Chairman's Statement

On behalf of the Board of Directors of Industronics Berhad ("Industronics" or "the Company"), I am pleased to present the Annual Report and the Financial Statements of the Group and the Company for the Financial Year ended 31 December 2007.

General Overview

In 2007, the Malaysian economy grew by 6.3% (2006: 5.9%) as measured by GDP driven by strong domestic growth and private sector investment despite weaker external markets. Private sector growth rate recorded the highest since 2000. While the manufacturing sector growth is still substantial, the main driver of growth is now in the service sector with a growth rate of 9.7%.

Financial Report

The Group recorded a revenue of RM94.57 million, an increase of 17.6% over the previous year. Despite the higher revenue the Group recorded a loss of RM2.5 million which were mainly contributed by the inventory adjustment to recognise the variance between the physical inventories balances and the book balances by approximately RM8.6 million, the effect of which has reduced the income of the Group by the same amount with corresponding reduction in inventories reflected in the balance sheets. However, the Cash position of the Group had improved by RM4.5 million.

At the Company level the revenue was RM59.08 million compared to RM51.05 million the previous year. Despite the increase in revenue, the Company recorded a net loss of RM2.98 million which were mainly attributed by the net allowance for doubtful debts of RM4.53 milion and inventories adjustment to recognise the variance between the physical inventories balances and the book balances by approximately RM5.9 million.

2007 Business Highlights and Operations Review

Industronics designs and manufactures a range of Electronic LED Displays and Public Information Display Systems (PIDS) under its brand OLYMPEX. Our Flight Information Display Systems (FIDS) inform and connect you and loved ones in the many airports in Malaysia and at Suvarnabhumi International Airport in Bangkok, Thailand. Our electronics display systems are your source of information on the highways, financial burses, sport avenues, train/bus stations and electronic advertising media.

However, the Industronics Group is also an engineering and systems solutions provider with a strong presence in the following business segments:

• Electronics Products
• Telecommunications
• Security Systems, Mechanical & Electrical Engineering
• Fabrication & Manufacturing
• Industrial Automation and others

Our services and solutions are needed and used in infrastructure developments such as airports, transportation infrastructures/ highways, power plants, stadiums, commercial and industrial markets including universities, commercial buildings, urban township development and private homes.

Electronics Products

Demand for OLYMPEX products in 2007 increased by 7% over the same period in 2006 and also saw significant portions of businesses coming from overseas markets. This trend is expected to continue well into 2008 as the Company further strengthens its foothold in the international markets.

In the sports arena, we are proud to have been part of the 24th South East Asia Games (SEA Games) held in Nakhon Ratchasima, Thailand in December 2007. The Games are a biennial multi-sport event involving participants from the current 11 countries of South East Asia. Our scoreboards were used in the Main Stadium, the Aquatic Centre and Velodrome. Our scoreboards also performed strongly on the foreign front with successful installations in Kuwait, Indonesia, Vietnam and the United States. Some of these were supplied together with and worked seamlessly with our partners Track and Field Timing Systems and Swim Timing Systems.

OLYMPEX n-Matrix solutions, which are used primarily for large screen outdoor video and information display and advertising applications, also met with positive interest with installations at Masjid Negara, Technology Park Malaysia and Angkasapuri, Radio Television Malaysia (RTM) in Kuala Lumpur and also of overseas in Pakistan.

The Transport sector also saw strategic successes where OLYMPEX LED Traffic Lights were officially approved for use by Singapore's Land Transport Authority (LTA) and Brunei's Public Works Department. This, coupled with similar efforts in other countries, is hoped to further improve its growing international market position for OLYMPEX transport-related products.

Furthermore, works for the Rail Information Displays for the Mandurah Railway Line in Perth, Western Australia is progressing well and the project is scheduled for completion in mid-2008.

Telecommunications

Telecommunications covers the business areas of telecommunications equipment, audio visual and multimedia systems, Intelligent Transport Systems (ITS) solutions and other major system integration projects involving Information and Communication Technology (ICT).

In 2007, the Company successfully carried out audio visual systems projects in Bank Negara Malaysia, the University of Nottingham in Malaysia, the Tun Hussein Onn Eye Hospital and University Sains Malaysia.

The Company has also successfully carried out the SMART Tunnel Linear Heat Detection System as well as the Surveillance and Communication portion of its Flood Detection System (FDS). The Stormwater Management and Road Tunnel (SMART Tunnel) is a storm drainage and road structure in Kuala Lumpur, Malaysia and is the longest stormwater tunnel in South East Asia.

Security Systems and M&E Contracting

The Industronics Group provides integrated systems and solutions for building and home security, fire protection systems and M&E services through our subsidiaries Ademco (M) Sdn Bhd (“Ademco”) and Sukitronics Sdn Bhd (“Sukitronics”). The turnover for this segment in year 2007 improved significantly over previous year.

Industronics itself has been a major supplier of conventional, microprocessor and addressable Fire Alarm Detection Panels under the Industronics brand name since 1975.

Ademco had focused on the property and retail industry in 2007. The key project works include the design, supply, installation, testing & commissioning of the following systems.

• CCTV System, Intruder Detection System, Public Address System and SMATV System at JUSCO's new store at Sunway Pyramid's new wing at Bandar Sunway, Selangor D.E.
• CCTV and Door Access Systems for SP Setia Behad's new corporate office at Bandar Eco-Setia in Shah Alam, Selangor D.E.
• Intelligent Home Security Systems for some of the houses at Phase 1B and Phase 1D of Bandar Setia Alam, Shah Alam, Selangor D.E.
• Intruder Detection System and CCTV System, Access Systems, Barrier Gate System and local Central Monitoring System for KIPLAND Sdn Bhd's Phase 3 and Phase 4 gated and guarded KIPark, Sri Utara in Selayang, Selangor D.E.

During the year, Ademco also provided fire protection systems to Titan's industrial plant and warehouses.

Sukitronics Group is primarily focused on the growing business of M & E services for buildings, industrial plants, power stations, oil / petroleum downstream engineering sectors and other similar markets.

The major projects completed in 2007 include the Fire Protection System in Tanjung Bin Power Plant and the Kemaman Bitumen Refinery in Kemaman, Terengganu. The company also continued its project for the Tuanku Jaafar Power Station, Phase II in Port Dickson, Negeri Sembilan.

Fabrication & Manufacturing

Our fabrication and manufacturing subsidiaries comprise Primeworth (M) Sdn Bhd ("Primeworth") and TTE Electronics Sdn Bhd ("TTE").

Primeworth's core business is its 19” rack and enclosures which is primarily targeted at the IT, Communications and Data Control Centres market.

Local sales and demand from overseas markets, especially from the UAE, improved Primeworth's revenue and helped the company achieve a net profit despite an increasingly challenging environment. Primeworth's continuous focus on the efficiencies of its business processes, product design and quality management system are some of the contributing factors to improved performance.

Our contract manufacturing arm, TTE provides contract manufacturing, in house engineering and design solutions to both local and foreign companies that seek to outsource their product manufacturing needs primarily in the automotive, security and general electronics sectors.

Industrial Automation

The Industronics Group interests in the growing environmental monitoring and supervisory control and data acquisition (Scada) businesses particularly applied in the irrigation / waterworks related industry is managed through its wholly-owned subsidiary Industronics Automation Sdn Bhd ("IASB").

As an established system integrator, IASB specialises in the provision of integrated system solutions for all monitoring and telemetric works for applications which are used in the waterworks, reservoirs, dams, rivers and flood mitigations.

In 2007, IASB and technology partner Greenspan Technology of Australia successfully completed the handover of a state of art Flood Detection System which is part of the SMART Tunnel in Kuala Lumpur.

IASB's contract for the annual maintenance for some 36 number of automated irrigation gates stations in Selangor with Jabatan Pengaliran and Saluran (JPS) is renewed and the company looks forward to securing further expansion works in the area.

IASB continues to be actively involved in the integrated building automation solution business. In the past year the company has successfully delivered and commissioned the building automation system for the Tawau Sports Complex and a related system for a Polytechnic campus in Kuantan.

Business Outlook - Exporting Our Solutions To The World

The Industronics Group continues to pursue and develop its Malaysian business opportunities in the various business segments and markets especially in the implementation of the infrastructure and construction projects within the 9th Malaysian Plan (9MP).

Our other focus is on export and foreign market opportunities especially in countries such as Vietnam, Thailand, Middle- East countries, Indonesia, Pakistan, India and United States of America where there exists extensive infrastructure development programs and where our solutions and engineering experience can be replicated. We continue to develop and broaden our foreign market export opportunities through strategic partnerships with local partners in Indonesia, Thailand, the Middle East, Australia and the USA.

To further strengthen our market presence in the ASEAN region we have incorporated two subsidiaries in Vietnam, namely, Sukitronics Corporation Limited (incorporated in December 2006) and Industronics Corporation Limited (incorporated in March 2007) where Sukitronics Corporation Limited will pursue M&E project opportunities and Industronics Corporation Limited will develop the market and sales channels for our LED Display Boards, Swim and Athletic Timing Solutions, Intelligent Transportation Systems (ITS) solutions and Fire Alarm Panels.

Board Changes

Mr. Pawan Kumar Ruia, Mr. Deepak Kumar Ruia and Mr. Sanjay Kumar Garodia were appointed as Non Executive Directors to the Board of Industronics on 30 June 2007. Subsequently, Mr. Deepak Kumar Ruia was re-designated as an Executive Director of Industronics in August 2007. We welcome them to the Board of Industronics.

Dr. Lim Jit Chow retired on 1 May 2008 as the Managing Director of Industronics. He remains on the Board as a Non Independent Non Executive Director. We wish to extend our sincere thanks to Dr. Lim Jit Chow for his vast contribution to the growth and development of the Industronics Group.

Ms. Wendy HH Lim was re-designated as Non Independent Non Executive Director on 26 May 2008 following her resignation from Industronics. We also wish to thank Ms. Wendy HH Lim for her dedicated efforts to the advancement of the Company.

Dividend

The Board of Directors does not recommend any payment of dividend for the financial year ended 31 December 2007.

Corporate Social Responsibility (CSR)

At Industronics, we recognize the importance of achieving commercial success in ways that honour ethical values as well as respecting our stakeholders, employees, suppliers, clients, in particular the general community.

During the year, Industronics has provided industrial training opportunities for undergraduates to enhance their work readiness skillsets upon graduation. We continue to encourage more interaction amongst employees in the Group through the annual company trip and annual dinner. Occupational safety and health is a priority in our work environment due to the nature of the business and seminars are organised to emphasise health and safety measures to our employees. We also sent our employees to various continuing training programmes on a needs basis to enhance job performance and their career development.

Acknowledgements

I would like to record our sincere thanks to all of our customers, business associates, the Malaysian Government, shareholders and Board members for the support given to the Group in 2007.

I also wish to thank the Management and Staff for their ongoing dedication, resourcefulness and commitment to the Group. Our people, with their skills and knowledge, innovation, courage and discipline, are the key assets that allow the Industronics Group to grow.

This is my final Report on behalf of the Board of Directors of Industronics as I have decided not to seek re-election at the upcoming Annual General Meeting in June 2008. I would like to place on record my thanks to all my colleagues, past and present, for their support over the years, and to wish the Industronics Group a successful future.

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