Dear Shareholders,

THE YEAR IN REVIEW

The financial year ended 30 June 2010 (FY2010) marked a year of transition from our former core businesses of electronics distribution and connector manufacturing into the natural resources and minerals business. On 30 October 2009, after receiving approval by the Singapore Exchange (SGX), we convened an Extraordinary General Meeting and obtained Shareholders’ approval to diversify into the sourcing, supply, trading and distribution of commodities, minerals and resource related products.

As announced, the Company has been placed on the SGX watch-list with effect from 3 December 2009. The Board and management fully understand the importance and urgency of returning to profitability and have in place a plan to move out of the red. However, in spite of this time pressure, we will be cautious in entering new ventures and will conduct satisfactory due diligence before making sizable investments. It is important to note that whilst the commodities sector is widely-regarded as highly lucrative, the risks involved are commensurately high. The Board and management will continue to take calculated risks in first bringing the Company out of the watch-list, and subsequently create value for our loyal shareholders in the years to come.

In  order  to  better  understand  the  dynamics  and  idiosyncrasies of our new core markets, the Company began with small-volume trading of reclamation sand and thermal coal to various end buyers. Having built-up a reasonable level of comfort with the thermal coal business, we have formed a subsidiary company to engage in coal mining activities and trading.

Through our 51% subsidiary, PT Anugrah Ultro Sejati (“PT AUS”), the Group is prospecting on two coal mining interests with a total mineable area of 160 hectares at the Pantai Lango area in Penajam, East Kalimantan, Indonesia.

In order to support our foray into the commodities, mineral and resource industry, we have recapitalised the share capital of our wholly-owned subsidiary, Ultro Resources Pte Ltd, and incorporated a new subsidiary company in Indonesia, as announced on 12 February 2010, for general trading of minerals and resource based products. We have also raised net proceeds of S$3.4 million through our rights-cum-warrant issue to support the Company’s investment in the new core business relating to natural resources and minerals. The Company will keep shareholders apprised on the progress of our investments, operations and any material deviations from what has been announced.

REVENUE & PROFITABILITY

Year-on-year financial performance from FY2009 was markedly weaker in FY2010 due to the phased exit from our former core business segments. The Group revenue and gross profit decreased by 78.3% and 68.4% to $2.6 million and $95,000 respectively. However, we are pleased to note that whilst minimal, the Group’s revenue and gross profit contribution for FY2010 came mainly from our new core business segment -- natural resources and minerals.

The thinner than expected margins were a result of initial unfamiliarity with the market forces of the new core business and higher initial costs due to the use of brokers and consultants for the various trades. However, any contribution is a good step in the right direction for the Company as we embark on establishing our new core business. More importantly, I believe that having this operational experience behind us, the management will be able to better manage the new core business that will hopefully lead to healthier margins that are more in line with industry standards. Meanwhile, the other operating income of $3.1 million in FY2010 comprised significantly of rental income amounting to $2.1 million. The overall operating expenses (consisting of  distribution  &  selling,  administrative,  other  operating expenses, finance costs and adjustments due to discontinuing operations) for FY2010 was reduced by 43.4% compared to FY2009 due to a decline in operating expenses attributable to the exit from the electronic distribution business and reduction in manufacturing activities.

Discontinued operations comprised these former subsidiaries namely, Ultro Lighting International Pte Ltd (“ULI”), Ultro Automation Pte Ltd (“UA”), CP Solutions Pte Ltd (“CPS”), Ultro Distribution Private Limited (“UD”), Ranoda Electronics Pte Ltd (“RE”) and Ranoda (Shanghai) Co. Ltd (“RSH”).  The net loss after tax for FY2010 from these former subsidiaries was $2.9 million, after taking into account the gains of $1.51 million from the disposal of ULI & UA and deconsolidation of CPS & UD. The comprehensive loss incurred in FY2010 was $6.4 million due to the various factors mentioned above.

FINANCIAL POSITION

The Net Tangible Asset of the Group as at 30 June 2010 declined by 23.8% to $9.7 million compared to $12.8 million, mainly due to the operating loss attributable to insufficient revenue from the former core businesses.

NEW BUSINESS ACTIVITIES & PROSPECTS  

The new financial year FY2011 marks the beginning of a new era for the Company, with our maiden entry into the minerals and resources based business. Through our 51% subsidiary, PT Anugrah Ultro Sejati (“PT AUS”), the Group is prospecting on two coal mining interests with a total mineable area of 160 hectares at the Pantai Lango area in Penajam, East Kalimantan, Indonesia. Both mines cover the Pulau Balang Formation, a coal formation that is known to produce high quality coal suitable for export and is associated with higher selling prices and profit margins.

PT AUS is currently actively working on securing mining rights as part of its expansion plan to develop into a significant coal mining company.

APPRECIATION

On behalf of the Board of Directors, I thank our management and staff for their dedication and perseverance in a challenging and difficult year.  In addition, I would like to thank all of our customers, shareholders, bankers, business associates, partners and suppliers for their continuing support.

The management will put in their best efforts in bringing the Company out of the watch-list and create long-term value for shareholders in the years to come.

Thank you and God bless.

Lim Ee Ann

Executive Chairman
6 October 2010