Overview
Current Operating Subsidiaries
2007 Annual Report

Overview

Lemarne Corporation Ltd has been a listed Australian company (ASX:LMC) since 23 December 1971. By focusing on specialised niche engineering businesses which are (or have the capacity to be) market leaders in their fields, Lemarne has achieved stability through limited diversity while pursuing growth opportunities in specialised businesses.

The company has a well defined model of corporate governance, including an active risk management control program in its operating subsidiaries, and a defining investment and business philosophy which has enabled it to prosper and grow in good times and hard times.

Over the past few years our strategy has been to focus on the development of niche businesses with recurrent income streams while divesting our manufacturing business in Australia and returning excess funds to shareholders. Optional buy-backs of up to 35% and 50% of shareholdings were carried out in 2004 and 2006 respectively.

The performance of the company’s investment in two businesses, Lemarne Healthcare and ValueNet have been well below expectations. As a result, Lemarne Healthcare was sold on 23 January for $6million. In respect of ValueNet, alternate strategies are being evaluated to achieve our objectives.

In contrast, the strategy at Lemtronics has been successful and management has achieved an outstanding turnaround. Going forward, Lemtronics will invest in broadening its development capability to meet changing market needs.

C10’s products division should continue to make acceptable returns and these will continue to be re-invested in the building of the ValueNet hosted IP telephony business.

Further investment will be made in Lemtronics, particularly in the areas of capital equipment and the expansion of its engineering and development resources. These initiatives coupled with strong markets that many of our major customers are projecting for 2007/2008, should underpin Lemtronics’ future growth in revenue and profits next year.

Overall, the Lemarne group’s future will be underpinned by the performance of Lemtronics and C10 Communications.

Current Operating Subsidiaries

Lemtronics: electronics manufacturing

Founded in 1988, Lemtronics is a rapidly growing ‘world class’ niche integrated EMS provider, specialising in electronics and mechanical engineering, project management and manufacturing services. The company specialises in the assembly of medium to complex electronic modules with emphasis on RF, optical, laser, electronics & electro-mechanical applications.

Lemtronics employs over 650 people at its manufacturing and assembly facility in the Bayan Lepas Free Industrial Zone in Penang, Malaysia. With revenues in excess of US$40 million, a strong balance sheet and positive cash flow, Lemtronics is able to fund future expansion and reinvest in the growth of the business.

With high quality manufacturing operations, Lemtronics has the base to extend the range and depth of the value-added engineering services it can offer to its customers.

C10 Communications: specialised telecommunications solutions

C10 Communications is a supplier both of hardware and software solutions to telecommunications carriers. These solutions include modems and filters for accessing the internet which improve access speeds.

ValueNet is a division which offers value-added telephone and PABX services using licensed software technologies and the Voice Over Internet Protocol (VoIP). ValueNet provides hosted services which enable small to medium enterprises to gain access to advanced telecommunications features which are not economically available using current PABX technologies.

In particular, ValueNet offers the integration of voice and data on a common network. The VoIP sector is growing quickly in the USA, and C10 Communications is now the exclusive distributor in Australia and New Zealand of a leading technology which has successful deployments in Japan, Europe and the United States.

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