous customer satisfaction embrace the customers and suppliers as our partners. Take the time to develop our employees.

Creativity

Encourage out-of-the box thinking among employees. Challenge existing paradigms in all that we do. Create an environment that encourages new ideas from employees, while fostering teamwork.


4/124InnoTek Annual Report 20132

Zero tolerance for political behaviour

Be vested in the success of our subordinates, peers and superiors

Build consensus as much as possible without hindering decision making

Respect for the individual, as all team members provide something of value

TEAMWORK



Drive towards excellence in all that we do

Growth in profitability and shareholder value are our measures of success

Respect is earned, not granted, regardless of position

ACHIEVEMENT



REGISTERED OFFICE1 Finlayson Green #15-02

Singapore 049246

Telephone : (65) 6535 0689

Facsimile: (65) 6533 2680

Website: www.innotek.com.sg

EXECUTIVE COMMITTEEMr. Robert Sebastiaan Lette, Chairman

Mr. Yong Kok Hoon

Mr. Peter Tan Boon Heng

PLACE OF INCORPORATIONSingapore

AUDIT COMMITTEEMr. Steven Chong Teck Sin, Chairman


Mr. Robert Sebastiaan Lette

COMPANY REGISTRATION NUMBER199508431Z

NOMINATING COMMITTEEMr. Robert Sebastiaan Lette, Chairman


Mr. Steven Chong Teck Sin

DATE OF INCORPORATION28 November 1995

REMUNERATION COMMITTEEMr. Peter Tan Boon Heng, Chairman



BOARD OF DIRECTORSMr. Robert Sebastiaan Lette, Chairman

Mr. Yong Kok Hoon



AUDITORSErnst & Young LLP

One Raffles Quay

North Tower, Level 18

Singapore 048583

Audit Partner-in-charge:

Mr. Christopher Wong (since 2012)

COMPANY SECRETARIESMs. Linda Sim Hwee Ai

Ms. Fu Nee Fa (Resigned on 1 August 2013)

PRINCIPAL BANKERSThe Hongkong and Shanghai Banking Corpn

DBS Bank Limited

SHARE REGISTRARBoardroom Corporate & Advisory Services Pte Ltd

50 Raffles Place

#32-01 Singapore Land Tower

Singapore 048623

Corporate Information



Letter to Shareholders

Managing Director

Mr. Yong Kok HoonChairman


Dear Shareholders,

We are pleased to present you the annual report for InnoTek Limited (InnoTek or the Group) for the financial year ended31 December 2013 (FY13).

Business conditions remain challenging in the current global economic and political uncertainty. The slower growth ofmanufacturing activities in China, coupled with rising minimum wages and a strengthening Renminbi, have continued toput pressure on margins. Meanwhile, the political tension between Japan and China has continued to impact our majorJapanese customers.

Despite these conditions, the Group recorded a net profit of S$0.9 million in FY13, reversing a loss of S$18.5 million in FY12 aswe pressed on with our restructuring efforts to improve efficiencies while we continued to tap on new business opportunities.

Dongguan Mansfield Magix Dongguan Plant 4

the Group recorded a net profit of S$0.9 million in FY13,reversing a loss of S$18.5 million in FY12 as we pressed onwith our restructuring efforts to improve efficiencies whilewe continued to tap on new business opportunities.



FINANCIAL PERFORMANCE

The Groups positive swing of S$19.4 million in FY13 net

profit was mainly due to the consolidation and restructuring

efforts first implemented in FY12 as well as one-off gains

on disposal of a PRC plant in Q213 and our Hong Kong

premises completed in July 2013. Against the backdrop

of these challenges, revenue from continuing operations

of wholly owned Mansfield Manufacturing Company Ltd

(MSF) declined to S$246.9 million in FY13 from S$258.8

million in FY12. This was largely due to lower margins inChina and the relocation of Japanese corporations from

China to South East Asia. Our FY13 revenue also excludes

contribution from Mansfield Industrial Co. Ltd (MICL),

which was disposed of in 2012 and had accounted for

S$5.0 million of FY12 revenue.

In FY13 revenue from the Precision sub-assembly segment

slowed to S$17.8 million from S$21.3 million in FY12,mitigated by a S$5.9-million increase in revenue from the

Precision Components and Tooling businesses to S$225.6

million from S$219.7 million, respectively.

Despite the lower revenue, MSFs gross profit margin in FY13rose to 12.1% from 11.3% in FY12 on improved efficiency

following consolidation and restructuring efforts; despite

higher salaries due to further minimum wage adjustments

in Q213. This resulted to gross profit increase to S$29.9

million from S$29.2 million over the comparative period.

The consolidation and restructuring further helped narrow

MSFs operating loss in FY13 to S$8.4 million from S$17.1

million a year ago, mainly due to the S$6.8-million reduction

of administrative expenses to S$37.9 million arising mainly

from the consolidation of the two Dongguan plants and

the freeing up of the old rented Suzhou plant in FY12, and

the disposal of the HK premises.

The Groups FY13 loss was also due to S$0.9-million

retrenchment expense and S$1.3-million impairment losses

of certain equipment, although these were mitigated by

fair-value gain of investment property amounting to S$0.5

million.


Wuhan Mansfield Plant

Sun Mansfield Plant

Suzhou Mansfield

Feng Chuan Tooling (Dongguan)




FY13 operating loss was further mitigated by the S$7.8-

million gain on disposals from a Dongguan plant and Hong

Kong office. The Group also recorded corporate gain

of S$1.4 million in FY13, reversing a loss of S$0.8 million

a year ago mainly due to a reversal of a tax provision of

S$1.3 million in Q413 and an exchange gain of S$0.6

million. This resulted to a positive bottom-line of the Groups

performance in FY13.

InnoTeks cash position remains healthy at S$17.7 million

or 7.92 cents per share, comprising cash and cash

equivalents of S$27.8 million less total borrowings of S$10.1

million as at 31 December 2013.

Earnings per share for FY13 was 0.41 cent versus a loss

of 8.25 cents in FY12. Net asset backing per share as at

31 December 2013 increased to 72.6 cents compared to

70.0 cents as at 31 December 2012.

DIVIDEND

Despite the operational loss in FY13, we remain committed

to maintaining shareholder value. The Directors have

proposed a first and final one-tier tax exempt dividend of

1.0 Singapore cent per share, unchanged from a year

ago, to be funded by proceeds from the one-off gain on

disposal of the Hong Kong premises. This is the seventh

consecutive year that InnoTek has been giving out dividend

to its shareholder.

Continuing our efforts to enhance shareholder value, the

Company repurchased 117,000 InnoTek shares in FY13,

a process it had begun in FY2007. This brought the total

treasury shares held by the Company to 22.8 million shares

or 9.25% of total issued share capital. This excludes 15.8

million treasury shares re-issued in FY08 to acquire the

remaining 16.7% stake in MSF not already owned then by

the Company.

Consumer electronic parts

Coordinating measuring machine

TV parts

1000 tons press machine



OUTLOOK & STRATEGIC ACTIONS

The Group continues to face challenges from high

operating costs in China. Meanwhile, anti-Japanese

sentiment in China has led many Japanese corporations

to relocate production facilities to South East Asia and other

regions as they face fierce competition from producers

of other countries, particularly South Korea. These have

caused a contraction of new export orders as well as a

slower demand growth from abroad.

Demand for automotive components remains strong

although there remains uncertainty about the business

outlook for the Groups other main industry sub-sectors TV

components and printing & imaging (formerly referred to

as office automation).

In order to stay competitive, the Group will continue its

consolidation and restructuring initiatives to achieve even

lower cost structures in the long run. The sharp reversalto profit despite the challenging business environment

underscores the success of our streamlining efforts. As

part of our strategic review, the Group is also aggressively

diversifying our customer base to reduce its dependence

on Japanese customers by seeking out local Chinese

brands, which are racing to compete with international

brands.

While unexpected economic and political events continue

to provide an uncertain outlook, we believe that the steps

taken over the past year provide a solid platform going

forward as we continue to build InnoTeks capabilities as a

precision metal components specialist.

CORPORATE DEVELOPMENTS

On 31 December 2013, Mr. Josiah Ang Lien Peng resigned

as Chief Operating Officer of MSF to pursue other career

opportunities. We wish to thank Mr. Ang for his contributions

to the Group.

Subsequent to the year end, the Board announced the

dissolution of the Executive Committee (ExCo) on 25

February 2014. The ExCo was originally formed to assist

the Board in the absence of a CEO after the Company


Auto parts

CMM equipment

TV parts

Turning Lathe



disposed of its data storage business in 2008. Followingthe appointment of Mr. Yong Kok Hoon as the Companys

Managing Director in 2010 who is now fully in charge of

the InnoTek Group, the ExCo had served its purpose and,

accordingly, the Board of Director has decided that it be

dissolved.

In 2013 InnoTek was named SIAS Investors Choice winner

for corporate governance under the small-cap category.

On behalf of InnoTek, Mr Yong Kok Hoon, our Managing

Director, received the award from the Guest-of-Honour,

Ms. Josephine Teo, Singapores Senior Minister of State,

Ministry of Transport, at a gala dinner held at Resorts World

Convention Centre on 8 November 2013. This prestigious

award was received a year after we won the merit award in

the same category. It is a highly commendable recognition

of the emphasis placed by the Directors and management

to follow the best practices of corporate governance and

transparency while seeking to enhance shareholder value.

APPRECIATION

On behalf of the Board, we thank all customers, business

partners, management and staff for your effort and

continued support to InnoTek. We would also like to take

this opportunity to thank our shareholders for their loyalty

and continued support.

Mr. Robert Sebastiaan Lette Mr. Yong Kok Hoon

Chairman And Non-ExecutiveIndependent Director

Managing Director

Auto parts

CNC machine centre

Heat treatment

Printing & Iomega parts




InnoTek Locations

InnoTek Limited1 Finlayson Green #15-02

Singapore 049246

Tel : (65) 6535 0689

Fax : (65) 6533 2680

www.innotek.com.sg

Mansfield Manufacturing Company Limited

Unit C, 4/F, Garment Centre

No. 576-586 Castle Peak Road

Kowloon, Hong Kong

Tel : (852) 2489 1968Fax : (852) 2481 0946

www.mansfield.com.hk

Sun Mansfield Manufacturing (Dongguan) Co. Ltd.

Block 103, 105 & 106, Xin Yang Road,

New Sun Industrial City, Lincun, Tangxia,

Dongguan City, Guangdong Province, China

PC : 523711

Tel : (86) 769-87929299

Fax : (86) 769-87928993

Sun Mansfield Manufacturing (Dongguan) Co., Ltd.

(Branch)

No. 3, Lindong 3 Road, Lincun, Tangxia,


PC : 523711

Tel : (86) 769-87930866

Fax : (86) 769-87930766

Mansfield (Suzhou) Manufacturing

Company Limited

No. 2, Jin Wang Road, Xu Shu Guan,Suzhou New District, Suzhou,

Jiangsu Province, China

PC : 215151

Tel : (86) 512-66617083

Fax : (86) 512-66617760

Mansfield Manufacturing (Wuhan) Company LimitedNo. 169, North Quanli Road,

Wuhan Economic and Technological Development

Zone, Wuhan City, Hubei Province, China

PC : 430056

Tel : (86) 027-84551088

Fax : (86) 027-84893788

Feng Chuan Tooling Company Limited



Kowloon, Hong Kong

Tel : (852) 2489 1968Fax : (852) 2481 0946

Feng Chuan Tooling (Dongguan) Company Limited

No. 55 Xiang Xin East Road, Yantian,

Fenggang Town,


PC : 523700

Tel : (86) 769-87513998

Fax : (86) 769-87512008

Magix Mechatronics Company Limited



Kowloon, Hong Kong

Tel : (852) 2489 1968

Fax : (852) 2481 0946

Magix Mechatronics (Dongguan) Company Limited

No. 1 Er Heng Dao, Xiang Xin East Road,

He Dong Industrial Zone, Yantian,

Fenggang Town, Dongguan City,

Guangdong Province, China

PC : 523740

Tel : (86) 769-82039188

Fax : (86) 769-82039100



Board of Directors

Mr. Yong Kok Hoon

Mr. Steven Chong Teck Sin - Mr. Robert Sebastiaan Lette - Mr. Yong Kok Hoon - Mr. Peter Tan Boon Heng

Mr. Yong Kok Hoonheld key leadership roles in the Group

for over 15 years serving initially as Chief Financial Officer,

Executive Director and presently the Managing Director

of InnoTek Limited.

Mr. Yong is a Chartered Accountant, Singapore and

a Fellow of the Association of Chartered Certified

Accountants, UK; he was the Group Financial Controller

of QAF Ltd., a listed FMCG group, before joining InnoTek.

Prior to that, he serves in various senior positions at

international accounting firms for more than 15 years.

During which time he gained extensive experience

in auditing, advisory services and M&A; and was

reporting accountant for multi-million dollar IPOs and

major transactions. He was a member of the financial

statements review committee and was a member of the

China committee of the Institute of Singapore Chartered

Accountants. He holds a Master of Business Administration

degree from the International Management Centre,

Europe.

With a strong background in finance and mergers andacquisitions, Mr Yong played a pivotal role in the formation

of JVs, acquisition of strategic investments and merger

of the Groups data storage business with Magnecomp

Precision Technology Public Company Limited of Thailand

(MPT) and the subsequent disposal in 2007 of MPT. Since

then, he re-focuses his attention on building operation

excellence to improve cost and efficiencies, governance

and control and most importantly, the strategic direction

of its main subsidiary, Mansfield Group of Companies, as

well as at the Group level.

Mr. Yong also sits on the board of Sabana Shariah

Compliant Industrial Real Estate Trust. He was re-elected

as a Director of the Company at the 2012 AGM.



Mr. Robert Sebastiaan LetteMr. Robert Sebastiaan Lette is a Non-Executive

Independent Director of InnoTek Limited since May 16,

2002. Mr. Lette was appointed Chairman of the Board

on November 12, 2004. A former banker with Credit

Suisse Singapore, Mr. Lette is a non-executive director

of Heineken Beverages Switzerland, A.G. Mr Lette was

re-elected as a Director of the Company at the 2011

AGM and is due for re-election at this years AGM.

Mr. Peter Tan Boon Heng joined InnoTek as a Non-Executive Independent Director on September 17,

2008 and is a member of the Audit and Nominating

Committees. He chairs the Remuneration Committee.

Peter has experience in the public and private sectors,

having worked in several multinational companies and

held directorships and advisory position in companies

engaged in the investment, technology, semiconductor,

education and IT industries. Amongst his previous

appointments, Peter was Group Executive Director of JIT

Holdings Limited and President and Managing Director of

Flextronics International Inc. Asia, and was also a board

member of Vacuumschmelze (VAC) Luxembourg S.a.r.l.,Dialog Semiconductor PLC (UK) and VariOptic SA.

He is presently Director and Managing Partner of JP

Asia Capital Partners Pte Ltd and also sits on the board

of SMRT Corporation Ltd and Exploit Technologies

Pte Ltd. He is also co-Chairman of the Advanced

Remanufacturing Technology Center, a new initiative

from the Agency for Science, Technology & Research

(A*STAR), in collaboration with Nanyang Technological

University (NTU). Besides his board role, Peter has advisory

function in the National University of Singapore BTech

Program, and is also a member of the International

Evaluation Panel, Competitive Research Program for the

Singapore National Research Foundation. He is also an

advisor to SolarEdge Technologies, Inc. in Israel. Peter

holds a Graduate Diploma in Management Studies

(Distinction) from the University of Chicago and an MBA

Degree from Golden Gate University, San Francisco,

USA. In accordance with the Articles of Association of the

Company, Mr. Peter Tan was re-elected as a Director of

the Company at the 2012 AGM.



Mr. Steven Chong Teck Sin joined InnoTek as a Non-

Executive Independent Director on September 17,

2012 and is a member of the Audit Committee. Steven

has extensive experience as director of public listed

companies in Singapore, particularly in the technology

sector. Between 1999 and 2004 he served as Group

Managing Director (Commercial) of Seksun Corporation

Ltd, which was then listed on the Main Board of the

Singapore Exchange (SGX). He later held non-executive

roles in other SGX Main Board listed companies, including

Midsouth Holdings Ltd, Beyonics Technology Limited,Wanxiang International Limited, Sihuan Pharmaceutical

Holdings Group Ltd, and JES International Holdings

Limited.

Mr. Chong was also a board member of the Accounting

and Corporate Regulatory Authority (ACRA), a statutory

board of Singapores Ministry of Finance from April

2004 to March 2010, as well as a board member of

Singapores largest charity called the National Kidney

Foundation (NKF) from October 2008 to July 2010. Mr.

Chong currently sits on the board of public companies

listed on the SGX and the Hong Kong Stock Exchange.

Mr. Chong graduated with a Bachelor of Engineering

from the University of Tokyo in 1981 on a government

scholarship and subsequently obtained a Masters of

Business Administration from the National University ofSingapore in 1987 through part-time study. Mr. Steven

Chong was re-elected as a Director of the Company at

the 2013 AGM.

Board of Directors



Senior Management

Mr. Yi Yuan WahMr. Yi Yuan Wah joined Mansfield as its Chief Financial Officer (CFO) in November 2012

and after a year, relinquished his CFO post to assume the responsibility as the General

Manager of Mansfield Manufacturing for its 3 manufacturing plants in Dongguan, namely

Sun Mansfield Manufacturing (Dongguan) Co. Ltd, Magix Mechatronics (Dongguan) Co.

Ltd and Feng Chuan Tooling (Dongguan) Co. Ltd. Mr. Yi graduated from Murdoch

University, Western Australia in 1989 with a Bachelor of Commerce, and went on to

pursue an MBA from Hull University, UK in 1992.

An associate member of the Australian CPA, Mr. Yi has more than 20 years of experience

in investment, finance and accounting. His experience spans across different industries

ranging from multi-national corporation such as Ericsson to small-medium enterprises

like Swee Chioh Groups of Companies. His last appointment was Finance Director andBoard Director of Ettason Group of Companies in Sydney, Australia. In Ettason Mr. Yi

was entrusted by its major shareholder with the responsibility to oversee their investment

and with the task to transform the family driven company into one that conformed to

corporate standards and a process driven organization.

Before joining Ettason, Mr. Yi spent ten years with Swee Chioh Group of Companies as

its Managing Director and successfully transformed a family-run fishery into one of the

largest aquaculture companies in Singapore. Earlier, Mr. Yi was holding different positions

in Ericsson Telecom China from 1995-2001 with his main responsibilities in Finance and

Accounting. His last appointment with Ericsson was as the Managing Director of Ericsson

Guangdong Telecom Pte Ltd, a service joint venture between Ericsson Sweden and

Guangdong Telecom.

Mr. William Zhang

Mr. William Zhang is the General Manager of Mansfield (Suzhou) Manufacturing Co. Ltd.

and Mansfield Manufacturing (Wuhan) Co. Ltd. in Eastern and Central China. Mr. Zhang

joined Mansfield in December 2013 and reports to the CEO of Mansfield Manufacturing

Company Limited. Upon coming on board, William assumes full executive responsibility

over the business direction and operational decision of Mansfield Suzhou and Mansfield

Wuhan. In particular, William will look into the automotive business development and

enhance the operational efficiency in these locations.

Mr. William Zhang brought with him more than 20 years track record in the automobile

industry and corporate experience. He started as a mechanical engineer in operations

and was progressively promoted to production and manufacturing manager. Prior to

joining Mansfield, he was the Managing Director of Citek Industrial (China) from March

1998 to November 2013. During that period he left Citek International to join Shanghai

Lear Automotive Systems as its General Manager from November 2006 to November

2007.

William graduated with a Bachelor of Science degree in Mechanical Engineering and

obtained his MBA from the University of Plymouth in the United Kingdom.



Ms. Quek Siew Hoon is the Corporate Controller of InnoTek Limited. Ms. Quek joined

InnoTek in 2000 and has been with the Group for more than 13 years. Ms. Quek has

over 25 years of experience in finance and accounting. Ms. Quek is responsible for the

financial reporting of the Group and travels frequently to the Groups subsidiaries in Hong

Kong and the PRC. Ms Quek currently sits on the Board of Mansfield Manufacturing Co

Ltd in Hong Kong as well as the other Hong Kong subsidiaries of the Mansfield group of

companies. All the Finance departments of Mansfield and its subsidiaries reports into

Ms. Quek.

In her early career, Ms. Quek joined KPMG for two years and was responsible for auditing

assignments mainly manufacturing companies. Thereafter she spent more than three

years with Texas Instruments Singapore (Pte) Limited holding the position of FinancialAccountant and later as Cost Accountant in its Singapore manufacturing plant which

was later taken over by Micron Semiconductor.

Prior to joining InnoTek Limited, Ms. Quek was a Finance Director with Seagate

Technology Electronic Assembly Operation (EAO) division with manufacturing operations

in Singapore, Batam and Senai. At Seagate Ms. Quek spent eleven years as Costing

and Financial Planning Manager and was subsequently promoted to Finance Director.

She handled complex inventory system, budgeting, scrap and product cost controls,

financial reporting and other accounting functions of the EAO division; besides providing

financial information to the EAO president for his strategic planning. In addition she ensure

adherence to financial policies and compliance amongst her other responsibilities.

Ms. Quek holds a Bachelor of Accountancy Degree from the National University ofSingapore and is a member of the Institute of Singapore Chartered Accountants.

Ms. Quek Siew Hoon

Senior Management



Group Structure

INNOTEK LIMITEDINNOTEK LIMITED

MANSFIELD MANUFACTURING

COMPANY LIMITED

100%

Magix Mechatronics

Co. Ltd. (Hong Kong)

98.24%

LENS TOOL & DIE (H.K.)

LIMITED (HONG KONG)

100%

Feng Chuan Tooling


100%

Feng Chuan Tooling

(Dongguan) Co. Ltd.

(PRC) 100%

Magix Mechatronics

(Dongguan) Co. Ltd.

(PRC) 100%

Dongguan Mansfield

Metal Forming

Co. Ltd. (PRC) 100%

Sun Mansfield Manufacturing

(Dongguan) Co. Ltd.

(PRC) 100%

Go Smart Development

Limited (Hong Kong)

100%

Mansfield (Suzhou)

Manufacturing Co. Ltd.

(PRC) 100%

Mansfield Manufacturing

(Wuhan) Company Limited

(PRC) 100%

INNOTEK LIMITED


COMPANY LIMITED

100%

Magix Mechatronics


98.24%

LENS TOOL & DIE (H.K.)

LIMITED (HONG KONG)

100%

Feng Chuan Tooling


100%

Feng Chuan Tooling

(Dongguan) Co. Ltd.

(PRC) 100%

Magix Mechatronics

(Dongguan) Co. Ltd.

(PRC) 100%

Dongguan Mansfield

Metal Forming

Co. Ltd. (PRC) 100%


(Dongguan) Co. Ltd.

(PRC) 100%


Limited (Hong Kong)

100%

Mansfield (Suzhou)


(PRC) 100%



(PRC) 100%


COMPANY LIMITED

(Hong Kong)

100%

Magix Mechatronics


98.24%

Lens Tool & Die (H.K.)

Limited (Hong Kong)

100%

Feng Chuan Tooling


100%

Feng Chuan Tooling

(Dongguan) Co. Ltd.

(PRC) 100%

Magix Mechatronics

(Dongguan) Co. Ltd.

(PRC) 100%

Dongguan Mansfield

Metal Forming

Co. Ltd. (PRC) 100%


(Dongguan) Co. Ltd.

(PRC) 100%


Limited (Hong Kong)

100%

Mansfield (Suzhou)


(PRC) 100%



(PRC) 100%



Encourage out-of-the-box thinking among employees

Challenge existing paradigms in all that we do

Create an environment that encourages new ideas from employees while fostering teamwork

CREATIVITY



Dont be defensive assume good intentions from others

Reveal your issues no hidden agendas and dont keep problems internally

Be a good listener attack the problem, not the person

COMMUNICATION



Do what you say you will do, in all relationships

Continuous customer satisfaction embrace the customers and suppliers as our partners

Take the time to develop our employees

COMMITMENT



If its not fun, change it we are probably not doing it right

Respect for the family as well as the business

Realise the equal value of all functions within the organization

Balance the organizational success with the caring of people

BALANCE



Financial Highlights

FOR THE YEAR (S$ in thousands) 2010 2011 2012 2013

Turnover 415,926 312,088 258,860 246,948

Operating Profit/(loss) 23,823 804 (14,946) 7

Profit/(loss) Before Tax and Minority Interest 24,579 3,181 (18,048) 548

Profit/(loss) After Tax and Minority InterestAttribute to members of the Company 17,770 536 (18,446) 926

AT YEAR-END

Shareholder Equity (S$ in thousand) 193,970 190,581 156,712 162,433

PPE, Investment Property and prepaid landlease payment (S$ in thousand)

102,175 100,506 99,864 96,037

Total Debts (S$ in thousand) 32,880 24,540 16,119 10,060

Less: Cash and cash equivalents (S$ in 000) (89,458) (56,056) (35,773) (27,787)

Net Cash / (Borrowings) (S$ in 000) (56,578) (31,516) (19,654) (17,727)

Weighted Average Number of Shares (000) 229,255 226,481 224,150 223,881

Number of Shares at end of period (000) 227,041 225,233 223,952 223,835

PER SHARE (Singapore cents)

Profit / (loss) After Tax & Minority Interests 7.75 0.24 (8.23) 0.41

Net Tangible Assets 85.2 84.4 69.6 72.0

RATIOS

Operating Profit % 5.7% 0.3% (5.8%) 0.0%

Profit Before Tax % 5.9% 1.0% (7.0%) 0.2%

Profit After Tax % 4.3% 0.2% (7.1%) 0.4%

Net gearing (net cash) (29.2%) (16.5%) (12.5%) (10.9%)Current Ratio 1.68 1.62 1.36 1.52



Corporate Governance Report

The Board and management of InnoTek Limited (InnoTek or the Company) firmly believe that commitment

to setting and maintaining a high level of corporate governance within the Company and its subsidiaries (theGroup) is essential to the sustainability of the Companys businesses as well as to preserve and enhance theinterest of shareholders. The Board and management are pleased to confirm that the Company has adheredto the principles and guidelines of the Code of Corporate Governance 2012 (the 2012 Code) or specify eacharea of non-compliance.

This report (Report) outlines the corporate governance framework and practices adopted by the Company withspecific reference given to the 2012 Code.

BOARD MATTERS

THE BOARDS CONDUCT OF AFFAIRS

Principle 1: Effective Board to lead and control the company

The Board is responsible for overall corporate governance, strategic direction, formulation of policies to overseethe business, performance and affairs of the Group. The Board supervises the Management which has the roleof ensuring that the day-to-day operation and administration of the Group are carried out in accordance withthe policies and strategies determined by the Board, and in that respect, Management is fully accountable tothe Board.

The principal functions of the Board are to:

- Act as ultimate decision-making body of the Company, except with respect to those matters reserved toshareholders. All directors take decisions objectively in the interests of the Company;

- Represent shareholders interest in developing the Companys businesses successfully including optimizing

long-term financial returns;

- Review and evaluates management performance and ensures that management is capable of executingits responsibilities;

- Act as an advisor to senior management;

- Recognise its legal, social and moral obligations towards its stakeholders;

In addition to its statutory duties, the Board is also responsible for:

- Providing entrepreneurial leadership within a framework of prudent and effective controls which enablerisks to be adequately assessed and managed.

- Ensuring that the necessary financial and human resources are in place for the Company to meet itsobjectives and overseeing the management of the Company and the Group;

- Deicide an matters in relation to the Groups activities which are of a significant nature including approvingof investment and divestment proposals;

- Overseeing the processes for evaluating the adequacy of internal controls and risk management, financialreporting and compliance and satisfy itself as to the adequacy of such process;

- Approving the nominations of board directors and oversees succession planning. Assuming responsibilityfor compliance with the Companies Act and other regulatory bodies; and

- Setting the Companys values and standards and ensuring that its obligations to its shareholders and othersare understood and met.



Financial and other matters that require the Boards approval are set out in the Groups Financial Procedures

Manual (FPM). All policies and procedures on financial matters including approval limits and authorities areclearly defined in the FPM. Other matters specifically reserved to the Board for decision include strategic planning,material acquisitions and disposals of assets, annual budget, capital expenditure, share issuances, share buy-backs and dividends.

To ensure that specific issues are subject to in-depth and timely review, certain functions have been delegatedto various Board Committees, which would submit their recommendations or decisions to the Board. The BoardCommittees constituted by the Board are the Executive Committee, the Audit Committee, the NominatingCommittee and the Remuneration Committee. Each of these Board Committee has its own terms of reference,which has been updated to incorporate the recommendation made under the 2012 Code.

Board meetings are scheduled quarterly for the purpose of, inter alia, approving the release of the Groupsfinancial results. Ad hoc Board meetings are also held whenever the Boards guidance or approval is required,

outside of the scheduled Board meetings. Important and critical matters concerning the Company are alsotabled for the Boards decision by way of written resolutions, faxes and electronic mails. The Companys Articlesof Association allow a Board meeting to be conducted by way of videoconference, teleconference and otherforms of electronic communication.

A total of four Board meetings were held in 2013. The number of Board committee meetings as well as Boardmembers attendance thereat is set out below:

Board ExecutiveCommittee

AuditCommittee

RemunerationCommittee

NominatingCommittee

No. of Meetings Held 4 5 4 2 1Attended Attended Attended Attended Attended

Mr. Robert S. Lette 4/4 4/5 4/4 2/2 1/1Mr. Yong Kok Hoon 4/4 5/5 4/4 2/2 1/1Prof. Low Teck Seng(1) 1/1 NA 1/1 1/1 1/1Mr. Peter Tan Boon Heng 4/4 5/5 4/4 2/2 1/1Mr. Steven Chong Teck Sin 4/4 NA 4/4 1/1 NA

Note: (1) Prof. Low Teck Seng retired as a Director, Chairman of the Audit Committee and member of the Nominating Committee andRemuneration Committee on 29 April 2013.

BOARD EXECUTIVE COMMITTEE (Executive Committee)

The names of the members of the Executive Committee are set out in the Corporate Information page of thisAnnual Report.

In 2013, the Executive Committee met five times to provide the overall direction of the Group and to review,with management, and recommend to the Board the overall corporate strategy, objectives and policies of theGroup, and monitor their implementation.

The Executive Committee was formed in September 2008 as an Ad Hoc committee to assume the duties andresponsibilities of the Chief Executive Officer of the Company after the departure of Mr. Steven Campbell andprior to the appointment of Mr. Yong Kok Hoon as the Managing Director of InnoTek Limited. Having been aroundfor more than six years, the Board is of the view that it has served its purpose during those times. With Mr. Yongtaking charge as Managing Director of InnoTek for some years now, the Board is of the view that the ExecutiveCommittee should be dissolved and on 26 February 2014 the Executive Committee was formally dissolved afterholding its last meeting on 25 February 2014.




Training for Directors

Newly appointed Directors are briefed on the Groups business activities, strategic direction, corporategovernance practices as well as their statutory and other duties and responsibilities. In addition, new Directorsare given a memorandum outlining their obligations, duties and responsibilities to the Company. As and whennew regulations and changes to regulations and accounting standards which have an important bearing on theCompanys or Directors disclosure obligations, Directors will be briefed either during the Board meetings or throughmemorandum and emails. Where appropriate, Directors are encouraged to attend courses, conferences andseminars in relevant fields. All new Directors will have an opportunity to visit the InnoTek Groups offices and plantsoverseas to familiarize themselves with the InnoTek Groups businesses.

BOARD COMPOSITION AND GUIDANCE

Principle 2: Strong and independent Board

The Board comprises five directors, four of whom are independent non-executive directors. During the year, Prof.Low Teck Seng retired at the AGM and Mr. Timothy Chia Chee Ming was appointed a director of the Company on26 February 2014. However, due to Mr. Chia having to take on additional responsibility in his other commitments,Mr Chia had to relinquish his post as a director of InnoTek on 10 March 2014 after having been appointed for arelatively short period.

The Board is able to exercise objective judgment on corporate affairs independently, in particular fromManagement, as there is a strong and independent element on the Board, with independent Directors makingup 75% of the Board.

The Board comprises the following members:-

1) Mr. Robert S. Lette (Chairman) Non-Executive and Independent

2) Mr. Yong Kok Hoon Executive and Non-Independent

3) Prof. Low Teck Seng Non-Executive and Independent (Retired on 29 Apr 13)

4) Mr. Peter Tan Boon Heng Non-Executive and Independent

5) Mr. Steven Chong Teck Sin Non-Executive and Independent

Profiles of the current directors are set out in the Board of Directors section on page 11 and 12 of this AnnualReport.

The Nominating Committee is responsible for reviewing the independence of each Director based on theguidelines set out in the 2012 Code. For the financial year ended 31 December 2013, all the Non-Executive

Directors, namely, Messrs Robert S. Lette, Peter Tan Boon Heng and Steven Chong Teck Sin were considered bythe Nominating Committee to be independent as they do not have any business relationship with the InnoTekGroup and neither are they related to any of the other Directors or substantial shareholders of the InnoTek Group.

Annually, each independent director is required to submit a confirmation of independence based on theguidelines provided in the Code.

The 2012 Code states that the independence of any director who has served on the Board beyond nine years fromthe date of his first appointment should be subject to particularly rigorous review. In this regard, the NominatingCommittee (save for Mr. Robert S. Lette who abstained from the deliberation on this matter) noted that Mr. Lettewould be deemed non-independent under the 2012 Code as he was first appointed to the Board on 16 May2002. However, the Committee considered that Mr. Lette has demonstrated independent mindedness and wasof the firm view that Mr. Lette has been exercising independent judgment in the best interests of the Companyin the discharge of his directors duties. The Committee and the Board therefore considered Mr. Lette should be

deemed independent.




The Board considers its current Board structure, size and composition appropriate for the Groups present

operations. Non-Executive directors constructively challenge and help develop proposals on strategy and reviewthe performance of Management. With the core competencies of members of the Board in various fields offinance, business, industry and strategic planning, their stature, and wealth of international business experience,the Company is well positioned to chart new frontiers for the InnoTek Group. The Directors actively participateand engage Management in setting goals and objectives for the Company and the Group and monitor thereporting of performance.

Composition of Board and Board Committees

Director Boardmembership

ExecutiveCommittee

AuditCommittee

NominatingCommittee

RemunerationCommittee

Mr. Robert S. Lette Non-ExecutiveChairman

Chairman Member Chairman Member

Mr. Yong Kok Hoon ManagingDirector

Member - - -

Prof. Low Teck Seng(1) IndependentDirector

- Chairman Member Member

Mr. Peter Tan Boon Heng IndependentDirector

Member Member Member Chairman

Mr. Steven ChongTeck Sin

IndependentDirector

- Chairman Member Member

Note: (1) Prof. Low Teck Seng retired as a Director, Chairman of the Audit Committee and member of the Nominating Committee andRemuneration Committee on 29 April 2013.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Principle 3: Clear division of responsibilities between Chairman and Chief Executive Officer to ensure a

balance of power and authority

The position of Chairman and Chief Executive Officer (CEO) are separate and had always been held by twoseparate persons to ensure an appropriate balance of power and authority, and a clear division of responsibilitiesand accountability.

The Chairman, Mr. Robert S. Lette is an independent and non-executive director. He leads the Board to ensureits effectiveness in all aspects of its role. He ensures Directors receive accurate, timely and clear information,fosters effective communication with shareholders, encourages constructive relations between the Board andManagement, and among Directors, and promotes high standards of corporate governance.

The Company does not have a CEO. Mr. Yong Kok Hoon was appointed Managing Director of the Companyon 7th January 2010 to assume most, if not all, the executive responsibility for the Groups businesses. TheManaging Director has full executive responsibilities and oversees the daily running of the Groups operations andis responsible to execute strategies and policies recommended by the Executive Committee and adopted bythe Board.

BOARD MEMBERSHIP

Principle 4: Formal and transparent process for appointment of new directors to the Board

The Nominating Committee (NC), through a formal and transparent process, makes recommendations to theBoard on all board appointments. The NC met once in 2013.




The NC comprises three directors. Members of the NC are Non-Executive Directors, all of whom, including the

Chairman, are independent. The Chairman is not directly associated with a substantial shareholder. Membersof the NC comprise persons of stature, integrity and accountability, who would be able to exercise independentjudgment in the performance of their duties.

The names of the members of the Nominating Committee are set out in the Corporate Information page of thisAnnual Report.

The NC is guided by its Terms of Reference, which sets out its responsibilities. Its duties with regard to nominationfunctions are to review and make recommendations to the Board on all board appointments, to review allnominations for the appointment and re-appointment of directors, to evaluate the effectiveness and performanceof the Board as a whole and each individual director and to review the independence of each director annually.In determining the independence of directors, the NC determines whether or not a director is independentbearing in mind the 2012 Codes definition of an independent director and guidance as to relationships which

would deem a director not to be independent. The NC has endorsed the independence status of all the Non-executive directors.

The process for the selection and appointment of new directors to the Board is carried out when necessary bythe Nominating Committee. The NC initiates and executes a process to search and identify suitable candidatesfor nomination to the Board for appointment.

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

At least one-third of the Directors retire at each AGM. Article 103 of the Articles of Association of the Companyallows the retiring directors to offer themselves for re-election. All of the Directors are subject to re-election at leastonce every three years.

Apart from sitting on this Board, Mr. Robert S. Lette does not sit on the board of other listed company. Both Mr.Yong Kok Hoon and Mr. Peter Tan Boon Heng sat on the Board of one other listed company while Mr. StevenChong Teck Sin sat on the Board of two other listed companies apart from InnoTek.

BOARD PERFORMANCE

Principle 5: Formal assessment of the effectiveness of the Board and contribution of each director

Annually, the NC evaluates the effectiveness of the Board as a whole as well as the individual director byestablishing a process for conducting reviews of all Board members.

All Directors are required to assess the performance of the Board, the Board Committees and the individualdirector. The assessment covers areas such as contribution of each individual director to the effectiveness ofthe Board and Board Committees, information management, Board processes, Shareholder management,managing the Companys performance. The NC takes into consideration their respective preparedness,commitment, participation, attendance at Board and Board committee meetings. The evaluation would alsotake into account their respective ability to make informed decisions and level of comprehension of legal,accounting and regulatory requirements and whether they have the essential skills to competently discharge theBoards duties.

The NC is satisfied that each Director is able to and has been adequately performing his duties as a Director of

the Company, devoting sufficient time and attention to the affairs of the Company.




ACCESS TO INFORMATION

Principle 6: Provision of complete, adequate and timely information prior to board meetings and on an on-going basis

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

In order to ensure that the Board is able to fulfill its responsibilities, the Management provides the Board with monthlyfinancial reports, forecasts/budgets and other relevant information of the Group. In addition, the Managementprovides adequate and timely information to the Board on affairs and issues that require the Boards decision.

Board members have full co-operation from Management and separate and independent access to the seniormanagement including the Company Secretary, who attends all Board and Board committee meetings.

The role of the Company Secretary is clearly defined and includes responsibility for ensuring that board proceduresare followed and that the Company complies with the requirements of the Companies Act and all otherapplicable rules and regulations. The Company Secretary ensures that Board members are fully briefed andaware of their duties and responsibilities when making decisions. The Company Secretarys responsibilities alsoinclude ensuring good information flows within the Board and its committees, and between senior managementand non-executive directors.

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

REMUNERATION MATTERS

Principle 7 - Formal and transparent procedure for fixing remuneration packages of directors

The Remuneration Committee which is also the Employees Share Option Plan Committee (RC) comprisesentirely Non-Executive Directors, all of whom, including the Chairman, are independent:

Mr. Peter Tan Boon Heng ChairmanProf. Low Teck Seng Member (Resigned on 29 April 2013)Mr. Robert S. Lette MemberMr. Steven Chong Teck Sin Member (Appointed on 29 April 2013)

There is a formal and transparent procedure for developing policy on executive remuneration and for fixing theremuneration packages of individual top management executives including directors.

The RC is guided by its Terms of Reference, which sets out its responsibilities. The primary function of the RCis to advise the Board on compensation issues generally, and in particular, in relation to Directors and keymanagement executives, bearing in mind that a meaningful portion of Managements compensation shouldbe contingent upon financial performance in order to foster the creation of long-term shareholder value.

The principal responsibilities of the RC include the following:

- advise the Board of Directors on compensation theory and practice, as well as best practice with regardto non-cash compensation and trends;

- review Managements appraisal on current market situation as it relates to compensation and Managementsrecommendation of the overall aggregate adjustments to be made at the annual review of compensation

for all staff, Management and Directors, including stock options and other equity incentive schemes;




- recommend to the Board compensation packages for senior management, non-executive directors and

Managing Director;

- responsible for the grant of options and other equity incentives, if any, to Directors, Management and staffbased on the recommendations by the Management;

- oversee the implementation of remuneration policies within InnoTek Group and ensure that no directorparticipates in decisions on his own remuneration; and

- ensure that appropriate structures for management succession and career development are adopted.

LEVEL AND MIX OF REMUNERATION

Principle 8: Appropriate remuneration to attract, retain and motivate directors

In setting remuneration packages, the RC considers the level of remuneration to attract, retain and motivateExecutive Directors and Key Management and to align their interests with those of shareholders. A proportionof Executive Directors remuneration is structured to link rewards to the performance of the InnoTek Group as awhole, as well as individual performance.

On an annual basis, the RC reviews the level and mix of remuneration and benefits policies and practices of theCompany. When conducting such reviews, the RC takes into account the performance of the Company andthat of individual employees. It also reviews and approves the framework for salary reviews, performance bonusand incentives for key management employees.

The total remuneration mix comprises three key components; that is, annual fixed cash, annual performanceincentive, and the InnoTek Share Option Scheme. The annual fixed cash component comprises the annual

basic salary plus any other fixed allowances which the Company benchmarks with the relevant industry marketmedian. The annual performance incentive is tied to the Companys business units and individual employeesperformance. The InnoTek Share Option Scheme is a long-term incentive plan. The equity component is intendedto achieve the objective of aligning the interests of the Executive Directors and Key Management with those ofthe shareholders of the Company. Performance targets are set and performances are evaluated annually.

Executive directors do not receive directors fees but are remunerated as a member of Management. Non-Executive Directors are paid Directors fees, which comprise a basic fee and additional fees for appointmentson Board Committees.

In reviewing the fees for Non-Executive Directors, the RC has adopted a framework based on guidelinesrecommended by the Singapore Institute of Directors, which comprises a base fee, fees for membership inBoard Committees as well as fees for chairing Board Committees, taking into consideration the amount of timeand effort that each Board member may be required to devote to the role and the fees paid by comparablecompanies.

The first InnoTek Employees Share Option Plan (Plan) approved at the Extraordinary General Meeting (EGM) ofthe Company on 18 September 2000 ran its full duration of five years from the first date of grant and had expiredon 7 February 2006. The expiration of the Plan however did not affect options which had been granted andaccepted by the participants of the Plan whether such options have been exercised or not. After the expiry ofthe Plan, a subsequent plan known as InnoTek Employees Share Option Scheme II (Scheme II) was approvedby shareholders at the EGM on 30 April 2008. Scheme II expired on 9 March 2014.

At this AGM, the Company is seeking shareholders approval to adopt a new InnoTek Employees Share OptionScheme 2014.Details and terms of the new scheme can be found in the Circular to Shareholders dated 11 April

2014.




The RC is assigned the responsibility of administering all share option plans in accordance with the rules of the

respective plan, to determine and approve the list of grantees of the share options, the date of grant and theprice thereof. During the year, 7,730,000 options were granted to employees of the Group.

DISCLOSURE ON REMUNERATION

Principle 9: Clear disclosure on remuneration policy, level and mix

The remuneration policy of the Company is based on an annual appraisal system using the criteria of corevalues, competencies, key result areas, performance rating and potential. Rewards are linked with corporateand individual performance. The Board is of the view that it is not necessary to present its remuneration policybefore shareholders for approval at the AGM.

A breakdown, showing the level and mix of each individual Directors remuneration payable for the financial yearended 31 December 2013 is as follows:

Directors Remuneration Remuneration Fee Salary Bonus Allowance/Benefits

Others Total

S$ (%) (%) (%) (%) (%) (%)Mr. Yong Kok Hoon 591,081 0 81 0 9 10(1) 100Mr. Robert S. LetteMr. Peter Tan Boon HengMr. Steven Chong Teck SinProf. Low Teck Seng(2)

126,000116,00069,50524,451

100100100100

0000

0000

0000

0000

100100100100

Note: (1) Quarterly pay tag to average (last 5 trading days) share price before quarter end

(2) Prof. Low Teck Seng retired on 29 April 2013.

Details of the share option plan are set out in the Report of the Directors whilst disclosure of the Directorsremunerations also made in the notes to the financial statements.

Key Management PersonnelRemuneration

Remuneration Salary AWS Allowance& Benefits

Others Total

S$ (%) (%) (%) (%) (%)

$250,000 to below $500,000Mr. Josiah Ang Lien PengMr. Chan Led ChowMr. Ip Chi Chung

423,258290,632261,354

675485

040

191115

14(1)

31(1)

0

100100100

Below $250,000Ms. Quek Siew HoonMr. Yi Yuan Wah

248,621248,091

7578

60

1922

00

100100

Note: (1) This relates to termination/retrenchment pay

No key officer or employee of the Company and its subsidiaries during the financial year was an immediatefamily member of a director or the Managing Director whose remuneration exceeded S$50,000 during the year.

The Company does not have any long-term incentive scheme apart from the InnoTek Employees Share OptionPlan and InnoTek Employees Share Option Scheme II both of which had expired. Details of the share option plansare set out in the Directors Report.




The annual remuneration of the Directors, the Managing Director and the top five key management personnel

(who are not directors or the Managing Director) above include the termination, retirement and post-employmentbenefits that are granted to them for the year 2013.

ACCOUNTABILITY & AUDIT

Principle 10 - Board to present balanced and understandable assessment of the companys performance

Shareholders are presented with the quarterly and full-year financial results within 45 days of the end of thequarter and 60 days of the end of the financial year. Through the release of its financial results, the Board aimsto present shareholders with a balanced and comprehensible assessment of the Groups performance, positionand prospects which extends to interim and other price sensitive public reports, and reports to regulators (ifrequired).

Management currently provides the Board with monthly management reports of the Groups performance andDirectors have separate and independent access to the Management of the Group.

In addition, the Directors have separate and independent access to the Corporate Controller of the Company.From time to time information on major transactions are discussed and circulated to Directors as and when theyarise.

Principle 11 - Establishment of an Audit Committee with written terms of reference

The Audit Committee (AC) comprises members who are non-executive, independent and the Board is satisfiedthat members of the AC are appropriately qualified to discharge their responsibilities. The Chairman and membersof the AC are:

Prof. Low Teck Seng Chairman (Retired on 29 April 2013)Mr. Robert S. Lette MemberMr. Peter Tan Boon Heng MemberMr. Steven Chong Teck Sin Chairman (Appointed Chairman on 29 April 2013)

The AC met four times during the year under review. The Corporate Controller, Internal Audit Director, CompanySecretary and the External Auditors are usually invited to these meetings. The AC meets with the externalauditors, without the presence of the Companys management, at least once a year to obtain feedback onthe competency and adequacy of the finance function and to ascertain if there are any material weaknessesor control deficiencies in the Groups financial reporting and operational systems. This meeting enables theauditors to raise issues encountered in the course of their work directly to the AC. In addition, the AC is periodicallyupdated on changes in accounting standards, risk management, corporate governance and regulatory relatedtopics which have a direct impact on financial statement during the year.

The Audit Committee guided by its terms of reference reviews the scope and results of the internal and externalaudit and the cost effectiveness, significant financial reporting issues, and adequacy of the Companys internalcontrols, as well as the effectiveness of the Companys internal audit function.

The responsibilities of the AC include the following:

- review and recommend to the Board the release of the quarterly and full year financial statements;

- review the independence and objectivity of the external auditor, their appointment, reappointment andaudit fee;




- review and approve both the internal audit and the external auditors scope and plan to assure completeness

of coverage and effective use of audit resources and where the auditors also supply a substantial volumeof non-audit services to the Company, review the nature and extent of non-audit services performed bythem to ensure that the independence of the auditors would not be affected;

- review the significant financial reporting issues and judgments so as to ensure the integrity of the financialstatements and any formal announcements relating to the Companys financial performance;

- review and report to the Board the internal audit plan, oversees and reviews the adequacy and effectivenessof the internal control functions and evaluate the level of risks and assess the system of ensuring integrity offinancial reporting, steps taken by Management to minimize or control Companys exposure to such risksand assessing financial risk management;

- review major findings on internal audit during the year and Managements responses thereto, difficulties

encountered during the course of the audit and compliance with relevant professional internal auditstandards with the Director of Internal Audit and Management; and

- review interested person transactions as required under the Listing Manual of the Singapore ExchangeSecurities Trading Limited Listing Manual (SGX-ST).

The AC makes recommendations to the Board for approval by Shareholders, the re-appointment of Ernst &Young LLP as the Auditors of the Group for FY2014.

The AC reviews the Groups risk assessment and, based on the auditors reports and management controls inplace throughout the Group, is satisfied that there are adequate internal controls, including financial, operational,compliance and information technology controls, and risk management systems in the Group.

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

The AC has reviewed all non-audit services provided by the external auditors to the Company and is satisfied thatthe extent of such services provided will not prejudice the independence and objectivity of the external auditors.The amount paid and payable to external auditors for audit and non-audit services fees were $452,291 and$217,759, respectively, for the financial period under review. The re-appointment of the external auditors will besubject to approval by way of an ordinary resolution of shareholders at the Companys Annual General Meeting,to be held on 28 April 2014.

In appointing the audit firms for the Company, the Audit Committee is satisfied that the Company has complied

with the requirements of Rule 712 and 715 of the SGX-ST Listing Manual.

Principle 12 Sound system of internal controls to safeguard the shareholders investments and the companys

assets

Principle 13 Establishment of an internal audit function that is independent of the functions it audits

The Board considers that the Group has in place, a system of internal controls of its procedures and processesmaintained by the Companys Management to safeguard shareholders investments and assets of the Company.The system of internal controls addressing financial, operational and compliance and information technologycontrols and risk management, is designed to provide reasonable and not absolute assurance for achievingcertain internal control standards and helps the Group manage rather than to eliminate the risk of failure toachieve business objectives.



33/124



WHISTLE BLOWING POLICY

To reinforce a culture of good business ethics and governance, the Group has in place a whistle-blowing policyand procedures as prescribed under the Guidebook for Audit Committee in Singapore. The aim of this policy isto encourage the reporting in good faith of any suspected improper conduct whilst protecting the whistleblowersfrom reprisal within the limits of the law.

The whistle blowing policy provides employees an avenue for reporting in good faith of suspected fraud, corruption,dishonest practices or other similar matters. All reports are channeled to the IAD directly via a dedicated andsecured e-mail channel and the IAD treats the matter with utmost confidentiality. Following the departure of theIAD all reports are channelled to the AC Chairman directly.

All cases reported are treated confidentially and objectively investigated. Identities of whistle blower will be keptconfidential to the extent possible. Results of the investigation would not be disclosed or discussed with anyoneother than those who have a legitimate right to know. The IAD, who reports directly to the AC Chairman, will reviewthe information disclosed, interview the whistle blower when required and determine whether the circumstanceswarrants a report to the AC and trigger an investigation process to be employed and corrective actions (if any)to be taken.

Anonymous complaints may be considered, taking into account factors such as the seriousness of the issuesraised, the credibility of the report and the likelihood of confirming the allegation.

COMMUNICATION WITH SHAREHOLDERS

Principle 14 - Regular, effective and fair communication with Shareholders

The Company discloses to its shareholders pertinent information in a clear, forthcoming and timely manneron a regular basis. The quarterly financial results are published through the SGXNET, media releases and theCompanys corporate website. The Company also retained an investor relations firm to assist in its disseminationof material information and organise press and analyst briefings. The Company monitors the dissemination ofmaterial information to ensure that it is made publicly available on a timely and non-selective basis.

The Company does not practice selective disclosure. Price-sensitive information is first publicly released throughSGXNET, either before the Company meets with any investors or analysts or simultaneously with such meetings.The results are published through SGXNET, media releases and the Companys website and Shareinvestor. Allshareholders of the Company receive the annual report, and notice of AGM, which is held within four monthsafter the close of the financial year. The notice is also advertised in the newspapers. The annual report is alsoavailable on the Companys corporate website, www.innotek.com.sg.

Principle 15 Greater shareholder participation at Annual General Meetings (AGMs)

Whilst shareholders have a right to appoint up to two proxies to attend and vote at General Meetings on theirbehalf, the Articles currently do not provide for shareholders to vote at General Meetings in absentia such asby mail, email or fax. Such voting methods will need to be carefully reviewed for feasibility to ensure thereis no compromise to either the integrity of the information or the proper authentication of the identity of theshareholders.

Resolutions are, as far as possible, structured separately and may be voted on independently. All polls areconducted in the presence of independent scrutineers.

At General Meetings, shareholders are given the opportunity to communicate their views on matters relating tothe Group, with the Board members, Board Committees, the Company Secretary as well as the external auditorsin attendance at the AGMs.

The minutes of general meetings, which include substantial comments or queries from shareholders andresponses from the Board are available to shareholders upon written request.




DIVIDEND POLICY

In considering the level of dividend payments, the Board takes into account various factors, including the levelof cash available, the returns on equity and retained earnings amongst other criteria and set aside a certainpercentage of the Group net operating profits attributable to Shareholders for payment of dividend. The Board isproposing to Shareholders to pay a first and final tax-exempt (one-tier) dividend of 1 cent per share at the AGMon 28 April 2014.

DEALINGS IN SECURITIES

In line with the rules of the Listing Manual of the SGX-ST, the Company has in place a policy and guidelines ondealings in the securities of the Company. This policy and guidelines restrict Directors and employees from tradingin the Companys securities during the period falling two weeks before the announcement of the Companysquarterly financial statements for each of the first three quarters of its financial year and one month before theannouncement of the Companys full year financial statements.

Additionally, Directors and employees of the Company are also reminded to be mindful of the insider tradingprohibitions and ensure that their dealings in securities do not contravene the laws on insider trading under theSecurities and Futures Act, and the Companies Act. The policy and guidelines also remind employees andDirectors of the Group that they should not deal in the Companys securities on short term considerations.

Directors are required to report to the Company Secretary whenever they deal in the Companys shares and theCompany Secretary will make the necessary announcements.

INTERESTED PERSON TRANSACTION POLICY

In general, the Company has established procedures to ensure that all Interested Person Transactions will be

undertaken on an arms length basis and on normal commercial terms, which are generally no more favourablethan those extended to unrelated third parties and will thus not be prejudicial to the interests of the Companyand the shareholders.

The aggregate value of Interested Person Transactions entered into during the financial year under review are asfollows:-

Name of InterestedPerson

Aggregate value of all interestedperson transactions during the

financial year under review (excludingtransactions less than $100,000

and transactions conducted under

shareholders mandate pursuant toRule 920)

Aggregate value of all interestedperson transactions conducted under

shareholders mandate pursuant toRule 920 (excluding transactions less

than $100,000)

VQBN Holdings PteLtd

S$40,998 None

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

MATERIAL CONTRACTS

During the financial year, there were no material contracts entered into by the Company or any of its subsidiarycompanies involving the interests of any director or the controlling shareholder of the Company except thoseannounced via SGXNET from time to time in compliance with the SGX-ST Listing Manual.




RISK MANAGEMENT

InnoTek acknowledges that appropriate management of the risks accompanying its business is vital to preventlosses and damages in the fast-changing business environment. The Board has put in place processes andprocedures which help to identify and manage areas of significant strategic, business and financial risks. TheGroup manages risk under an overall risk management framework determined by the Board and supported bythe Audit Committee and Internal Audit. Management periodically reviews the past performance of, and profilesthe current and future risks facing the Group. This system by its nature can only provide reasonable, but notabsolute, assurance to investors regarding:

- the safeguarding and protection of the Groups assets against unauthorized or improper use or disposal;- protection against material misstatements or losses;- the maintenance of proper accounting records;- the reliability of financial information used within the business and for publication;-

the compliance with appropriate legislations, regulations and best practices; and- the identification and containment of business risks.

Among the various risks that affect the Group include, but are not limited to:

1. Industry and customer risk

The market demands and customers specific requirements constantly remind the Company not to becomplacent and to keep up and be able to cater to the needs in the market and of its customers.In the event the Company is unable to meet customer and industry requirements, there may be apossibility that its products and/or process will become obsolete, and its customers may take theirbusiness to those who are able to meet such requirements. As such, the Company works closely withits customers and industry sources to ensure that its technology and product roadmaps are in line with

customer requirements.

2. Under utilization of production capacity

The Companys business is characterized by high fixed costs including plant facilities, manufacturingequipment and machineries. In the event when its capacity utilization decreases due to poor demandor cancellation or delay of customer orders, the Company could encounter significantly higher unitproduction costs, lower margins and potentially significant losses. Under utilization of production capacitycould also result in equipment write-offs, restructuring charges and employee layoffs.

3. Dependence on a small customer base

In the highly competitive industry with low margin and customers could easily bring their orders elsewhere,the loss of one or more of its major customers or a substantial reduction in orders by any major customer,

for any reason, could have a material adverse effect on the Groups revenue. To mitigate the risk oflosing customer the Company works closely with its customers, so as to be able to build long term workingrelationships and, hence, build long term customers trust and loyalty.

4. Primary materials prices and timely supply of materials

The Group relies on a limited number of qualified suppliers for some of the materials used in its precisionmetal component division manufacturing processes. Any increase in the price of primary materialswould affect the cost of manufacturing. The Group mitigates the risk by not committing to large orders offixed price materials thus enabling the Group to adjust prices when appropriate and feasible. The timelysupply of sufficient quantity of raw materials by its supplier is also crucial in meeting the commitments toits customers. To mitigate the risk the Group employs supply chain management and builds long termrelationships with qualified suppliers.




5. Exposure to credit risks

The Group is exposed to credit risks of its customers. From time to time, in the ordinary course of business,certain customers may default on their payment. Such events may arise due to the inherent risk from itscustomers business, risk pertaining to the political, economic, social and legal environment of its customers

jurisdiction and foreign exchange risk. However, the Group regularly reviews its exposure by way of monthlymanagement reports, market feedbacks, performing checks on customers financial status and executesnecessary payment recovery measures to minimize its credit risks.

6. Foreign exchange exposure

The Groups core assets and raw materials are primarily in U.S dollar denominated currency whereasmanufacturing and related expenses are in the currency of the country of operation. The Group has apolicy of monitoring the foreign currency exchange rates changes closely so as to minimize any potentialmaterial adverse impact on its financial performance. The Group enters into short-term, forward contracts

as and when it deems appropriate.

7. Liquidity risk

To ensure that it has adequate funding to achieve these requirements and its long term goals, the Groupregularly monitors its capital expenditure to ensure an appropriate rate of returns, monitors the efficiencyof the investment and pursues new financing opportunities to supplement its current capital resources.

8. Changes in the political, social and economic conditions

The Groups manufacturing facilities are located mainly in China. Any unfavorable changes in the political,social, legal, regulatory and economic conditions in the PRC may disrupt our operations and affect ourfinancial performance.

Regulatory changes could result in increased costs to the Group. The Group continues to evaluate andmonitor developments with respect to new and proposed rules and regulations by the local authorities inthe different provinces in the PRC which can or may affect the Group in any way, and cannot predict orestimate the amount of additional costs the Group may incur or the timing of such costs.

CORPORATE SOCIAL RESPONSIBILITY

As part of our corporate social responsibility, the Company plays its part in ensuring energy conservation in ourplants and offices by cutting down on our energy usage, as this not only helps mitigate climate change, but alsoto save cost for the Group. Posters are put up at prominent places in the plants to remind workers to conserveenergy and reduction in water consumption. We adopt good human resource policies and practices thatpromote fairness, safe working conditions and encourage teamwork, which is one of the Companys Core Value.

Our ongoing focus on safety and security, encompassing the reduction of accidents, sick leave and environmentaldamage, is keeping us on a steady course towards a more sustainable business.




Directors Report

The directors are pleased to present their report to the members together with the audited consolidated financial

statements of InnoTek Limited (the Company) and its subsidiaries (the Group) and the balance sheet andstatement of changes in equity of the Company for the financial year ended 31 December 2013.

Directors

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

Robert Sebastiaan Lette (Chairman)Yong Kok HoonPeter Tan Boon HengSteven Chong Teck Sin

Arrangements to enable directors to acquire shares and debentures

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

Directors Interests in shares, share options and debentures

The following directors, who held office at the end of the financial year, had, according to the register of directorsshareholdings required to be kept under section 164 of the Singapore Companies Act, Cap. 50, an interest inshares and share options of the Company and related corporations (other than whollyowned subsidiaries) asstated below:

Name of director

Direct interest Deemed interest

At thebeginning of

financialyear

At theend of

financialyear

At thebeginning of

financialyear

At theend of

financialyear

Ordinary shares of the Company

Yong Kok Hoon 1,040,000 1,040,000

Robert Sebastiaan Lette 40,000 40,000

Options to subscribe for ordinary shares in the Company

DirectorAt beginning

of the yearAt end

of the year

Exercise

Priceper Share

Date ofGrant

Yong Kok Hoon 50,000 50,000 $0.69* 8 March 2004

2,000,000 $0.28 23 May 2013

* Granted at a 20% discount

There was no change in any of the above-mentioned interests between the end of the financial year and 21January 2014.

Except as disclosed in this report, no director who held office at the end of the financial year had interests inshares, share options of the Company, or of related corporations, either at the beginning of the financial year, or

date of appointment if later, or at the end of the financial year.



Directors contractual benefits

Since the end of the previous financial year, no director of the Company has received or become entitled toreceive any benefits by reason of a contract made by the Company or a related corporation with the directors,or with a firm of which the director is a member, or with a company in which the director has a substantialfinancial interest, except as disclosed in this report and the accompanying financial statements.

Share Options

(1) InnoTek Limited Employees Share Option Plan

(a) InnoTek Employees Share Option Plan (the Plan) was approved by the shareholders at anExtraordinary General Meeting on 18 September 2000. The Plan expired on 8 February 2006. Optionsgranted under the Plan remain exercisable until the end of the relevant Option Period. The Planexpired in 2006 and was succeeded by the InnoTek Employees Share Option Scheme II.

(b) InnoTek Employees Share Option Scheme II (Scheme II) was approved by shareholders at theAnnual General Meeting on 30 April 2008. Scheme II expired on 9 March 2014 and options grantedunder the Scheme II remain exercisable until the end of the relevant Option Period.

(2) Both the Plan and Scheme II are administered by the Remuneration Committee whose members are:

Peter Tan Boon Heng (Chairman)Robert Sebastiaan LetteSteven Chong Teck Sin

(3) As at the end of the financial year, details of the options to subscribe for ordinary shares of the Company

granted to directors of the Company pursuant to the InnoTek Employees Share Option Plan are as follows:

Director

Aggregateoptions

granted sincecommencement

of Plan

Aggregateoptions

cancelled sincecommencement

of Plan

Aggregateoptions

exercised sincecommenceme

Documents

Innotek Ltd Annual Report 2013