CEO's Message

Extracted from Annual Report 2006

Dear Shareholders,

I am pleased to announce that the Group has recorded a satisfying set of results for the financial year ended December 31, 2006.

Accordingly, the Group achieved its goals for the year under review. Although the media storage industry remained extremely competitive, our financial performance, balance sheet strength, management track record and drive towards innovation put us in a stronger position to meet the challenges in the industry and lay the foundation for future growth.

Financial Overview

In FY2006, conditions within the industry remained competitive. Faced with increasingly stringent quality demands has led to certain price pressures. In addition, the cost environment remained tough. Among other things, higher manufacturing costs and a rise in labour cost in China raised our cost of production. We have succeeded in meeting these challenges, and posted an profit after tax of US$1.05 in FY2006, a 121.0% jump from the level we achieved in FY2005, and an increase of 66.4% from the amount we recorded in FY2004. This was despite a fall in revenue of US$1.11 million to US$22.74 million, which reflected the sustained intensity of competition in our industry. Gross profit margins were down primarily due to the increased manufacturing costs from 22.3% in FY2005. to 20.6% in FY2006. The Group continues to have a strong balance sheet, with substantial cash reserves and no borrowings. In FY2006, the Group's operating activities generated a positive cah flow of US$995,000.

Consolidated Market Position

We have further consolidated our market position for the year under review. With an unwavering commitment to deliver second-to-none value to our customers, we continued to set new standards with our innovative designs. We are going to market with innovations based on a deep understanding of our customers and consumer trends. Our products are enjoying continued strong demand in Europe and targeted markets in Asia Japan was a particularly bright spot, delivering 25.3% growth in revenue, from US$4.96 million in FY2005 to US$6.21 million in FY2006.

We also aspire for excellence when it comes to customer service. In addition, our efforts to provide top quality at competitive prices and to be available wherever our customers need us bring us closer to our goal of delivering best value. The increase in the number of high-volume and repeat customers during FY2006 confirms that we are on the right track.

Successful Cost Reduction Strategy

Cost reduction continued to be a major issue for the entire media storage industry in FY2006. In the second half of FY2005, we launched an extensive strategic cost reduction programme that was implemented successfully. Through rigorous value engineering, sourcing and improved manufacturing efficiencies, we have exceeded our targets for reducing the cost of our products. Such efforts are ongoing, and we have established even more ambitious goals for FY2007.

Well Prepared for Future Growth

The Group remains on course in the majority of its business activities. We are convinced that the strategic and operative measures introduced to date are laying the foundation for the profitable development of the Group and will result in sustained added value for shareholders.

The top line should continue to benefit from new and improved products with better profit margins and strong results in Japan and Europe.

We are also confident that we will generate additional cost savings in FY2007 and beyond. We anticipate continued inflationary pressures, and we will maintain a disciplined approach to meeting the challenges ahead.To deliver our strategic goals, it is equally important for us to develop and retain talent in our organisation. We remain committed to investing in our human capital to create further competitive advantage.

Proposed Dividend

In light of our strong earnings and robust cash flow, the Board of Directors is proposing a first and final dividend of US$0.003 per share, amounting to US$650,000. This is a 19.1% increase over the US$545,600 that was returned to shareholders in FY2005.

Acknowledgements

On behalf of the Board of Directors, I would like to thank all of our employees and commend them for the dedication they have shown during the challenging year that is now behind us. Our sincere gratitude also goes to our customers, business partners, as well as to you, our valued shareholders, for your continuing trust and support. We will make every effort to earn that support in the current year.

Lim Beng Guan
President & Chief Executive Officer