Sing Lee Software (Group) Limited — Annual Report 2001

Mar 25, 2002

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(Incorporated in Bermuda with limited liability)

ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2001

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 announcement.

This announcement, for which the directors of Sing Lee Software (Group) Limited 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 of Hong Kong Limited for the purpose of giving information with regard to Sing Lee Software (Group) Limited. 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 assumptions that are fair and reasonable.

* for identification purposes only

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RESULTS

The board of directors (the “Directors”) of Sing Lee Software (Group) Limited (the “Company”) is pleased to announce the audited combined results of the Company and its subsidiaries (the “Group”) for the year ended 31 December 2001 as follows:

Note Revenue 2 Cost of sales Gross profit Distribution costs General and administrative expenses Other operating income 3 Profit from operations Finance costs Profit before tax 4 Income tax expense 5 Profit after tax Minority interests Profit attributable to shareholders Dividends 6 Earnings per share 7 - Basic - Diluted		Year ended 31 December 2001 RMB’000 70,416 (49,482)		Year ended 31 December 2000 RMB’000 87,028 (54,437) 32,591 (2,693) (14,980) 609 15,527 (771) 14,756 — 14,756 (3,930) 10,826 9,900 RMB2.39 cents N/A
		20,934 (1,508) (14,565) 7,094 11,955 (1,196) 10,759 (779) 9,980 480		32,591 (2,693 (14,980 609
				15,527 (771
				14,756 —
				14,756 (3,930
		10,460 1,500 RMB2.09 cents N/A

Notes:

1. Group reorganisation and basis of presentation

Sing Lee Software (Group) Limited (the “Company”) was incorporated in Bermuda on 27 October 2000 as an exempted company with limited liability under the Companies Act 1981 of Bermuda. In preparation for the listing of the Company’s shares on GEM, a group reorganisation was effected whereby the Company became the holding company of the Group on 27th August, 2001 (the “Reorganisation”). The Company’s shares have been listed on the Growth Enterprise Market (the “GEM”) of The Stock Exchange of Hong Kong Limited since 5 September 2001.

The Reorganisation involved companies under common control, and the Company and its subsidiaries resulting from the Reorganisation are regarded as a continuing group. Accordingly, the Reorganisation has been account for on the basis of the pooling of interests method under which the combined financial statements for the years ended 31 December 2000 and 2001 have been prepared as if the Company had been the holding company of the other companies comprising the Group throughout the years, rather than from the date on which the Reorganisation was completed.

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The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board, the disclosure requirements of the Hong Kong Companies Ordinance and the Rules Governing the Listing of Securities on the GEM.

2. Revenues

The Group is principally engaged in the development and sale of information and network technologies and services to the financial industry in the Mainland China (the “PRC”). Revenue comprises:—

	Year ended	Year ended
	31 December	31 December
	2001	2000
	RMB’000	RMB’000
Sale of software	34,826	35,609
Sale of hardware	30,360	45,825
Revenue from maintenance services	5,230	5,594
	70,416	87,028
All sales were derived in the Mainland China.
Other operating income
	Year ended	Year ended
	31 December	31 December
	2001	2000
	RMB’000	RMB’000
Interest income from bank deposits	367	—
VAT refund	5,985	—
Government subsidies	742	609
	7,094	609

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1. Profit before tax

Profit before tax was determined after crediting and charging the following:

5.

	Year ended	Year ended
	31 December	31 December
	2001	2000
	RMB’000	RMB’000
After crediting:
Written back of provision for doubtful
receivables	663	—
After charging:
Employment costs
-Salaries and wages	10,832	9,343
-Provision for bonus and welfare fund	1,253	1,063
-Contribution to retirement schemes	942	131
	13,027	10,537
Cost of inventories	21,749	30,870
Research and development costs expenditures	9,689	8,893
Amortisation of intangible assets	11	—
Depreciation of property, plant and equipment	2,180	1,586
Provision for doubtful receivables	—	1,250
Operating lease rentals	3,101	2,451
Loss on disposal of property, plant and
equipment	—	217
Auditors’ remuneration	382	15
Taxation
	Year ended	Year ended
	31 December	31 December
	2001	2000
	RMB’000	RMB’000
Mainland China enterprise income tax (c)	779	—

(a) Overseas income tax

The Company is incorporated in Bermuda and is exempt from taxation in Bermuda until 28 March 2016. The Company’s subsidiary established in the BVI is incorporated under the International Business Companies Acts of the BVI and, accordingly, is exempt from payment of BVI income taxes.

(b) Hong Kong profits tax

No Hong Kong profits tax was provided as the Group had no assessable profit arising in or derived from Hong Kong.

(c) Mainland China enterprise income tax

As foreign investment enterprises incorporated in the Advanced Technology Industry Development Area in Hangzhou City, the subsidiaries in Mainland China are entitled to full exemption from income tax for two years with effect from its first profitable year after offsetting prior year’s losses and a 50% reduction in income tax from 15% to 7.5% for the following three years.

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There was no significant unprovided deferred taxation for the year ended 31 December 2001 (2000: Nil).

6. Dividends

	Year ended	Year ended
	31 December	31 December
	2001	2000
	RMB’000	RMB’000
Dividends declared and paid to the then owners/
shareholders of subsidiaries	1,500	9,900

Subsequent to 31 December 2001, the Company proposed final dividends of HK$0.005 per share, totalling HK$3,015,000 (equivalent to RMB3,195,900).

7. Earnings per share

The calculation of basic earnings per share is based on the combined net profit for the year attributable to shareholders of approximately RMB10,460,000 (2000: RMB10,826,000) divided by the weighted average number of ordinary shares outstanding during the year of 501,360,000 shares (2000: 453,000,000 shares). The weighted average number of shares outstanding for 2000 is calculated assuming all ordinary shares outstanding at 31 December 2001, except for the 150,000,000 ordinary shares issued in 2001 through placing, were outstanding throughout 2000. No diluted earnings per share was presented as there was no dilutive potential ordinary shares issued for the year.

8. Movement of Reserves

2001 Share premium Capital reserve Revenue reserve Cumulative translation adjustments Retained profits (Accumulated losses) Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Group Balance as at beginning of year — 3,930 3,104 — 4,666 11,700 Buyout of minority interests by majority shareholders — (480) — — — (480) Premium on issue of ordinary shares, net of issues at nil consideration 74,593 — — — — 74,593 Share issuance expenses (10,828) — — — — (10,828) Capitalisation of share premium (4,642) — — — — (4,642) Effect of Reorganisation (a) — (15) — — — (15) Translation adjustments — — — 4 — 4 Net profit for the year — — — — 10,460 10,460 Profit appropriation to reserve fund — — 1,350 — (1,350) — Dividends — — — — (1,500) (1,500) Balance as at end of year 59,123 3,435 4,454 4 12,276 79,292	2001	2001	2001	2001	2001	2001	2001	2000	2000
	Share premium Capital reserve Revenue reserve Cumulative translation adjustments Retained profits (Accumulated losses) Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 — 3,930 3,104 — 4,666 11,700 — (480) — — — (480) 74,593 — — — — 74,593 (10,828) — — — — (10,828) (4,642) — — — — (4,642) — (15) — — — (15) — — — 4 — 4 — — — — 10,460 10,460 — — 1,350 — (1,350) — — — — — (1,500) (1,500)							Total RMB’000 6,844 3,930 — — — — — 10,826 — (9,900
		59,123	3,435	4,454	4	12,276	79,292		11,700

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Company Balance as at beginning of year Premium on issue of ordinary shares, net of issues at nil consideration Share issuance expenses Capitalisation of share premium Effect of Reorganisation (a) Net profit for the year Balance as at end of year	2001	2001	2001	2001	2001	2001	2001	2000	2000
	Share premium Capital reserve Revenue reserve Cumulative translation adjustments Retained profits (Accumulated losses) Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 — — — — (2,741) (2,741) 74,593 — — — — 74,593 (10,828) — — — — (10,828) (4,642) — — — — (4,642) — 6,653 — — — 6,653 — — — — 16,203 16,203							Total RMB’000 — — — — — (2,741)
		59,123	6,653	—	—	13,462	79,238		(2,741)

• (a) This represents the difference between the nominal value of the share capital issued by the Company and the nominal value of the share capital of Sing Lee Electronics (B.V.I.) Co., Limited at 27 August 2001, the date of the Reorganisation.

• (b) Mainland China laws and regulations require wholly foreign-owned enterprises to provide for certain statutory funds, namely, reserve fund and staff and worker’s bonus and welfare fund, which are appropriated from net profit after tax (based on the local statutory accounts of the Company’s subsidiaries in the mainland China) but before dividend distribution. The subsidiaries are required to allocate at least 10% of their net profit to the reserve fund until the balance of such fund has reached 50% of their respective registered capital. Appropriation to the staff and workers’ bonus and welfare fund is at the discretion of the directors of such subsidiaries. The reserve fund can only be used, upon approval by the relevant authority, to offset accumulated losses or increase capital. The staff and workers’ bonus and welfare fund can only be used for special bonuses or collective welfare of the employees of the individual subsidiary, and assets acquired through this fund shall not be taken as the Group’s assets. As of 31 December 2001, the reserve funds amounted to approximately RMB 4,454,000 (2000: RMB 3,104,000). Under IFRS, appropriations to the staff and workers’ bonus and welfare fund have been included as expenses and the balance of the fund as a liability of the Group.

Under the Companies Act 1981 of Bermuda (“Companies Act”), share premium and capital reserve are distributable to shareholders, subject to the condition that the Company cannot declare or pay a dividend, or make a distribution out of share premium and capital reserve if (i) it is, or would after the payment be, unable to pay its liabilities as they become due, or (ii) the realisable value of its assets would thereby be less than the aggregate of its liabilities and its issued share capital account.

As at 31 December 2001, the Company’s reserves available for distribution to shareholders amounted to approximately RMB 79,238,000, computed in accordance with the Companies Acts and the Company’s articles of association. This includes the Company’s share premium and capital reserve of approximately RMB 59,123,000 and RMB 6,653,000 respectively, plus retained profits of approximately RMB 13,462,000, which is available for distribution provided that immediately following the date on which the dividend is proposed, the Company will be able to pay off its debts as they fall due in the ordinary course of business.

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CLOSURE OF REGISTER OF MEMBERS FOR FINAL DIVIDEND AND ANNUAL GENERAL MEETING

The Register of Members will be closed from Thursday, 18th April, 2002 to Thursday, 25th April, 2002 (both days inclusive), during which period no transfer of shares can be registered.

All transfer documents accompanied by the relevant share certificates must be lodged with the Company’s Registrars in Hong Kong, Abacus Share Registrars Limited at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong not later than 4:00 p.m. on Wednesday, 17th April, 2002.

BUSINESS REVIEW AND PROSPECTS

BUSINESS REVIEW

In the wake of the PRC’s formal accession to the WTO at the end of 2001, opportunities arise with challenges to the development of the financial industry in the PRC. In the PRC banking industry, the Group’s customers are all head offices and local branch institutions of large and medium sized commercial banks in the PRC, all of which have been emphasizing on the investment in technology with a view to enhancing their competitive edges. However, during the year 2001, several nationwide commercial banks performed upgrade reforms to their own core systems independently, which have hindered the sales and the implementation of orders on the banking peripheral products of the Group directly. In spite of this, the Group managed to overcome these difficulties and forged close relationship and contacts with commercial bank customers in the PRC. In 2001, the Group’s newly launched Bank Card Order Placement System ( ), also known as “ ” (one of the ALLWEB banking series), has become a fast selling product, and another new product, the Wireless POS Payment System ( ) has been launched by the Group towards the end of 2001. Being a trial launch of the financial applications towards wireless direction, and the concept of “Wireless Application - Unlimited Application” having its debut, this system has therefore been in the spot-light among the industrial players at the end of 2001 with tremendous market potential. In 2001, the Group has completed the Multi-Bank POS Sharing System ( ) for the Yichang city of Hubei province together with the People’s Bank of China and numerous commercial banks. The successful implementation of this project has won recognition for this product on an even larger scale, and prospects for this product is promising. In view of the connections of the Group with the various banks in the PRC, it will provide a comprehensive support to the development in the Group’s IC card operations.

In 2001, the composite index of Shanghai Stock Exchange and the composite index of Shenzhen Stock Exchange fell by approximately 20.6% and 25.1% respectively. The adverse condition in the securities market during the whole year (especially during the second half) has led to the deterioration of the operations of the PRC brokerage firms, which in turn has a direct adverse impact in the short-term on the promotion of the Group’s securities application solutions. For example, sales of the Telephone Order Placement System ( ) in the Group’s securities application solutions, which is directly related with the securities market condition, has slid conspicuously, which has also hindered the promotion of the related hardware products which are sold as package with its sub-systems.

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Under such adverse market condition, the Group captured the opportunity of the market consolidation and timely proceeded with the upgrading and renewal of the core transaction system for the whole security industry. Following the completion and launching of the new product ALLWEB Enterprise Securities Transaction System, the existing transaction systems are being gradually replaced, and the ALLWEB Enterprise Securities Transaction System is now starting to secure market share, it is anticipated that growth in 2002 will be even larger. The new products of “Integrated Securities Infrastructure Platform” ( ) and “Unicorn” ( ) which the Group launched at the end of 2001 have attracted attention from various securities customers. The “Integrated Securities Infrastructure Platform” ( ) has participated in the tender of a large securities company in the PRC, whereas agreement has been entered into with two medium sized securities companies on “Unicorn” ( ), one of which has started to implement. The Directors consider that the full launch of these two new products will bring significant returns to the Group.

RESEARCH AND DEVELOPMENT

In order to ensure the long-term growth of the Group’s operations and to meet market demands, the Group is transforming from a supplier of traditional financial software solutions for the PRC financial industry into a financial network technology and solutions provider in the PRC. Since the end of 2000, the Group took the lead in introducing the ALLWEB concept to the PRC financial IT industry, and through the adoption of web technology and the incorporation of web functions in the new product designs, it provided application solutions to the PRC financial industry using extensive network technology, so as to achieve an all-compatible model of the All-on-Web. In 2001, the Group continued to incorporate the ALLWEB concept into its product development, and has invested substantial development resources in it.

In 2001, the Group completed the R&D on some of the products for the ALLWEB series, in particular, the most important products include the ALLWEB Enterprise Securities Transaction System for the PRC brokerage firms, the Bank Card Order Placement System ( ) for the PRC commercial banks and the Wireless Financial Management System. Development of other products of the ALLWEB series are also under way.

MARKET DEVELOPMENT AND SALES

Prior to 2001, the Group focussed on the reliance of distribution network, setting up additional regional offices and recruiting additional service personnel in order to carry out marketing and services. As from 2001, the Group began to focus on the business expansion in major cities, and has completed the upgrading of the offices in Beijing, Shanghai and Shenzhen, making them regional headquarters for business expansion. Following the enhancement of the Group’s sales capability and management capability, part of the marketing efforts of the regional offices are gradually concentrated to the regional headquarters.

In 2001, the Group has initially completed the construction of its internal information network, and is gradually transforming the simple direct customer service to be an on-line

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one, upgrading its customer responding efficiency with a Face to Face on Web service model. With the application of such a model, the original reliance on the recruitment of employees and additional offices to maintain the ever-expanding customer services changes gradually. and will be able to attain the continued reduction in the cost of customer services.

In 2001, the Group continued to participate in large technological product exhibitions of the financial IT industry, the most important events being the Chinese Securities and Futures Electronic Technology Fair in April and the Chinese International Financial (Banking) Technology and Equipment Exhibition in September. The Group also participated as a Primary Observer in the Chinese Securities IT Technology seminar organized by the China Securities Regulatory Commission, where the IT management of various major securities companies were participating members.

In 2001, the Group continued to forge good strategic partner relationship with internationally renown IT enterprises, in particular, the Group has entered into a tripartite strategic cooperation agreement with the BEA Systems Company and Oracle Software Systems Co., Ltd. during the third quarter, which consolidated the position to provide upgraded, systematic and personalized application system solutions to the financial industry in the PRC.

MANAGEMENT

In 2001, Hangzhou Singlee Software Company Limited, an indirectly wholly-owned subsidiary of the Company, was awarded the ISO 9001 certification in November, which is evident that the quality management model of the Group has attained a certain level. At the same time, the Group has been implementing the CMM (Capability Maturity Model) standard, which is recognised by the software industry worldwide in implementing the quality control in its internal software developing procedures. The Directors of the Group are currently focussing on the successful implementation of CMM. The Directors believe that this may enhance the quality of the Group’s software products, the development efficiency and may improve cost control. In 2001, in compliance with the CMM standards, the Group carried out a readjustment of its own development procedures, personnel training and workflow, and completed the selection of CMM appraisal institution.

FUTURE OUTLOOK

The Directors of the Group are confident that upon the completion of the improvement to the core system of banking customers, extensive upgrading and renewal of the peripheral systems will bring forth even greater opportunities to the Group. At the same time, the Credit Card “ ” network promoted by the People’s Bank of China has started to operate on some inter-city networks since January, 2002. “ ” will make it possible for the linked-usage of credit cards issued by different commercial banks on a nationwide multi-regional scale in the PRC, thereby providing tremendous opportunities and market to the Group’s promotion of new credit card technology solutions and new products.

As for the securities IT business, the Directors of the Group are confident that the adverse condition in the PRC securities market is simply a normal cyclical fluctuation. The PRC securities market is an integral part of the economic development of the PRC. Since its

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founding, the Group has fully witnessed the ups and downs in the development history of the PRC securities industry, and the Group’s securities IT business grows thrives in an uneven course. The Group will continue with its efforts to provide an overall solution to the PRC securities industry with network technology as the core, which will help securities companies to achieve their objective of providing better and more comprehensive services at lower costs to their customers. The PRC securities industry has broad horizon ahead, where huge potential of development can be seen. The Directors believe that the Group has accumulated considerable industrial experience and good reputation through the years in the banking industry and securities industry in the PRC, which are important foundation and strengths for the future continued development of the Group.

FINANCIAL REVIEW

The Group is principally engaged in the development and sale of information and network technologies and services to the financial industry in Mainland China (the “PRC”).

During the year ended 31 December 2001 (“the reported year”), the securities market in the PRC was not as strong as that in year 2000. This has resulted in a certain contraction in the securities brokerage business in the PRC. Also, certain commercial banks in the PRC took the initiative to restructure themselves, which had an impact on the sales of the securities and banking solutions of the Group as well as the sales of related hardwares.

During the year 2001, several nationwide commercial banks performed upgrade reforms to their own core systems independently, which have hindered the sales and the implementation of orders on the banking peripheral products of the Group directly.

In 2001, the composite index of Shanghai Stock Exchange and the composite index of Shenzhen Stock Exchange fell by approximately 20.6% and 25.1% respectively. The adverse condition in the securities market during the whole year (especially during the second half) has led to the deterioration of the operations of the PRC brokerage firms, which in turn has a direct adverse impact in the short-term on the promotion of the Group’s securities IT solutions. For example, sales of the Telephone Order Placement System ( ) in the Group’s securities application soulution, which is directly related with the securities market condition, has slid conspicuously, which has also hindered the promotion of the related hardware products which are sold as package with its sub-systems.

In this regard, the Group recorded a consolidated turnover of approximately Rmb70.4 million for the reported year, representing a drop of approximately 19% over last year (2000: Rmb87.0 million). Turnover comprises:

	Turnover	Turnover
	2001	2000
	Rmb’000	Rmb’000
Sales of software	34,826	35,609
Sales of hardware	30,360	45,825
Maintenance income	5,230	5,594
	70,416	87,028

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In light of keen competition in PRC, selling prices of some of the Group’s major products like POS machines, Singlee Bank/Brokerage Firm Account Transfer System ( ), and Telephone Order Placement System ( ) dropped by approximately 13%, 30% and 21% respectively.

Gross profit of the Group decreased by approximately 36% to approximately Rmb20.9 million for the reported year (2000: Rmb32.6 million). Gross profit margin shrank to approximately 30% (2000: 37%). Gross margin decreased mainly due to thinner gross margin for the new product Bank Card Order Placement System ( ) which accounted for significantly towards the Group’s turnover during the reported year. Decrease in gross margin was also attributable to price cut of some of the Group’s major products mentioned above and rise in staff costs due to enhanced sales network and rise in average wages.

Profit attributable to shareholders decreased by approximately 3% to approximately Rmb 10.5 million (2000: Rmb 10.8 million). Profit attributable to shareholders decreased to a lesser extent than gross profit because of an other income of PRC value added tax refund of approximately Rmb 6.0 million recorded during the reported year (2000: Rmb nil). Please refer to note 16 and 19 of the notes to the financial statements for details.

LIQUIDITY, FINANCIAL RESOURCES AND DEBT RATIO

Aggregate outstanding borrowings of the Group as at 31 December 2001 were Rmb 11.0 million (2000: Rmb 11.0 million), representing short term bank loans all repayable within one year. The Group does not have any committed bank facilities as at 31 December 2001.

The debt ratio (defined as total liabilities over total assets) of the Group as at 31 December 2001 was 35% (2000: 81%). The significant improvement was due to listing proceeds received from the initial public offer.

No interest was capitalized by the Group during the reported year (2000: nil).

CAPITAL STRUCTURE, EXPOSURE TO EXCHANGE RATES FLUCTUATION

As at 31 December 2001 all of the Group’s bank borrowings of Rmb 11.0 million were denominated in Renminbi, of which Rmb1.0 million was secured by the Group’s bank deposits. All such bank borrowings were at fixed interest rates during the term of the loan, and bore interest ranging from 5.02% to 6.14% (2000: from 5.30% to 5.85%) per annum.

As at 31 December 2001 the Group held cash and cash equivalents denominated in Hong Kong Dollars, US Dollars and Renminbi. Please refer to note 9 of the notes to the financial statements for details.

Substantially all of the revenue-generating operations of the Group are transacted in Renminbi, which is not freely convertible into foreign currencies. The Group had prudent policy to manage currency and interest rate exposures, and as most of the Group’s monetary assets and liabilities are denominated in Renminbi, US Dollars and Hong Kong Dollars, the exchange rate risks of the Group is considered minimal.

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FINANCIAL INSTRUMENTS

The carrying amounts of the Group’s cash and cash equivalents, trade and receivables and payable, other receivable and payable, borrowings and balances with related parties approximate their fair values because of the short maturity of these instruments.

The Group did not enter into any foreign exchange forward contracts to hedge against fluctuations.

PROSPECTS OF NEW PRODUCTS

Please refer to business review, research and development, market development and sales and future outlook discussed above and in the Chairman’s Statement for a discussion on this.

SIGNIFICANT INVESTMENT

Other than the establishment of an indirectly wholly owned subsidiary, Hangzhou Singlee Technology Company Limited, the Group did not have significant investments during and at the end of the reported year.

SEGMENTAL INFORMATION

Please refer to note 30 of the notes to the financial statements for details. The Group conducts its business in Mainland China within one business segment and within one geographical segment. Please refer to business review, research and development, market development and sales and future outlook discussed above and in the Chairman’s Statement for a discussion on industry and market conditions, as well as new products introduced.

STAFF

As at 31 December 2001 the Group employed 400 employees (2000: 373 ) at market remuneration with employee benefits such as defined contribution retirement schemes, employee share option scheme and medical coverage. Total staff costs for the reported year were approximately Rmb 13.0 million (2000: approximately Rmb 10.5 million). The increase in staff costs was due to firstly, increase in headcount due to enhanced sales network and secondly, a rise in average wages of about 10% to 15% and lastly, the addition of headcount last year (year 2000) happened mainly towards the end of that year.

CHARGE ON ASSETS

Other than a US$136,000 (2000: US$125,000) bank deposits of the Group was used as security to secure a Rmb 1 million (2000: Rmb 1 million) bank loan, as at 31 December 2001 and 2000, the Group did not have any charge on its asset.

FUTURE PLANS FOR MATERIAL INVESTMENTS AND EXPECTED SOURCE OF FUNDING

Details of the Group’s future plans for material investments or capital assets and their expected source of funding have been stated in the Company’s prospectus dated 30th August,

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2001 under the sections headed “Statement of Business Objectives” and “Reasons for the New Issue and Use of Proceeds” respectively. Progress of these has been dealt with below and in sections headed “Comparison of Use of Proceeds” and “Review of Business Objectives” in this annual report. Other than those disclosed, the Group did not have any plan for material investments or capital assets.

CONTINGENT LIABILITIES

As at 31 December 2001 the Group did not have any material contingent liabilities (2000: nil).

COMPARISON OF USE OF PROCEEDS

The net proceeds raised from the public listing on 5 September 2001 were approximately HK$61.9 million. The proceeds had been applied to achieve the business objectives as set out in the prospectus dated 30th August, 2001 and are detailed below:

			Actual amount
		Use of proceeds as	Utilized up to 31
		stated in the	December
		prospectus	2001
		HK$’000	HK$’000
Research and development of new
products and technologies		25.0	2.0
Sales, marketing and promotion		7.5	0.6
Expansion of regional offices,
implementation of CMM and
enhancement of internal information
network infrastructure		5.5	0.1
Repayment of bank loans and other
borrowing	(i)	8.3	12.1
Repayment of shareholder’s loan		4.2	4.2
General working capital		11.4	5.8
Placed with banks		0.0	38.0

Unused net proceeds of HK$38.0 million have been placed with licenced banks in Hong Kong and PRC, and would be used to achieve objectives as stated in the prospectus.

(i) The excess utilization is attributable to the Group’s decision to decrease its debt level.

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REVIEW OF BUSINESS OBJECTIVES

Objectives up to 31st December, 2001 Actual business progress up to 31st as stated in the prospectus dated December, 2001 30th August, 2001

1. ALLWEB banking solution

2. I. Bank CRM solution

3. (i) Complete the system requirement analysis and system design of ALLWEB bank customer service centre

4. (i)&(ii) Completed the system requirement analysis for bank customer service centre and bank customer information analysis system

5. (ii) Complete the system requirement analysis and system design of ALLWEB bank customer information analysis system

6. II. Bank financial management system

7. (i) Complete development of bank card order placement system for banksecurities finance management system

8. (i) Completed development of bank card order placement system for banksecurities finance management system and successfully made an early market launch

9. (ii) Complete system requirement analysis and development of application modules of bankinsurance finance management system

10. (ii) System requirement analysis is in progress

11. (iii) Complete system development of bank-fund finance management system

12. (iii)&(iv) Completed system development of bankfund finance management system and is currently under trial marketing

13. (iv) Trial marketing of bank-fund finance management system

14. III. Bank account manager system

15. (i) Launch bank IC card application system to a specific industrial sector

16. (i) Launched bank IC card application system with the bank as the basis and facing the medical social security

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• Objectives up to 31st December, 2001 Actual business progress up to 31st as stated in the prospectus dated December, 2001 30th August, 2001

• (ii) Complete system development of various modules of multiple bank POS application system

• (ii) Completed the system development of various modules of multiple bank POS application system

• IV. Bank supervision system Complete system development of bank internal audit system

Completed system development of bank internal audit system

1. ALLWEB securities solution

2. I. Brokerage CRM solution

   • (i),(ii)&(iii) Completed requirement analysis of Brokerage CRM solution

3. (i) Complete system development of ALLWEB brokerage customer service centre

4. (ii) Complete system development of ALLWEB brokerage customer information centre

5. (iii) Complete requirement analysis of ALLWEB brokerage customer information decision system

6. II. ALLWEB enterprise securities transaction system

7. Full launch of ALLWEB institutional securities transaction system and gradually replace the Singlee SL-IV system

8. Successfully launched ALLWEB enterprise securities transaction system to replace the original version, and is currently developing its upgraded version.

9. ALLWEB electronic financial service platform

10. I. Complete the full design of system platform

11. I. Completed the initial design of system platform

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Objectives up to 31st December, 2001 as stated in the prospectus dated 30th August, 2001

• II. Full launch of electronic securities trading function of the platform

• III. Full launch of wireless securities financial management function of the platform

• IV. Test trial of family financial management system based on the cable network

• V. Complete the system development of electronic banking and wireless banking financial management functions of the platform

Actual business progress up to 31st December, 2001

• II. Electronic securities trading function of the platform has been applied on the ALLWEB enterprise securities transaction system

• III. Completed development of wireless securities financial management function and is currently under trial marketing

• IV. R&D on family financial management system based on the cable network is in progress

• V. Completed R&D on wireless banking financial management functions and successfully launched to market

• Business development & information network

• I. Complete initial construction of Group’s internal information network infrastructure

• II. Expand Group’s regional sales offices in Shenzhen

• I. Completed initial construction of Group’s internal information network infrastructure, and a part of it has been opened to customers for after-sale service

• II. Completed expansion of Group’s Shenzhen sales offices in the 3rd Quarter, and has become regional headquarters

• Marketing & promotion

• I. Participate in PRC banking products exhibitions

• II. Organise seminar on application solution technology of PRC securities industry

• I. Participated Chinese International Financial (Banking) Technology and Equipment Exhibition held in September, 2001

• II. Participated IT technology seminar of PRC securities industry organised by CSRC as a Primary Observer

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Objectives up to 31st December, 2001 as stated in the prospectus dated 30th August, 2001

Actual business progress up to 31st December, 2001

1. CMM

2. I. Evaluate development process, training of personnel and redefine development process

3. I. Completed evaluation of development process, training of personnel and redefine development process

4. II. Select CMM appraisal agency

5. II. Basically completed the selection of CMM appraisal agency

BOARD PRACTICES AND PROCEDURES

During the period from 5th September, 2001 (the date of listing of the Company’s shares on GEM) to 31st December, 2001 the Company was in compliance with Board Practices and Procedures as set out in Rule 5.28 to 5.39 of the GEM Listing Rules.

PURCHASE, SALE OR REDEMPTION LISTED SECURITIES

During the period from 5th September 2001 (the date of listing of the Company’s shares on GEM) to 31st December 2001, the Company has not redeemed any of its listed securities. Neither the Company nor any of its subsidiaries has purchased or sold any of the Company’s listed securities during the period.

By order of the Board Hung Yung Lai Chairman

Hong Kong, 25th March 2002

This announcement will remain on the GEM website on the “Latest Company Announcements” page for 7 days from the day of its posting.

• For identification purpose only

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