micro-mechanics (Holdings) Ltd

micro-mechanics (Holdings) Ltd.annual report FY2008

CONT

ENTS

01 Founder’s Message04 Executive Management Report06 Financial Review10 Board of Directors & Executive Offi cers12 Corporate Information13 Corporate Governance22 Financial Section54 Shareholders’ Statistics56 Notice of Twelfth Annual General Meeting58 Notice of Books Closure and

Dividends Payment Date ■ Proxy Form

small Idea, bIg ambITIons

Micro-Mechanics designs, manufactures and markets consumable parts and precision tools used in the assembly and testing of semiconductors. The Group also has a Custom Machining and Assembly division that offers precision manufacturing services to high technology industries. Today, Micro-Mechanics serves more than 300 customers worldwide through six manufacturing facilities located in Singapore, Malaysia, China (Suzhou), Thailand, the Philippines and the USA; its direct sales presence in Switzerland, Taiwan, Indonesia and Korea; as well as a distributor in Japan. Micro-Mechanics became a public corporation in 2003. Its shares are listed on the SGX Main Board in Singapore.

Micro-Mechanics was founded with modest capital of S$1,200 in 1983, starting business with just one employee in a 500 sq. ft. workshop at the back of a hat-sewing factory.

In 1989, we welcomed our fi rst design engineer, Mr Low Ming Wah (second from left), to our young team at Micro-Mechanics. Now our President and Chief Operating Offi cer, Mr Low oversees our Asian operations.

Our fi rst employee at work on our fi rst machine - a second-hand lathe that cost a princely sum of S$300.

Those were pioneering days for the semiconductor industry in Asia. We continued investing in people and machines as our business picked up and moved to larger premises at the Golden Wall Flatted Factory in 1985.

As our customer base continued to grow in Malaysia, we took our fi rst steps overseas and set up a manufacturing plant in Penang.

In early 1981, I landed at the old Paya Lebar airport in Singapore.

I was 24 years old and arrived with only a suitcase, briefcase and

US$10,000 in loans I had for graduate school. I had no contacts

in Asia. My job, with a pioneering American maker of assembly

equipment, was to establish the company’s first sales and

engineering office in Asia. In the next few months, as I lived, worked

and traveled across the region, I came to love the land, people and

culture of Asia.

From the time I stopped

wanting to be a cowboy or

fireman, I had dreamed

of starting a business.

This dream came true

in late 1983, when I

started Micro-Mechanics.

Beginning with S$1,200, a 30-year-old lathe, a 500 sq. ft. workshop

in the back of a friend’s hat-sewing factory and one employee, we

made our first product. It was a stainless steel ‘pick-up tool’ for

the semiconductor die-attach process. To drum up orders, I spent

alternating weeks driving the back roads of Malaysia from factory to

factory in a car my friends called “The Mango” – a 1971 Austin GT.

The car had a dashboard fan, no air-conditioning and a recent coat

of bright yellow paint.

As orders for our first products began to flow, we hired more

people and added equipment, mostly bought from a bankrupt,

watch-making factory. We began building Micro-Mechanics

one step at a time. In 1985, I flew to Switzerland to introduce

Micro-Mechanics to a leading equipment maker. I was greeted

by Mr. Karl Zurfluh. During our supplier relationship over the next

13 years, Karl helped bring to Micro-Mechanics an appreciation for

order, quality and precision for which the Swiss are famous. Karl is

still a driving force; today, he is our Vice President and Director.

In July of 1987, we moved into a 5,000 sq. ft. industrial unit in

Kampong Ubi. That month, sales reached S$100,000 for the first

time. About the same time, I made a quick trip to the United States

and while traveling there met a young woman named Andrea.

Over the next nine months, we saw each other eight days. On the

ninth day, I asked her to marry me. She said “yes”. During the next 8

years, our three sons were born in Singapore.

In 1989, we hired our first engineer, Mr. Low Ming Wah. Perhaps

more than any one person, Ming Wah has put his heart and

soul into the company, and last year he became President and

Chief Operating Officer. In 1996, Mr. Chow Kam Wing answered

an advertisement we had placed for a subsidiary-level finance

manager. With anxiety running high over the impending handover

of Hong Kong to China, he and his young family had recently

left Hong Kong. I was impressed with Kam’s desire to build a

better life for his family. After becoming Vice President in 2000,

Kam subsequently led our Initial Public Offering. A few months ago,

he was honored during the Singapore Corporate Awards as “CFO of

the Year” for his efforts in promoting a high standard of corporate

governance and transparency.

As I look back over the last 25 years, I see the success of

Micro-Mechanics stemming from a handful of key decisions.

Although I am not sure I would start a business again overseas

and on such a small budget, I learned a priceless lesson: People

make everything happen. I also have to say that hiring Ming Wah,

Kam and Karl, and asking Andrea to marry me, were four of the best

decisions in my life, although not necessarily in that order!

As we start our next chapter, I am grateful to our people for their

passion, commitment and contribution, and to our customers,

suppliers and shareholders for their support and trust. As we strive

to build a great company, it is a privilege to work with our board

that also includes our independent directors Sumitri Menon,

Ng Beng Tiong and Duane Wadsworth. I just hope they decide to

keep me for another year – or maybe even 25!

Chris BorchChairman and CEO

1Micro-Mechanics (Holdings) Ltd.

25th Anniversary

founder’s message

25th

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Annual Report FY20082

By the mid-1990s, things were coming together for us as we had the fi ve essentials to become a great business - capital, products, customers, know-how and a team of great people.

To tap the chip industry’s growth in Asia, we strengthened our regional presence through new factories in Thailand and Philippines, our new corporate headquarters at Kaki Bukit Place in Singapore and larger plant in Bayan Lepas, Malaysia.

All smiles as our Executive Management team sounds the gong to kick-off trading of Micro-Mechanics shares on SGX-Sesdaq on 25 June 2003.

CombInIng sTraTegy, abIlITy and deTermInaTIon

25th Anniversary


As more of our customers shifted their manufacturing to China, we set up our fifth factory in Suzhou in 2004 to provide them with fast, effective and local support.

Corporate governance is highly prized at Micro-Mechanics … our efforts have been recognised - CFO of the Year 2007, Forbes Asia 200 Best Under a Billion 2006, SIAS Corporate Governance (Sesdaq) 2006, SIAS Most Transparent (Sesdaq) Company 2005.

To boost growth of our budding CMA business, we made our first acquisition since listing and began operating our sixth factory in the USA, and first outside of Asia, in June 2008.

reaCHIng neW fronTIers

We marked our 25th anniversary with Micro-Mechanics’ upgrade to the SGX Mainboard on 22 July 2008. It has been a great five years since our listing and we look forward to continuing this journey with all our stakeholders.

exeCuTIve

managemenT reporTTo our shareholders, employees, customers and suppliers

For the financial year ended 30 June 2008 (“FY2008”), Group net

profit rose 6.7% to a record S$8.9 million while sales increased

10.1% to S$38.2 million. In line with our practice of rewarding

shareholders, we have proposed – for approval by shareholders at

our Annual General Meeting on 31 October 2008 – to distribute a

final dividend of 3 cents per share. Together with the interim dividend

of 2 cents we paid in February, the total dividend for FY2008 will

amount to 5 cents per share.

As a mark of our continued corporate development, the listing and

quotation of our shares were upgraded to the SGX Main Board on

22 July 2008.

Our continual efforts to improve corporate disclosure and

transparency also received recognition during the year. Based on

our ranking in the Business Times Corporate Transparency Index,

Micro-Mechanics continues to rank among Singapore’s best

blue-chip firms. In February, our Chief Financial Officer, Mr. Chow

Kam Wing, received the “CFO of the Year Award (Sesdaq)” at the

Singapore Corporate Awards. The winner of the CFO Award is

judged to be an exemplary role model in corporate disclosure and

transparency best practices.

Industry and competitive trends

Based on data from the Semiconductor Industry Association (SIA),

global semiconductor sales rose about 3.9% to US$260.4 billion

during the twelve months between July 2007 to June 2008,

compared to the previous corresponding period. Although demand

from key end-markets remains healthy, the SIA has lowered its

forecast for semiconductor sales in 2008 to 4.3% from an earlier

estimate of 7.7% growth. Other industry watchers are forecasting

chip sales in 2008 to grow between 2% and 5%.

Amid signs of a slowing economy in the United States, it may be too

early to gauge if dampened spending there will be offset by consumer

spending in other markets. With over half of all semiconductor chips

now finding their way into consumer applications, we will be looking

closely at consumer spending patterns, especially in Asia. If chip

manufacturers continue to offer more functionality and performance

for less cost, we think consumers will continue to be drawn to

the latest and most sophisticated cell phones, music players and

computers.

While a more consumer-dominated demand is good for

semiconductor industry growth, this trend may also result in

additional price pressures for chip makers and, consequently,

the industry supply chain. Together with the increasing cost of

materials, energy and skilled people, we think it is essential to have

clear strategies, an unrelenting focus on operational improvement,

and fast and effective access to a full range of products for our

global customers.

Growth strategies

Providing fast and effective support is a key element of our growth

plan. With five factories in Asia, a new plant in the United States

and a sales subsidiary in Switzerland, we are continuing to build

a worldwide, local presence. We also want to improve our existing

products and develop new consumable tools for the core chip-

packaging and testing processes. For example, we developed

a tool used to bond ultra-fine aluminum wires during FY2008.

With feature sizes below 0.10mm and tolerances in the microns,

this tool is a good example of the “micro” design and manufacturing

capability that is increasingly required as the semiconductor

industry packs more performance into less electronic real estate.

In addition to our semiconductor tooling business, we intend to

strengthen our Custom Machining & Assembly (CMA) division.

During FY2008, our CMA sales increased 35.4% to S$4.1 million

to reach 10.7% of Group revenue. Besides diversifying the Group’s

revenue and reducing our dependency on the semiconductor

industry, our CMA customers are primarily high-tech equipment,

medical or aircraft companies based in Europe and the United

States. This geographical spread provides a good balance to our

semiconductor tooling business, which is increasingly centered on

customers in Asia.

4 Annual Report FY2008

25th

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As part of our plans to accelerate the growth of our CMA division, we completed a S$2.5 million acquisition of substantially all of the assets of AMP3, a California-based company, on 30 May 2008. The next day, our first plant in the United States commenced operations.

We believe this modest investment is an important step for the Group. In addition to acquiring equipment, inventory and know-how, we extended employment to 45 of AMP3’s people. We believe this team of experienced people is critical to the acquisition as they immediately provide us with skills and know-how that could have taken us many years to develop. The acquisition also gave us immediate access to new CMA customers in the aircraft, medical, bioscience and other industries that could have involved lengthy marketing and qualification periods. With companies always looking to reduce cost, we believe many of our new CMA customers in the United States will find Micro-Mechanics’ ability to transfer manufacturing to Asia, a compelling supplier proposition.

During FY2009, our goals for our new 41,000 sq. ft. factory are to strengthen our team, introduce key elements of the MM culture – such as 5S housekeeping and a constant focus on quality, cost and operational improvement – and work towards profitability. By financing the acquisition without debt or share dilution of existing shareholding, we have the chance to learn about acquisitions – and evaluate this way of enhancing the Group’s growth – without undue pressure, risk or distraction of key personnel.

Personnel review

People – their skills, experience, creativity and commitment – are fundamental to our long-term success. As the company grows, our aim is to build an organizational structure that emphasizes shop-floor personnel, minimizes bureaucracy and focuses on clear, fair and bottomline-oriented measures of performance. During FY2008, we added 96 people, bringing our year-end headcount to 569. Of these, 408 or 72% are production and quality personnel.

We believe attendance and retention rates are useful indicators

of our human capital management. Based on our year-end

headcount and the number of confirmed employees that

left during FY2008, our retention rate was 88.3%. While up

from 84.4% in FY2007, this is still below our target of 90%.

During FY2008, we lost 0.8% of our available man-days due to

illness for an attendance measure of 99.2%.

To create opportunities for staff development, our employee

exchange program allows shop-floor, technical, sales or

administrative people to work in another facility for periods of

up to one month. For mid-level managers, we have an executive

development program with quarterly review and training sessions.

Improving personnel systems, communication and development

programs will continue to be key factors in our corporate

development. We also believe in building reward systems – based

on clear and fair measures of performance – to identify leaders

with commitment, determination and passion. During FY2008,

we distributed S$1.9 million in incentive pay to all our people

under our Performance Bonus Incentive (PBI) program.

Outlook for FY2009

The outlook for the global economy is uncertain. With continuing

turmoil in the credit markets, high energy costs and inflationary

pressure for materials, services and personnel, we think it is

essential to have a consistent and practical strategy for growth.

Together with a strong balance sheet that includes S$11.5 million

in cash and no borrowings, our goal is to be ready, not only for

opportunities, but also for set-backs as they arise.

As we begin FY2009, we are optimistic that our current business

strategy positions the Group to further enhance value for

shareholders over the coming years. Barring a more pronounced

slowdown in the semiconductor industry and global economy,

we expect the Group to achieve further progress in the coming years.

In closing, we would like to extend our appreciation to our

shareholders, Independent Directors, management and staff,

customers, business partners and suppliers for their contributions

and continued support of Micro-Mechanics.


25th Anniversary

Christopher Reid BorchChief Executive Officer

Karl ZurfluhVice President

Low Ming WahChief Operating Officer

Chow Kam WingChief Financial Officer

25th

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Group revenue

For the year ended 30 June 2008 (FY2008), Group revenue

rose 10.1% to S$38.2 million from S$34.7 million in FY2007,

driven mainly by increased sales in China, Europe, Thailand and

Malaysia. With approximately 43% of our sales priced in U.S.

dollars, the currency’s depreciation during FY2008 resulted in

a foreign exchange drag on our revenue growth when translated

into Singapore dollars. Compared to the same period last year,

the U.S. dollar has weakened about 11% against the Singapore

dollar, from 1.53 to 1.36.

For the three months ended 30 June 2008 (4Q08), our quarterly

revenue reached its highest-ever level of S$9.8 million, translating

into year-on-year growth of 9.5% and quarter-on-quarter growth

of 6.7%.

In terms of revenue contribution, Malaysia remains our largest

market with sales increasing a steady 11.0% to S$7.7 million in

FY2008. We have also continued to expand our local customer base

and support in China with sales to this market increasing 36.9% to

S$6.6 million. Sales in Thailand rose by 17.8% to S$2.1 million.

Meanwhile, sales in Europe rose 32.3% to S$4.3 million due mainly

to increased orders for products from our Custom Machining &

Assembly (CMA) division. While our business in the United States

picked up in 4Q08, sales to this market eased 5.2% in FY2008

due to slower orders from our customers in the wafer-fabrication

equipment industry.

5-year CAGR = 13.3%

23.2

38.2

FY2008FY2004

26.6

FY2005

31.7

FY2006

34.7

FY2007

grou

p re

venu

e(y

early

ana

lysi

s)(S

$M)

9.88.9

9.78.8

9.2

8.1

9.68.9

FY2008FY2007

4Q3Q2Q1Q

grou

p re

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e(q

uart

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$M)

fInanCIal revIeW

10.1% growth

revenue breakdown by markets (FY2008)

Thai

land

• S

$2.1

M •

5%

Taiw

an •

S$3

.4M

• 9

%

China •

S$6.6M • 17%

USA • S$3.9M • 10%

Europe • S$4.3M • 11%

Japan • S$2.2M • 6%

Othe

rs •

S$1.8

M • 6%

Singapore • S$2.3M • 6%

Malaysia • S$7.7M • 20%

Philippines • S$3.9M • 10%

25th Anniversary

Micro-Mechanics (Holdings) Ltd. 7

Our long-term product strategy for the semiconductor tooling segment is to offer our customers a “one-stop” solution for consumable tools and parts. During FY2008, sales of semiconductor tools increased by 7.7% to S$34.1 million, from S$31.6 million in FY2007 despite slower conditions in the semiconductor industry. We have continued to make encouraging progress in our efforts to build the CMA division, which is the Group’s strategy to leverage our expertise in precision manufacturing to explore opportunities beyond consumable tools. In FY2008, CMA sales increased 35.4% to S$4.1 million to account for 10.7% of Group revenue, compared to the contribution of 9.0% in FY2007. Besides diversifying the Group’s revenue from the cyclicality of the semiconductor industry, our CMA division’s focus on customers in Europe and the United States also provides a good balance to our semiconductor tooling business, which is increasingly centered on customers in Asia.

Gross profit margin

In FY2008, our gross profit margin remained steady at 58.2%, compared with 58.1% in FY2007. While we experienced cost increases for some raw materials, price pressures across the semiconductor supply chain and higher personnel costs from an increase in our production headcount, these increases were partially offset by reduced depreciation expenses. In 4Q07,

the Group reviewed and changed the accounting estimates

of useful life and the related residual values of certain plant and equipment from 5 years to 10 years to more accurately reflect our historical experience. With many of our machines operating well beyond 5 years, we felt it is important to align this major cost of our business more accurately, and thereby improve product-costing and investment-related decisions. The impact of the changes on the financial statements for FY2007 and FY2008 was to increase gross profit by S$256,000 and S$754,000 respectively.

In 4Q08, our gross profit margin dipped to 53.9% from 58.1% in 4Q07. This was mainly due to an increase in production costs following the commencement of our new 41,000 sq. ft. CMA manufacturing facility in the United States in June 2008.

Net profit

In FY2008, our administrative, distribution and other operating expenses (inclusive of other income) rose 13.4% to S$11.3 million, from S$9.9 million in FY2007, due mainly to an increase in sales-related remuneration and expenses, higher administrative salaries and one-time costs totaling S$91,000 in relation to our asset acquisition in the United States and a second factory in Singapore. As a percentage of sales, these overhead costs were 29.5%, a slight increase from 28.6% in FY2007. While still less than 30.8% in FY2006 and 34.5% in FY2005, overhead costs in FY2008 rose at a faster pace than revenue. As such, we intend to keep a close

watch on these expenses in future.

23.9%

60.4%

24.4%

61.4%

20.4%

63.3%

net profit margingross profit margin

profi

t mar

gins

58.1% 58.2%

20.5%23.2%

FY2007FY2006FY2005FY2004 FY2008

Profit before tax increased 7.5% to S$11.0 million in FY2008, from S$10.2 million in FY2007. After deducting taxation of S$2.1 million (S$1.9 million in FY2007), the Group’s net profit increased 6.7% to S$8.9 million in FY2008, from S$8.3 million in FY2007. Our effective tax rate increased from 18.7% in FY2007 to 19.3% in FY2008, mainly attributable to a lower reinvestment allowance

for our Malaysia subsidiary and the end of tax-holiday status for our plant in Suzhou in December 2007. In 4Q08, net profit declined to S$1.8 million due to the impact of withholding taxes in the Philippines and our asset acquisition in the United States, which amounted to about S$300,000.

The Group’s net profit margin softened slightly to 23.2%, from 23.9% in FY2007 (24.4% in FY2006 and 20.5% in FY2005). Return on equity improved to 23.7%, from 22.2% in FY2007. Return on equity (ex-cash) was 34.2%, compared to 35% in FY2007.

Balance sheet

As at 30 June 2008, the Group remained in a sound financial position with total assets of S$43.5 million and shareholders equity of S$37.4 million.

With customers constantly demanding faster delivery cycles, our management of inventory (to avoid overstocking and write-offs) plays a key role in our daily work processes. Including inventory of nearly S$300,000 acquired as part of our asset acquisition in the United States, our inventories rose 38.2% to S$1.4 million at the end of FY2008 (S$1.0 million at end-FY2007). As a percentage of sales, inventory was 3.7% in FY2008 (3.0% in FY2007) while inventory written off totaled S$15,000 in FY2008 (S$22,000 in FY2007).

As at 30 June 2008, our total accounts receivables rose 22.4% to S$7.3 million. Of this, trade receivables accounted for S$6.5 million, which was an 18.6% increase from S$5.5 million at the end of FY2007 due mainly to additional sales of about S$700,000 from our new CMA-related production operations in the United States during the month of June 2008. While collecting monies on a timely basis is not always easy, we ended FY2008 with just 1.0% of our trade receivables outstanding for 90 days or more while bad debt expense for the year totaled S$3,500.

Although trade and other payables at the end of FY2008 increased 25.9% to S$3.8 million, none were outstanding for 30 days or more. Reliable, committed and quality-minded suppliers are critical to our success, and through prompt payment and other actions, we hope to set the tone for a strong sense of mutual cooperation and benefit.

5-year CAGR = 17.3%

6.7% growth

4.7

8.9

FY2008FY2004

5.4

FY2005

7.7

FY2006

8.3

FY2007

grou

p ne

t pro

fit

(yea

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naly

sis)

(S$M

)

1.8

2.22.1 2.1

1.7

2.52.3

4Q3Q2Q1Q

grou

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fit(q

uart

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ana

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s)(S

$M)

2.5

FY2008FY2007


25th

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Cash flow

The Group continued to generate healthy cash flow from operating

activities of S$10.6 million in FY2008 (S$11.8 million in FY2007).

During the period, cash flow used for investing activities amounted

to S$4.6 million after accounting for capital expenditures and

proceeds from the disposal of property, plant and equipment.

After deducting total dividend distributions of S$7.6 million paid out

during the period, we ended FY2008 with a healthy cash balance of

S$11.5 million and no bank borrowings.

Capital investment

Having completed major capital investments of S$5.5 million

during FY2007 to increase production capacity and improve

manufacturing capability, we had initially budgeted for lower capital

spending of about S$2.0 million in FY2008. In line with this plan,

we invested about S$2.1 million in plant and equipment mainly

for our operations in Malaysia, the Philippines and Singapore.

In May 2008, we were presented with an opportunity to purchase

assets comprising machinery, inventory and know-how in the

United States to strengthen the capabilities of our CMA business.

Including this S$2.5 million acquisition, our capital expenditure

for FY2008 amounted to S$4.6 million in FY2008. Legal and tax

expenses of nearly S$200,000 relating to the acquisition were

capitalized in the purchase price.

During FY2008, our average capacity utilization was 58%,

down slightly from 61% in FY2007, due to the additional

production capacity brought onstream in Penang during the latter

half of FY2007 as well as our new United States facility in June

2008. With the exception of plans for introducing a more integrated

IT system for the group, we intend to limit spending on plant and

equipment during FY2009 to about S$2.0 million. Our key focus

now is on improving our operational performance and enhancing

overall plant utilization.

Dividend payment

The Board of Directors is recommending a final dividend of 3 cents

a share (tax-exempt). Together with the interim dividend of 2.0 cents

per share (tax-exempt) paid on 28 February 2008, the Group’s total

dividend for FY2008 would be 5 cents per share (tax-exempt).

The total payout for FY2008 will amount to S$6.9 million (S$6.9

million in FY2007).

DPS based on 138.5 million shares, after adjusting for 1-for-4 bonus issue on 10 November 2005

1.2

5.0

FY2008FY2004

2.4

FY2005

3.5

FY2006

5.0

FY2007

0.8

FY2003

divi

dend

per

sha

re

(cen

ts)

special dividendinterim dividend

proposed final dividend


25th Anniversary

Chow Kam WingExecutive Vice President & Chief Financial Officer

Mr. Chow joined Micro-Mechanics in 1996 as Finance &

Administration Manager of our Singapore subsidiary. Mr. Chow

received his BA (Accounting) from the University of Southern

Queensland, Australia, and an MBA from the University of Wales in

the United Kingdom. Since joining the company, Mr. Chow has held

a succession of positions at both the subsidiary and group level.

He is also Company Secretary. Mr Chow was conferred the CFO

of the Year 2007 (Sesdaq) under the Singapore Corporate Awards.

He is a non-practicing Certified Public Accountant registered in

Australia, Singapore and Hong Kong. Mr Chow is also currently

appointed as member of CFO Committee of Institute of Certified

Public Accountants of Singapore. Prior to joining Micro-Mechanics,

he lived and worked in Hong Kong.

Christopher Reid BorchChairman & Chief Executive Officer

Mr. Borch has over 30 years of engineering, manufacturing and

management experience in the semiconductor industry,

including 17 years living and working in Asia. Prior to founding

Micro-Mechanics in 1983, Mr. Borch held positions with several

leading makers of automatic assembly equipment including

Kulicke & Soffa, Inc. Mr. Borch earned his undergraduate degree

from Furman University and an MBA from The Wharton School

at the University of Pennsylvania. A life-long competitive runner,

Mr. Borch is a director of the United States Track and Field Federation

Foundation, the national governing body for athletics in the U.S.

Karl ZurfluhVice President

Mr. Zurfluh joined Micro-Mechanics in 1998 as a member of the

board of directors. In July, 2002, he assumed responsibility for

establishing the first subsidiary for Micro-Mechanics in Europe.

In addition, he oversees the Group’s custom machining and

assembly division. Prior to joining Micro-Mechanics, Mr. Zurfluh

was Managing Director of Mandatec AG, a precision subcontracting

firm located in Switzerland and Executive Vice President of the

ESEC Group, a leading Swiss manufacturer of semiconductor

assembly equipment. He has over 35 years of experience in the

semiconductor industry.

Low Ming WahPresident & Chief Operating Officer

Mr. Low joined Micro-Mechanics in 1989 as the company’s first

engineer. During his career at Micro-Mechanics, Mr. Low has

held key engineering, manufacturing and management positions.

Prior to joining Micro-Mechanics, Mr. Low held engineering and

design positions with General Electric and Siemens. Mr. Low

received his Diploma in Mechanical Engineering from Singapore

Polytechnic and an MBA from the University of Hull, UK. He has over

25 years of experience in the semiconductor industry.


25th

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board of dIreCTors

Ng Beng TiongIndependent Director

Mr. Ng is the Director, Operations of ARA Managers (Asia Dragon)

Pte Ltd, a real estate fund management company. Prior to his current

job, he was Finance Director of Low Keng Huat (Singapore) Ltd,

a publicly listed construction, property and hotel group from 2003

to 2007 and director of Stone Forest M&A Pte. Ltd. from 2002 to

2003. From 1997 to 2002, he was director for corporate planning

and business development of Labroy Marine Limited, a publicly

listed marine engineering and shipping group which has since been

privatized. Between 1989 and 1997, he was with DBS Bank and

held various positions in its corporate banking and corporate

finance departments. Mr. Ng holds a Master of Engineering

(Software Engineering) (First Class Honours) from Imperial College,

London. He is also a Chartered Financial Analyst.

H. Duane WadsworthIndependent Director

Mr. Wadsworth is the retired President of Wadsworth-Pacific Mfg.

Associates, Inc., a sales and marketing organization providing

leading-edge materials to the semiconductor industry. He served

eleven years on the board of directors of Semi conductor Equipment

and Materials International (SEMI), a global trade organization and

is currently the lead director of Tegal, Inc., a publicly-listed

manufacturer of wafer fabrication equipment based in Petaluma,

California. Mr. Wadsworth earned his undergraduate degree

from Harvard University and an MBA from Stanford University.

Sumitri Mirnalini Menon @ RabiaIndependent Director

Ms Menon @ Rabia is an advocate and solicitor and has been

practicing as a lawyer since 1982. She is currently a consultant with

Jansen, Menon and Lee, a law firm in Singapore. She was previously

a partner at Raja and Partners. Ms Menon graduated from the

National University of Singapore with a Bachelor of Laws (Honours).

She is a member of the Singapore Institute of Directors.

Executive OfficersSINGAPORE

Micro-Mechanics Pte LtdMr. Abdul Samad bin Ahmad(General Manager)

MALAYSIAMicro-Mechanics Technology Sdn. Bhd.Mr. Tan Beng Lim(General Manager)

PEOPLE’S REPUBLIC OF CHINAMicro-Mechanics Technology (Suzhou) Co. Ltd.Mr. Tan Teck Hoe(General Manager)

THAILANDMicro-Mechanics (Thailand) LimitedMs Pantira Liewtrakool(Acting Country Manager)

THE PHILIPPINESMicro-Mechanics Technology International, Inc.Mr. Tan Chong Jin(Senior Factory Manager)

THE UNITED STATESMicro-Mechanic, Inc.Mr. Kent Richard Rounds (General Manager)


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Board of DirectorsChristopher Reid Borch (Chairman)

Low Ming Wah (Executive Director)

Chow Kam Wing (Executive Director)

Karl Zurfluh (Executive Director)

Sumitri Mirnalini Menon @ Rabia (Lead Independent Director)

Ng Beng Tiong (Independent Director)

Howard Duane Wadsworth (Independent Director)

Audit CommitteeNg Beng Tiong (Chairman)

Sumitri Mirnalini Menon @ Rabia

Howard Duane Wadsworth

Nominating CommitteeSumitri Mirnalini Menon @ Rabia (Chairman)

Ng Beng Tiong

Christopher Reid Borch

Remuneration CommitteeSumitri Mirnalini Menon @ Rabia (Chairman)

Ng Beng Tiong

Howard Duane Wadsworth

Company SecretaryChow Kam WingCertified Public Accountant (Singapore)

Registered OfficeCompany No: 199604632W31 Kaki Bukit PlaceEunos Techpark Singapore 416209Tel: 65-6746-8800 Fax: 65-6746-7700

Share Registrar & Share Transfer Office

M & C Services Private Limited138 Robinson Road#17-00 The Corporate OfficeSingapore 068906

AuditorsKPMG, Certified Public Accountants 16 Raffles Quay#22-00 Hong Leong BuildingSingapore 048581Partner-in-charge : Gerald Low(appointed since November 2007)

Principal BankerDBS Bank Ltd6 Shenton WayDBS Building Tower One Singapore 068809

SolicitorVenture Law LLC 50 Raffles Place#31-01 Singapore Land TowerSingapore 048623

Investor Relations Consultant

Octant Consulting10 Anson Road #33-04 International Plaza Singapore 079903 Tel: 65-6220-2842

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CorporaTe InformaTIon

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governance The Board of Directors and Management of Micro-Mechanics (Holdings) Ltd. are committed to a high standard of corporate governance and transparency and to the protection of shareholders’ interests. In July 2005, a revised Code of Corporate Governance (the “Code”) was released by the Council on Corporate Disclosure and Governance. The Board has reviewed and implemented changes to the Company’s corporate governance policies and processes so as to be in line with the Code.

This report describes the Company’s corporate governance policies and processes for the financial year ended 30 June 2008 with specific reference to the Code.

BOARD MATTERSThe Board’s Conduct on Affairs Board, Composition and Guidance

The Board comprises seven Directors, three of whom are Independent and Non-Executive Directors and four are Executive Directors. The particulars of the Directors are set out on pages 10 and 11. The Directors are not related to one another.

The Board believes that its primary role is to protect and enhance long-term shareholder value. To this end, it sets the overall strategy for the Company and its subsidiaries (collectively, the “Group”) and oversees management. To fulfill this objective, the Board takes responsibility for implementing and maintaining sound corporate governance practices for the Group. The Board provides leadership, sets strategic direction, establishes risk policies and procedures and requires goals from management as well as monitors the achievement of those goals.

To assist in the execution of its responsibilities, the Board has established a number of committees, including an Audit Committee a Nominating Committee and a Remuneration Committee. These committees are chaired by Independent Directors and function within clearly defined terms of reference and operating procedures. The Board and the committees meet regularly and, if necessary, on an ad hoc basis. To facilitate the ease, frequency and speed of Board meetings, the Company’s Articles of Association allow Board members to attend meetings via any electronic or telegraphic methods of simultaneous communication including via tele-conference.

The Board regularly reviews all matters within its purview including but not limited to business strategies, development plans and the performance of the Group. Reviews are also made of the annual budget, announcements of financial results, annual reports, performance bonus incentives and any acquisition or disposal of material assets.

There are comprehensive internal guidelines on matters that require the Board’s approval, such as changes in the Company’s constitution and structure, material capital commitments, commencing and defending litigation etc. These guidelines were approved by the Board.

The Board recognizes the importance of appropriate orientation training and continuing education for its Directors. Newly appointed Directors will be fully briefed as to the business activities of the Group and its strategic directions, as well as their duties and responsibilities as Directors.

The Directors are also updated from time to time on regulatory changes which have a bearing on the Company and the Directors’ obligations towards the Company.


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The following table shows the number of meetings held and Directors’ attendances during the financial year under review:

Audit Remuneration Nominating Board Committee Committee Committee

Number of meetings held 4 5 4 2

Number of Meetings Attended

Directors: Christopher Reid Borch 4 NA 4 * 2Low Ming Wah 4 NA NA NAChow Kam Wing 4 5 * 4 ** 2 **Karl Zurfluh 3 NA NA NAHoward Duane Wadsworth 4 5 4 NANg Beng Tiong 4 5 4 2Sumitri Mirnalini Menon @ Rabia 4 5 4 2

NA - not applicable as the director is not a member of the Committee* - attendance by invitation of the Committee** - attendance as Secretary of the Committee

Chairman and Chief Executive Officer

Mr. Christopher Reid Borch is both the Chairman and the Chief Executive Officer of the Company.

As Chairman, Mr. Borch’s major responsibilities are:

- to ensure that Board meetings are held when necessary to enable the Board to perform its duties and facilitate the Company’s operations;

- to set Board meeting agendas in consultation with the company secretary and the Executive Directors;

- to review all Board papers ;

- to provide adequate, timely and relevant materials and Board papers to the Board members to help to ensure the quality, quantity and timeliness of the flow of information between management and the Board; and

- to assist in ensuring compliance with the Company’s guidelines on corporate governance.

Being the Chief Executive Officer, Mr. Borch has overall responsibility for the management and daily operation of the Group, and is supported by the Executive Directors and executive officers. Mr. Borch and the Executive Directors and executive officers are not related to one another.

The Board has not adopted the recommendation of the Code for a separation of the offices of the Chairman and Chief Executive Officer. The Board is of the view that there are already sufficiently strong and independent elements on the Board to enable independent exercise of objective judgment on affairs and operations of the Group by members of the Board, taking into account factors such as the number of Independent and Non-Executive Directors on the Board, the appointment of a Lead Independent Director as stated below as well as the contributions made by each member at Board meetings.

The Board has established three committees as stated below. Both the Remuneration and Audit Committees are comprised of only Independent and Non-Executive Directors and there is a majority of Independent and Non-Executive Directors in the Nominating Committee. In view of above, the Board is of the opinion that the role of Mr. Borch as Chairman and Chief Executive Officer of the Company concurrently does not affect the independence of the Board.

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governance Lead Independent Director

Ms Sumitri Mirnalini Menon @ Rabia, upon the recommendation of the Nominating Committee, was elected and appointed by the Board as the Lead Independent Director.

The major duties and responsibilities of the Lead Independent Director are:

- to meet with shareholders if they have concerns which have not been resolved by the Chairman, Chief Executive Officer or Chief Financial Officer through the normal channels or for where such contact is inappropriate;

- to lead the Independent and Non-Executive Directors in providing and facilitating a non-executive perspective and contribute a balance of viewpoints on the Board in particular, acting as principal liaison between the Independent and Non-Executive Directors and the Chairman on sensitive issues;

- to coordinate the activities of Independent and Non-Executive Directors and schedule of meetings of the Independent and Non-Executive Directors and chair such meetings without the presence of the Executive Directors, if necessary;

- to prepare minutes of any such meetings of the Independent and Non-Executive Directors, share the minutes with the full Board not later than at the next meeting of the Board and deliver the minutes to the company secretary of the Company for posting in the minutes book of the Company;

- to promote high standards of corporate governance; and

- to undertake such further responsibilities as may be determined by the Board from time to time.

Board Membership and Performance

The Nominating Committee (“NC”) has three members, two of whom including the Chairman are Independent and Non-Executive Directors. The members are:

Chairman : Sumitri Mirnalini Menon @ RabiaMember : Ng Beng TiongMember : Christopher Reid Borch

The NC makes recommendations to the Board on all board appointments and re-appointments. The process for the selection and appointment of new directors including the search and nomination process was established as recommended by NC and approved by the Board.

The NC also assesses the effectiveness of the Board as a whole and the contribution of each Director to the effectiveness of the Board. The NC has recommended both quantitative and qualitative indicators to measure the Board’s performance. Quantitative considerations are based on the creation of shareholder value reflected for example in the share price and earnings per share. The NC also looks at the Group’s and the Company’s performance measured against the goals and targets set by the Board. Qualitative indicators include compliance with applicable laws and rules, transparency of disclosures and feedback from authorities and investors etc. Directors are assessed on their attendance record at Board and Committee meetings, their contributions and participation at meetings, their relevant knowledge and experience available to the Company. The NC’s written terms of reference, which describe its major responsibilities, are:

- to make recommendations to the Board on the re-nomination of retiring Directors standing for re-election at the Company’s Annual General Meeting (“AGM”), having regard to the Directors’ contribution and performance;

- to determine annually whether or not a Director is independent;

- to determine whether a Director is able to and has been adequately carrying out his duties as a Director of the Company;

- to ensure that disclosure of key information relating to Directors is in the Annual Reports as required by the Code of Corporate Governance; and

- to decide how the Board’s performance may periodically be evaluated against objective criteria.


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The NC also reviewed and was satisfied that any director who has multiple Board representations is able to and has been adequately carrying out effectively the duties as a Director and ensured that internal guidelines adopted to address the competing time commitments are relevant and being followed. All Directors are required to declare their other Board representations. The independence of each Director is reviewed annually by the NC. The NC adopts the Code’s definition of what constitutes an Independent Director in its review. As a result of the NC’s review of the independence of each Director, the NC is of the view that the Independent and Non-Executive Directors are independent directors and further, no individual or small group of individuals dominate the Board’s decision-making process. A Declaration of Independence, in a form required by the NC, was signed by all Independent Directors and reviewed by the NC.

The Company’s Articles of Association require one-third of our Directors to retire and subject themselves to re-election by shareholders at every AGM. At the forthcoming AGM, Mr. Karl Zurfluh and Mr. Christopher Borch will retire by rotation. After taking into account their contributions and performance, the NC has recommended to the Board that Mr. Karl Zurfluh and Mr. Christopher Borch be re-nominated for re-appointment at the forthcoming AGM.

Mr. Howard Duane Wadsworth who is 71 and is statutorily required to seek re-appointment at each AGM pursuant to Section 153(6) of the Companies Act, Cap 50. Mr. Wadsworth, however, has notified the Company’s board of his intention to not stand for re-election as a director. He stated that he had served for ten years as a director; five when Micro-Mechanics was a private company and five as a public company and would now like to pursue other interests, both business and personal, in the USA. The Board has accordingly accepted his retirement.

Each member of the NC abstains from voting on any resolutions and making any recommendation and/or participating in respect of matters in which he or she is interested.

ACCESS TO INFORMATIONThe Board and the Committees are furnished with complete, adequate and reliable Board papers and information in a timely manner prior to any meeting so as to facilitate Directors in the proper and effective discharge of their duties. The Directors have separate, unfettered and direct access to the management team, the company secretary, the internal auditor and the external auditors at all times. Detailed Board papers are prepared for each meeting of the Board and are normally circulated one week in advance of each meeting. The Board papers include sufficient information from Management on financial, business and corporate issues to enable the Directors to properly consider those issues at Board meetings.

The company secretary attends and minutes all Board meetings. He assists with proper procedure and compliance with the Companies Act, the Company’s Memorandum and Articles of Association and other applicable rules and regulations.

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REMUNERATION MATTERSProcedures for Developing Remuneration Policies Level and Mix of Remuneration

The Remuneration Committee (“RC”) has three members, all of whom are Independent and Non-Executive Directors. The members are:

Chairman : Sumitri Mirnalini Menon @ Rabia Member : Ng Beng TiongMember : Howard Duane Wadsworth

The RC’s written terms of reference which describe its major responsibilities, are:

- to make recommendations to the Board on the framework of remuneration, including but not limited to directors’ fees, salaries, allowances, bonuses, options and benefits in kind for the Board and key executives and to determine specific remuneration packages for each Executive Director;

- to review all benefits and long-term incentive schemes (including share schemes), whether Directors should be eligible for benefits under long-term incentive schemes and compensation/ remuneration packages for the Board and key executives;

- to review service contracts of the Executive Directors; and

- to review remuneration packages of employees who are related to any Director or substantial shareholders.

The Company adopts a remuneration package for employees including Executive Directors, which is made up of a fixed and a variable component. The fixed component is the basic salary and the variable component is the Performance Bonus Incentive (“PBI”) scheme that is linked to the Group’s performance and the accomplishment of established targets. Details of the PBI scheme can be found in the Company’s prospectus issued in relation to its initial public offering.

An over-riding principle of our remuneration policy is that no Director is involved in deciding his own remuneration.

Disclosure of Remuneration

The breakdown of the level and mix of remuneration of each Director and the top five key executives in FY2008 is as follows:

Remuneration of Directors

Remuneration band & name of Director Director’s fee Salary Bonus Allowances/Benefits Total

S$250,000 to S$499,999 Christopher R. Borch 5% 58% 35% 2% 100%Low Ming Wah 4% 53% 40% 3% 100%Chow Kam Wing 5% 50% 41% 4% 100%Karl Zurfluh 5% 52% 33% 10% 100%

Below S$250,000 Howard Duane Wadsworth 100% - - - 100%Ng Beng Tiong 100% - - - 100%Sumitri Mirnalini Menon @ Rabia 100% - - - 100%

The director’s fees are subject to shareholders’ approval at the Annual General Meeting.

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Remuneration of executive officers

Remuneration band & name of executive officer Director’s fee Salary Bonus Allowances/Benefits Total

S$250,000 to S$499,999 # Tan Teck Hoe - 45% 28% 27% 100%

Below S$250,000 Tan Chong Jin # - 45% 20% 35% 100%Pantira Liewtrakool - 71% 28% 1% 100%Tan Beng Lim - 55% 29% 16% 100%Abdul Samad bin Ahmad - 57% 31% 12% 100%

# These Executive Officers are Singaporeans who are based overseas. The percentages shown under Allowances and Benefits are inclusive of tax equalization compensation, overseas allowances, accommodation and transportation allowance.

No employee of the Group is an immediate family member of a Director or the CEO in the financial year under review.

ACCOUNTABILITY AND AUDITAccountability

The Board is accountable to the shareholders while the management is accountable to the Board. The Board is mindful of its obligation to provide timely, reliable and fair disclosure of material information in compliance with the SGX-ST Listing Manual and present the financial results quarterly, half yearly and yearly to the public.

In presenting the financial results, the Board has sought to provide a balanced and reader friendly assessment of the Company’s performance and position.

To help continually ensure the accountability of management to the Board, the management provides all members of the Board with a useful and balanced summary of the Company’s performance and position on a frequent basis.

Audit Committee

The Audit Committee (“AC”) comprises three members, all of whom are Independent and Non-Executive Directors.

Chairman : Ng Beng TiongMember : Howard Duane Wadsworth Member : Sumitri Mirnalini Menon @ Rabia

All the members have had many years of experience in senior positions in financial and/or commercial sectors. They have sufficient financial expertise and experience to discharge the AC’s functions. The Chairman, who is a Chartered Financial Analyst, has many years of finance, banking and listed company experience.

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The AC’s written terms of reference which describe its major responsibilities are:

- to review with the external auditors the audit plan and the results of the external auditor’s examination and evaluation of the Group’s system of internal controls;

- to review (i) the quarterly, half yearly and yearly announcement of financial results, and (ii) the consolidated financial statements, balance sheets and statements of profit & loss accounts, and the external auditor’s reports on those financial statements, before submission to the Board for approval;

- to review and discuss with external auditors any suspected fraud or irregularities, or failure of internal controls or infringement of any law, rule or regulation which has or is likely to have a material impact on the Company’s operating results and/ or financial position;

- to make recommendations to the Board on the appointment, re-appointment and removal of the external auditor, and approve the remuneration and terms of engagement of the external auditor;

- to review the independence of the external auditors annually including the nature and extent of non-audit services provided by the external auditors;

- to review interested person transactions falling within the scope of Chapter 9 of the SGX-ST Listing Manual;

- to review the adequacy and effectiveness of the internal control framework and risk management processes and help ensure adequate measures are in place;

- to review the compliance with the Code of Best Practice on Security Transactions; and

- to undertake such other functions and duties as may be required by statute or the SGX-ST Listing Manual.

In the financial year under review, the AC met with the external auditor without the presence of Executive Directors and senior management. All AC meetings were run without the presence of Executive Directors and senior management unless invited by the AC to attend for any particular reason.

The AC has reviewed the non-audit services performed by the external auditors and is satisfied that the provision of such services has not affected the independence of the external auditors. The AC has recommended their re-appointment at the forthcoming AGM.

Some of the subsidiaries in the Group are being audited by external auditors other than those of the Company due to the relatively small size of these subsidiaries in terms of net book value and revenue compared to the whole Group. The AC is satisfied that there are sound internal controls applied in these subsidiaries and the scope of audit performed by these other external auditors is adequate.

Whistle Blowing Policy

The Board has formulated a written and comprehensive Whistle Blowing policy which has been disseminated throughout the Group. The Board believes that this policy will, inter alia, act as a deterrent to malpractice and wrongdoing, encourage openness, promote transparency and underpin the risk management systems of the Group.

The Whistle Blowing Officers are the members of the Board. Any Whistle Blowing Officer to whom a concern has been raised is obliged to make a report to the Audit Committee of the substance of the concern without breaching employee confidentiality. The Audit Committee is obliged to review all reports received and take or approve appropriate action.

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governance INTERNAL CONTROLS AND INTERNAL AUDITWe maintain a sound internal control and internal audit system to ensure the integrity and reliability of our financial information, as well as to safeguard shareholder value and the Group’s assets. It is strengthened and reinforced by the Group’s internal auditor who carries out regular internal audits to ensure compliance with stipulated internal controls, applicable laws and regulations.

The internal auditor reports directly to the AC. During the financial year, the internal auditor met with the AC quarterly to present his internal audit reports.

The AC also reviews and approves the internal audit plan and programme annually.

RISK MANAGEMENTThe Company has put in place internal controls necessary to identify and manage significant business risks. The Company’s internal audit function provides an independent resource and perspective to the Audit Committee by highlighting any areas of concern discovered during the course of performing such internal audit process.

Management regularly reviews the Company’s business and operational activities to identify areas of significant business and operational risk as well as measures to control these risks. These include detailed financial and management reporting and detailed operational manuals and reports. Targets are set to measure and monitor the performance of operations periodically, such as growth, profit margins, inventory efficiency, management of receivables, personnel attendance, cycle time and housekeeping.

The Company’s assets and our employees are insured under a comprehensive insurance program which is reviewed annually. These also include product liability insurance and directors and officers liability insurance.

Financial risk management is discussed in Note 19 to the financial statements set out on page 48.

COMMUNICATION WITH SHAREHOLDERSGreater Shareholder Participation

The Company makes announcements of its financial results and provides material information as required under the SGX-ST Listing Manual via SGXNET. Annual reports and notices of AGMs are sent to all shareholders. Such notices are also published in the local newspapers and announced via SGXNET. Shareholders are encouraged to attend the Company’s AGMs. At AGMs, shareholders have the opportunity to share with and communicate their views to the Board. The Chairpersons of the Audit, Nominating and Remuneration Committees as well as the external auditors are requested to be present and available to address any queries by shareholders.

The Board takes note that there should be a separate resolution at general meetings on each substantially separate issue and will provide reasons and material implications where resolutions are interlinked.

Regular media and analyst briefings are organized to enable a better appreciation of the Group’s performance and developments. Shareholders can also visit our website at www.micro-mechanics.com to find out more about the Company and its latest developments. Under the Investor Relation section, Shareholders can see the updated financial highlights, announcements and Frequently Asked Questions (FAQs) from the public.

To enhance and encourage communication with our shareholders and the public, the Company provides an email address for the investors at [email protected]. During the year, the Company received a number of questions and the FAQs were posted on our website for the shareholders and the public to share and know more about the Company.

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governance SECURITIES TRADING CODEThe Company has adopted an internal compliance code which is applicable to all officers in relation to dealings in the Company’s securities. Its officers are not allowed to deal in the Company’s shares during the period commencing two weeks before the announcement of the Company’s financial statements for each of the first three quarters of its financial year, or one month before half year or financial year, as the case may be, and ending on the date of announcement of the relevant results or if they are in possession of unpublished material price-sensitive information pertaining to the Group.

All Directors and all employees of the Group have been instructed to observe the internal compliance code and all applicable insider trading laws at all times even when dealing in securities within permitted trading periods. In this connection all Directors and employees are requested to sign a Declaration of Compliance with the internal compliance code annually to confirm their compliance.

INTERESTED PERSON TRANSACTIONSThe Company has adopted a policy in respect of any transactions with interested persons and requires that all such transactions be at arm’s length and reviewed by the AC. During the financial year under review, the Company had no interested person transactions.

DIRECTORSHIPS The following lists the present and past directorships of our Directors in other listed companies other than directorships held in our Company.

Past Directorships Name Present Directorships (preceding 3 years)

Christopher Borch NIL NILLow Ming Wah NIL NILChow Kam Wing NIL NILKarl Zurfluh NIL NILHoward Duane Wadsworth Tegal Corporation, Petaluma, USA NILNg Beng Tiong NIL Low Keng Huat (Singapore) LtdSumitri Mirnalini Menon @ Rabia NIL NIL


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Financial

Section CO

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23 Directors’ Report

26 Statement by Directors

27 Independent Auditors’ Report

28 Balance Sheets

29 Consolidated Income Statement

30 Consolidated Statement of Changes in Equity

31 Consolidated Cash Flow Statement

32 Notes to the Financial Statements

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We are pleased to submit this annual report to the members together with the audited financial statements for the financial year ended 30 June 2008.

DirectorsThe directors in office at the date of this report are as follows:

Christopher Reid BorchLow Ming WahChow Kam WingKarl ZurfluhHoward Duane WadsworthSumitri Mirnalini Menon @ RabiaNg Beng Tiong

Directors’ InterestsAccording to the register kept by the Company for the purposes of Section 164 of the Companies Act, Chapter 50 (the “Act”), particulars of interests of directors who held office at the end of the financial year and their immediate families in shares or debentures in the Company are as follows:

At beginning At end of the year of the year

Ordinary shares Christopher Reid Borch 80,788,169 76,295,169Low Ming Wah 7,127,001 7,127,001Chow Kam Wing 2,812,000 2,812,000Karl Zurfluh 816,500 916,500Howard Duane Wadsworth 125,000 125,000Sumitri Mirnalini Menon @ Rabia 125,000 275,000Ng Beng Tiong 125,000 125,000

By virtue of Section 7 of the Act, Christopher Reid Borch is deemed to have an interest in all the wholly-owned subsidiaries of the Company at the beginning and at the end of the financial year.

Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares or debentures of the Company or of related corporations at the beginning or at the end of the financial year.

As at 21 July 2008, the registered shares for Sumitri Mirnalini Menon @ Rabia increased to 375,000. There were no other changes in any of the abovementioned interests in the Company between the end of the financial year and 21 July 2008.

Neither at the end of, nor at any time during the financial year, was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

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DirectorS’

reportSince the end of the last financial year, except as disclosed in this report or the accompanying financial statements, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member or with a company in which he has a substantial financial interest.

Share OptionsDuring the financial year, there were:

(a) no options granted by the Company or its subsidiaries to any person to take up unissued shares in the Company or its subsidiaries; and

(b) no shares issued by virtue of any exercise of option to take up unissued shares of the Company or its subsidiaries.

As at the end of the financial year, there were no unissued shares of the Company or its subsidiaries under option.

Audit CommitteeThe members of the Audit Committee during the year and at the date of this report are as follows:

Ng Beng Tiong (Chairman), Independent directorSumitri Mirnalini Menon @ Rabia, Independent directorHoward Duane Wadsworth, Independent director

The Audit Committee performs the functions specified by section 201B of the Companies Act, the Listing Manual of the Singapore Exchange and the Code of Corporate Governance.

The Audit Committee has held five meetings during the year. In performing these functions, the Audit Committee reviewed the scope of work of the Company’s external auditors, and their evaluation of the Company’s system of internal accounting controls.

The Audit Committee also reviewed the following:

• thescopeandresultsoftheworkoftheinternalauditor;

• thefinancialstatementsfortheyearended30June2008priortotheirsubmissiontothedirectorsoftheCompanyforadoption;

• theCompany’sannouncementoftheunauditedresultsforthethreemonthsended30September2007,halfyearended31December2007, the nine months ended 31 March 2008 and the final results for the year ended 30 June 2008;

• interestedpersontransactions(asdefinedinChapter9oftheSGXListingManual);

• theassistanceprovidedbytheCompany’sofficerstotheexternalauditorsandtheindependenceoftheexternalauditors;and

• corporategovernanceprocesses.

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DirectorS’

reportThe Audit Committee also met the external auditors without the presence of management.

The Audit Committee has full access to management and is given the resources required for it to discharge its functions. It has full authority and discretion to invite any director or executive officer to attend its meetings. The Audit Committee also recommends the appointment of the external auditors and reviews the level of audit and non-audit fees.

The Audit Committee is satisfied with the independence and objectivity of the external auditors and has recommended to the Board of Directors that the auditors, KPMG, be nominated for re-appointment as auditors at the forthcoming Annual General Meeting of the Company.

AuditorsThe auditors, KPMG, have indicated their willingness to accept re-appointment.

On behalf of the Board of Directors

CHRISTOPHER REID BORCHDirector

CHOW KAM WING Director

23 August 2008


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Statement by

DirectorSIn our opinion:

(a) the financial statements set out on pages 28 to 53 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 30 June 2008 and the results, changes in equity and cash flows of the Group for the year ended on that date in accordance with the provisions of the Singapore Companies Act, Chapter 50 and Singapore Financial Reporting Standards; and

(b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

The Board of Directors has, on the date of this statement, authorised these financial statements for issue.

On behalf of the Board of Directors

CHRISTOPHER REID BORCHDirector

CHOW KAM WING Director

23 August 2008

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inDepenDent

auDitorS’ reportMembers of the Company Micro-Mechanics (Holdings) Ltd.

We have audited the accompanying financial statements of Micro-Mechanics (Holdings) Ltd. (the Company) and its subsidiaries (the Group), which comprise the balance sheets of the Group and the Company as at 30 June 2008, the income statement, statement of changes in equity and cash flow statement of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 28 to 53 .

Management’s responsibility for the financial statements:

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the Act) and Singapore Financial Reporting Standards. This responsibility includes:

(a) devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets;

(b) selecting and applying appropriate accounting policies; and

(c) making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion

In our opinion:

(a) the consolidated financial statements of the Group and the balance sheet of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards to give a true and fair view of the state of affairs of the Group and of the Company as at 30 June 2008 and the results, changes in equity and cash flows of the Group for the year ended on that date; and

(b) the accounting and other records required by the Act to be kept by the Company and by its subsidiary incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

KPMGPublic Accountants andCertified Public Accountants

Singapore23 August 2008


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SheetS As at 30 June 2008

Group Company

Note 2008 2007 2008 2007 $ $ $ $

Non-current assetsProperty, plant and equipment 3 23,223,817 21,981,612 - - Subsidiaries 4 - - 12,183,324 12,183,324

23,223,817 21,981,612 12,183,324 12,183,324

Current assetsInventories 5 1,428,455 1,033,254 - - Trade and other receivables 6 7,333,665 5,990,778 7,549,707 4,407,614Cash and cash equivalents 7 11,488,994 13,635,776 641,349 5,888,890

20,251,114 20,659,808 8,191,056 10,296,504

Total assets 43,474,931 42,641,420 20,374,380 22,479,828 Shareholders’ equityShare capital 8 14,569,466 14,569,466 14,569,466 14,569,466 Reserves 9 22,830,190 22,817,299 5,560,199 7,686,346

Total equity 37,399,656 37,386,765 20,129,665 22,255,812 Non-current liabilitiesDeferred tax liabilities 11 982,155 996,783 - -

982,155 996,783 - -

Current liabilitiesTrade and other payables 12 3,791,266 3,010,524 234,915 206,016 Employee benefits 13 323,287 327,016 - - Current tax payable 978,567 920,332 9,800 18,000

5,093,120 4,257,872 244,715 224,016

Total liabilities 6,075,275 5,254,655 244,715 224,016

Total equity and liabilities 43,474,931 42,641,420 20,374,380 22,479,828

The accompanying notes form an integral part of these financial statements.

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income StatementYear ended 30 June 2008

Group

Note 2008 2007 $ $

Revenue 14 38,205,955 34,695,608Cost of sales (15,971,044) (14,552,341)

Gross profit 22,234,911 20,143,267Other income 15 289,106 339,391 Distribution costs (3,954,996) (3,182,244)Administrative expenses (6,278,698) (5,933,786)Other operating expenses (1,311,983) (1,150,727)

Profit before income tax 15 10,978,340 10,215,901

Income tax expense 16 (2,119,548) (1,914,142)

Net profit for the year 8,858,792 8,301,759

Earnings per share (in cents) – basic and diluted 17 6.40 5.99



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conSoliDateD Statement oF

changeS in equity Year ended 30 June 2008

Foreign currency Share translation Accumulated capital reserve profits Total

$ $ $ $

Group

At 1 July 2006 14,569,466 (1,164,157) 20,761,293 34,166,602Translation differences arising on translation of net assets of foreign subsidiaries - 457,839 - 457,839

Net gain recognised directly in equity - 457,839 - 457,839

Net profit for the year - - 8,301,759 8,301,759

Total recognised income and expense for the year - 457,839 8,301,759 8,759,598

Final dividend paid of 2.5 cents per share (tax exempt) in respect of 2006 - - (3,462,147) (3,462,147)

Interim dividend paid of 1.5 cents per share (tax exempt) in respect of 2007 - - (2,077,288) (2,077,288)

At 30 June 2007 14,569,466 (706,318) 23,523,617 37,386,765

At 1 July 2007 14,569,466 (706,318) 23,523,617 37,386,765Translation differences arising on translation of net assets foreign subsidiaries - (1,229,177) - (1,229,177)

Net loss recognised directly in equity - (1,229,177) - (1,229,177)

Net profit for the year - - 8,858,792 8,858,792

Total recognised income and expense for the year - (1,229,177) 8,858,792 7,629,615

Final dividend paid of 2.5 cents per share (tax exempt) and special dividend paid of 1.0 cent per share (tax exempt) in respect of 2007 - - (4,847,006) (4,847,006)

Interim dividend paid of 2.0 cents per share (tax exempt) in respect of 2008 - - (2,769,718) (2,769,718)

At 30 June 2008 14,569,466 (1,935,495) 24,765,685 37,399,656


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caSh Flow StatementYear ended 30 June 2008

Group

Note 2008 2007 $ $

Operating activitiesProfit before income tax 10,978,340 10,215,901 Adjustments for:Depreciation of property, plant and equipment 2,563,985 2,951,273 (Gain)/loss on disposal of property, plant and equipment (612) 19,366Interest income (239,468) (278,682)

Operating profit before changes in working capital 13,302,245 12,907,858

Inventories (395,201) 92,539Trade and other receivables (1,345,086) 212,754Trade and other payables 559,339 (176,655)

Cash generated from operations 12,121,297 13,036,496Interest received 241,667 272,731Income tax paid (1,762,591) (1,489,952)

Cash flows from operating activities 10,600,373 11,819,275 Investing activitiesPurchase of property, plant and equipment (4,586,896) (5,532,447) Proceeds from disposal of property, plant and equipment 21,974 23,745

Cash flows from investing activities (4,564,922) (5,508,702)

Financing activitiesDividends paid (7,616,724) (5,539,435)

Cash flows from financing activities (7,616,724) (5,539,435) Net (decrease)/increase in cash and cash equivalents (1,581,273) 771,138 Cash and cash equivalents at beginning of the year 13,635,776 12,864,638 Effect of exchange rate fluctuations (565,509) -

Cash and cash equivalents at end of the year 7 11,488,994 13,635,776



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Financial StatementSYear ended 30 June 2008

These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the directors on 23 August 2008.

1. Domicile and ActivitiesMicro-Mechanics (Holdings) Ltd. (the “Company”) is incorporated in the Republic of Singapore with its registered office at 31 Kaki Bukit Place, Eunos Techpark, Singapore 416209.

The principal activities of the Company during the financial year are those of an investment holding company.

The principal activities of the subsidiaries during the financial year are set out in note 4 to the financial statements.

The consolidated financial statements for the year ended 30 June 2008 relate to the Company and its subsidiaries (referred to as the “Group”).

2. Summary of Significant Accounting Policies2.1 Basis of preparation

The financial statements have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”).

The financial statements are prepared on the historical cost basis, except for certain financial instruments which are stated at fair value.

The financial statements are presented in Singapore dollars which is the Company’s functional currency.

The preparation of financial statements in conformity with FRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about carrying amounts of assets and liabilities that are not readily apparent from other sources.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.

The accounting policies used by the Group have been applied consistently to all period presented in these financial statements.

In the current year, the Group has adopted all new and revised standards and interpretations that are relevant to its operations and effective for annual periods beginning on or after 1 January 2007. The adoption of these new/revised standards and interpretations does not result in changes to the Group’s and Company’s policies and has no material effect on the amounts reported for the current and prior years, except that the Group has adopted FRS107 – Financial Instruments: Disclosures and Amendments to FRS1 Presentation of Financial Statements – Capital Disclosures. The new standard has resulted in an expansion of the disclosures in these financial statements regarding the Group’s financial instruments. The Group has also presented information regarding its objectives, policies and processes for managing capital as required by amendments to FRS1 which are effective from annual periods beginning on or after 1 January 2007.

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2.2 Basis of consolidation

Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of a company so as to obtain benefits from its activities. In assessing control, potential voting rights presently exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Investments in subsidiaries are stated in the Company’s balance sheet at cost less impairment losses.

Transactions eliminated on consolidation

All significant intra-group transactions, balances and unrealised gains are eliminated on consolidation. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

2.3 Foreign currencies

Foreign currency transactions

Transactions in foreign currencies are translated at the respective functional currencies of Group entities at the foreign exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into Singapore dollars at foreign exchange rates ruling at that date. Foreign exchange differences arising from translation are recognised in the income statement. Non-monetary assets and liabilities measured at cost in a foreign currency are translated using exchange rates at the dates of the transactions. Non-monetary assets and liabilities measured at fair value in foreign currencies are translated into Singapore dollars at foreign exchange rates ruling at the dates the fair value was determined.

Exchange differences arising from such monetary items that in substance form part of the Company’s net investment in a foreign operation are recognised in the Company’s income statement. Such exchange differences are reclassified to equity in the consolidated financial statements. Deferred exchange differences are released to the income statement upon disposal of the investment.

Foreign operations

Assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on the acquisition of foreign operations, are translated into Singapore dollars for consolidation at the rates of exchange ruling at the balance sheet date. Revenues and expenses of foreign operations are translated at the average exchange rates for the year. Exchange differences arising on translation are recognised directly in equity. On disposal, accumulated translation differences are recognised in the consolidated income statement as part of the gain or loss on sale.


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2.4 Property, plant and equipment

Owned assets

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Where an item of property, plant and equipment comprises major components having different useful lives, they are accounted for as separate items of property, plant and equipment.

Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the Group. All other subsequent expenditure is recognised as an expense in the period in which it is incurred.

Gains or losses arising from the retirement or disposal of property, plant and equipment are determined as the difference between the estimated net disposal proceeds and the carrying amount of the asset and are recognised in the income statement on the date of retirement or disposal.

Depreciation

Depreciation is recognised in the income statement on a straight line basis over the estimated useful lives (or lease terms, if shorter) of each part of an item of property, plant and equipment.

The estimated useful lives are as follows:

Freehold property - 50 yearsLeasehold properties - 50 yearsPlant and equipment - 5 to 10 yearsFurniture, fittings and office equipment - 5 yearsMotor vehicles - 5 years

Depreciation methods, useful lives and residual values are reviewed, and adjusted as appropriate, at each reporting date, in accordance with FRS 16 Property, Plant and Equipment.

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2.5 Inventories

Inventories are stated at the lower of cost and net realisable value.

Cost is calculated using the weighted average cost formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of manufactured inventories and work-in-progress, cost includes an appropriate share of overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any allowance for write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any allowance for write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

2.6 Financial instruments

Non-derivative financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents and trade and other payables.

Financial instruments are recognised at fair value plus, any directly attributable transaction costs, and subsequently measured at amortised cost using the effective interest method, less any impairment losses.

A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or transfers substantially all the risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.

Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost less allowance for doubtful receivables.

Cash and cash equivalents

Cash and cash equivalents comprise cash and bank balances.

Trade and other payables

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost.

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Derivative financial instruments

Derivative financial instruments are used to manage exposures to foreign exchange and interest rate risks arising from operational, financing and investment activities. Derivative financial instruments are not used for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

Derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, derivative financial instruments are remeasured at fair value. The gain or loss on remeasurement to fair value is recognised immediately in the income statement.

Impairment of financial assets

A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in the income statement. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised.

Share capital

Ordinary shares are classified as equity.

2.7 Impairment – non-financial assets

The carrying amounts of the Group’s non-financial assets, other than inventories, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the recoverable amounts are estimated.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the assets in the unit (group of units) on a pro rata basis.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

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2.8 Defined contribution plans

Contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred.

2.9 Income tax expense

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and joint ventures to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income tax levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realised.

2.10 Revenue recognition

Revenue from the manufacture and sale of precision tools is recognised when the goods are delivered to customers. Revenue excludes goods and services tax or other sales taxes and is stated after deduction of any trade discounts.

Interest income is recognised on an accrual basis using the effective interest method and dividend income is recognised when the shareholder’s right to receive payment is established.

2.11 Operating leases

Where the Group has use of assets under operating leases, payments made under the leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease payments made. Contingent rentals are charged to the income statement in the accounting period in which they are incurred.

2.12 Finance costs

Interest expense and similar charges are expensed in the income statement in the period in which they are incurred.

2.13 Dividends

Dividends on ordinary shares are recognised as a liability in the period in which they are declared.

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3. Property, Plant and Equipment Furniture, fittings Freehold Leasehold Plant and and office Motor property properties equipment equipment vehicles Total

$ $ $ $ $ $

Group

Cost At 1 July 2006 1,560,207 11,969,447 17,775,671 3,547,781 628,432 35,481,538Additions - 346,712 4,762,099 423,636 - 5,532,447Disposals - (22,664) (602,901) (253,340) - (878,905)Translation differences on consolidation (57,839) 133,268 389,534 89,546 8,755 563,264

At 30 June 2007 1,502,368 12,426,763 22,324,403 3,807,623 637,187 40,698,344Additions - 270,031 3,805,808 432,683 78,374 4,586,896Disposals - (1,527) (129,670) (135,096) (38,546) (304,839)Translation differences on consolidation (168,619) (280,493) (885,548) (177,125) (19,055) (1,530,840)

At 30 June 2008 1,333,749 12,414,774 25,114,993 3,928,085 657,960 43,449,561 Accumulated depreciation and impairment losses At 1 July 2006 122,156 2,549,691 10,907,666 2,462,474 167,118 16,209,105Charge for the year 30,295 339,123 2,049,583 405,898 126,374 2,951,273Disposals - (14,712) (569,331) (251,554) - (835,597)Translation differences on consolidation (4,776) 49,725 275,151 65,453 6,398 391,951

At 30 June 2007 147,675 2,923,827 12,663,069 2,682,271 299,890 18,716,732Charge for the year 28,016 365,444 1,622,410 423,949 124,166 2,563,985Disposals - (1,527) (123,657) (120,184) (38,546) (283,914)Translation differences on consolidation (17,916) (85,591) (508,083) (143,802) (15,667) (771,059)

At 30 June 2008 157,775 3,202,153 13,653,739 2,842,234 369,843 20,225,744 Carrying amount At 1 July 2006 1,438,051 9,419,756 6,868,005 1,085,307 461,314 19,272,433

At 30 June 2007 1,354,693 9,502,936 9,661,334 1,125,352 337,297 21,981,612

At 30 June 2008 1,175,974 9,212,621 11,461,254 1,085,851 288,117 23,223,817

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4. SubsidiariesThe investments in subsidiaries in the Company’s balance sheet are stated at cost. Details of the subsidiaries are as follows:

Place of Percentage of incorporation equity held Name of subsidiary Principal activities and business by the Group Cost

2008 2007 2008 2007 % % $ $

Micro-Mechanics Manufacturing Singapore 100 100 5,463,500 5,463,500Pte Ltd1 of precision tools

Micro-Mechanics Manufacturing Malaysia 100 100 856,875 856,875Technology of precision toolsSdn. Bhd.2

Micro-Mechanics Manufacturing Thailand 100 100 1,050,207 1,050,207(Thailand) Limited3 of precision tools

Micro-Mechanics Manufacturing Philippines 100 100 347,200 347,200Technology of precision toolsInternational, Inc.2

Micro-Mechanics Manufacturing People’s 100 100 2,544,407 2,544,407Technology of precision tools Republic of China(Suzhou) Co. Ltd4

Micro-Mechanics Inc.5 Sale of precision tools United States 100 100 1,666,535 1,666,535 of America

Micro-Mechanics AG6 Sale of precision tools Switzerland 100 100 254,600 254,600

12,183,324 12,183,324

1 Audited by KPMG Singapore.2 Audited by other member firms of KPMG International.3 Audited by Prangporn Accounting Office.4 Audited by Welsen CPAs Co., Ltd.5 Not required to be audited by the laws in the country of incorporation.6 Audited by ABT Revisionsgesellschaft AG.

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5. Inventories Group

2008 2007 $ $

At cost:Raw materials 338,520 338,837 Work-in-progress 456,157 169,417 Finished goods 633,778 525,000

1,428,455 1,033,254 In 2008, raw materials and changes in finished goods and work-in-progress recognised in cost of sales amounted to $3,959,203 (2007: $3,359,865).

6. Trade and Other Receivables Group Company

2008 2007 2008 2007 $ $ $ $

Trade receivables 6,469,591 5,456,865 - -Other receivables 487,111 230,556 - 15,444Amount owing by subsidiaries - - 7,515,769 4,377,000Deposits 178,735 167,506 1,271 -Tax recoverable 12,793 10,651 - -Prepayments 185,435 125,200 32,667 15,170

7,333,665 5,990,778 7,549,707 4,407,614

The maximum exposure to credit risk for receivables at the reporting date (by type of customer) is:

Group Company

2008 2007 2008 2007 $ $ $ $

Distributors 366,197 389,373 - -Direct customers 6,103,394 5,067,492 - - Related corporations - - 7,515,769 4,377,000Others 487,111 230,556 - 15,444

6,956,702 5,687,421 7,515,769 4,392,444

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The maximum exposure to credit risk for receivables at the reporting date (by geographical location of customer) is:

Group Company

2008 2007 2008 2007 $ $ $ $

Singapore 300,344 406,873 3,000,000 3,015,444Malaysia 1,248,912 1,192,079 - - Philippines 594,552 729,817 1,114,520 1,377,000Thailand 288,636 270,345 - -USA 812,292 435,847 3,401,249 -Europe 707,405 491,884 - -China 1,902,727 1,113,378 - -Japan 366,197 380,158 - -Taiwan 433,713 425,038 - -Others 301,924 242,002 - -

6,956,702 5,687,421 7,515,769 4,392,444

The aging of receivables at reporting date is: Group Company

2008 2007 2008 2007 $ $ $ $

Current 5,053,345 3,764,008 4,114,520 4,392,444Past due 0 – 30 days 1,472,085 1,541,773 3,401,249 -Past due 31 – 60 days 356,329 315,564 - -More than 61 days 74,943 66,076 - -

6,956,702 5,687,421 7,515,769 4,392,444

Based on historical default rates, the Group believes that no impairment allowance is necessary in respect of trade receivables as at 30 June 2008 (2007: Nil). These receivables are mainly arising by customers that have a good record with the Group.

7. Cash and Cash Equivalents Group Company

2008 2007 2008 2007 $ $ $ $

Cash at banks and in hand 3,901,357 3,462,816 641,349 388,890 Fixed deposits 7,587,637 10,172,960 - 5,500,000

11,488,994 13,635,776 641,349 5,888,890

The fixed deposits include an amount of $152,000 (2007: $148,522) pledged to a bank for a banker’s guarantee issued on behalf of a subsidiary in Malaysia.

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8. Share Capital Group Company

2008 2008 2007 2007

Number Number of shares $ of shares $

Fully paid ordinary shares, with no par value:

At 1 July/30 June 138,485,881 14,569,466 138,485,881 14,569,466

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets. Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to provide an adequate return to shareholders.

The Group aims to obtain an optimal capital structure by balancing capital efficiency and financial flexibility. The Group manages the capital structure in the light of changes in economic conditions and the risk characteristics of the underlying assets.

9. Reserves Group Company

2008 2007 2008 2007 $ $ $ $

Accumulated profits 24,765,685 23,523,617 5,560,199 7,686,346 Foreign currency translation reserve (1,935,495) (706,318) - -

22,830,190 22,817,299 5,560,199 7,686,346 The foreign currency translation reserve comprises the foreign exchange differences arising from the translation of the financial statements of foreign subsidiaries.

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10. Employee Share Gift ProgramDuring the year, a major shareholder of Micro-Mechanics (Holdings) Ltd (“MMH”), Mr. Christopher Borch and his spouse, Mrs. Andrea Borch offered some of their shares in MMH to eligible employees and directors of the Group and/or to eligible family members of such employees and directors under a Employee Share Gift Program (the “Program”) on the basis that for every 500 shares purchased at $0.66 per share, they will be given 500 gift shares. As a condition of the transfer, the employees/directors and their family members were required to hold the shares for at least 18 months. The employees and/or their family members could not be existing shareholders of MMH.

Mr. and Mrs. Borch offered this one-off Program in connection with the Group’s 25th Anniversary. Mr. and Mrs. Borch wished to increase the number of shareholders of the Company whilst acknowledging the important role employees have played. The Program, which was completed on 30 June 2008, resulted in Mr. and Mrs. Borch transferring a total of 293,000 shares to 293 eligible employees and/or family members.

11. Deferred Tax Movement in deferred tax assets and liabilities (prior to offsetting of balances) during the year are as follows:

At Recognised in At Recognised in At 1 July income statement Exchange 30 June income statement Exchange 30 June 2006 (note 16) differences 2007 (note 16) differences 2008

$ $ $ $ $ $ $

Group

Deferred tax liabilities Property, plant and equipment 854,195 225,218 12,827 1,092,240 19,446 (35,996) 1,075,690

Deferred tax assets Others (83,986) (10,100) (1,371) (95,457) (1,974) 3,896 (93,535)

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxation authority. The following amounts, determined after appropriate offsetting are as follows:

Group

2008 2007 $ $

Deferred tax liabilities 982,155 996,783

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12. Trade and Other Payables Group Company

2008 2007 2008 2007 $ $ $ $

Trade payables 531,961 265,076 - - Accrued operating expenses 2,938,598 2,365,062 214,900 188,250 Other payables 320,707 380,386 20,015 17,766

3,791,266 3,010,524 234,915 206,016

The following is the expected contractual undiscounted cash inflows (outflows) of financial liabilities: Carrying amount Cash flows

Contractual Within cash flow 1 year

$ $ $

Group

2008Trade and other payables 3,791,266 (3,791,266) (3,791,266)

2007Trade and other payables 3,010,524 (3,010,524) (3,010,524)

Company

2008Trade and other payables 234,915 (234,915) (234,915)

2007Trade and other payables 206,016 (206,016) (206,016)

13. Employee BenefitsThis represents the liability for unconsumed leave.

14. RevenueRevenue of the Group represents the value of goods invoiced to third parties.

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15. Profit for the yearThe following items have been included in arriving at profit for the year:

Group

2008 2007 $ $

(a) Other income Exchange gain (net) - 3,403 Interest income 239,468 278,682 Gain on disposal of property, plant and equipment (net) 612 - Others 49,026 57,306

289,106 339,391 (b) Staff costs Wages and salaries 11,302,573 9,967,756 Contribution to defined contribution plans 1,258,479 1,124,753 Increase in liability for unconsumed leave 20,782 20,886

12,581,834 11,113,395

(c) Other expenses Audit fees - auditors of the Company 99,000 90,250 - other auditors 39,618 38,818 Non-audit fees - auditors of the Company 11,500 20,200 - other auditors 5,431 5,237 Depreciation of property, plant and equipment (note 3) 2,563,985 2,951,273 Directors’ remuneration - directors of the Company 1,789,362 1,783,962 - other directors 288,699 295,424 Loss on disposal of property, plant and equipment (net) - 19,366 Exchange loss (net) 18,626 - Trade receivables written off 3,509 - Inventories written off 15,203 21,868 Operating lease expenses 521,426 338,505

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16. Income Tax Expense Group

2008 2007 $ $

Tax chargeCurrent taxBased on current year’s results 2,089,944 1,637,380Underprovided in prior years 12,132 61,644

2,102,076 1,699,024

Deferred taxOrigination and reversal of temporary differences 119,566 210,324(Over)/Underprovided in prior years (102,094) 4,794

17,472 215,118

Total tax charge in the income statement 2,119,548 1,914,142

Group

2008 2007 $ $

Reconciliation of effective tax rate

Profit before income tax 10,978,340 10,215,901

Statutory tax rate 18% 18% Income tax calculated using the statutory tax rate 1,976,101 1,838,862Non-deductible expenses 442,202 171,371Income not subject to tax (101,479) (108,479)(Over)/Underprovided in prior years (89,962) 66,438Benefit of tax losses recognised (1,596) (47,940)Effect of tax incentives granted (831,490) (863,878)Effect of reduction in tax rate on opening deferred taxes - (57,019)Effect of tax rate in foreign jurisdictions 443,776 588,353Withholding tax paid in foreign jurisdictions 217,677 270,211Others 64,319 56,223

2,119,548 1,914,142

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17. Earnings per shareThe calculation of earnings per share is based on:

Group

2008 2007 $ $

Net profit for the year 8,858,792 8,301,759

Number of shares outstanding during the year 138,485,881 138,485,881

There are no potentially dilutive ordinary shares at the end of either financial year, and there is therefore no difference between the basic earnings per ordinary share and the diluted earnings per ordinary share.

18. Related partiesKey management personnel compensation

Key management personnel of the Group are those persons having the authority and responsibility for planning, directing and controlling the activities of the Group. The directors and the facility heads of the Company and the subsidiaries are considered as key management personnel of the Group.

Group

2008 2007 $ $

Short-term benefits of key management personnel 2,733,870 2,698,946

Other related party transactions

Other than disclosed elsewhere in the financial statements, transactions with related parties are as follows:

Group

2008 2007 $ $

Sales of goods - related corporations 11,912,534 11,468,549Purchase of goods - related corporations 12,048,704 11,564,674Dividend - subsidiaries 5,073,880 4,743,083Other income - related corporations 10,425 103,638Other expenses - related corporations 5,551 52,361

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19. Financial InstrumentsExposure to credit, foreign currency, liquidity and interest rate risks arises in the normal course of the Group’s business. The management of these risks is discussed below.

Credit risk

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount and outstanding debts are reviewed on an ongoing basis. The Group does not require collateral in respect of financial assets.

Cash and fixed deposits are placed with banks and financial institutions which are regulated. Transactions involving derivative financial instruments are allowed only with counterparties that are of high quality.

At the balance sheet date, there is no significant concentration of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet.

Foreign currency risk

The Group’s exposure to foreign currency risk relates primarily to its US Dollars, Japanese Yen and Euro denominated trade receivables and payables, although it has exposures in other foreign currencies and in other assets and liabilities. The Group is also exposed to the foreign currencies of the countries in which the subsidiaries operate. The Group endeavours to minimise such exposure as far as possible by matching assets and liabilities of the same currency although there is no formal hedging policy. As at 30 June 2008, the Group had outstanding foreign exchange contracts with notional amounts of approximately $1,586,375 (2007: $2,085,426). The Group’s exposures to foreign currency are as follows:

Chinese Singapore US Dollar Japanese Yen Euro Renminbi Dollar

$ $ $ $ $

2008Trade and other receivables 1,997,653 366,197 180,466 - 5,361Cash and cash equivalents 486,120 119,398 4,011 1,086 4,603Trade and other payables (13,957) (61,016) (9,159) (25,855) (4,869)

2,469,816 424,579 175,318 (24,769) 5,095 2007 Trade and other receivables 1,841,291 380,158 178,457 - -Cash and cash equivalents 360,698 37,424 161,943 1,774 410,591Trade and other payables (32,443) (77,003) (363) (15,932) (8,911)

2,169,546 340,579 340,037 (14,158) 401,680

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Sensitivity analysis

A 10% strengthening of Singapore dollar against the following currencies at the reporting date would increase/(decrease) equity and profit by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

Group

2008 2007 Profit Profit $ $

US Dollar (246,982) (216,955)Japanese Yen (42,458) (34,058)Euro (17,532) (34,004)Chinese Renminbi 2,477 1,416Singapore Dollar 510 40,168

A 10% weakening of Singapore dollar against the above currencies would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

Liquidity risk

The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows.

In addition, the Group maintains the following lines of credit:

- $1 million overdraft facility that is unsecured. Interest would be payable at the 1.25% above DBS Bank Prime rate

- $4.55 million trade facilities

At the balance sheet date, the Group has no outstanding payable on these lines of credit.

Interest rate risk

The Group’s exposure to changes in interest rates relates primarily to its interest-earning financial assets.

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Effective interest rates and repricing analysis

In respect of interest-earning financial assets of the Group, the following table indicates their effective interest rates at balance sheet date and the periods in which they reprice or mature:

Effective Less than Between After Note interest rate Total 1 year 1 to 5 years 5 years

$ $ $ $

Group

2008Financial assetsFixed deposits 7 2.7% 7,587,637 7,587,637 - -

2007Financial assetsFixed deposits 7 2.1% 10,172,960 10,172,960 - -

Fair values

The fair values of the financial assets and liabilities approximate their carrying amounts.

As at the end of the financial year, the Group and the Company have no significant exposure to unrecognised financial instruments.

20. CommitmentsApart from the obligations set out elsewhere, the Group had the following commitments as at balance sheet date:

Group

2008 2007 $ $

Capital commitments:- contracted but not provided for 168,093 64,980- authorised but not contracted for - -

168,093 64,980

Group

2008 2007 $ $

Non-cancellable operating lease commitments:- payable within 1 year 1,015,172 293,587- payable after 1 year but within 5 years 1,382,897 353,995

2,398,069 647,582

The operating lease expenses recognised in the income statement for the year is $521,426 (2007: $338,505).

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21. Segment ReportingThe Group has only one business and operating segment, comprising the manufacturing and sale of precision tools.

The Group monitors the segment revenue, results and assets and liabilities based on the geographical location of its manufacturing facilities and other operating assets and liabilities. These essentially correspond with the location of the individual legal entities. Inter-segment pricing is determined on an arm’s length basis. The assets, liabilities and expenses of the corporate head office are disclosed as unallocated assets, liabilities and expenses.

Geographical Segments

2008

Revenue by geographical location of manufacturing facilities/ assets Singapore Malaysia Philippines Thailand USA China Switzerland Elimination Consolidated

$ $ $ $ $ $ $ $ $

Total revenue from external customers 9,648,532 9,669,402 3,929,631 2,078,835 3,888,736 4,682,655 4,308,164 - 38,205,955Inter-segment revenue 5,720,111 4,801,044 647,875 472,572 197,518 7,312 66,101 (11,912,533) -

Total revenue 15,368,643 14,470,446 4,577,506 2,551,407 4,086,254 4,689,967 4,374,265 (11,912,533) 38,205,955 Segment results 2,902,821 4,519,800 1,536,422 517,691 (211,037) 1,592,753 432,538 28,577 11,319,565Unallocated expenses (341,225)

Profit from operations 10,978,340Taxation (2,119,548)

Net profit for the year 8,858,792 Segment assets 13,822,842 15,179,671 2,208,210 1,279,417 5,184,892 4,644,032 1,473,008 (1,002,604) 42,789,468Unallocated assets: Tax recoverable 12,793Others 672,670

Total assets 43,474,931 Segment liabilities 4,729,574 814,134 1,698,325 153,028 581,505 411,206 373,106 (4,881,240) 3,879,638Unallocated liabilities: Income tax 1,960,721Others 234,916

Total liabilities 6,075,275 Other segment information Capital expenditure 855,983 761,164 106,004 86,429 2,461,646 311,138 4,668 (136) 4,586,896Depreciation 890,147 942,983 242,487 103,704 77,307 300,373 6,984 - 2,563,985

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Geographical Segments

2007

Revenue by geographical location of manufacturing facilities/ assets Singapore Malaysia Philippines Thailand USA China Switzerland Elimination Consolidated

$ $ $ $ $ $ $ $ $

Total revenue from external customers 10,173,241 9,201,845 3,922,386 1,764,107 3,993,502 2,760,576 2,879,951 - 34,695,608Inter-segment revenue 5,330,358 5,012,266 590,575 286,227 80,124 - 168,998 (11,468,548) -

Total revenue 15,503,599 14,214,111 4,512,961 2,050,334 4,073,626 2,760,576 3,048,949 (11,468,548) 34,695,608

Segment results 3,396,422 4,167,994 1,673,809 279,440 41,211 456,089 344,479 (24,159) 10,335,285Unallocated expenses (119,384)

Profit from operations 10,215,901Taxation (1,914,142)

Net profit for the year 8,301,759 Segment assets 14,398,890 13,975,971 2,585,456 1,165,590 1,949,090 2,893,923 927,216 (1,184,872) 36,711,264Unallocated assets: Tax recoverable 10,651Others 5,919,505

Total assets 42,641,420 Segment liabilities 4,668,377 827,239 1,927,073 148,110 353,992 188,062 313,945 (5,295,274) 3,131,524Unallocated liabilities: Income tax 1,917,115Others 206,016

Total liabilities 5,254,655 Other segment information Capital expenditure 1,212,194 2,687,667 1,145,166 150,337 5,993 331,880 3,919 (4,709) 5,532,447Depreciation 960,389 1,151,867 272,002 123,381 61,376 372,865 9,393 - 2,951,273

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In addition, the Group monitors the segment revenue by geographical location as follows:

2008 2007 Revenue by geographical location of external customers $ $

Singapore 2,329,988 2,512,286 Malaysia 7,672,207 6,913,741 Philippines 3,929,631 3,922,386 Thailand 2,078,835 1,764,107 USA 3,888,917 4,102,917 Europe 4,308,164 3,256,457 China 6,556,559 4,788,089 Japan 2,169,994 2,138,959 Taiwan 3,379,310 3,477,094 Others 1,892,350 1,819,572

Total revenue from external customers 38,205,955 34,695,608

22. Subsequent EventOn 18 July 2008, the Company has received in-principle approval from the Singapore Exchange Securities Trading Limited for the transfer of the listing and quotation of the Company’s shares from SGX-CATALIST to the SGX Mainboard. The effective date of the transfer of the Company’s shares from SGX-CATALIST to the Mainboard was on 22 July 2008.

On 23 August 2008, the directors recommended the payment of a final tax-exempt dividend of 3 cents per share, amounting to $4,154,576.

23. New Accounting Standards and Interpretations Not Yet AdoptedThe Group has not applied the following standards (including its consequential amendments) and interpretations that have been issued as of the balance sheet date but are not yet effective:

FRS 1 (revised 2008) Presentation of Financial Statements FRS 23 Borrowing CostsFRS 108 Operating SegmentsINT FRS 112 Service Concession ArrangementsINT FRS 113 Customer Loyalty ProgrammesINT FRS 114 The Limit on a Defined Benefits Asset, Minimum Funding Requirements and their Interaction

FRS 1 (revised 2008) will become effective for the Group’s financial statements for the year ending 30 June 2010. The revised standard requires an entity to present, in a statement of changes in equity, all owner changes in equity. All non-owner changes in equity (i.e. comprehensive income) are required to be presented in one statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income). Components of comprehensive income are not permitted to be presented in the statement of changes in equity. In addition, a statement of financial position is required at the beginning of the earliest comparative period following a change in accounting policy, the correction of an error or classification of items of financial statements. FRS 1 (revised 2008) does not have any impact on the Group’s financial position or results.

Other than the amendment to FRS 1, the initial application of the other standards (and its consequential amendments) and interpretations is not expected to have any material impact on the Group’s financial statements. The Group have not considered the impact of accounting standards issued after the balance sheet date.

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StatiSticS As at 19 September 2008

SHARE CAPITALNumber of Shares : 138,485,881Class of Shares : Fully paid ordinary shares Voting Rights : 1 vote per ordinary share

Based on the information available to the Company as at 19 September 2008, the percentage of shareholding held in the hands of the public is approximately 36.01% which is more than 10% of the issued share capital of the Company. Therefore Rule 723 of the Listing Manual of the Singapore Exchange Securities Trading Limited has been complied with.

SUBSTANTIAL SHAREHOLDERS AS AT 19 SEPTEMBER 2008Name Direct Interest Deemed Interest

No. of Shares % No. of Shares %

1 Christopher Reid Borch* 37,034,913 26.74% 39,260,256 28.35%2 Sarcadia LLC 39,260,256 28.35% - -3 Low Ming Wah 7,126,001 5.15% 1,000 0.00%4 Frederic Louis Borch * 587,000 0.43% 39,260,256 28.35%5 Andrea W. Borch* - - 39,260,256 28.35%6 Kyle Borch* - - 39,260,256 28.35%7 Tyler Borch* - - 39,260,256 28.35%8 Cameron Borch* - - 39,260,256 28.35%9 Allison Borch* - - 39,260,256 28.35%

* Deemed to be interested in 39,260,256 shares held by Sarcadia LLC.

ANALYSIS OF SHAREHOLDERS BY RANGE AS AT 19 SEPTEMBER 2008 % of Issued Size of Shareholdings No. of Shareholders % of Shareholders No. of Shares share capital

1 – 999 51 5.00 20,519 0.011,000 – 10,000 681 66.76 1,587,786 1.1510,001 – 1,000,000 277 27.16 21,582,906 15.581,000,001 and above 11 1.08 115,294,670 83.26

Total 1,020 100.00 138,485,881 100.00

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ShareholDerS’

StatiSticS As at 19 September 2008

TWENTY LARGEST SHAREHOLDERS AS AT 19 September 2008 % of Issued Name No. of Shares share capital

1 Sarcardia LLC 39,260,256 28.352 Christopher Reid Borch 37,034,913 26.743 Citibank Nominees Singapore Pte Ltd 9,764,000 7.054 Low Ming Wah 7,126,001 5.155 DBS Nominees Pte Ltd 6,535,500 4.726 Raffles Nominees Pte Ltd 5,407,000 3.907 Chow Kam Wing 2,811,000 2.038 HSBC (Singapore) Nominees Pte Ltd 2,243,000 1.629 Chin Poh Leng 2,068,000 1.4910 United Overseas Bank Nominees Pte Ltd 1,975,250 1.4311 Kim Eng Securities Pte Ltd 1,069,750 0.7712 Tan Eng Yam @ Tan Eng Ann 984,000 0.7113 Karl Zurfluh 850,500 0.6114 Chen Wei Ching 800,000 0.5815 Yeap Lam Yang 750,000 0.5416 Lim Yong Wah 649,500 0.4717 Frederic Louis Borch 587,000 0.4318 Lam Yen Yong 585,000 0.4219 Lee Dorcas 584,500 0.4220 Abdul Samad bin Ahmad 436,275 0.32

Total 121,521,445 87.75


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annual general meetingMICRO-MECHANICS (HOLDINGS) LTD.•(Incorporated in the Republic of Singapore)•(Company Registration No: 199604632W)

NOTICE IS HEREBY GIVEN that the Twelfth Annual General Meeting of the Company will be held at Ballroom 1, Level 3, Amara Hotel, 165 Tanjong Pagar Road, Singapore 088539 on Friday, 31 October 2008 at 3:30 p.m. to transact the following business: -

Ordinary Business1 To receive and adopt the Directors’ Report and Audited Accounts for the financial year ended 30 June 2008 and the Auditors’

Report thereon. [Resolution 1]

2 To declare a final dividend of 3.0 cents per ordinary share one-tier tax exempt for the financial year ended 30 June 2008. [Resolution 2]

3 To note the retirement of Mr Howard Duane Wadsworth as a Director of the Company. [See Explanatory Note (a)]

4 To re-elect Mr Christopher Reid Borch, who retires by rotation pursuant to Article 91 of the Company’s Articles of Association, as Director of the Company. [Resolution 3]

5 To re-elect Mr Karl Zurfluh, who retires by rotation pursuant to Article 91 of the Company’s Articles of Association, as Director of the

Company. [Resolution 4] 6 To approve the sum of S$180,000 as Directors’ fees for the financial year ended 30 June 2008 (2007: S$180,000). [Resolution 5] 7 To re-appoint KPMG as Auditors of the Company and to authorise the Directors to fix their remuneration. [Resolution 6]

Special Business8 To consider and, if thought fit, to pass the following as Ordinary Resolution, with or without modifications: -

Ordinary Resolution: - General mandate to authorise the Directors to issue share or convertible securities

“That pursuant to Section 161 of the Companies Act, Cap. 50 and the listing rules of the Singapore Exchange Securities Trading Limited, authority be and is hereby given to the Directors of the Company to allot and issue shares and/or convertible securities in the Company, whether by way of rights, bonus or otherwise, at any time to such persons and upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit, provided always that:

(a) the aggregate number of shares and/or convertible securities to be issued pursuant to such authority does not exceed 50 percent of the total number of issued shares excluding treasury shares in the capital of the Company, of which the aggregate number of such shares and/or convertible securities to be issued other than on a pro-rata basis to the existing shareholders of the Company does not exceed 10 percent of the total number of issued shares excluding treasury shares in the capital of the Company;

(b) for the purpose of determining the aggregate number of shares and/or convertible securities that may be issued under paragraph (a) above, the total number of issued shares excluding treasury shares shall be calculated based on the total number of issued shares excluding treasury shares in the capital of the Company at the time this resolution is passed, after adjusting for: (i) new shares arising from the conversion or exercise of convertible securities; (ii) new shares arising from exercising share options or vesting of share awards outstanding or subsisting at the time this resolution is passed, and (iii) any subsequent consolidation or subdivision of shares; and

25th Anniversary


notice oF twelFth

annual general meetingMICRO-MECHANICS (HOLDINGS) LTD.•(Incorporated in the Republic of Singapore)•(Company Registration No: 199604632W)

(c) unless revoked or varied by the Company in general meeting, such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier.”

[See Explanatory Note (b)] [Resolution 7] 9 To transact any other business that may be transacted at an Annual General Meeting.

By Order of the Board

Chow Kam WingCompany Secretary

Singapore 14 October 2008

Explanatory Notes:

(a) Upon his retirement, Mr Howard Duane Wadsworth will also be relinquishing his positions as member of the Audit Committee and Remuneration Committee.

(b) Resolution 7, if passed, will empower the Directors from the date of the Annual General Meeting until the date of the next Annual General Meeting of the Company, to issue shares and/or convertible securities in the Company up to an aggregate number not exceeding 50% of the total number of issued shares excluding treasury shares in the capital of the Company, of which the aggregate number issued other than on a pro-rata basis to all existing shareholders of the Company shall not exceed 10% of the total number of issued shares excluding treasury shares in the capital of the Company, as more particularly set out in the ordinary resolution. Unless revoked or varied by ordinary resolution of the shareholders of the Company in general meeting, this resolution shall remain in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.

Notes:A member entitled to attend and vote at the Annual General Meeting may appoint not more than two proxies to attend and vote on his behalf and where a member appoints more than one proxy, he shall specify the proportion of his shareholding to be represented by each proxy. A proxy need not be a member of the Company. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 31 Kaki Bukit Place, Eunos Techpark, Singapore 416209 not less than 48 hours before the time appointed for the holding of the Annual General Meeting.


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NOTICE IS HEREBY GIVEN that the Share Transfer Books and Register of Members of Micro-Mechanics (Holdings) Ltd. (the “Company”) will be closed on 11 November 2008 for the preparation of dividend warrants.

Duly completed registrable transfers received by the Company’s Share Registrar, M & C Services Private Limited, 138 Robinson Road #17-00 The Corporate Office, Singapore 068906 up to 5.00 p.m. on 10 November 2008 will be registered to determine shareholders’ entitlements to the said dividend.

Members whose Securities Accounts with the Central Depository (Pte) Limited are credited with shares at 5.00 p.m. on 10 November 2008 will be entitled to the proposed dividend.

The proposed dividend, if approved by the members at the Twelfth Annual General Meeting to be held on 31 October 2008, will be paid on 21 November 2008.

notice oF bookS cloSure anD

DiviDenDS payment DateMICRO-MECHANICS (HOLDINGS) LTD.•(Incorporated in the Republic of Singapore)•(Company Registration No: 199604632W)

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No. Resolutions Relating To : For Against

ORDINARY BUSINESS

1 Directors’ Report and Audited Accounts for the financial year ended 30 June 2008

2 Payment of proposed final dividend

3 Re-election of Mr Christopher Reid Borch as director

4 Re-election of Mr Karl Zurfluh as director

5 Approval of directors’ fees

6 Re-appointment of KPMG as auditors

SPECIAL BUSINESS

7 Authority to issue new shares

proxy

Formimportant For cpF inveStorS only:1. This Annual Report is forwarded to you at the request of your CPF Approved Nominee

and is sent SOLELY FOR INFORMATION ONLY.2. This Proxy Form is therefore not valid for use by CPF Investors and shall not be effective

for all intents and purposes if used or purported to be used by them.3. CPF Investors who wish to attend the Annual General Meeting as OBSERVERS have to

submit their requests through their respective Agent Banks so that their Agent Banks may register with the Company Secretary of Micro-Mechanics (Holdings) Ltd.

I/We NRIC/Passport/Co. Registration No.

of

being a member/members of MICRO-MECHANICS (HOLDINGS) LTD. hereby appoint

and/or (delete as appropriate)

as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and, if necessary, to demand a poll at the Annual General Meeting (“AGM”) of the Company to be held at Ballroom 1, Level 3, Amara Hotel, 165 Tanjong Pagar Road, Singapore, 088539 on Friday, 31 October 2008 at 3.30 p.m. and at any adjournment thereof.

(Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the resolutions as set out in the Notice of AGM. In the absence of specific directions, the proxy/proxies will vote or abstain as he/they may think fit, as he/they will on any other matter arising at the AGM.)

MICRO-MECHANICS (HOLDINGS) LTD. (Incorporated in the Republic of Singapore) (Company Registration No: 199604632W)

NRIC/ Proportion of Name Address Passport No. Shareholdings (%)

NRIC/ Proportion of Name Address Passport No. Shareholdings (%)

Dated this day of 2008.

Signature(s) of Member(s) or Common Seal of Corporate Member

Total Number of Shares Held

IMPORTANT: PLEASE READ NOTES OVERLEAF


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Notes:

1 Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Cap. 50), you should insert that number. If you have shares registered in your name in the Register of Members of the Company, you should insert that number. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number. If no number is inserted, this form of proxy will be deemed to relate to all the shares held by you.

2 A member entitled to attend and vote at a meeting of the Company is entitled to appoint not more than two proxies to attend and vote on his behalf. A proxy need not be a member of the Company.

3 The instrument appointing a proxy or proxies must be deposited at the Company’s registered office at 31 Kaki Bukit Place, Eunos Techpark, Singapore 416209 not less than 48 hours before the time appointed for the holding of the AGM.

4 Where a member appoints more than one proxy, he shall specify the proportion of his shareholding to be represented by each proxy.

5 The instrument appointing a proxy shall be signed by the appointor or his attorney. Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid. In the case of a corporation, the instrument appointing a proxy shall be either given under its common seal or signed on its behalf by an attorney or a duly authorised officer of the corporation.

6 Any corporation which is a member of the Company may by resolution of its directors or other governing body authorise such person as it thinks fit to act as its representative at the meeting.

7 The Company shall be entitled to reject an instrument of proxy which is incomplete, improperly completed, illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument of proxy. In addition, in the case of shares entered in the Depository Register, the Company shall be entitled to reject any instrument of proxy if the member, being the appointor, is not shown to have any shares entered against his name in the Depository Register as at 48 hours before the time of the AGM, as certified by The Central Depository (Pte) Limited to the Company.

Micro-Mechanics (Holdings) Ltd.

No. 31 Kaki Bukit PlaceEunos Techpark

Singapore 416209

Attn: Company Secretary

Affix Postage Stamp

(1) Fold along this line

(2) Fold along this line

micro-mechanics (Holdings) Ltd.

Subsidiaries

SINGAPOREMicro-Mechanics Pte LtdNo. 31 Kaki Bukit Place

Eunos Techpark

Singapore 416209

Tel: 65-6746-8800

Fax: 65-6746-7700

[email protected]

MALAYSIAMicro-Mechanics Technology Sdn. Bhd. Lot P22, Phase 4Free Industrial Zone

Bayan Lepas, 11900

Penang, Malaysia

Tel: 604-643-4648

Fax: 604-643-4628

[email protected]

THAILANDMicro-Mechanics (Thailand) Limited 9/50 Moo 5

Phaholyothin Road

Tambol Klong Nueng

Amphur Klong Luang

Pathumthani

Province 12120

Thailand

Tel: 662-902-2620

Fax: 662-902-2623

[email protected]

PHILIPPINESMicro-Mechanics Technology International Inc.Lot B2-1 C Carmelray Industrial Park II

Brgy Tulo, Calamba City, Laguna,

Philippines

Tel: 63-49-545-7718

Fax: 63-49-545-7719

[email protected]

CHINASuzhou FactoryMicro-Mechanics Technology (Suzhou) Co., Ltd1 3B Suchun Industrial Square

No 428 Xing long Street

Suzhou Industrial Park

P.R. China 215126

Tel: 86-51 2-871 6-8800

Fax: 86-51 2-871 6-7700

[email protected]

Shanghai OfficeMicro-Mechanics Technology Sdn. Bhd.A410,Yin hai Building

250 Caoxi Road

Shanghai, 200235, China

Tel: 8621-6495-4488

Fax: 8621-5450-0408

[email protected]

USAMicro-Mechanics, Inc.610 University Avenue

Los Gatos, California 95032

Tel: 888-909-8668

Fax: 408-354-5728

Micro-Mechanics, Inc.465 Woodview Drive

Morgan Hill, California 95037

Tel: 408-779-2927

Fax: 408-779-9189

[email protected]

SWITZERLANDMicro-Mechanics AG Alte Steinhauserstrasse 21

CH-6330 CHAM

Tel: 41-41-748-01-60

Fax: 41-41-748-01-69

[email protected]

TAIWANMicro-Mechanics Taiwan Representative Office 13F-8, No. 295, Sec 2

Kuan-Fu Road, Hsin Chu 300

Taiwan, R.O.C

Tel: 886-03-5724835

Fax: 886-03-5724845

[email protected]

CorporaTe dIreCTory

No. 31 Kaki Bukit PlaceEunos TechparkSingapore 416209Tel: 65-6746-8800Fax: 65-6746-7700www.micro-mechanics.com

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