Full Year Financial Statement Ended 31 March 2005

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Business Review
With the gradual recovery of global economy in the beginning of the financial year ended 31st March 2005, the demand in electronic products had increased and had propelled the revival of the electronics industry worldwide. This revival, together with our effort in executing our growth plan, had led us to achieve a significant growth of 32.1% in turnover for the first half of this financial year. However, the subsequent imbalance demand and supply of electronics products had caused the built up of inventories for the industry. The imbalance situation was further affected by the macro economic measures adopted by the Chinese government to moderate the overheated economic growth. As a result, our sales in the second half year slowed down dramatically and hence overall we achieved an annual growth of 15.8% in turnover to HK$2,043.9 million (2004: HK$1,764.7 million).

Despite a 15.8% increase in turnover, gross margin had decreased from 10.1% for the financial year ended 2004 to 9.3% for 2005. The decrease was attributable to the pricing pressure arising from the competitive environment of the component industry. In addition, the Group had increased the purchasing activities during the first half of financial year in order to meet customer demand as anticipated by the market and to prepare for the possible supply shortages. However this anticipated demand did not materialize and as a result it had led us to reduce the inventories at a lower margin.

The Group was able to contain the increase in administrative expenses at a rate of 11.0%, which is less than the corresponding rate of increase in sales revenue of 15.8%. This moderate increase was achieved through the cost savings measures introduced during the year. Nevertheless, overall administrative expenses increased were due to the increase in number of staff for the expansion scheme in China and the increased provison for doubtful debts.

Other operating income decreased was mainly attributable to lower commission income of HK$14.8 million (2004: HK$21.3 million) received from our major principal as an incentive rebate for achieving certain sales target.

Financial Position
The increase in trade receivables was mainly attributable to the increase in sales in the current financial year when compared to the financial year 2004. The debtors turnover has been stable at the level of about 2 months.

The increase in inventories was due to purchase of inventories to accommodate increased sales for the coming months. Despite the higher inventory level, our stock holding period has been stable at the level of about 2 months.

The increase in other investment refers to an investment of HK$7.8 million, representing an equity interest of 7.4% in a company which specialised in smart card solutions including software and hardware development.

Cash Flow
At 31st March 2005, the Group had a working capital of HK$312.1 million, which included a cash balance of HK$214.9 million, compared to a working capital of HK$308.0 million, which included a cash balance of HK$270.1 million at 31st March 2004. The decrease in cash by HK$55.2 million was principally attributable to a cash outflow of HK$47.2 million from operating activities, a cash outflow of HK$16.2 million from investing activities and a cash inflow of HK$8.1 million from financing activities.

Cash outflow from operating activities was mainly attributable to an increase of trade receivables and inventories.

Cash outflow from investing activities was due to investment in a company which specialised in smart card solutions and the implementation cost of SAP system.

Cash inflow from financing activities increased as there were long-term bank loans raised to finance our growth in China.

The Chinese government¡¯s macro economic control measures which commenced in early 2004 will continue in 2005. High and volatile oil prices together with expected increases in interest rates will have impact on the overall economy.

In spite of the market uncertainties, we will continue with our 3-year growth plan and move on with our expansion program in China including hiring of staff and provision of training. The essence of this plan is to strive for sales growth by means of market expansion, industry breadth and depth, and human resource management.

By maintaining our continuous emphasis on China market, together with our effort in implementing our growth strategy and carrying on the continual cost savings program, barring any unforseeable circumstances, we are positive with our overall growth although we anticipate challenging market conditions for the next twelve months.