Chairman's Statement

Dear Shareholders,

On behalf of the Board, I am once again pleased to present to you another year of outstanding performance, with strong turnover and earnings growth for the year ended 31 December 2007 (“FY2007”).

Our continuous pursuit to develop innovative and high quality products has propelled us to a new level. We have become a first mover, market leader and innovator of quality chemical fibre products and uniform microfibre leather (“microfibre leather”) in the People’s Republic of China (the “PRC”). Today, we continue to see strong recognition of our products and their quality.

The Group’s microfibre leather, which could be the closest alternative to genuine leather, has recently obtained the Oeko-Tex Standard 100 certification, which is an internationally recognised consumer benchmark for human ecological safety of textile products. This affirms we do not use harmful substances in the production of our microfibre leather and the end product is safe for use by consumers.

We are currently exploring new microfibre leather market segments, including automotive upholstery and home interiors. We expect maiden contributions from these segments in 2008, and we are also increasing capacities for our chemical fibre products in response to market demand.

Innovation and integration are keys to the Group’s strategic growth. Our expansion plans in 2008 include a new differential polyester chip production facility, which is expected to be ready by the end of the year. This in-house facility generates strategic benefits in product development and innovation, and enhances product quality through materials control and process integration. FibreChem will continue to be a first-mover, and a market leader through expertise and technology.

Financial Highlights

FibreChem achieved record revenue of HK$1.8 billion for FY2007, which represented a 43.7% increase from the previous year. This revenue growth was mainly driven by full-year contributions from our microfibre leather products, and contributions from our enlarged differential bi-component long fibre capacity since June 2007.

The Group’s gross profit rose by 46.5% to HK$697.9 million for the year, and net earnings grew by 62.2% to HK$538.6 million, backed by the higher margin microfibre leather products and relevant tax exemptions in FY2007.

In view of our strong performance in FY2007 and to reward our shareholders, we are recommending a final dividend of HK$0.080 per ordinary share and S$0.011 per non-redeemable convertible non-cumulative preference share.

Laying the foundation ahead

In 2008, the Group will be positioning itself for a new phase of growth in 2009. We are systematically expanding our production capacities in tandem with growing market demand. We will also boost our leadership position by enhancing product recognition in both the domestic and export markets that we plan to penetrate. FibreChem is currently the first and only producer of the uniform microfibre leather in the PRC. We are spending efforts in achieving international accreditation to propel us into the global arena.

The quality of our management team will continually be improved as the Group grows bigger. At FibreChem, our forte lies in good management control that complements key technological expertise. Together they drive product innovation and the manufacture of superior quality products.

Acknowledgements

My sincere appreciation goes to the management and staff members of FibreChem, who have individually and cohesively contributed to the achievements of the Group in 2007. I would also like to express my sincerest appreciation to our Board of Directors for their invaluable contribution to the Group.

Last but not least, I would like to extend my heartfelt gratitude to all our shareholders for their confidence in FibreChem. With your support we can set the stage for our next wave of growth.

Yours Truly,

Mr James Zhang
Executive Chairman