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Founder Holdings Limited

[FOR IMMEDIATE RELEASE]

FOUNDER ACHIEVES 2001 ANNUAL TURNOVER OF HK$1,670 MILLION
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CONTRACTS ON HAND HK$444 MILLION
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COMMITTED TO MAINTAIN LEADERSHIP POSITION IN SOFTWARE DEVELOPMENT

(Hong Kong - 23 April 2002) Founder Holdings Limited ("Founder", or the "Group") (stock code: 418), a leading software developer and systems integration provider, today announced its annual results for the year ended 31 December 2001.

For the year 2001, the Group achieved a turnover of approximately HK$1,670 million, as compared with the previous year's turnover of HK$2,088 million. Loss attributable to shareholders for the year ended 31 December 2001 amounted to approximately HK$384 million, while loss per share was approximately HK 34 cents. The Board of Directors does not recommend the payment of a final dividend.

At the end of December 2001, the Group had contracts on hand amounting to HK$444 million, out of which approximately HK$388 million was not completed.

Mr Alan Cheung, President and Executive Director of Founder, said, "We are confident to improve our performance in the coming year, though our last year's results turned out unsatisfactory. Remedies, such as streamlining of operations and restructuring of management and business structures, have been taken to solve the problems. We have, for example, reduced the headcount for our non-media business by nearly 50% and have also tightened control over all kinds of costs and expenses."

For the year 2001, the Group reported a substantial loss of approximately HK$172 million for its software development and systems integration business in the non-media sector. The said loss was principally attributable to five reasons: (1) unexpected slow down in sales orders especially from the banking sector, thus resulting in the drop in turnover by 58% as compared to the previous year; (2) drop in gross margin as a result of severe market competition; (3) delay in the completion of a number of sales contracts, thus leading to the non-realization of profits as scheduled within 2001; (4) over-expansion of operations, thus resulting in the surge in operating expenses; (5) restructuring costs such as severance payments and compensation pay. Furthermore, the Group recorded an impairment of goodwill in respect of this sector amounting to approximately HK$30 million in 2001 since its adoption of the new Statement of Standard Accounting Practice 31 "Impairment of Assets" and Interpretation 13 "Goodwill - continuing requirements for goodwill and negative goodwill previously eliminated against/credited to reserves".

With regard to business from software development and systems integration in the media sector, the Group recorded a decrease of 18% in turnover for the year 2001 as compared to the previous year. This drop in turnover was mostly attributable to the slowdown of the overall global economy, which largely led to holdups or decreases of capital expenditure on new systems and/or upgrading demands in the media sector.

Nevertheless, with the support of strong research and development team, the Group continued introducing new products to customers in 2001. They include Founder Fei-hong Yellow-page Typesetting System (), Founder Victory Editorial System for Magazine (), Founder Tian-jian Internet Audio & Video Integrated Solution (), Founder Tian-yi News Management System for Radio and Television Stations () and various other management systems for publishing companies. Also launched in 2001 were the Group's network publishing solutions, Founder Apabi eBook Solutions, which has been well received by renowned PRC publishers such as Peking University Press (), Tsinghua University Press () and Fudan University Press (). Additionally, our self-developed Founder GB18030 Char-set Font Library and Founder Super-set Font Library were awarded state-level recognitions by the State News and Publishing Bureau, the State Language Committee and the China National Printing Font Committee. This is the first time for a font product in the PRC to have received state-level recognitions.

For the year 2001, the businesses from software development and systems integration for the media sector and the non-media sector respectively accounted for around 32% and 15% of the Group's total turnover.

With regard to business from the distribution of information products, turnover increased slightly by 5% in 2001, as compared to the previous year. The economy uncertainties have slowed down the corporate demand for information products. We suffered from price cut and drop in profitability in addition to keen market competition, thus leading to the increase in loss contribution from HK$16 million in the previous year to HK$77 million in 2001.

Nevertheless, in mid of 2001, the Group implemented an ERP system to effectively monitor inventories and trade debtors, thus improving the efficiency of the distribution business. Besides, great progress has been made on the sales of "Founder" scanner, which is now cited as one of the top three best-seller scanners in the PRC.

"Based on the fingerprint technology developed by Peking University Founder Group Corporation, we have developed a number of industrial and consumer fingerprint products. The products were introduced to the market in the last quarter of 2001 and we foresee growing demand in the years to come."

Mr Cheung continued, "With our striking strength in research and development and our well-established customer base, we are committed to maintain our market leader position in Chinese electronic publishing systems as well as other e-media and non-media solutions."

Mr Cheung concluded, "With sizable contracts on hand, coupled with our on-going initiatives to introduce new products to the market, we are confident to turn the table soon."

- End -

Enquiries

Ms Cindy Cheung, Public Relations Officer, Founder Holdings Limited
cindy@founder.com.hk (eMail); 852-2611 4124 (Tel); 852-2413 3218 (Fax)


Source: Founder Holdings Limited
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