Novautek Technologies Group Limited — Earnings Release 2001

Apr 23, 2002

KONG SUN HOLDINGS LIMITED

江山控股有限公司

(Incorporated in Hong Kong with limited liability)

2001 RESULTS ANNOUNCEMENT

The Board of Directors of Kong Sun Holdings Limited (the "Company") is pleased to present the audited consolidated results of the Company and its subsidiaries (the "Group") for the year ended 31 December 2001 with comparatives figure for the year ended 31 December 2000 as follows:

Year ended

31 December

2001 2000

Notes HK$'000 HK$'000

TURNOVER 2 143,366 39,430

Other revenue and gains 29,591 12,377

Cost of inventories sold (97,301 ) -

Cost of short term investments sold - (4,193 )

Staff costs (15,232 ) (12,349 )

Depreciation and amortisation expenses (8,437 ) (5,204 )

Other operating expenses (19,075 ) (16,531 )

PROFIT FROM OPERATING 2, 3

ACTIVITIES 32,912 13,530

Finance costs (4,487 ) (4,473 )

Share of profits less losses

of associates (after amortisation

of goodwill relating to associates) (6,433 ) -

PROFIT BEFORE TAX 21,992 9,057

Tax 4 (1,018 ) (1,009 )

PROFIT BEFORE MINORITY

INTERESTS 20,974 8,048

Minority interests (3,819 ) (1,024 )

NET PROFIT FROM

ORDINARY ACTIVITIES

ATTRIBUTABLE TO

SHAREHOLDERS 17,155 7,024

DIVIDEND - -

EARNINGS PER SHARE

• Basic 5 1.47 cents 1.32 cents

• Diluted 5 1.45 cents N/A

Notes:

1. Adoption of new and revised statements of standard accounting practice

In the current year, the Group has adopted for the first time a number of new and revised Statements of Standard Accounting Practice ("SSAP(s)") as follows:

* SSAP 9 (Revised): "Events after the balance sheet date"

* SSAP 14 (Revised): "Leases"

* SSAP 18 (Revised): "Revenue"

* 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"

* Interpretation 12: "Business combinations - subsequent adjustment of fair values and goodwill initially reported"

* Interpretation 13: "Goodwill - continuing requirements for goodwill and

negative goodwill previously eliminated against/credited to reserves"

Effects of the changes of the Group's accounting policies and the adoption of these new policies will be set out in the annual report.

2. SEGMENT INFORMATION

By principal activity

Contribution to

profit from

Turnover operating activities

2001 2000 2001 2000

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

Property investment and

development 19,483 13,658 7,207 15,409

Trading of computer products 99,116 - 109 -

Securities broking and

investment 4,664 23,575 351 5,148

Financial services 14,164 11,879 8,272 11,248

Information technology 12,579 3,930 4,375 (5,021 )

150,006 53,042 20,314 26,784

Intersegment eliminations (6,640 ) (13,612 ) (6,640 ) (13,612 )

Interest income and

unallocated gains - - 27,089 358

Unallocated expenses - - (7,851 ) -

143,366 39,430 32,912 13,530

By geographical area

Contribution to

profit from

Turnover operating activities

2001 2000 2001 2000

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

People's Republic of China

Hong Kong 114,904 25,482 4,364 4,567

Mainland China 9,879 1,339 7,722 3,495

Singapore 3,107 3,643 (2,829 ) (4,100 )

Malaysia 15,476 8,966 4,417 9,210

143,366 39,430 13,674 13,172

Interest income and

unallocated gains - - 27,089 358

Unallocated expenses - - (7,851 ) -

143,366 39,430 32,912 13,530

3. Profit from Operating Activities

The Group's profit from operating activities is arrived at after charging/(crediting):

2001 2000

HK$'000 HK$'000

Depreciation 3,929 2,883

Amortisation of goodwill 3,791 1,631

Amortisation of trading rights 343 285

Amortisation of self-developed software 374 405

Loss on disposal of fixed assets, net 199 43

Negative goodwill recognised as income

during the year (140 ) -

Gain on disposal of short term listed investments - (10,282 )

Gain on disposal of subsidiaries (22,092 ) -

Dividend income from listed investments - (54 )

Interest income (2,902 ) (1,833 )

4. Tax

Hong Kong profits tax has been provided at the rate of 16% (2000: 16%) on the estimated assessable profits arising from Hong Kong during the year. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates, based on existing legislation, interpretations and practices in respect thereof.

Group

2001 2000

HK$'000 HK$'000

Group:

Hong Kong 140 301

Elsewhere 1,113 2

Overprovision in prior year (27 ) -

Deferred tax charge/(credit) (208 ) 706

Tax charge for the year 1,018 1,009

5. Earnings per share

The calculation of basic earnings per share is based on the net profit from ordinary activities attributable to shareholders for the year of HK$17,155,000 (2000: HK$7,024,000) and on the weighted average of 1,169,261,000 (2000: 530,790,000) shares in issue during the year.

The diluted earnings per share is based on 1,185,097,000 ordinary shares which is the weighted average number of ordinary shares in issue during the year plus the weighted average number of 15,836,000 ordinary shares deemed to be issued at no consideration if all outstanding share options had been exercised. The effect of the warrants outstanding during the year was anti-dilutive; and accordingly, they had no impact on the calculation of the diluted earnings per share.

Diluted earnings per share for the year ended 31 December 2000 had not been calculated as there was no dilutive potential ordinary shares in that year.

6. Comparative amounts

Due to the adoption of certain new and revised SSAPs during the current year, the accounting treatment and presentation of certain items and balances in the financial statements have been revised to comply with the new requirements. Accordingly, certain comparative amounts have been reclassified to conform with the current year presentation.

Final DIVIDEND

The Board of Directors does not recommend to declare a dividend for the year ended 31 December 2001 (2000: Nil).

CLOSURE OF REGISTER OF MEMBERS

The Register of Members will be closed from Wednesday, 22 May 2002 to Friday, 24 May 2002, both days inclusive. During the period, no transfer of shares will be effected. In order to establish entitlement to attend and vote at the forthcoming Annual General Meeting, all transfer documents accompanied by the relevant share certificates must be lodged with the Company's Share Registrars, Central Registration Hong Kong Limited of Room 1712, 17th Floor, Hopewell Centre, 183 Queen's Road East, Hong Kong, not later than 4:00 p.m. on Tuesday, 21 May 2002.

WARRANTS

On 10 May 2000, the Company had issued the bonus warrants on the basis of one warrant for every five shares of HK$0.10 each in the Company held by shareholders carrying rights to subscribe up to HK$70,560,428 in aggregate for 117,600,714 shares at an initial subscription price of HK$0.60 per share (subject to adjustment). The exercisable period of the Group began on 26 April 2000 and will lapse after the close of business on 25 April 2002.

Employee share option scheme

The Company has adopted the Employee Share Option Scheme granting share options to the permanent employees (Including the directors) at the Annual General Meeting held on 31 May 2001. As at 31 December 2001, the Company has granted 68,282,085 share options at an exercise price of HK$0.17984 to the eligible employees. No share options has been exercised as at the year end date.

WORKFORCE

The Group has a work force of 60 staff. The Group employs and remunerates its staff based on their performance and experience. In addition to basic salary payments, staff members are covered by the Group's health and medical scheme, discretionary bonus, share option scheme and mandatory provident fund scheme.

Management Discussion & Analysis

Results

For the year ended 31 December 2001, the Group recorded a turnover of HK$143,366,000, representing a rise of 264% as compared with the figure of HK$39,430,000 in 2000. Profit attributable to shareholders also increased 144% from HK$7,024,000 in 2000 to HK$17,155,000 for the year under review. Earnings per share were 1.47 HK cents. (2000: 1.32 HK cents).

The Company's principal activity is investment holding while its business comprised of in property development and investment, environmental protection, finance, information technology development and other investment activities.

Business Review

Overview

2001 was a remarkable year for the development of the Group. Despite the general downturn in the global economy, we were able to achieve spectacular results in the review year. Turnover recorded an impressive growth of 264% to reach HK$143,366,000 while net profit also surged 144%, reaching HK$17,155,000.

These impressive results were brought by our aggressive mergers and acquisitions ("M&A") during the year. As at the announcement date, the total investment as well as M&A projects amounted to approximately HK$397 million. These newly acquired businesses not only broadened the Group's asset base and strengthened our investment portfolio, but also opened up more income sources for the Group's future growth. The year also witnessed another important corporate development of the Group as we officially entered the environmental protection business in Hong Kong and China. With such strategic moves, we have made a big step towards our goal of becoming a well-established conglomerate in South East Asia.

Besides, during the year, the Group has successfully raised approximately HK$205 million by way of placement and subscription of shares. As at the announcement date, a total of 876 million new shares have been issued.

Property

The Group's investment portfolio consists of commercial, industrial and residential premises across Malaysia, China and Hong Kong. During the year, it recorded satisfactory turnover growth, rising 55.7% to reach HK$16,942,000 (after inter segment elimination) and accounted for 12% of the Group total turnover.

China

2001 marked an important milestone for the Group's expansion in China's property market, as we formed a joint venture with Beijing XiCheng Housing Construction Development Company in September 2001, to jointly develop properties at XiCheng District in Beijing. Phase I of the project located at Feng Sheng Area (Area B) is about 20,045 square metres, with a total buildable floor area above ground of approximately 44,880 square metres. The development project costs RMB360 million and is expected to be completed in 2003.

The commercial premises and car parks owned by the Group at Hanzhong Guangchang, Shanghai has achieved satisfactory occupancy rate and has made a stable contribution to the Group's recurrent income for the year under review.

Malaysia

Pioneer Heritage Sdn. Bhd. ("Pioneer") is one of the Group's subsidiaries engaging in property investment, with a particular focus on letting out retail shoplots in Johor Bahru. During the financial year, the Hypermarket developed by Pioneer recorded impressive performance, which contributed satisfactory returns to the Group. In view of the promising growth potential of the business, the Group acquired an extra 15% interest in Pioneer at a consideration of HK$18,013,000 during the year, bringing our total equity interest to 70%.

This year also saw the Group's 100% acquisition of Dual Aim Sdn. Bhd. ("Dual Aim") which mainly engages in property investment with a special focus on the development and sale of commercial and residential units. During the year, Dual Aim was involved in a housing project in Johor Bahru, which successfully brought in promising returns to the Group.

During 2001, a residential housing project in Melaka proceeded as scheduled. We expect this project, comprising 11 bungalow lots, 15 two-storey shoplots and 316 double-storey terrace housing lots, to be completed this year, which will make positive contributions to the Group in the years to come.

Hong Kong

The property investment of the Group spread includes commercial, residential and industrial buildings in Hong Kong. In 2001, the occupancy rate of the Group's properties, including top grade office, industrial and residential premises over 90% and contributed stable returns for the Group.

Environmental Protection

Environmental protection was a new business area for the Group. After several acquisitions during the year, we are confident that this business will grow rapidly and will help drive the future growth of the Group.

Hong Kong

As at the year end date, the Group holds a 20.25% interest in Grandy Applied Environmental Technology Corporation ("Grandy") which provides pollution-combating solutions, such as the monitoring of indoor air quality, waste water treatment and the sale of energy-saving products in Hong Kong. Besides, Grandy also owns the exclusive worldwide distribution rights (except North America, Japan and Korea) for an organic environmental product which originated from Japan.

China

During the review year, the Group acquired a 50% interest in China Anti-Flooding System Monitor Limited which develops and sells flood monitoring systems with telemetry capabilities. Additionally, this subsidiary has the assistance of researchers and professors from Peking University in the provision of hydrology services in the PRC. Apart from the above acquisition, the Group also acquired a 50% interest in China Environmental System Monitor Limited which engages in the development and sale of air and factory waste pollutant detection and pollution monitoring systems in China. With these strategic acquisitions, the Group has further diversified its businesses and added additional growth driver for its future development.

Finance

As at the year end date, the finance arm of the Group recorded a decrease in profit as compared to last year.

Owing to the sluggish economy and the volatility of the stock market in the past financial year, the local finance sector is inactive. This was mainly attributable to the drop in profit of the Group's 80% owned brokerage firm Coin Fall Limited.

In the year under review, the Group acquired a 100% interest in Genesis Strategic (Holdings) Limited ("Genesis"). Genesis provides comprehensive financial services, including fund management, securities dealing, investment advisory and corporate finance services. This move has further facilitated our goal to become a one-stop financial institution. As the economy is already on the road to recovery, we believe that Genesis will present a strong growth driver for the Group once the market rebounds.

Information Technology

The Group's information technology ("IT") portfolio which consists of educational software development, the provision of multimedia training, as well as the trading of computer products and related accessories in China, Hong Kong and Singapore, recorded an impressive turnaround. These encouraging results were due in part to the pressing need for the region to equip itself for the challenges of today's knowledge-based economy as well as increasing computerization in China. Under the review period, this section of the business accounted for the turnover of HK$111,668,000 (after inter segment elimination).

During the year, the Group acquired a 60% interest in Xswim (Holding) Limited ("Xswim"), which provides wireless broadband services in China and trades in a wide range of hardware products in Hong Kong. With an established client base in China and Hong Kong, Xswim made significant contribution to the Group's IT investment and generated a turnover of HK$99,116.000 in 2001.

The Group's multimedia training centre in Central also recorded a high occupancy rate of over 90% and contributed a stable income stream for the Group during the year under review.

The year also saw the Group's acquisition of a 30% interest in Human Online.Com Limited, which provides financial and corporate management services. With this acquisition, our existing core businesses in finance were further consolidated and our income base strengthened.

On 31 December 2001, the Group disposed 50% equity interest in Great Win Int'l Ltd. ("Great Win") to an independent third party at a consideration of HK$25,000,000. Great Win is principally engaged in IT trading in Singapore and develops educational software for Singapore schools. Owing to narrowing profit margin and the increased level of competition, the Group decided to withdraw from this business to maintain the best investment returns.

Financial Review

During the past financial year, the Group maintained a healthy financial position with HK$39 million cash on hand as at end of year. Total bank borrowings amounted to HK$153,180,000, which were mainly secured by mortgages on the Group's land and buildings, investment properties and time deposits. As at 31 December 2001, the current ratio and the gearing ratio were 2.06 and 0.28 respectively while that ratio as at 31 December 2000 were 1.47 and 0.24.

Since the Group's businesses spread across Hong Kong, China, Singapore and Malaysia, its income and expenditure are mainly denominated in HKD, RMB, SGD and MYR. As the impact of the Asian financial crises is now diminishing, fluctuations in exchange rates on the Group is insignificant.

Prospects

Entering 2002, China will undoubtedly play an increasingly important role in the global economy. With its spectacular GDP growth of over 7% last year and its continuously rising standards of living, China presents a market with tremendous opportunities. As a member of the World Trade Organization, restrictions on the development of and investment in China's businesses are expected to be further relaxed. As a management with vision, we have already commenced a property project at XiCheng District, Beijing, which is expected to be completed next year. In view of China's hosting of the Olympic Games in 2008, we believe this project will present a lucrative opportunity in driving the growth of the Group. During the review year, we also successfully penetrated into the environmental protection business in Hong Kong and China, opening up a new income source and paving the way for the future growth of the Group.

Subsequent to the reporting period, the Group placed 100,000,000 existing shares at HK$0.32 per share to New Profit Investment Limited, ("New Profit"), a wholly owned subsidiary of Beijing Enterprises Holdings Limited ("Beijing Enterprises") (stock code : 392). The introduction of New Profit as a strategic partner is an important corporate move for the Group. Backed by Beijing Enterprises, New Profit will contribute significantly to the expansion of the Group's businesses in property investment and development, environmental industries, finance and information technology. As Beijing Enterprises maintains a diversified business portfolio in China, it will definitely present a plenty of room for mutual co-operation in the future.

On the other hand, Hong Kong's economy has yet fully recovered from the economic slowdown experienced in the past few years. But with its unique geographical location and politico-economic ties with China, it is the gateway through which foreign investors open up markets in China. This in turn presents a surging demand for services provided in Hong Kong, which will undoubtedly bring in ample opportunities for the Group's IT and financial services in the future.

With a year of aggressive acquisitions, the Group will be dedicated to consolidating and integrating its businesses in the coming year to maximize its synergies in the different business sectors. With our solid financial foundation, we will also actively seek further expansion opportunities to consolidate our position as a leading multinational conglomerate in Southeast Asia.

PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES

Neither the Company nor any of its subsidiaries purchased, redeemed or sold any of the listed securities of the Company during the year.

PUBLICATION OF INFORMATION ON THE STOCK EXCHANGE'S WEBSITE

A detailed annual results announcement containing all the information required by paragraphs 45(1) to 45(3) inclusive of Appendix 16 to the Listing Rules will be published on The Stock Exchange of Hong Kong Limited's website in due course.

Appreciation

We would like to take this opportunity to extend our sincere thanks to all of our business partners, shareholders, directors and staff for their support and contribution to the Group during the past year.

By Order of the Board

Kong Look Sen

Chairman & Managing Director

Hong Kong , 22 April 2002

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Annual General Meeting of Kong Sun Holdings Limited (the "Company") will be held at Salon Room II, Ballroon Level (B3), The Ritz-Carlton, Hong Kong of 3 Connaught Road, Central, Hong Kong on Thursday, 30 May 2002 at 3:00 p.m. for the following purposes:

ORDINARY BUSINESS

1. To receive and consider the audited financial statements and the reports of the directors and auditors for the year ended 31 December 2001.

2. To re-elect retiring directors and authorise the Board of Directors to fix their remuneration.

3. To re-appoint auditors and authorise the Board of Directors to fix their remuneration.

SPECIAL BUSINESS

To consider and, if thought fit, pass with or without modification, the following resolutions as ordinary resolutions:

1. That:

(a) subject to paragraph (c) below, 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 in the additional shares or securities convertible into shares, or options, warrants or similar rights to subscribe for any shares, and to make or grant offers, agreements, and options (including bonds, warrants convertible loan notes and debentures convertible in shares) which would or might require the exercise of such powers be and is hereby generally and unconditionally approved;

(b) the approval in paragraph (a) above shall be in addition to any other authorisations given to the directors during the Relevant Period to make or grant offers agreements and options which would or might require the exercise of such powers after the end of the Relevant Period;

(c) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) and issued by the directors pursuant to the approval in paragraph (a) above, otherwise than pursuant to:

(i) a rights issue (as hereinafter defined);

(ii) the exercise of rights of subscription or conversion under terms of any warrants issued by the Company or any securities which are convertible into shares;

(iii) the exercise of any option scheme or similar arrangement for the time being adopted for the grant or issue to officers and/or employees of the Company and/or any of its subsidiaries of the Company's shares or rights to acquire the Company's shares; and

(iv) any scrip dividend or similar arrangement providing for the allotment of shares in lieu of the whole or part of a dividend on the shares of the Company in accordance with the Articles of Association of the Company.

shall not exceed 20% of the aggregate nominal amount of the share capital of the Company in issue at the date of passing the resolution and the said approval shall be limited accordingly;

(d) any prior approvals of the kind referred to in paragraphs (a), (b) and (c) of this resolution which had been granted to the directors of the Company and which are still in effect be and hereby revoked; and

(e) 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 expiration of the period within which the next annual general meeting of the Company is required by law or articles of association of the Company to be held; or

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

"Rights Issue" means the allotment, issue or grant of shares pursuant to an offer of shares of the Company open for a period fixed by the directors of the Company to holders of the shares or any class thereof on the register on a fixed record date in proportion to their then holdings of such shares of the Company or class thereof (subject to such exclusion 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 to any territory outside Hong Kong)."

(5) "That:

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

(b) the aggregate nominal amount of the shares which may be repurchased by the Company pursuant to the approval in paragraph (a) above during the Relevant Period shall not exceed 10% of the aggregate nominal amount of the shares capital of the Company in issue on the date of passing of this resolution;

(c) any prior approvals of the kind referred to in paragraphs (a) and (b) of this resolution which has been granted to the directors and which are still in effect be and hereby revoked; and

(d) 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 expiration of the period within which the next annual general meeting of the Company required by any applicable law or the articles of association of the Company to be held; or

(iii) the revocation or variation of the authority given under this resolution by ordinary resolution of the Company's shareholders in general meeting;

whichever is the earlier"

(6) "That subject to the passing of ordinary resolutions numbered (4) and (5) above, the aggregate nominal amount of share capital of the Company that may be allotted or agreed conditionally or unconditionally under ordinary resolution numbered (4) above, be and is hereby increased and extended by the addition thereto of the aggregated nominal amount of the Company's shares which may be repurchased by the Company pursuant to and in accordance with the mandate granted under ordinary resolution numbered (5) above provided that such amount shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue on the date of passing of this resolution."

By Order of the Board

Kong Look Sen

Chairman and Managing Director

Hong Kong, 22 April 2002

Notes:

1. A member entitled to attend and vote at the meeting convened by the above notice is entitled to appoint one or more proxies to attend and, in the event of a poll, to vote in his stead. A proxy need not be a member of the Company.

2. In order to be valid, a form of proxy, together with the power of attorney or other authority (if any) under which it is signed or a naturally certified copy thereof, must be lodged with the Company's Share Registrars, CENTRAL REGISTRATION HONG KONG LIMITED of Room 1712, 17th Floor, Hopewell Centre, 183 Queen's Road East, Hong Kong not less than 48 hours before the time scheduled for the holding of the meeting or any adjourned meeting.

3. The Register of Members will be closed from Wednesday, 22 May 2002 to Friday, 24 May 2002, both days inclusive, during which period no transfer of shares can be effected. In order to establish entitlement to attend and vote at the forthcoming Annual General Meeting, all transfer documents accompanied by the relevant share certificates must be lodged with the Company's Share Registrars, Central Registration Hong Kong Limited, not later than 4:00 p.m. on Tuesday, 21 May 2002.

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