Novautek Technologies Group Limited — Earnings Release 2001

Oct 23, 2001

Applied International Holdings Limited

實力國際集團有限公司

(incorporated in Bermuda with limited liability)

ANNOUNCEMENT OF RESULTS

FOR THE YEAR ENED 30TH JUNE, 2001

The Board of Directors (the "Director") of Applied International Holdings Limited (the "Company") announce that the audited consolidated results of the Company and of its subsidiaries (the "Group") for the year ended 30th June, 2001 were as follows:-

NOTES 2001 2000

HK$'000 HK$'000

Turnover 1 210,800 226,852

Cost of sales (168,245 ) (177,090 )

Gross profit 42,555 49,762

Other revenue 2,128 14,145

Distribution costs (6,141 ) (5,675 )

Administrative expenses (76,116 ) (86,196 )

Investment income 2 9,080 22,602

Interest income 4,158 10,590

Unrealised loss on trading securities - (1,352 )

Impairment loss in respect of properties held

for development (6,334 ) -

Impairment loss in respect of other securities (2,500 ) (3,085 )

Surplus on revaluation of investment properties - 4,004

Impairment loss in respect of goodwill (270 ) -

Gain on disposal of investment properties 516 -

Gain on disposal of properties held for development - 13,834

Provisions - (4,410 )

(Loss) profit from operations 3 (32,924 ) 14,219

Finance costs 4 (7,732 ) (12,157 )

(Loss) gain on disposal of subsidiaries (7 ) 5,802

Gain on repurchase of convertible bonds 276 1,578

Gain on partial disposal of a subsidiary 3,132 -

Share of results of associates - 38

(Loss) profit before taxation (37,255 ) 9,480

Taxation 5 272 438

(Loss) profit before minority interests (37,527 ) 9,042

Minority interests (14,032 ) (11,505 )

Net (loss) profit for the year (23,495 ) 20,547

(Loss) earnings per share 6

Basic (2.5) cents 2.2 cents

Notes:

1. Turnover

The Group's turnover and operating results analysed by business segment and geographical location are as follows:

2001 2000

Operating Operating

Turnover results Turnover results

HK$'000 HK$'000 HK$'000 HK$'000

By business segment:

Trading and manufacture of:

Electronic products 197,473 801 212,789 7,569

Security products - - 2,106 (3,534 )

Rental income 13,327 11,663 11,957 10,866

210,800 12,464 226,852 14,901

Net central administrative

expenses (45,388 ) (682 )

(Loss) profit from operations (32,924 ) 14,219

By geographical location:

Hong Kong 146,474 6,360 90,505 3,854

The People's Republic of China

other than Hong Kong

(the "PRC") 9,938 2,452 77,736 10,958

Other Asian countries 8,125 (115 ) 28,962 753

Europe 34,048 (480 ) 15,716 409

United States of America 11,492 2,927 12,490 (1,777 )

Others 723 1,320 1,443 704

210,800 12,464 226,852 14,901

Net central administrative

expenses (45,388 ) (682 )

(Loss) profit from operations (32,924 ) 14,219

1. Investment income

2001 2000

HK$'000 HK$'000

Dividend income from listed securities 25 123

Gain on disposal of trading securities 168 8,286

Gain on disposal of other securities 8,887 14,193

9,080 22,602

1. (Loss) profit from operations

2001 2000

HK$'000 HK$'000

(Loss) profit from operations has been arrived

at after charging:

Depreciation:

Owned assets 10,177 11,805

Assets held under finance leases 2,193 2,985

Loss on disposal of property, plant and equipment,

other than properties held for development - 492

and after crediting:

Gain on disposal of property, plant and equipment,

other than properties held for development 143 -

1. Finance costs

2001 2000

HK$'000 HK$'000

Interest expense on:

borrowings wholly repayable within five years 4,208 1,513

borrowings not wholly repayable within five years 627 2,844

convertible bonds 2,393 6,901

Finance charges on obligations under finance leases 298 317

7,526 11,575

Amortisation of bond issue expenses 206 582

7,732 12,157

1. Taxation

2001 2000

HK$'000 HK$'000

The (credit) charge comprises:

Hong Kong Profits Tax

Current year 160 362

(Over) underprovision in prior year (74 ) 3

(86 ) 365

Deferred taxation 186 73

272 438

Hong Kong Profits Tax is calculated at 16% of the estimated assessable profit for the year.

1. (Loss) earnings per share

The calculation of the basic (loss) earnings per share is based on the net loss for the year of HK$23,495,000 (2000: profit of HK$20,547,000) and on 941,080,745 (2000: weighted average of 948,742,575) ordinary shares of the Company in issue during the year.

No diluted (loss) earnings per share has been presented as the exercise prices of the Company's outstanding share options and warrants were higher than the average market price of the shares of the Company for both years.

The computation of diluted (loss) earnings per share does not assume the conversion of the Company's outstanding convertible bonds since their exercise would result in a decrease in loss per share in the current year and an increase in earnings per share in 2000.

DIVIDEND

The Directors do not recommend the payment of a dividend for the year ended 30th June, 2001 (2000: Nil).

REVIEW OF OPERATIONS & PROSPECTS

Results

The audited consolidated loss attributable to shareholders of the Group for the year ended 30th June, 2001 amounted to approximately HK$23,495,000, which includes the loss of HK$15,807,000 attributed by iQuorum Cybernet Ltd. (a public listed company in the Hong Kong Stock Exchange) comparing to last year's profit of approximately HK$20,547,000. Turnover for the year ended 30th June, 2001 was approximately HK$210,800,000 compared to the turnover of approximately HK$226,852,000 in last year, representing a decrease of 7%.

OEM Business

Our OEM manufacturer company produces computer main boards, VGA cards, modem cards and sound cards. It continues to perform well for the first six months of the year, but due to the slower sales in computers, slow down of the worldwide economy, the business for the second half of the year has been reduced. In order to maintain its competitiveness in the market, the company has introduced various measures to operate more efficiently and cost effectively.

iQuorum Cybernet Limited

The Group held approximately 55.39% of the issued share capital of iQuorum Cybernet Limited ("iQuorum") (formerly known as RJP Electronics Ltd.) which shares are also listed on The Stock Exchange of Hong Kong Ltd. (the "SEHK"). The principal activities of iQuorum are manufacturing and marketing of consumer electronic products on OEM basis. iQuorum has also diversified its activities into properties investment.

LIQUIDITY AND FINANCIAL INFORMATION

As at 30th June, 2001, the Group's total borrowings amounted to approximately HK$63,602,000 with approximately HK$47,254,000 repayable within one year, approximately HK$5,305,000 repayable between one to two years, approximately HK$10,162,000 repayable between two to five years and approximately HK$881,000 repayable after five years. Cash, bank balances and deposits at 30th June, 2001 amounted to approximately HK$23,651,000. The Group's current ratio was 0.98 (2000:1.07) and the gearing ratio which is expressed as a ratio of total liabilities and minority interests to shareholders' funds was 0.89 (2000:1.23).

Cash, bank balances and deposits were held in Hong Kong dollars. Bank borrowings were denominated in Hong Kong dollars and US dollars amounting to HK$59,683,000 and HK$3,919,000 respectively. The Group had no significant exposure to foreign exchange fluctuation.

PROPERTIES INTEREST

The People's Republic of China

(a) Dan Shui

On 28th October, 2000, the multinational petrochemical giant Royal Dutch Shell Group signed a US$4 billion joint venture (the "Joint Venture") contract with China National Offshore Oil Corp to build a petrochemicals complex to produce high quality petrochemicals products in Huizhou, Guangdong. This is one of the largest sino-foreign joint venture in China that is expected to bring in lots of opportunities to the surrounding areas including the large piece of land (the "Dan Shui Land") owned by our group in the centre of Dan Shui. This huge project would attract large numbers of local and overseas investors to come to the area be set up various down streams industries. According to data provided by the Chinese Government, the ratio of main industry to the down streams industries is estimated to be 1:20 and an further investments of HK$300 billion or more is expected to be put into down streams industries in the near future. This large amount of investment is expected to result in the fast development of the construction, business, finance, hotel, recreation and service industries and will increase the working population in these areas to an addition of 1.2 million people. Consequently, there is large room for the development in land, properties and the economy in these areas. The first phase of site, infrastructural and structural investigation have already been started in June 2001 and a report on the investigation be issued around November, 2001.

Our Group has a land bank of approximately 730,000 sq.m. in Central Dan Shui and 1.5 acres in the old town district situated approximately 15 minutes away from the site of the Joint Venture which has been recently zoned by the state government for residential and commercial usages to support the growth in population in the area as a result of the Joint Venture. The Dan Shui Land has been valued by Jones Lang for more than HK$1 billion in 1993. After the signing of the relevant joint venture agreement, in Dan Shui, the value of the properties in the area has increased by 10% and the value of the land in the area has increased by 50% to more than HK$1,000 per sq.m. The directors of the Company (the "Directors") believe the demand for land in the area will continue to be increasing in the future.

Guangdong Urban & Rural Planning and Design Institute completed the market feasibility studies on land usage and zoning and based on the advice from the financial adviser for the financial plan on the property development with local and overseas blue chip property developers and fund raising through sale of land, our group will develop the land in pace with the development and production schedule of the Joint Venture. In view of the benefits derived from such large scale Joint Venture Project, the directors expect the future prospect for the development of the Dan Shui Land will be excellent.

(b) Jiangmen

The Group has submitted a plan to develop the 1 million sq. ft. of land owned by the Group, which is located near a train station and highway, to the relevant authority for approval. The Group understands that the plan is still under consideration. The Group will begin any project on the land after approval to do so is obtained.

Overseas

Beef Island

An Health and Spa Resort Project (the "Spa") is expected to be established in the Beef Island. The Spa involves unique and novel concepts in healthcare combining the best in medical, surgical and well being therapy and which is located in a vacation location which will create a new paradigm in health care. The Spa has specialty medical facilities providing elective surgery, diagnostic services and testing, traditional and complementary medicine, the finest and latest in longevity and wellness care. As well as the above, the Spa is also a five star resort.

A memorandum of sales of land for this project with the Health and Spa Resort Co. have been signed recently for the area of 20 acres at US$140,000 per acre and the cost of the land is US$15,000 per acre. The project is expected to generate a profit of US$2,500,000 for the Group.

The airport on Beef Island is expected to be expanded to enable direct flights from New York, Florida and other major cities in the United States and is expected to be completed on or before December 2002. Recently enquiries on sale of the Group's land in the area, formation of joint ventures, building of a golf course, a hotel, marina city have been received. The Group expect that the value of the land will be increased substantially in view of the likely developments in the area in the near future.

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

During the year ended 30th June, 2001, the Company has also repurchased a total nominal value of US$1,625,000 of the Company's 5.25% convertible bonds due 2000. These bonds have then been cancelled by the Company. The details of the purchases are as follows:-

Nominal Price expressed

value of as a percentage

convertible of the principal

Month of bonds mount of bonds

repurchase repurchased Highest Lowest Aggregate price

US$ US$

July 2000 1,415,000 100.00 97.50 1,380,875.00

August 2000 210,000 98.00 98.00 205,800.00

1,625,000 1,586,675.00

The repurchased convertible bonds were cancelled upon repurchase and, accordingly, the gain or loss on repurchase was credited or charged to the income statement. The gain or loss represents the difference between the amounts paid and the net book value of the convertible bonds repurchased.

Save as disclosed herein, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company's listed securities during the year ended 30th June, 2001.

APPRECIATION

The Directors would like to express their sincere appreciation for all the dedicated efforts of all the management and staff of the Group during the year.

On behalf of the Board

Hung Kin Sang Raymond

Chairman

Hong Kong, 22nd October, 2001

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that an annual general meeting of the above mentioned company (the "Company") will be held at The Oregon Room, The American Club, 47th Floor, Two Exchange Square, No. 8 Connaught Place, Central, Hong Kong on Wednesday, 28th November, 2001 at 10:00 a.m. for the following purposes:

1. To receive and consider the reports of the directors and auditors and the statements of accounts of the copy for the year ended 30th June, 2001.

2. To re-elect Mr. Lo Yun Tai as director of the Company and authorise the directors of the Company to fix their remuneration.

3. To re-appoint Deloitte Touche Tohmatsu as Auditors of the Company and authorise the Directors to fix their remuneration.

As special business, to consider and, if thought fit, pass the following resolutions as Ordinary Resolutions:

ORDINARY RESOLUTIONS

(1) "THAT:

(a) subject to paragraph (b), the exercise by the directors of the Company (the "directors") during the Relevant Period of all powers of the Company to allot, issue and deal with additional shares in the capital of the Company and to make or grant offers, agreements or options which would or might require the exercise of such powers be and is hereby generally and unconditionally approved; and

(b) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the directors pursuant to the approval in paragraph (a), otherwise than (i) pursuant to a rights issue or (ii) pursuant to the exercise of options under any share option scheme of the Company approved by The Stock Exchange of Hong Kong Limited or (iii) pursuant to the exercise of subscription rights attaching to any warrants of the Company or (iv) pursuant to the exercise of conversion rights conferred by the convertible bonds of the Company, shall not exceed 20 per cent. of the aggregate nominal amount of the share capital of the Company in issue at the date of this resolution;

"Rights Issue" means an offer of shares open for a period fixed by the directors of the Company to the holders of shares on the register of members of the Company on a fixed record date in proportion to their then holdings of such shares (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 or any stock exchange in any territory outside Hong Kong)."

(2) "THAT:

(a) subject to paragraph (b), the exercise by the directors during the Relevant Period of all the powers of the Company to repurchase shares in the capital of the Company and warrants in each case be and is hereby generally and unconditional approved;

(b) the aggregate nominal amount of share capital of the Company to be repurchased or agreed conditionally or unconditionally to be repurchased by the Company pursuant to the approval in paragraph (a) shall not exceed 10 per cent. of the aggregate nominal amount of the share capital of the Company in issue on the date of this resolution and the aggregate number of warrants to be repurchased or agreed conditionally or unconditionally to be repurchased by the Company, pursuant to paragraph (a) shall not exceed 10 per cent. of the aggregate amount of such warrants in issue on the date of this resolution, and in each case, 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 earliest of:

(i) the conclusion of the next annual general meeting of the Company;

(ii) the expiration of the period within which the next annual general meeting of the Company as required by the bye-laws of the Company or any applicable law to be held; and

(iii) the revocation or variation of this Resolution by any ordinary resolution of the shareholders of the Company in general meeting."

(3) "THAT:

(a) conditional upon the passing of Ordinary Resolutions numbered (1) and (2) set out in the notice of the meeting of which this Resolution forms part, the aggregate nominal amount of the shares in capital of the Company which shall have been repurchased by the Company after the date hereof pursuant to and in accordance with the said Ordinary Resolution (2) shall be added to the aggregate nominal amount of share capital that may be allotted or agreed conditionally or unconditionally to be allotted by the directors of the Company pursuant to the general mandate to allot and issue shares granted to the directors of the Company by the said Ordinary Resolution (1)."

By Order of the Board

Danny Che Wah Lam

Company Secretary

Hong Kong, 22nd October, 2001

Notes:

1. The registers of members and of warrant holders will be closed from Friday 23rd November, 2001 to 27th November, 2001, both days inclusive, during which period no transfers of shares will be registered. For the purpose of determining the identity of members who are entitled to attend and vote at the meeting, all transfers of shares accompanied by the relevant share certificates must be lodged with the Registrar of the Company in Hong Kong, Central Registration Hong Kong Limited, at 17th Floor, Hopewell Centre, 183 Queen's Road East, Hong Kong, for registration by not later than 4:00 p.m. on Thursday 22nd November, 2001.

2. A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote on behalf of him. A proxy need not be a member of the Company. The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of such power or authority must be deposited at the principal place of business of the Company in Hong Kong, at 41st Floor, Far East Finance Centre, 16 Harcourt Road, Central, Hong Kong, not later than 48 hours before the time for holding the Annual General Meeting. In default, the proxy will not be treated as valid.

3. With respect to the matters set out in Resolutions (1), (2) and (3) of this notice, approval is being sought from shareholders for general mandate to be given to the Directors to issue further shares and to purchase the Company's shares. In accordance with the Rules Governing the Listing of Securities of The Stock Exchange of Hong Kong Limited and the Hong Kong Code on Share Repurchases Purchases, a letter setting out the terms and conditions upon which the power to purchase the Company's shares will be exercised accompanies this notice.

"Please also refer to the published version of this announcement in the Hong Kong i-mail"