Sing Lee Software (Group) Limited — Interim / Quarterly Report 2003

Nov 13, 2003

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The Stock Exchange of Hong Kong Limited 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 however 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.

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*

(incorporated in Bermuda with limited liability)

QUARTERLY RESULTS ANNOUNCEMENT FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2003

The board of directors (“Board”) of Sing Lee Software (Group) Limited (the “Company”) announce the unaudited results of the Company and its subsidiaries (collectively, the “Group”) for the three and nine months ended 30 September 2003, together with the unaudited comparative figures for the corresponding periods in 2002, as follows:

UNAUDITED COMBINED STATEMENT OF INCOME

Note Turnover 2 Cost of sales Gross (loss)/profit Distribution costs General and administrative expenses Other operating income 3 Loss from operations Finance costs Loss before tax Taxation 4 Loss after tax Minority interests Loss attributable to shareholders Loss per share - Basic 5	Three months ended 30 September 2003 2002 Rmb’000 Rmb’000 4,718 20,388 (7,081) (14,373) (2,363) 6,015 (2,619) (4,004) (3,716) (4,599) 514 1,310 (8,184) (1,278) (39) (125) (8,223) (1,403) (406) — (8,629) (1,403) — — (8,629) (1,403) Rmb(1.43) cents Rmb(0.23) cents	Nine months ended 30 September 2003 2002 Rmb’000 Rmb’000 18,942 43,095 (21,050) (30,525) (2,108) 12,570 (10,551) (12,438) (15,952) (13,977) 8,535 4,615 (20,076) (9,230) (370) (454) (20,446) (9,684) (409) — (20,855) (9,684) — — (20,855) (9,684) Rmb(3.46) cents Rmb(1.61) cents

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

As at 1 January 2002 Dividend Translation for distribution Utilisation for the period Translation adjustment Reverse over-accrued share issuing expenses Reverse over-accrued profit appropriation to reserve fund Loss for six months ended 30 June 2002 As at 30 June 2002 As at 1 July 2002 Translation adjustment Loss for three months ended 30 September 2002 As at 30 September 2002 As at 1 January 2003 Profit appropriation to reserve fund Translation adjustment Loss for six months ended 30 June 2003 As at 30 June 2003 As at 1 July 2003 Translation adjustment Loss for 3 months ended 30 September 2003 As at 30 September 2003	Share Capital (unaudited) Rmb’000 6,392 — — — — — — —	Share premium (unaudited) Rmb’000 59,122 — — — — 145 — —	Capital reserve (unaudited) Rmb’000 3,435 — (1,500 — — — — —	Revenue reserve (unaudited) Rmb’000 4,454 — ) — (47 — — (1,350 —	Cumulative translation adjustment (unaudited) Rmb’000 5 — — ) — 2 — ) — —	Retained earnings/ (Accumulated losses) (unaudited) Rmb’000 12,276 (3,196 1,500 — — — 1,350 (8,282	Total (unaudited) Rmb’000 85,684 ) (3,196 ) — (47 ) 2 145 — ) (8,282 ) 74,306 74,306 (1 ) ) (1,403 ) 72,902 72,273 ) — 4 ) (12,226 ) ) 60,051 ) 60,051 6 ) (8,629 ) ) 51,428
	6,392	59,267	1,935	3,057	7	3,648
	6,392 — —	59,267 — —	1,935 — —	3,057 — —	7 (1 —	3,648 ) — (1,403
	6,392	59,267	1,935	3,057	6	2,245
	6,392 — — —	59,267 — — —	— — — —	3,546 94 — —	4 — 4 —	3,064 (94 — (12,226
	6,392	59,267	—	3,640	8	(9,256
	6,392 — —	59,267 — —	— 6 —	3,640 — —	8 — —	(9,256 — (8,629
	6,392	59,267	6	3,640	8	(17,885

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NOTES TO THE COMBINED STATEMENT OF INCOME

1. Basis of preparation and principal accounting policies

The results 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 GEM.

The Group principally operates in the People’s Republic of China (the “PRC”) and its business activities are principally transacted in Renminbi (“Rmb”), the results are prepared in Rmb.

All significant intra-group transactions and balances have been eliminated on consolidation.

The principal accounting policies and methods of computation adopted for the preparation of the financial statements are the same and consistent with those adopted by the Group in its audited annual financial statements for the year ended 31 December 2002.

2. Turnover

Turnover represents revenue from sale of computer software and hardware, and maintenance income. Turnover comprises the following:

Sales of software Sales of hardware Maintenance income Other operating income Others Interest income Value added tax refund Income from open up source code	(Unaudited) Three months ended 30 September 2003 2002 Rmb’000 Rmb’000 3,039 8,266 977 10,867 702 1,255 4,718 20,388 (Unaudited) Three months ended 30 September 2003 2002 Rmb’000 Rmb’000 100 — 21 — 393 1,310 — — 514 1,310	(Unaudited) Nine months ended 30 September 2003 2002 Rmb’000 Rmb’000 7,782 17,254 8,392 22,819 2,768 3,022 18,942 43,095 (Unaudited) Nine months ended 30 September 2003 2002 Rmb’000 Rmb’000 127 805 126 351 1,282 3,459 7,000 — 8,535 4,615	(Unaudited) Nine months ended 30 September 2003 2002 Rmb’000 Rmb’000 7,782 17,254 8,392 22,819 2,768 3,022 18,942 43,095 (Unaudited) Nine months ended 30 September 2003 2002 Rmb’000 Rmb’000 127 805 126 351 1,282 3,459 7,000 — 8,535 4,615
			4,615

3. Other operating income

Pursuant to document Caishui [2000] No. 25 issued by State Tax Bureau, effective from 24 June 2000, for companies engaged in the development and distribution of software, their revenues from sale of software are subject to value added tax with applicable tax rate of 17% and are entitled to refund of value added tax paid exceeding 3% of the revenues. The value added tax refund of the Group has been accounted for as other operating income.

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4. Taxation

Other PRC taxation_(Note a)_ Business tax	(Unaudited) Three months ended 30 September 2003 2002 Rmb’000 Rmb’000 56 — 350 — 406 —	(Unaudited) Nine months ended 30 September 2003 2002 Rmb’000 Rmb’000 59 — 350 — 409 —	(Unaudited) Nine months ended 30 September 2003 2002 Rmb’000 Rmb’000 59 — 350 — 409 —
			—

Hong Kong profits tax has not been provided as the Group had no income assessable for profits tax in Hong Kong for the three and nine months ended 30 September 2003 (three and nine months ended 30 September 2002: Nil).

PRC enterprise income tax has not been provided as the Group had no estimated assessable profits for the three and nine months ended 30 September 2003 (three and nine months ended 30 September 2002: Nil).

There was no significant unprovided deferred taxation for the reported periods.

Note:

(a) Tax paid in respect to business operation and interest income of PRC source.

5. Loss per share

The calculation of the Group’s basic loss per share for the three months and nine months ended 30 September 2003 is based on the Group’s unaudited loss attributable to shareholders of approximately Rmb8,629,000 and Rmb20,855,000 (three months and nine months ended 30 September 2002: loss of approximately Rmb1,403,000 and Rmb9,684,000 respectively) divided by the weighted average number of ordinary shares outstanding for three months and nine months ended 30 September 2003 of 603,000,000 shares (three and nine months ended 30 September 2002: 603,000,000 shares) in issue respectively.

Diluted loss per share has not been presented as the exercise of share options would have an anti-dilutive effect during the three and nine months ended 30 September 2003, and three and nine months ended 30 September 2002.

6. Dividend

• (a) The Board does not recommend the payment of dividend for the nine months ended 30 September 2003 (nine months ended 30 September 2002: Nil).

• (b) Final dividend of HK$0.005 per share for the year ended 31 December 2001 were declared, approved and paid during the nine months ended 30 September 2002.

	(Unaudited)
	Nine months ended
	30 September
	2003 2002
	Rmb’000 Rmb’000
Final dividends declared and paid	— 3,196

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MANAGEMENT DISCUSSION AND ANALYSIS

Financial review and results of operations

For the three and nine months ended 30 September 2003, the Group recorded a loss attributable to shareholders of approximately Rmb8,629,000 and Rmb20,855,000 respectively. Loss for the period was primarily attributable to price cut competition with other IT enterprise, prolonged economic downturn and the outbreak of SARS in PRC.

As compared to the same period of last year, turnover decline for both banking and securities sector, the Group still maintains a fixed number of engineering and technical staff to provide in time software installation and after-sales services for customers. This is the primary reason which attributable to the gross loss of the period. On the other hand, decline on the gross profit margin of POS also attributable to the decrease in gross profit margin as compared to the same period of last year.

Business review

Major business operation

Chinese financial businesses, including commercial banks and brokerage firms, are going smoothly under the reorganisation and remain positive on investing IT projects for their internal infrastructure. For examples:

The Group signed the software system development contract with Chinese Commercial Banking Clearing and Settlement Center of the Chinese Commercial Banking Association.

The Nanjing Commercial bank will cooperate with our Group and the Group is going to provide software design and hardware development for the Nanjing Commercial bank. The success of this project is a landmark for the product-line direction for the Group.

The Group successfully signed contracts with Zhejiang Province Post Office to develop the project on Short Message System. As the result, the Group has accumulated 4 clients in the aspects of SMS product-line.

The Head-office of Industrial and Commercial Bank of China has completed the POS centralised biding project. The Group got the qualification to provide services to 9 branch offices and one card center. The Group now has over 30% of the market share from Bank of China on the national basis.

The Group actively analyses the IT market for the Options and Futures in PRC. The Chinese Constriction Bank of Zhejiang Branch responded very positively in related product and services. The Group will corporate with the Chinese Construction Bank of Zhejiang Branch on the product development.

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Future outlook

Chinese financial industry is in the restructure process. Especially, there are many merger and acquisition activities in the brokerage section. The framework of the industry has been undertaking fundamental changes. The Group believes that the restructuring process will last for a period of time. This brings difficulty to the Group's marketing and product promotion. Besides, there are significant manpower turnover in the IT industry. The ability to maintain a group of well-educated and experienced workforce is a really challenging work for the Board. Nevertheless, the Group is looking forward positively to the future. Commercial banks in PRC are undergoing reorganisation. So commercial banks are investing intensively on the IT system integration. The Group is actively designing and implementing new products and systems.

DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS IN SECURITIES

As at 30 September 2003, the interests or short positions of the directors and chief executives of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (“SFO”)) which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which he/she is taken or deemed to have under such provisions of the SFO), or which were required to be entered into the register required to be kept by the Company, pursuant to Section 352 of the SFO, or which were required, pursuant to Rules 5.40 to 5.58 of the GEM Listing Rules, to be notified to the Company and the Stock Exchange, were as follows:

Shares in the Company:

		Number of	shares held	Percentage
	Capacity/	Long	Short	of
Name of directors	Nature of interest	position	position	shareholding
Mr. Hung Yung Lai	Corporate interest	306,000,000	—	50.7%
		(note 1)
Ms. Li Kei Ling	Corporate interest	306,000,000	—	50.7%
		(note 1)

Shares in associated corporation:

		Number of ordinary
		shares held in Goldcorp
		Industrial Limited (note 2)	Percentage
	Capacity/	Long Short	of
Name of directors	Nature of interest	position position	shareholding
Mr. Hung Yung Lai	Personal interest	1 —	50.7%
Ms Li Kei Ling	Corporate interest	1 —	50.7%
	(note 3)

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Notes:

1. The Shares were held by Goldcorp Industrial Limited, a company equally owned by Mr. Hung Yung Lai and Great Song Enterprises Limited which in turn is wholly owned by Ms. Li Kei Ling. Mr. Hung Yung Lai controls more than one third of the voting power of Goldcorp Industrial Limited. Ms. Li Kei Ling controls more than one third of the voting power of Great Song Enterprises Limited which in turn holds more than one third of the voting power of Goldcorp Industrial Limited. Mr. Hung Yung Lai and Ms. Li Kei Ling are deemed, by virtue of the SFO, to be interested in the same 306,000,000 shares held by Goldcorp Industrial Limited.

2. The entire issued capital of Goldcorp Industrial Limited as of 30 September 2002 composed of 2 ordinary shares. Goldcorp Industrial Limited held 306,000,000 Shares in the Company.

3. The share was held by Great Song Enterprises Limited which is a company wholly owned by Ms Li Kei Ling.

SHARE OPTION SCHEME

Pursuant to the share option scheme (the “Scheme”) adopted on 27 August 2001, the Directors may at their discretion grant options to employees (including Directors of the Company) of the Group and other persons who, in the sole discretion of the board of the Directors, have contributed to the Group (“Participants”). The Scheme enables the Company to grant share options to Participants as incentives or rewards for their contribution to the Group. The Scheme would be valid and effective for a period of ten years commencing on the adoption date.

The maximum number of shares in respect of which options may be granted under the Scheme shall not exceed 30% of the issued share capital of the Company from time to time. After the listing of the shares on GEM, the total number of shares which may be issued upon the exercise of all options to be granted under the Scheme and any other schemes must not in aggregate exceed 10% of the shares in issue upon completion of placing, capitalisation issue and say other shares to be issued upon the exercise of the over-allotment option in connection with the listing of the shares on GEM. According to the Scheme, the total number of shares available for issue as at 30 September 2003 is 60,300,000 shares.

The total number of shares issued and to be issued upon the exercise of options granted and to be granted to each Participant (including both exercised and outstanding options) in any 12 months period up to the date of grant must not exceed 1% of the shares in issue at the date of grant.

The subscription shall be a price determined by the board of directors at its absolute discretion and shall not be less than the higher of the closing price of the share on the date of grant of the option and the average closing price of the shares for the five business days immediately preceding the date of grant of the option.

Options granted shall be deemed to be accepted upon receipt of the acceptance of offer letter from the grantee within 28 days from the offer date, together with a remittance in favour of the Company of HK$1 by way of consideration for the grant.

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An option may be exercised in accordance with the terms of the Scheme at any time during a period notified by the board to each grantee but may not be exercised after the expiry of 10 years from the date of grant.

On 8 April 2002 the Company granted 60,230,000 options to subscribe for shares in the Company under the Scheme at an exercise price of HK$0.614 per share to 163 employees (including three executive directors) of the Group. Shares of the Company were at closing price HK$0.58 immediately before the day on which options were granted. The summary details of options granted are as follows:

Number of Number of Number of Number of share options share options share options share options Name of directors outstanding as granted during exercised during cancelled during and employees Exercise period at 1 January 2003 the period the period the period Cui Jian 7 September 2002 3,180,000 — — — to 7 April 2012 Li Kei Ling 7 September 2002 2,300,000 — — — to 7 April 2012 Duan Patrick 7 September 2002 3,800,000 — — — to 7 April 2012 Continuous contract 7 September 2002 47,310,000 — — — employees to 7 April 2012 (other than directors) 56,590,000 — — —	Number of Number of share options share options lapsed during outstanding as the period at 30 June 2003 — 3,180,000 — 2,300,000 (3,800,000 ) — (23,950,000 ) 23,360,000 (27,750,000 ) 28,840,000	Number of Number of share options share options lapsed during outstanding as the period at 30 June 2003 — 3,180,000 — 2,300,000 (3,800,000 ) — (23,950,000 ) 23,360,000 (27,750,000 ) 28,840,000
		28,840,000

The directors consider it inappropriate to value the options as a number of factors critical for the valuation cannot be determined accurately. Any valuation of the options based on various speculative assumptions would be meaningless and misleading. Therefore the directors believe that the cost for disclosing the value of options do not justify for the benefits it provides.

Save as disclosed above, as at 30 September 2003, none of the directors, chief executives, or their respective associates had any interest or short position in the shares of the Company or its associated corporations (within the meaning of Part XV of the SFO) which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provision of the SFO) or which were required to be kept under Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the minimum standards of dealing by directors of listed issuers as referred to in Rules 5.40 to 5.58 of the GEM Listing Rules.

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INTEREST IN SECURITIES AND SUBSTANTIAL SHAREHOLDERS

As at 30 September 2003, shareholders (other than directors or chief executive of the Company) who had interests or short positions in the shares, underlying shares and debentures of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or, directly, or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote on all circumstances at general meeting of any other members of the Group or substantial shareholders as recorded in the register required to be kept by the Company under Section 336 of the SFO were as follows:

		Number of	shares held	Percentage
	Capacity/	Long	Short	of
Name of shareholder	Nature of interest	position	**position **	shareholding
Goldcorp Industrial	Beneficial interest	306,000,000	—	50.7%
Limited		(note 1)
Great Song Enterprises	Corporate interest	306,000,000	—	50.7%
Limited		(notes 1 and 2)
Mr. Hung Yung Lai	Corporate interest	306,000,000	—	50.7%
		(notes 2 and 4)
Ms. Li Kei Ling	Corporate interest	306,000,000	—	50.7%
		(notes 2 and 3)
Mdm Iu Pun	Family interest	306,000,000	—	50.7%
		(note 5)

Notes:

1. Goldcorp Industrial Limited is a company incorporated in the British Virgin Islands equally owned by Mr. Hung Yung Lai and Great Song Enterprises Limited which in turn is wholly owned by Ms Li Kei Ling.

2. The Shares were held by Goldcorp Industrial Limited.

3. Ms. Li Kei Ling controls more than one third of the voting power of Great Song Enterprises Limited which in turn holds more than one third of the voting power of Goldcorp Industrial Limited. Ms Li Kei Ling is deemed, by virtue of the SFO, to be interested in the same 306,000,000 shares held by Goldcorp Industrial Limited.

4. Mr. Hung Yung Lai controls more than one third of the voting power of Goldcorp Industrial Limited. Mr. Hung Yung Lai is deemed, by virtue of the SFO, to be interested in the same 306,000,000 shares held by Goldcorp Industrial Limited.

5. These shares are beneficially owned by Goldcorp Industrial Limited as mentioned in Note 4 of above. Mr. Hung Yung Lai is deemed to be interested in the same 306,000,000 shares held by Goldcorp Industrial Limited. Mdm Iu Pun is the wife of Mr. Hung Yung Lai and is deemed to be interested in these shares in which Mr. Hung Yung Lai is deemed or taken to be interested for the purpose of the SFO.

Save as disclosed above, as at 30 September 2003, the directors of chief executives of the Company were not aware of any other person (other than directors or chief executives of the Company) who had an interest or short position in the shares, underlying shares and debentures of the Company which would fall to be disclosed to the Company under the provision of Divisions 2 and 3 of Part XV of the SFO, or who was interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any other member of the Group or any other substantial shareholders as recorded in the register required to be kept by the Company under Section 336 of the SFO.

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

There was no purchase, sales or redemptions of the Company’s listed securities by the Company or any of its subsidiaries during the nine months ended 30 September 2003.

COMPETING INTERESTS

None of the Directors, the management shareholders of the Company and their respective associates (as defined in GEM Listing Rules) has an interest in a business, which competes or may compete with the businesses of the Company.

BOARD PRACTICES AND PROCEDURES

During the nine months ended 30 September 2003 the Company has complied with Board Practices and Procedures as set out in Rules 5.28 to 5.39 of the GEM Listing Rules.

AUDIT COMMITTEE

The Company has established an audit committee on 27 August 2001 with written terms of reference in compliance with the requirements of Rules 5.23 to 5.25 of the GEM Listing Rules. The primary duties of the audit committee are to review and supervise the financial reporting process and internal control procedures of the Group and to provide advice and comments to the Board. The members of the Group’s audit committee are as follows:

	Position in the	Position in the
Name	audit committee	Board of Directors
Prof. Wang, Gui Guo	Chairman	Independent Non-Executive Director
Prof. Pan, Yun He	Member	Independent Non-Executive Director

The audit committee has reviewed and commented in the Company’s interim report for the nine months ended 30 September 2003.

INTEREST OF SPONSOR

As notified and updated by ICEA Capital Limited (“ICEA”), none of ICEA, its directors, employees or associates (as referred to in note 3 to Rule 6.35 of the GEM Listing Rules) had an interest in the shares of the Company as at 30 September 2003.

Pursuant to an agreement dated 15 July 2003 entered into between the Company and ICEA, ICEA received fees for acting as the Company’s sponsor.

By Order of the Board Hung Yung Lai Chairman

Hong Kong, 13 November 2003

This announcement will remain on the “Latest Company Announcements” page on the GEM website for at least 7 days from the date of its publication.

• For identification purposes only

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