President's Statement

Dear Shareholders,

Revenue from North Asia jumped from S$18.8 million in FY 2004, to S$37.7 million in FY 2006 and to S$60.9 million in FY 2007. This represents a three-fold increase within a short span of three years. We also reached our target to have 50 PRC sales offices by 2008. In fact we surpassed our target and achieved so a year earlier, by increasing them from 14 at the time of our IPO in FY 2005, to 42 by FY2006 and to 52 by FY2007.

The past year marked a period of rapid progress and development for the Group. ISDN inked several strategic partnerships and alliances that would place the company on an even stronger footing in the years to come. The Group reached a significant performance milestone by surpassing the S$100 million-revenue mark. Revenue from North Asia jumped from S$18.8 million in FY2004, to S$37.7 million in FY2006 and to S$60.9 million in FY2007. This represents a three-fold increase within a short span of three years. We also reached our target to have 50 PRC sales offices by 2008. In fact we surpassed this a year earlier than targeted, increasing them from 14 when ISDN was listed in FY2005, to 42 in FY2006, and hitting 52 offices in FY2007.

The Group has gone beyond just being a motion control specialist exposed to the cyclical nature of the semi-conductor industry. It has successfully transformed itself into a bona fide technology and innovation-driven one-stop solutions provider with its own proprietary cache of intellectual property and industrial patents. This gives the Group a critical competitive advantage to enable it to compete with international players. It also provides us with the necessary wherewithal to attract new customers and new industry partners.

Our customer base has expanded substantially, now totaling almost 4,000, from about 3,000 a year earlier. We have also cast our nets wider to encompass new and exciting sectors such as renewable energy and specialised industrial components such as high-end hinges and locks.

All these efforts have steadily translated into concrete results. For the financial year in review, Group revenue continued its double digit growth, rising by 38.0% to S$102.9 million, from S$74.5 million. Net profits to shareholders were marginally lower by 9.1%, coming in at S$5.6 million, from S$6.2 million.

Net earnings per share, after taking into account new shares issued from a share placement earlier in the year, was 3.21 Singapore cents, from 3.89 Singapore cents previously while net asset value per share climbed from 13.86 Singapore cents to 19.29 Singapore cents.

The Group continued to generate positive cash flow from operations, churning S$3.5 million of net cash from operating activities.

I am pleased to announce that the Board of Directors has proposed a final dividend of 0.55 cents per share.

Operationally, our business in North Asia, in particular, China, was once again the star performer and it looks poised to continue this surge. Demand is expected to continue to be robust and the Group is benefitting from its partnerships with strategic partners. Besides expanding geographically within China, we are also striving to penetrate deeper into specific industries. During the year we started a joint venture, Weiyi M&E Equipment (Shanghai) Co., Ltd to offer engineering solutions to packaging, textile and plastic industries in China. We expect to forge even more new collaborations in the near future while strengthening existing ones.

We will continue to stamp our mark on the global scene by venturing into new exciting frontiers like India and Taiwan where the potential for growth is immense. To ease this transition we have started to put in place the necessary foundations to tap into these two markets. We have incorporated a subsidiary in India and established an associate company in Taiwan. Late last year, we have also set up a representative office in Indonesia to tap into new business opportunities.

We have also recently completed our acquisition of Dirak Asia Pte Ltd, which was part of the German-based Dirak GmbH & Co group of companies that has a strong heritage of innovation with ownership of more than 250 patents worldwide. Dirak specialises in the innovative design and manufacture of hinges and locks for the high-end industrial enclosure market for a diverse range of industries.

This acquisition will introduce new revenue streams and will significantly add to our profitability starting from FY2008. Dirak Asia has consistently generated approximately 55% compounded annual growth rate from 2004 to 2006.

In addition, this acquisition opens a new vista of opportunities for the Group to provide a wider scope of other specialised engineering solutions to our growing pool of global and domestic clientele.

Additionally, the Group recently delivered 18 units of positioning stages and control systems, worth RMB 3 million to a leading solar panel equipment manufacturer in China, heralding our entry into the highly lucrative renewable energy sector. According to the manufacturer, the orders could potentially escalate to 200 units, which would translate to RMB 30 million.

With these new growth drivers, new markets in place and potential penetration into the marine and offshore sectors, I am confident the Group is now ready to charge ahead towards its next phase of growth. 2008 looks poised to be an exciting year ahead for ISDN and its shareholders.

Let me take this opportunity to thank our Board of Directors, management and staff for their contributions and dedication as well as our shareholders, customers, suppliers and business partners for their continued support.

Teo Cher Koon
President and Managing Director