Shenzhen EVOC Intelligent Technology Company Limited *

Transcription

1 Shenzhen EVOC Intelligent Technology Company Limited * (a joint stock limited company incorporated in the People s Republic of China) ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET ( GEM ) OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE STOCK EXCHANGE ) GEM has been established as a market designed to accommodate companies to which a high investment risk may be attached. In particular, companies may list on GEM with neither a track record of profitability nor any obligation to forecast future profitability. Furthermore, there may be risks arising out of the emerging nature of companies listed on GEM and the business sectors or countries in which the companies operate. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors. Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM. The principal means of information dissemination on GEM is publication on the internet website operated by the Stock Exchange. Listed companies are not generally required to issue paid announcements in gazetted newspapers. Accordingly, prospective investors should note that they need to have access to the GEM website in order to obtain up-to-date information on GEM-listed issuers. The Stock Exchange takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this report. This announcement, for which the directors ( the Directors ) of Shenzhen EVOC Intelligent Technology Company Limited (the Company ) collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the Growth Enterprise Market of the Stock Exchange (the GEM Listing Rule ) for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief:(1) the information contained in this announcement is accurate and complete in all material respects and not misleading; (2) there are no other matters the omission of which would make any statement in this announcement misleading; and (3) all opinions expressed in this announcement have been arrived at after due and careful consideration and are founded on bases and assumption that are fair and reasonable. 1

2 RESULTS HIGHLIGHT. Turnover for the year ended 31 December 2003 was approximately RMB202.6 million, representing an increase of approximately 33% as compared to that of last year. Net profit from ordinary activities attributable to shareholders amounted to approximately RMB51.6 million for the year ended 31 December 2003, representing an increase of 31% when compared with that of last year. Basic earnings per share was RMB0.137 for the year ended 31 December 2003, representing an increase of approximately 22%. The Directors recommend the payment of a final dividend of RMB0.03 per share for the year ended 31 December The Board of Directors (the Board ) of the Company are pleased to announce the audited results of the Company for the year ended 31 December 2003, together with the comparative figures for the corresponding period of 2002 as follows: PROFIT AND LOSS ACCOUNT Year ended 31 December Notes RMB 000 RMB 000 (Audited) (Audited) Turnover 3 202, ,462 Cost of sales (110,245) (87,484) Gross profit 92,383 64,978 Other revenue 12,883 11,320 Selling and distribution costs (26,749) (17,953) Administrative expenses (10,896) (5,148) Other operating expenses (9,719) (5,947) Profit from operating activities 57,902 47,250 Finance costs (2,502) (4,472) Profit before tax 55,400 42,778 Tax 6 (3,811) (3,518) Net profit from ordinary activities attributable to shareholders 51,589 39,260 Dividends Interim 30,002 Proposed final 14,013 14,013 30,002 Earnings per share Basic 7 RMB0.137 RMB

3 Notes: 1. Corporation background The Company was established in the People s Republic of China (the PRC ) on 18 December 2000 as a joint stock limited company under the Company law. The Company s H Shares were listed on the Growth Enterprise Market (the GEM ) of The Stock Exchange of Hong Kong Limited (the Stock Exchange ) on 10 October 2003 (the Listing ). The Company is principally engaged in the research, development, manufacture and distribution of Embedded Intelligent Platform ( EIP ) products in the PRC. 2. Principal accounting policies and the basis of preparation of the accounts The financial statements have been prepared in accordance with Hong Kong Statements of Standard Accounting Practice, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention. 3. Turnover Turnover represents invoiced value of goods sold, net of value-added tax, and after allowances for goods returned and trade discounts. 4. Segment Information The Company operates in one business segment, which is the sale of EIP products and therefore, no further business segment analysis is presented. No further geographical segment is presented as the Company s operations were substantially carried out in the PRC during the year. 5. Profit before income tax The Company s profit from operating activities is arrived at after charging/(crediting): RMB 000 RMB 000 Cost of inventories sold 110,245 87,484 Depreciation 4,738 3,396 Research and development costs 9,644 5,277 Minimum lease payments under operating leases in respect of land and buildings 5,670 4,551 Auditors remuneration Staff costs (excluding remuneration of directors) Wages and salaries 15,427 8,400 Retirement benefits scheme contributions 1, Provision for doubtful debts 401 Provision for slow-moving inventories 1,028 1,931 (Gain)/loss on disposal of fixed assets (40) 56 3

4 6. Tax The Company is located in the Shenzhen Special Economic Zone and therefore is subject to a corporate income tax rate of 15%. In accordance with the relevant income tax laws and regulations in the PRC, the Company was exempt from corporate income tax for two years commencing from its first year with assessable profits after deducting the tax losses brought forward, and was entitled to 50% tax exemption for the next three years. The year ended 31 December 2003 was the fifth year since the Company s first year of operations with assessable profits and accordingly, the Company was entitled to a 50% exemption from corporate income tax for the year ended 31 December Earnings per share The calculation of basic earnings per share is based on the profit attributable to shareholders for the year of approximately RMB51,589,000 (2002: RMB39,260,000), and the weighted average number of 377,500,000 (2002: 350,300,000) ordinary shares in issue during the year. Diluted earnings per share amount for the two years ended 31 December 2002 and 2003 had not been presented as no diluting events existed during these years. 8. Movement in Reserves Share premium account Statutory funds* Retained earnings Total RMB 000 RMB 000 RMB 000 RMB 000 Balance as at 31 December ,136 34,119 45,255 Shares issued on placing 100, ,331 Share issue expenses (15,141) (15,141) Net profit for the year 51,589 51,589 Transfer from/(to) reserves 7,738 (7,738) Dividends (14,013) (14,013) At 31 December ,190 18,874 63, ,021 * The Company is required to follow the laws and regulations of the PRC and its articles of association to provide for certain statutory funds, namely, the statutory surplus reserve fund and the statutory public welfare fund (together, as the statutory funds ). 9. Dividends The Directors recommend the payment of a final dividend of RMB0.03 per ordinary share in respect of the year to shareholders on the register of members on 17 May The proposed final dividend in respect of the 2003 Year for payment 2004 is subject to the approval of the Company s shareholders at the forthcoming annual general meeting. This recommendation has been incorporated in the financial statements as an allocation of retained profits within the capital and reserves section of the balance sheets. 4

5 MANAGEMENT DISCUSSION AND ANALYSIS Business Review The Company, a successful EIP products manufacturer for the past 10 years, has worked unswervingly to help upgrade and transform traditional Chinese industries enabling them to benefit from the rapid developments in information technology. During the year under review, the Company signed an agreement with Intel Corporation (INTEL), and has formally becoming a member of the Intel Communication Alliance. This co-operation with INTEL in the development of embedded products, will raise the value of the Company s products and sharpen its competitive edge in the market. In 2003, turnover rose 33% over the year. With regard to industry distribution, the Company achieved a breakthrough in the video frequency, TV conferencing system and medical control sectors, further deepening and broadening its previous business pursuits. 1. Research & Development The Company attaches great importance to research and development. Investment in R&D amounted to about RMB9.6 million in 2003, representing 5% of the gross sales figure. During the year, the Company developed 8 board-type products for different applications, including multi-media, data control, digital video recording, network computing, advance technology, gambling and data processing. Among these products, five of them namely multi-media, digital video recording, network computing, advance technology products, and gambling & data processing have already been introduced to the market. In 2003, two of the Company s systems, the Embedded Real-time Control Operating System (ERCOS) and Embedded Intelligent Platform (EIP), were named as Shenzhen Municipal Import Industrial Development Projects of Other governmental accreditations obtained in 2003 included: Embedded PCI Industrial Computer Manufacturers Groups (PICMG) Standard Central Processing Unit (CPU) Card Embedded Intelligent Platform Embedded Real-time Control Operating System (ERCOS) Shenzhen Science and Technology First Prize (Awarded by Shenzhen Municipal Government) Guangdong Province Science & Technology Third Prize (Awarded by Guangdong Provincial Government) 2003 State Important New Product (Awarded by five bureaus and ministries) 2003 Guangdong Province Important New Product (Awarded by Guangdong Province Science and Technology Bureau) Shenzhen Outstanding Software Products (Awarded by Shenzhen Information Software Association) 5

6 2. Products & Services Currently, the Company owns 180 product types under three major categories and a number of industry-specific solutions, which boost the Company s competitiveness and enables it to achieve exceptional results in transforming traditional industries into digitalized and information-oriented organizations. At the end of 2003, the Company gained the TÜV Rheinland Group ( ) accreditation authority s ISO9001: 2000 certification in quality control with zero defects. In 2003, the Company was named China s highest potential growth Information Technology (IT) enterprise and one of China s 500 biggest information enterprises by the China Centre of Information Industry Development. 3. Sales and Marketing The Company has made significant efforts in the marketing and promotion of its brandname EVOC. In 2003, EVOC was recognized as a leading brandname in Guangdong Province. During the year, the Company spent approximately RMB9.6 million in advertising, accounting for 5% of the gross sales figure. As a domestic leader in the EIP industry, expansion of the sales services network and investment in the market are of prime importance to the Company. In 2003, the Company increased its investment in product research and development and in building up its product services network. Apart from expanding its existing five branches and three offices, the Company also set up new offices in Jinan and Fuzhou. Industry coverage of its products was also expanded. In 2003, the Company has increased its investment in its branches and offices to upgrade its distribution network and strengthen its customer services. 4. Training As at 31 December 2003, the Company was employing 902 staff. Apart from training for new recruits, the Company also held a number of internal training courses on a wide variety of topics, covering new knowledge, new technology and new training materials. Staff are given all-rounded professional training according to their job responsibility to improve their professionalism and skills and enhance their efficiency. This also helped to build a culture of learning across the Company. Prospects With the rising level of information technology in the PRC, the ratio of domesticallyproduced information products is on an uptrend. According to the forecast of CCID Consulting Company Limited, the PRC s fast-growing EIP industry will hit sales volumes of about RMB5.1 billion in the domestic market in

7 The directors view 2004 as an important year for the Company. During the year, the Company will boost its overall competitiveness in research and development, sales, product quality and services. The Company and all staff will continue to work hard work to bring better results to its shareholders. 1. Research & Development Industrial control automation technology is heading towards the development of intelligent-based, networking and integration. Development trends are: industrial Personal Computer (PC)-based on low-cost industrial control automation will become the mainstream for development; Programmable Logic Controllers (PLC) will move towards micro-scales, networking, personal computerization, and openness; Distributed Control Systems (DCS) will develop into small-scale systems with an extensive variety, personal computerization, openness, and the integration of testing, control and management. The control system will move from DCS to Fieldbus Control System (FCS); equipment and meter technology will see increasing digitalization, intelligent based, networking and micro-scales; data control technology will develop into intelligent-based, openness, networking and informationization; industrial control networks will move into a combination of wire and wireless while control software will develop increasingly towards advance control. In view of the above technology development trends, the Company will invest heavily in research and development. In the near future, it will launch a series of new products with new technology applications, such as the integration of the mainboard with the CPU, Peripheral Component Interconnection (PCI) bus, Industry Standard Architecture (ISA) bus and standard PCI-express functions. The development of new technology and products lays concrete foundations for the Company to further develop its services in the informationization of the embedded applications manufacturing industry. 2. Products & Services Fast and timely response in service delivery is the Company s service pledge and its nationwide services network is a guarantee of this fast and timely service delivery. The company upholds its principles of service begins in the research, development and design and runs through all aspects of operation and Meeting customers needs is our starting point stage and their satisfaction is our ending point. In 2004, the Company will move further towards direct sales, supplemented by EVOC embedded intelligent platform alliance members. To improve its services, the Company will also refine its after-sales system and enforce stringent quality controls in addition to better workflow management, maintaining a stable and reliable product quality, and introducing technology services hotlines and a network platform. 3. Marketing & Promotions The Company will stick to its marketing strategy which is based on direct sales and supplemented by sales agents. The company is also setting up sales points at suitable sites across the country. As at 31 December 2003, the Company had already established five branches and five offices, with a distribution network of over 60 sales agents spread out across 27 provinces and autonomous regions. 7

8 In 2004, the Company will continue to raise awareness of its brandname and boost the market share of its products. In addition to outdoor advertisements, the Company will place advertisements in professional magazines and the websites of a variety of industries. It will also organize and participate in large-scale professional exhibitions both locally and overseas and hold professional and academic seminars to comprehensively promote the application of embedded technology in China while at the same time promoting its products. 4. Management The Company has successfully implemented its Enterprise Resource Planning system (ERP) for over two years. The system has made a tremendous contribution in upgrading management functions for the Company. The ERP system provides computer software functions for the management of business information, sales requirements, procurement and inventory, productivity, general administration and finance. The ERP system provided Company s solutions that organized in ways that allow all internal departments to operate with maximum efficiency and reliability. In 2004, the Company will fine-tune the system s functions to fit its specific needs. Based on its development needs, the Company will adjust and rationalize its management structure, strengthen the appraisal exercise for various departments and enhance its management efficiencies. The aim is to move in line with international standards in corporate management to offer its shareholders first class returns. Financial Review For the year under review, the Company recorded total revenues of approximately RMB202.6 million, representing an increase of approximately 33% over that of the previous year. Profit attributable to shareholders for the year was RMB51.6 million, representing an increase of approximately 31% over that of the previous year, while basic earnings per share were RMB Turnover by product category Sales of Products Change RMB 000 RMB 000 Percentage Board-type EIPs 121,803 88, % Chassis-type EIPs 74,338 60, % Remote data modules 6,487 3, % Total 202, ,462 The Company recorded rapid growth during the year which was mainly due to the significant rise in market demand for the Company s board type products. The turnover of the Company s board-type products increased 38% as compared to the previous year. 8

9 Turnover by Geographical Location Regions in China Change RMB 000 RMB 000 Percentage North and Northeast China 51,296 41, % East China 29,220 15, % South China 99,286 72, % Southwest China 12,282 12,359-1% Northwest China 10,544 10, % Total 202, ,462 The East China region recorded a significant growth during the year, it is because the Company had focus the business development plan in Shanghai in The Company has reallocated more marketing staff to the Shanghai branch, resulting in an increase from 61 to 80 personnel during the year. Profit Margin The profit margin for the year was approximately 46%, representing an approximate 7% increase as compared to the previous year. The increase in the gross profit margin was mainly due to the increase in sales of board-type EIP products which have a higher profit margin. Liquidity, Financial Resources and Gearing ratio The Company was listed on the GEM of the Stock Exchange through the placement of 116,800,000 H shares on 10 October The net proceeds from the placement, after deduction of relevant expenses, were approximately HK$91 million. As at 31 December 2002, the Company s total cash and cash equivalents amounted to RMB199 million, representing an increase of 145% as compared to that of the year ended 31 December The increase was due to the net proceeds raised in the Listing. The ratio of current assets to current liabilities is 4.33 times. Bank loans as at 31 December 2003 totaled approximately RMB30 million at an interest rate of 5.31% per annum. The loans will expire in April The gearing ratio is calculated by dividing total liabilities by total assets and is approximately 20% (2002: 64%) The improvement in the gearing ratio is due to the placement of shares in the Company in the Listing. Exchange Rate Exposure All of the Company s assets, liabilities and transaction are denominated either in Hong Kong dollars, US dollars or Renminbi. As the exchange rates of the Hong Kong dollar, US dollar and Renminbi were relatively stable during the year, the Company was not exposed to any material foreign exchange risk. Charges on Assets There was no charge on the Company s assets as at 31 December 2003 for the banking facilities granted to the Company. 9

10 Capital Structure On 23 September 2003, the authorized share capital of the Company was increased from RMB35,030,000 to RMB46,710,000 by the creation of 116,800,000 ordinary shares of RMB0.10 each. On 8 October 2003, 116,800,000 ordinary shares of RMB0.10 each were issued to the public by way of a placement of shares at HK$0.90. The Company relies on internal resources and the net proceeds from the Placing as a source of funding. The Company keeps most of its cash in Renminbi in bank accounts as working capital of the Company. Significant Investment The Company has not held any significant investment for the year ended 31 December Future Plans for Material Investment or Capital Assets Save as disclosed in the section Statement of business objectives of the prospectus issued by the Company on 30 September 2003, the Directors do not have any future plans for material investment of capital assets. Segment Information The Company is principally engaged in the research, development, manufacturing and distribution of EIP products and most of the turnover and contribution to operating profit of the Company are located in the PRC. Accordingly no segmental analysis was presented. Contingent Liabilities As at 31 December 2003, the Company has endorsed bills RMB1.7 million not yet been settled. Human Resources A breakdown of the number of Company employees by function as at 31 December 2002 and 2003 is set out below: By function Sales and marketing Purchasing R&D Management 18 9 Accounting and Finance Quality control Production Human resources and administration Total (Staff)

11 As at 31 December 2003, the Company had 902 (2002: 790) full time employees, representing an increase of 112 employees or 14%. With the increase in headcount, salaries and wages for staff also increased by 77% to RMB16.4 million (2002: RMB9.3 million). The increase in headcount was mainly due to the addition of employees in sales and marketing, management, human resources and administration. The Company provides on going training programs for employees to keep them abreast of the latest market trends and new EIP technologies as well as to enhance their knowledge of national quality standards. The Company also provides different training programs to its senior management to ensure the highest management skills and techniques. The Company remunerates employees based on performance, experience and prevailing industry practices. The Company also provides statutory Mandatory Provident Fund benefits for its employees in Hong Kong and the Statutory Retirement Scheme for its employees in the PRC. Material Acquisitions The Company had no material acquisitions or disposals of subsidiaries and affiliated companies during the year ended 31 December DIRECTORS AND SUPERVISORS INTERESTS IN THE SHARES, UNDERLYING SHARES AND DEBENTURES As at 31 December 2003, the interests or short positions of the directors, supervisors and chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance, (the SFO )), which have been notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and/or short positions in which they are taken or deemed to have under such provisions of the SFO), or which have been required, pursuant to section 352 of the SFO, to be entered in the register referred to therein or which have been required, pursuant to Rules 5.4 to 5.58 of the GEM Listing Rules, to be notified to the Company and the Stock Exchange relating to securities transactions by the Directors, were as follows: (a) Long position Interests in the Company Director Type of interests Number of Domestic Shares Approximate percentage of holding of the relevant class of shares of the Company Approximate percentage of holding of the total share capital of the Company Chen Zhi Lie ( ) interest of a controlled corporation 318,422,700 (Note 1) 90.9% 68.17% Supervisor Zhou Cheng Yan ( ) Interest of a controlled corporation 1,751,500 (Note 2) 0.5% 0.38% 11

12 Notes: 1. These Domestic Shares are held by Shenzhen Yanxiang Wangke Industry Co. Ltd. which is owned as to 70% by Mr. Chen Zhi Lie ( )(Mr.Chen)and4.5%byWangRong( ), spouse of Mr. Chen. By virtue of Mr. Chen s holding of more than one-third interest in Shenzhen Yanxiang Wangke Industry Co. Ltd., Mr. Chen is deemed to be interested in all the Domestic Shares held by Shenzhen Yanxiang Wangke Industry Co. Ltd. in the Company pursuant to Part XV of the SFO. 2. These Domestic Shares are held by Shenzhen Kelijian Electronic Industry Co. Ltd. which is owned as to 60% by Zhou Cheng Yan, a Supervisor and 40% by Xiong Li ( ), an Independent Third Party. By virtue of Zhou Cheng Yan s ( ) holding of more than one-third interest in Shenzhen Kelijian Electronic Industry Co. Ltd. Zhou Cheng Yan ( ) is deemed to be interested in all the Domestic Shares held by Shenzhen Kelijian Electronic Industry Co. Ltd. in the Company pursuant to Part XV of the SFO. (b) Long position Interests in associated corporations Director Associated corporation Type of interests Approximate percentage of holding of the total share capital of the associated corporation Chen Zhi Lie ( ) Shenzhen Yanxiang Wangke Industry Co. Ltd. Beneficial owner Family 70% 4.5% Wang Rong ( ) Shenzhen Yanxiang Wangke Industry Co. Ltd. Beneficial owner Family 4.5% 70% Note: Wang Rong ( ) is the spouse of Mr.Chen Zhi Lie ( ) and therefore Mr. Chen is taken to be interested in the shares held by Wang Rong ( ) and Wang Rong ( )isdeemedto be interested in the shares held by Mr. Chen by virtue of Part XV of the SFO. 12

13 Substantial shareholders As at 31 December 2003, so far as the Directors are aware the persons who have an interest or short position in the shares of the Company which would fall to be disclosed to the Company under the provisions of Division 2 and 3 of Part XV of the SFO or be directly or indirectly interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances of general meetings of the Company or substantial shareholders as recorded in the register required to be kept by the Company under section 336 of the SFO, are as follows: Long positions in shares Name of shareholder of the Company Nature and capacity in holding shareholding interest Number of Domestic Shares Approximate percentage of shareholding Shenzhen Yanxiang Wangke Industry Co. Ltd. Chen Zhi Lie ( ) (Note) Registered and beneficial owner of the Domestic Shares Interest of a controlled corporation 318,422, % 318,422, % Note: Mr. Chen is the beneficial owner of 70% interests in Shenzhen Yanxiang Wangke Industry Co. Ltd. and is deemed to be interested in the Domestic Shares owned by Shenzhen Yanxiang Wangke Industry Co. Ltd. pursuant to Part XV of the SFO as he is entitled to exercise or control the exercise of one-third or more of the voting power at the general meetings of Shenzhen Yanxiang Wangke Industry Co. Ltd.. Save as disclosed above: (i) none of the Directors, supervisors or chief executives has any interest or short position in the shares, underlying shares or debentures of the Company or any associated corporation (if any) (within the meaning of the SFO) which will be required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO; (including interest which they are taken or deemed to have under such provisions of the SFO) or which will be required, pursuant to section 352 of the SFO, to be entered in the register referred to therein or which will be required pursuant to rules 5.4 to 5.58 of the GEM Listing Rules relating to securities transactions by the Directors to be notified to the Company and the Stock Exchange as at 31 December 2003; and (ii) So far as is known to any Director or supervisor, there is no person other than a Director or supervisor or chief executive who, as at 31 December 2003, have an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or will be directly or indirectly interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company or any other substantial shareholders whose interest or short position were recorded in the register required to be kept by the Company under section 336 of the SFO. 13

14 DIRECTORS AND SUPERVISORS RIGHTS TO PURCHASE SHARES At no time during the year, the Directors or supervisors (including their spouse and children under 18 years of age) had any interest in, or had been granted, or exercised, any rights to subscribe for shares of the Company and its associated corporations (within the meanings of the SFO Ordinance). SHARE OPTION SCHEME Up to 31 December 2003, the Company has not adopted any share option scheme or granted any option. COMPETING INTERESTS None of the Directors, initial management shareholders or their respective associates (as defined in the GEM Listing Rules) had any interests in any business which compete or may compete with the Company or any other conflicts of interest which any such person may have with the Company. SPONSORS INTERESTS As at 31 December 2003, neither Oriental Patron Asia Limited ( Oriental Patron ) nor its directors, employees or associates (as referred to in Note 3 of Rule 6.35 of the GEM Listing Rules) had any interest in the securities of the Company or right to subscribe for or to nominate persons to subscribe for securities of the Company. According to an agreement dated 29 September 2003 entered into between the Company and Oriental Patron, Oriental Patron has received and will receive sponsorship fees as being the retained sponsor of the Company as required under the GEM Listing Rules for the period from 10 October 2003 up to 31 December 2005 or until the agreement is terminated upon the terms and condition set out therein. PURCHASE, SALE OR REDEMPTION OF SECURITIES The Company has not purchased, sold or redeemed any of the Company s shares during the period. CONNECTED TRANSACTIONS There were no other transactions which need to be disclosed as connected transactions in accordance with the requirements of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the GEM Listing Rules ). CORPORATE GOVERNANCE The Company has complied with the board practices and procedures as set out in Rules 5.28 to 5.39 of the GEM Listing Rules throughout the year ended 31 December

15 AUDIT COMMITTEE An audit committee was established with written terms of reference in compliance with the requirements as set out in Rules 5.23 to 5.25 of the GEM Listing Rules. The primary duties of the audit committee are (i) to provide an important link between the Board and the Company s auditors in matters coming within the scope of the company audit, and (ii) to review and provide supervision over the financial reporting process, the effectiveness of the external audit and of internal controls and risk evaluation. At present, the audit committee currently comprises Miss Zhou Hong and Mr. Qi Yu Kun, who are the independent nonexecutive directors of the Company. In the course of the supervision of the financial reporting process and internal control system of the Company, two meetings were held during the year ended 31 December 2003 to review the third quarterly result and the yearly result. The Company s audited result for the year ended 31 December 2003 have been reviewed by the committee, which was of the opinion that the preparation of such results complied with the applicable accounting standards and requirements and that adequate disclosure have been made. Shenzhen, PRC, 18 March 2004 * For identification only ByorderoftheBoard Chen Zhi Lie Chairman This announcement will remain on the GEM website with the domain name of on the Latest Company Announcements page for not less than 7 days from the day of its posting. 15