Contract Sterilization Services Pte Ltd

On 8 March 2011, the Company announced the completion of its acquisition of a 100% equity interest in Contract Sterilization Services Pte Ltd (CSS). Henceforth, CSS becomes a wholly owned subsidiary of the Group.

CSS, a medical device company, is principally engaged in the assembly, sterilization and distribution of heart-lung pack for use in cardiopulmonary (heart-lung) bypass procedures. CSS presents growth opportunity for the Group in the medical industry and provides the Group immediate access to a profitable company with valuable know-how, expertise, and supplier and customer bases. The acquisition is in line with the Group's strategy to acquire companies which may capitalize on the Group's competitive strengths and extensive distribution network.


Share Capital

During the year, 97,003,031 Warrant W101220 were exercised into 97,003,031 new ordinary shares at an exercise price of $0.09 per ordinary share, raising total cash proceeds of $8.7 million. The remaining unexercised 3,563,806 Warrant W101220 lapsed on the expiry date on 20 December 2010.

As at the end of FY2010, the total number of issued and fully paid ordinary shares was 821,115,914. Subsequent to FY2010, 77,000 share options were exercised into 77,000 ordinary shares. 2,569,000 share options under the Serial System Executives Share Option Scheme remain outstanding after this exercise.


Internal Audit

For an even more comprehensive assessment of the overall effectiveness of the Group's control system, the Audit Committee holds the view that the internal audit function should continue to be outsourced. In Year 2010, Lee Seng Chan & Co was engaged to do an internal audit review of the controls on inventory, warehousing and logistics management, and procurement, expenditure and payment cycle of Serial Microelectronics (HK) Limited, and payroll accounting and controls of Serial Microelectronics (Shenzhen) Co., Ltd.


Geographical Balance

North Asia continues to be the single most important region. For the year under review, about 73% of the Group's assets are in North Asia and turnover from this region accounted for about 87% of the Group's total turnover.


Dividend

A one-tier tax-exempt final dividend of 0.38 cent per ordinary share were paid on 18 May 2010 in respect of the FY2009.

On 1 September 2010, the Company paid a one-tier tax-exempt interim dividend of 0.28 cent per ordinary share for FY2010.

The Board recommends a one-tier tax-exempt final dividend of 0.67 cent per ordinary share in respect of FY2010. The final dividend, if approved will be paid on 13 May 2011.


Outlook

The Group performed well in FY2010 achieving both record revenue and profitability on the back of a recovery in the semiconductor industry and improvement in the financial and economic environment. Most subsidiaries of the Group posted strong growth in revenue and profitability in FY2010.

While the Group is cautiously optimistic of a good performance in FY2011, it expects the business environment to remain uncertain and challenging. High unemployment and inflation rates, currency volatilities, real estate bubbles, social unrests, Eurozone debt crisis and more recently, the Japanese earthquake and tsunami are some of the key concerns affecting the global economies. Any negative impacts arising from these issues will affect the performance of the Group's businesses.

The Group will continue its expansion strategies by working closely with customers and suppliers as a value-added partner to expand new / existing product lines, product ranges and customer bases in the Asian market. The Group will make acquisitions as and when opportunities arise to capitalize on its competitive strengths and extensive distribution network. While the Group expands, it will remain vigilant on cost, inventory, credit and cash management in response to a volatile environment.


Appreciation

I would like to express my sincere thanks to my fellow Directors for their invaluable guidance and support and to team members at all levels of the Group for their dedication, drive, and support.

I would also like to extend my appreciation to customers, bankers, suppliers, business partners, and shareholders for their faith and continued support

.

With your continued support, we look forward to another rewarding year.

Dr Derek Goh Bak Heng
March 2011