DIT Group Limited — Annual Report 2002

Jul 26, 2002

(incorporated in Bermuda with limited liability)

ANNUAL RESULTS FOR THE YEAR ENDED 31 MARCH 2002

AUDITED RESULTS

The board of directors (the "Directors") of South East Group Limited (the "Company") announces the audited consolidated results of the Company and its subsidiaries (the "Group") for the year ended 31 March 2002 with comparative figures for the previous corresponding year as follows:

CONSOLIDATED PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 31 MARCH 2002

	Note	2002		2001
		HK$'000		HK$'000
Turnover	2	37,055		54,251
Cost of inventories sold		(29,447	)	(38,878)
Gross profit		7,608		15,373
Other (loss)/revenue	3	(771	)	1,646
Selling and distribution costs		(5,740	)	(8,609	)
Administrative expenses		(17,904	)	(24,232	)
Operating loss		(16,807	)	(15,822	)
Finance costs		(997	)	(2,175	)
Share of losses of joint venture		(604	)	-
Loss before taxation		(18,408	)	(17,997	)
Taxation	4	-		-
Loss after taxation		(18,408	)	(17,997	)
Minority interests		-		-
Loss attributable to shareholders		(18,408	)	(17,997	)
Dividends		-		-
Loss for the year		(18,408	)	(17,997)
Loss per share (Cents)	5	5.6		5.4

1. Principal accounting policies

In the current year, the Group adopted the following Statements of Standard Accounting Practice ("SSAPs") issued by the Hong Kong Society of Accountants which are effective for accounting periods commencing on or after 1 January 2001:

SSAP 9 (revised)	:	Events after the balance sheet date
SSAP 14 (revised)	:	Leases
SSAP 26	:	Segment reporting
SSAP 28	:	Provisions, contingent liabilities and contingent assets
SSAP 29	:	Intangible assets
SSAP 30	:	Business combinations
SSAP 31	:	Impairment of assets
SSAP 32	:	Consolidated financial statements and accounting for investments in subsidiaries

Comparative figures previously presented have been restated after the adoption of the new and revised standards as set out in the accounting policies in the financial statements.

2. Turnover and segment results

The business activities of the Group can be catergorised into sales of magnetic media products and related equipment and sales of by-products. Segment information in respect of these activities is as follows:

	2002				2001
			Contribution				Contribution
			to operating				to operating
	Turnover		loss		Turnover		loss
	HK$'000		HK$'000		HK$'000		HK$'000
By principal activities:
Sales of magnetic media products
and related equipment	36,433		(14,784	)	53,320		(8,992)
Sales of by-products	622		(1,252	)	931		(8,476)
	37,055		(16,036	)	54,251		(17,468)
Other (loss)/revenue			(771	)			1,646
			(16,807	)			(15,822)
By geographical markets:
Hong Kong	728		(2,986	)	1,836		(3,459)
USA and Canada	2,509		(4,829	)	16,121		(5,121)
People's Republic of China	31,992		(2,818	)	35,159		(3,172)
Australia and New Zealand	-		(1,888	)	-		(5,355)
Others	1,826		(3,515	)	1,135		(361)
	37,055		(16,036	)	54,251		(17,468)
Other (loss)/revenue			(771	)			1,646
			(16,807	)			(15,822)

3. Other (loss)/revenue

	2002		2001
	HK$'000		HK$'000
Interest income	513		2,095
Rental income	128		140
Dividend income	43		17
Unrealised loss in short-term investments	(1,455	)	(606)
	(771	)	1,646

4. Taxation

No provision for Hong Kong and overseas profits tax has been made in the financial statements for the current year as the Group has no assessable profits for the year. The Group did not have taxation payable as at 31 March 2002.

5. Loss per share

The calculation of loss per share is based on the consolidated loss attributable to shareholders for the year of HK$18,408,000 (2001: loss of HK$17,997,000) and on 330,571,880 (2001: 330,571,880) shares in issue during the year on the assumption that the capital reorganisation would have been completed in the financial year ended 31 March 2001. The Company has no potential dilutive ordinary shares that were outstanding during the two years ended 31 March 2002 and 31 March 2001.

DIVIDENDS

The Directors do not recommend the payment of any dividend for the year (2001 - nil).

BUSINESS REVIEW

As divided by business segments, the Group is principally engaged in manufacturing and trading of magnetic media products, property development and investment and other strategic investment projects. During the year under review, sales of magnetic media products accounted for approximately 98% of the total turnover of the Group.

The magnetic media products continued as the major source of income for the Group while other investment projects were making some headway on the whole. To rationalize its industrial operations, the Group consolidated its production facilities in Yingde, Guangdong to the manufacturing plant in Changzhou, Jiangsu in the first quarter of 2002. This gave rise to redundant assets which were disposed of accordingly. Relocation of production of magnetic media products to the Changzhou plant, in the vicinity of Shanghai, capitalized on the convenience provided by the transportation infrastructure there. Such operational restructuring placed the Group on a stronger foundation to focus on its magnetic media business, to consolidate and strengthen its niche service by offering consistent quality and flexibility.

The Group has a nation-wide distribution network covering around 23 provinces, autonomous regions and cities in the People's Republic of China (the "PRC"). The comprehensive sales network is commensurate with the idea of tapping business opportunities in the PRC market.

The residential development project in Pudong, Shanghai just resumed in the latter half of the financial year under review after the Group was compensated for the deficient land size by the vendor. The development aims at providing affordable housing to the rising middle class. It is planned to construct 12 residential blocks with an aggregate gross floor area of around 40,550 square metres. Construction of the residential development is expected to commence in the latter half of this year.

During the year, the Group carried out ongoing property market research as well as evaluated feasible plans for developing the residential property in Sydney, included inviting tender from interested contractors. To capitalize on the current property market situation in Australia and realize an immediate profit, the residential property project in Sydney was sold on 15 July 2002. The transaction is expected to complete on 20 August 2002.

Disposal of approximately 550 ha of the Group's farming properties in Western Australia ("WA") was completed in June 2001 and realized a net profit of approximately HK$536,000. After such disposal, the Group still has a remaining area of approximately 1,548 ha in the locality for farming purpose.

The Group's equity interest in the joint venture winery in Qingdao was increased to approximately 44% after additional brand new production machinery and equipment were delivered in the first half of 2002. According to the joint venture agreement, the Group's investment in the winery should be 55% of its total registered capital. The Group will discuss with its joint venture partner about their needs so as to orderly inject capital into the winery up to the 55% level.

PROSPECTS

To stay ahead of market competition, the Group will continue to streamline its industrial operations. It will also employ stringent cost control measures in order to sharpen competitive edge to cope with the ever-intensifying business environment.

In the wake of the PRC's full accession to the World Trade Organization and its continuous positive economic growth, the Group will continue to enhance its presence in the market through its well-established sales network.

After realization of part of the farming properties in WA in June 2001 and of the property for residential development in Sydney in July 2002, the Group's portfolio of properties consists of the development project in Pudong, Shanghai and the remaining part of the farming properties in WA. To capitalize on the fast developing residential property market in Shanghai, the Group will focus on its residential development project in Pudong by directing more resources to accelerate its pace of development. The residential development project in Pudong is expected to provide steady stream of income for the Group starting from 2003.

With the experience gained in property trading in Australia, the Group will prudently consider future business opportunities from this new line of business.

MANAGEMENT DISCUSSION AND ANALYSIS

Liquidity and financial resources

At the balance sheet date, cash and bank balances of the Group amounted to HK$27.8 million (2001: HK$33.9 million). Bank and other borrowings of the Group as at the same date amounted to HK$12.9 million (2001: HK$17.1 million). The calculation of debt to equity ratio (expressed as a percentage of bank and other borrowings net of cash and bank balances over total net assets of the Group) is not applicable.

The Group's cash and bank balances were mainly in Hong Kong dollars, United States dollars and Renminbi, which in aggregate constituted some 99% (2001: 100%) of the Group's balances.

The Group's bank and other borrowings were all denominated in Hong Kong dollar as compared to 85% and 15% in Hong Kong dollar and United States dollar respectively as in last year. Approximately 47% (2001: 41%) of the Group's bank and other borrowings was repayable within one year, and the remaining balance 53% (2001: 59%) repayable in the second to fifth years.

The Group conducted most of its business in Hong Kong dollars, United States dollars or Renminbi, and that together with the policy of keeping the majority of our cash and bank balances also in these currencies, helped to maintain our exposure to exchange rate fluctuation to the minimal.

Acquisition and disposal of subsidiaries and associated companies

During the year, a wholly owned subsidiary of the Company was incorporated in Australia for the farming of Angora goats.

Employee information

The Group has approximately 260 employees for its operations in Hong Kong and the PRC as at 31 March 2002. The costs for the employees (excluding director's remuneration) during the year were approximately HK$9.5 million. Employees are basically remunerated based on the nature of their job and their performance as well as prevailing market trend. Year end discretionary bonus would be granted to reward and motivate those well performed employees. Moreover, training and development courses would be provided as and when required.

Charges on group assets

At the balance sheet date, the Group has pledged certain assets including bank deposit, land and building with an aggregate net book value of HK$38.9 million (2001: HK$40.5 million) to secure the general banking facilities and bank mortgage loans granted to the Group.

Capital commitment and contingent liabilities

At the balance sheet date, the Group's commitments and contingent liabilities were as below:

(a) Commitments contracted but not provided for the interest in a joint venture was HK$6.9 million (2001: HK$10.8 million).

(b) A purported guarantee in respect of the indebtedness of the Company's subsidiary to a sub-contractor amounting to HK$38 million (2001: HK$38 million), albeit the Company denies liability to the subcontractor for the purported guarantee which came to the attention of the directors in previous years, has been treated by the directors of the Company on ground of prudence as a contingent liability in the Company's financial statements.

(c) A guarantee amounting to HK$1 million (2001: HK$1 million) was given by the Company to the broker for securities trading of a subsidiary.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES

During the year, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities.

AUDIT COMMITTEE

The Audit Committee has reviewed with management the accounting principles and practices adopted by the Group in the preparation of the audited consolidated financial statements for the year ended 31 March 2002.

CODE OF BEST PRACTICE

The Company has complied with the Code of Best Practice as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited throughout the year ended 31 March 2002. The term of office for the Non-executive Directors of the Company is subject to retirement and re-election at the annual general meeting in accordance with the Bye-Laws of the Company.

PUBLICATION OF FURTHER INFORMATION ON THE STOCK EXCHANGE'S WEBSITE

All the financial and other related information of the Company required by paragraphs 45(1) to 45(3) of Appendix 16 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ("the Exchange") will be published on the Exchange's website in due course.

By Order of the Board

CHEONG Swee Kheng

Chairperson

Hong Kong, 25 July 2002

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the Annual General Meeting of South East Group Limited (the "Company") will be held at Regency Rooms 1 & 2, Hyatt Regency Hong Kong, 67 Nathan Road, Kowloon on Friday, 27 September 2002 at 10:00 a.m. for the following purposes:

1. To receive and consider the Audited Financial Statements and the Reports of the Directors and the Auditors of the Company for the year ended 31 March 2002;

2. To re-elect Directors and to fix their remuneration;

3. To determine the maximum number of Directors for the financial year 2002/2003;

4. To re-appoint Auditors and to authorise the Directors to fix their remuneration; and

5. As special business, to consider and, if thought fit, pass, with or without amendments, the following resolution as an Ordinary Resolution:

"THAT:

(a) the exercise by the directors of the Company during the Relevant Period (as hereinafter defined) of all the powers of the Company to allot, issue and deal with additional shares of the Company, be and is hereby generally and unconditionally approved, provided that, otherwise than (i) pursuant to a rights issue where shares are offered to shareholders on a fixed record date in proportion to their then holdings of shares of the Company as at that date (subject to such exclusions or other arrangements as the directors of the Company may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body of any stock exchange, in any territory outside Hong Kong applicable to the Company); (ii) an issue of shares upon the exercise of rights of subscription or conversion under the terms of any securities which are convertible into shares of the Company; (iii) an issue of shares as scrip dividends pursuant to the bye-laws of the Company from time to time; or (iv) an issue of shares under any option scheme or similar arrangement for the grant or issue to employees of the Company and/or any of its subsidiaries of shares or rights to acquire shares of the Company, the aggregate nominal amount of share capital issued, allotted or disposed of or agreed conditionally or unconditionally to be issued, allotted or dealt with whether pursuant to an option or otherwise, shall not in total exceed 20 per cent. of the nominal amount of share capital of the Company in issue on the date of passing this Resolution and the said approval shall be limited accordingly; and

(b) for the purpose of this Resolution, "Relevant Period" means the period from the passing of this Resolution until whichever is the earlier of:

(i) the conclusion of the next Annual General Meeting of the Company;

(ii) the revocation or variation of the authority given under this Resolution by ordinary resolution of the shareholders of the Company in general meeting; and

(iii) the expiration of the period within which the next annual general meeting of the Company is required by the bye-laws of the Company of any applicable law to be held."

1. As special business, to consider and, if thought fit, pass with or without amendments, the following resolution as an Ordinary Resolution:

"THAT:

(a) subject to paragraph (b) below, the exercise by the directors of the Company during the Relevant Period (as hereinafter defines) of all the powers of the Company during the Relevant Period (as hereinafter defined) to repurchase its shares on The Stock Exchange of Hong Kong Limited ("Stock Exchange") or on any other stock exchange on which the shares of the Company may be listed and recognised by the Securities and Futures Commission of Hong Kong and the Stock Exchange for this purpose, subject to and in accordance with all applicable laws and the requirements of the Rules Governing the Listing of Securities on the Stock Exchange or of any other stock exchange as amended from time to time, be and is hereby generally and unconditionally approved;

(b) the total nominal amount of shares of the Company to be repurchased by the Company pursuant to the approval in paragraph (a) above shall not exceed 10 per cent of the total nominal amount of the shares of the Company in issue on the date of passing this Resolution and the said approval shall be limited accordingly; and

(c) for the purpose of this Resolution, "Relevant Period" means the period from the passing of this Resolution until whichever is the earlier of:

(i) the conclusion of the next Annual General Meeting of the Company;

(ii) the revocation or variation of the authority given under this Resolution by ordinary resolution of the shareholders of the Company in general meeting; and

(iii) the expiration of the period within which the next Annual General Meeting of the Company is required by the bye-laws of the Company or any applicable law to be held."

1. As special business, to consider and, if thought fit, pass, with or without amendments, the following resolution as an Ordinary Resolution:

"That, subject to the passing of Resolutions Nos. 5 and 6 set out in the notice convening this meeting, the general mandate granted to the directors of the Company to exercise the powers of the Company to allot and deal with additional shares and to make or grant offers, agreements and options which might or would require the exercise of such power pursuant to Resolution No. 5 set out in the notice convening this meeting, be and is hereby extended by the addition to the total nominal amount of the share capital of the Company which may be allotted or agreed conditionally or unconditionally to be allotted by the directors of the Company pursuant to such general mandate of an amount representing the total nominal amount of shares in the capital of the Company which has been repurchased by the Company under the authority granted pursuant to Resolution No. 6 set out in the notice convening this meeting provided that such amount of shares shall not exceed 10 per cent of the total nominal amount of the share capital of the Company in issue on the date of passing this Resolution."

1. To transact any other business.

By Order of the Board

CHEONG Swee Kheng

Chairperson

Hong Kong, 25 July 2002

Notes:

(i) A member entitled to attend and vote at the meeting convened by the above notice is entitled to appoint a proxy to attend and, in the event of a poll, vote in his stead. A proxy need not be a member of the Company.

(ii) in order to be valid, the form of proxy together with a power of attorney or other authority, if any, under which it is signed or a notarially certified copy of the power of attorney or authority must be deposited with the Company's principal place of business at Room 1103A. Admiralty Centre, Tower 1, 18 Harcourt Road, Hong Kong not less than 48 hours before the time for holding the meeting or adjourned meeting.

(iii) An explanatory statement containing further details regarding item 6 above will be sent to members of the Company together with the 2001/2002 Annual Report.

Please also refer to the published version of this announcement in The Standard dated 26 July 2002.