Prosten Technology Holdings Limited
Room 1506, 15/F., Tai Tung Building
8 Fleming Road, Wanchai, Hong Kong
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www.prosten.com
PROSTEN TECHNOLOGY HOLDINGS LIMITED
(Incorporated in the Cayman Islands with limited liability)
Stock Code p
THIRD QUARTERLY REPORT 2007
ZggVKg86S
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1:p"!Prosten Technology Holdings Limited
ZggVKg86SThird Quarterly Report 2007
CHARACTERISTICS OF THE GROWTH ENTERPRISE
MARKET (“GEM”) OF THE STOCK EXCHANGE OF HONG
KONG LIMITED (THE “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 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 Exchange takes no responsibility for the contents of
this report, 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
report.
This report, for which the directors (the “Directors”) of
Prosten Technology Holdings Limited (the “Company”)
collectively and individually accept full responsibility,
includes particulars given in compliance with the Rules
Governing the Listing of Securities on the GEM of the
Exchange (the “GEM Listing Rules”) for the purpose
of giving information with regard to the Company. The
Directors, having made all reasonable enquiries, confirm
that, to the best of their knowledge and belief, (1) the
information contained in this report 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 report misleading; and (3) all
opinions expressed in this report 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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ZggVKg86SThird Quarterly Report 2007
HIGHLIGHTS
The Group recorded profit from operations of
HK$10,880,000 for the nine months ended 31
December 2007, as compared to loss from
operations for HK$22,816,000 in the corresponding
period of 2006.
Excluding the impact of fair value loss and notional
interest expenses arising from convertible bonds
which amounted to HK$4,652,000 in aggregate, the
profit attributable to equity holders of the Company
for the nine months ended 31 December 2007 would
have been shown as HK$11,108,000.
The gross profit margin increased from 61% to
89% for the nine months ended 31 December 2007
compared with the same period of 2006.
The overall operating expenses for the nine
months ended 31 December 2007 decreased by
HK$28,466,000 or 55% to HK$23,648,000 compared
with the same period of 2006.
The Board does not recommend payment of any
interim dividend for the nine months ended 31
December 2007.
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ZggVKg86SThird Quarterly Report 2007
UNAUDITED CONSOLIDATED RESULTS
The Board of Directors (the “Board”) of the Company is
pleased to announce the unaudited consolidated results
of the Company and its subsidiaries (the “Group”) for the
nine months and three months ended 31 December 2007
together with the unaudited comparative figures for the
corresponding periods in 2006 as follows:
Nine months ended Three months ended
31 December 31 December
dZgdSXH dZgdSgH
2007 2006 2007 2006
Note HK$’000 HK$’000 HK$’000 HK$’000
ZggV Zgg ZggV Zgg
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(Unaudited) (Unaudited) (Unaudited) (Unaudited)
J2 J2 J2 J2
Turnover 8X 2 37,586 46,995 21,705 11,670
Cost of sales V/I (4,318) (18,526) (2,188) (6,018)
Gross profit ; 33,268 28,469 19,517 5,652
Other income I] 1,243 811 89 310
Selling expenses V/(4,871) (23,104) (2,181) (6,719)
General and administrative expenses SA (16,276) (27,888) (6,126) (8,897)
Other operating expenses I (2,484) (1,104) (1,296) (170)
Profit/(loss) from operations P;Jf& 10,880 (22,816) 10,003 (9,824)
Fair value (loss)/gain on lpN[H
derivative component of c;=
convertible bonds cf&JB (3,431) – 12,164 –
Finance costs l\ (1,238) (18) (641) (12)
Profit/(loss) before tax P;Jf& 6,211 (22,834) 21,526 (9,836)
Income tax credit/(expense) {5J 3 245 137 66 (6)
Profit/(loss) for the period I!B5[
attributable to equity holders c&
of the Company P;Jf& 6,456 (22,697) 21,592 (9,842)
Earnings/(loss) per share p;Jf& 4
Basic c?I HK1.1 (HK4.1) HK3.6 (HK1.7)
cents cents cents cents
Diluted c[ N/A N/A HK1.5 N/A
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ZggVKg86SThird Quarterly Report 2007
Notes:
1. Basis of Preparation
The Group’s unaudited consolidated results have been
prepared in accordance with Hong Kong Financial Reporting
Standards (“HKFRSs”) (which comprise Hong Kong Financial
Reporting Standards; Hong Kong Accounting Standards and
Interpretations) issued by the Hong Kong Institute of Certified
Public Accountants (“HKICPA”), accounting principles generally
accepted in Hong Kong and the applicable disclosures required
by the GEM Listing Rules.
The preparation of unaudited consolidated results in conformity
with HKFRSs requires the use of certain key assumptions
and estimates. It also requires management to exercise its
judgements in the process of applying the accounting policies.
The principal accounting policies applied in the preparation of
the unaudited consolidated results are consistent with those
adopted in the preparation of the annual consolidated financial
statements of the Group for the year ended 31 March 2007.
In the current period, the Group has applied a number of new
standard, amendment and interpretations (“new HKFRSs”)
issued by the HKICPA, which are effective for accounting
periods beginning on or after 1 January 2007. The adoption
of these new HKFRSs had no material effect on the results
or financial position of the Group for the current and/or prior
accounting periods. Accordingly, no prior period adjustment
has been required.
The Group has not early applied the new standards or
interpretations that have been issued but are not yet effective.
The directors of the Company anticipate that the application
of these new HKFRSs will have no material impact on the
unaudited consolidated results of the Group.
The unaudited consolidated results have been reviewed by the
audit committee of the Company.
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ZggVKg86SThird Quarterly Report 2007
2. Turnover
The Group’s turnover represents revenue from provision of
wireless mobile search services, wireless mobile value added
services and solution integration services, when the relevant
services have been rendered.
Revenue is measured at the fair value of the consideration
received or receivable and represents amount receivable for
services provided in the normal course of business, net of sales
related taxes.
3. Income Tax Credit/(Expense)
Nine months ended Three months ended
31 December 31 December
dZgdSXH dZgdSgH
2007 2006 2007 2006
HK$’000 HK$’000 HK$’000 HK$’000
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(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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Current period provision: Iaj
Hong Kong 0 – – – –
Elsewhere I (6) (6) (6) (6)
(6) (6) (6) (6)
Overprovision in prior years @a 251 143 72 –
245 137 66 (6)
Hong Kong Profits Tax has not been provided as the Group
did not generate any assessable profits arising in Hong Kong
for the nine months and three months ended 31 December
2007 (2006: Nil). Taxes on profits assessable elsewhere have
been calculated at the rates of tax prevailing in the countries
in which the Group operates, based on existing legislation,
interpretations and practices in respect thereof.
There was no unprovided deferred tax in respect of the nine
months and three months ended 31 December 2007 and at the
balance sheet date (2006: Nil).
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ZggVKg86SThird Quarterly Report 2007
4. Earnings/(loss) per Share
The calculation of basic and diluted earnings/(loss) per share
attributable to equity holders of the Company for the nine
months and three months ended 31 December 2007 and 2006
are based on the following data:
Nine months ended Three months ended
31 December 31 December
dZgdSXH dZgdSgH
2007 2006 2007 2006
HK$’000 HK$’000 HK$’000 HK$’000
ZggV Zgg ZggV Zgg
w w w w
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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Earnings/(loss) ;Jf&
Earnings/(loss) for the purpose 1p?I;Jf&
of basic earnings/(loss) per ;Jf&d
share, being profit/(loss) CI!B5[
for the period attributable to &P;Jf&
equity holders of the Company 6,456 (22,697) 21,592 (9,842)
Effect of dilutive potential [wpBj
ordinary shares:
Notional interest expenses clpN
on liability component of cc;
convertible bonds 641
Fair value gain on derivative clpN[H
component of convertible bonds cc;=B (12,164)
For the purpose of diluted 1p[;
earnings per share 10,069
Number of shares ppf
Weighted average number of 1p?I;Jf&
ordinary shares for the purpose of c;i
basic earnings/(loss) per share cwppf 594,740,818 552,477,273 596,775,000 563,353,261
Effect of dilutive potential [wpBj
ordinary shares:
Share options cp 34,861,295
Convertible bonds clpN 30,000,000
Weighted average number of ordinary 1p[;
shares for the purpose of diluted c;iwppf
earnings per share 661,636,295
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7:p"!Prosten Technology Holdings Limited
ZggVKg86SThird Quarterly Report 2007
The diluted earnings per share for the nine months ended 31
December 2007 was not presented, as the exercise of the share
options and the conversion of the convertible bonds would
result in an increase in earnings per share.
The diluted loss per share for the nine months and three
months ended 31 December 2006 were not presented, as
the exercise of the share options and the conversion of the
convertible bonds would result in a decrease in loss per share.
5. Reserves
Foreign
Share Statutory currency Share-based
premium reserve translation payments
account fund reserve reserve Accumulated
p , . pI losses Total
P ? 3 ]f& <
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
w w w w w w
At 1 April 2006 (Audited) Zgg,S2 339,275 53 954 283 (371,533) (30,968)
Exchange differences arising on ].n!f
consolidation of overseas [
subsidiaries 3X – – 731 – – 731
Share issue expenses p(361) – – – – (361)
Net income recognised directly B\
in equity ]X (361) – 731 – – 370
Loss for the period f&– – – – (22,697) (22,697)
Total recognised income and ]
expense for the period <X (361) – 731 – (22,697) (22,327)
Issue of shares p 9,245 – – – – 9,245
Recognition of share-based pI
payments – – – 671 – 671
At 31 December 2006 ZggdZgdS
(Unaudited) J2 348,159 53 1,685 954 (394,230) (43,379)
At 1 April 2007 (Audited) ZggV,S2 348,159 53 1,926 1,204 (405,936) (54,594)
Exchange differences arising on ].n!f
consolidation of overseas [3X
subsidiaries and net income B\
recognised directly in equity ]X – – 1,131 – – 1,131
Profit for the period P;– – – – 6,456 6,456
Total recognised income and ]
expense for the period <X – – 1,131 – 6,456 7,587
Exercise of share options 4p628 – – – – 628
Recognition of share-based pI
payments – – – 2,013 – 2,013
Transfer 7a– – – (172) 172 –
At 31 December 2007 ZggVdZgdS
(Unaudited) J2 348,787 53 3,057 3,045 (399,308) (44,366)
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8:p"!Prosten Technology Holdings Limited
ZggVKg86SThird Quarterly Report 2007
INTERIM DIVIDEND
The Board does not recommend payment of any interim
dividend for the nine months ended 31 December 2007
(2006: Nil).
MANAGEMENT DISCUSSION AND ANALYSIS
Financial Review
For the three months ended 31 December 2007, the
Group’s turnover was increased by 86% as compared with
the same period in 2006. The increase was contributed by
the continuous growth of wireless music search services.
The Group recorded a decrease of 20% in turnover to
HK$37,586,000 for the nine months ended 31 December
2007, as compared with the corresponding period last year.
The decrease was due to the cessation of previous mobile
value added services business since February 2007.
The Group’s gross profit margin for the nine months
ended 31 December 2007 was 89%, which represented
an improvement over the gross profit margin of 61% as
recorded in the corresponding period in last year. For the
three months ended 31 December 2007, the gross profit
margin was 90%, which was significantly increased as
compared with 48% as recorded in same period in 2006.
The Group continued to maintain a high gross profit margin
during this quarter as wireless music search services has
become the core business of the Group and this segment
has a relatively higher gross profit margin compared with
other segments.
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ZggVKg86SThird Quarterly Report 2007
For the nine months ended 31 December 2007, there was
a substantial decrease by HK$18,233,000 or 79% in the
selling expenses of the Group. During the period under
review, the Group reduced its general and administrative
expenses by 42% or HK$11,612,000 to HK$16,276,000
through continuous efforts to tighten the Group’s budget
controls. The Group’s overall operating expenses
(including selling expenses, general and administrative
expenses, other operating expenses and finance costs but
excluding notional interest expenses) was HK$23,648,000,
representing a 55% decline comparing with the
corresponding period last year.
The profit attributable to equity holders of the Company for
the nine months ended 31 December 2007 amounted to
HK$6,456,000, significantly improved by HK$29,153,000 as
compared to loss position of last year.
During the nine months ended 31 December 2007, the
Group recorded an aggregate amount of HK$4,652,000
for fair value loss on derivative component of convertible
bonds and notional interest expenses. By excluding such
accounting impact from the convertible bonds, the profit for
the nine-month period attributable to equity holders of the
Company would have been shown as HK$11,108,000.
Financial Position, Liquidity, Gearing Ratio and Financial
Resources
The total equity of the Group as at 31 December 2007
was HK$15,311,000 (31 December 2006: HK$15,858,000).
The Group has net current assets of HK$43,010,000
(31 December 2006: HK$9,483,000). The Group’s
current ratio, as a ratio of current assets to current
liabilities, was approximately 4.1 as at 31 December
2007 (31 December 2006: 1.3). As at 31 December
2007, the gearing ratio of the Group, as a ratio of total
borrowings to total equity, was 218% (31 December
2006: 0%).
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ZggVKg86SThird Quarterly Report 2007
For the nine-month period under review, the Group
financed its operations mainly with its revenue from
operations and the net proceeds from the issue of
convertible bonds during the period. The Group had bank
and cash balances of HK$18,266,000 as at 31 December
2007 (31 December 2006: HK$14,148,000).
Capital Structure
The shares of the Company were listed on GEM on
28 March 2000. The change of the Company’s capital
structure during the period under review was set out as
follows.
Issue of Convertible Bonds under General Mandate
Pursuant to a convertible bonds subscription agreement
dated 30 April 2007, the Company issued certain five-
year HK$28,800,000 zero-coupon convertible bonds
(“Convertible Bonds”) (which may be converted into
shares to be allotted and issued under general mandate)
to a subscriber which is an existing shareholder of the
Company. The Convertible Bonds may, upon exercise of
the conversion rights attaching to them, into new shares
at the conversion price initially of HK$0.96 per share
(subject to adjustment) at any time during the five years
commencing from the date of first issue of the Convertible
Bonds (the “Convertible Bonds Subscription”).
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If the holder(s) of the Convertible Bonds exercise the
conversion right attached to the Convertible Bonds in
full at the initial conversion price of HK$0.96 per share,
a total of 30,000,000 shares will be issued, representing
about 5.06% of the issued share capital of the Company
before exercise the conversion right and representing
approximately 4.82% of the issued share capital of the
Company as enlarged by such issue. If the holder(s) of the
Convertible Bonds exercise the conversion right attached
to the Convertible Bonds in full at the adjusted conversion
price of HK$0.50 per share, a total of 57,600,000 shares
will be issued, representing about 9.72% of the issued
share capital of the Company before exercise the
conversion right and representing approximately 8.86% of
the issued share capital of the Company as enlarged by
such issue.
The net proceeds from the issue of the Convertible Bonds
was approximately HK$28,000,000. The Convertible Bonds
Subscription was completed on 6 June 2007. There was
no movement in the number of these Convertible Bonds
during the period.
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Business Review and Outlook
The third quarter has special significance to the Group.
Since the exclusive launch of the wireless music search
service with China Mobile in the beginning of 2007,
the Group recorded a significant increase in profit from
operations to HK$10,003,000 for this quarter. At the same
time, turnover for this quarter also reached HK$21,705,000,
representing a significant increase of 137% as compared to
the second quarter of this financial year, and an increase of
86% as compared to the corresponding period of last year.
The overall improvement of the results of the Group is
mainly attributed to the following factors:
1. Innovative services products. It helped to improve
user experience, which in turn brings along positive
effects for driving up the users demand on wireless
music download. It also created new revenue
opportunities from the Group’s search services.
2. Strengthening of operational capabilities. Through
large-scale restructuring of the operation team,
operational efficiency has significantly improved and
has become a main driving force of the increase in
operating income.
3. Continuous improvement of the relationship
with operators. The Group has developed its
collaboration with China Mobile and other provincial
mobile operators both in terms of depth and scope,
which enabled the Group to explore more business
resources, especially for the support of marketing.
After nearly a year of extensive promotion, user
awareness of wireless music search service has
increased rapidly. Up to now, over 80 million wireless
music users have used the Group’s search services.
At the same time, the Group has established a sales
services network covering 31 provinces (municipalities)
and/or autonomous regions in Mainland China, which
has become one of the driving forces for the increase
in operating income of the Group.
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ZggVKg86SThird Quarterly Report 2007
4. Developing partnership in wireless search business.
Through aggressive business development efforts, the
Group has established various forms of partnership
with major wireless services providers and content
providers in Mainland China, which has helped to
create more new business opportunities and bring
positive contributions to the business of the Group in
the long run.
5. New management team. The Group has recruited a
number of experienced senior management members,
including the CEO, the Vice President of Operations
and the Director of Business Development. The
productivity of the Group was effectively improved
by their innovative but professional management
concepts and mature management practices,
reconstructing and enhancing internal business
procedures, improving the management system of staff
efficiency, and restructuring the organization structure
based on the business development requirement. In
the meantime, the above positive changes have also
boosted the confidence of the Group’s staff, which
helps to further motivate them.
Looking forward, the Group will speed up the launch
of new services and products to satisfy strong market
demand based on its new business development plans.
According to the latest market data, the total number of
mobile users in China exceeded 500 million, of which only
50% of them have used wireless music services, while
the accumulated number of music search subscribers
accounts for less than 20%. This indicates that market is
full of potential.
The Group is prepared to launch general search services
in the near future, and hopes to gain a dominant position
in the wireless search sector by leveraging on the Group’s
large user base and operational experiences gained in the
wireless music search service.
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14:p"!Prosten Technology Holdings Limited
ZggVKg86SThird Quarterly Report 2007
DIRECTORS’ INTERESTS AND SHORT
POSITIONS IN SHARES, UNDERLYING
SHARES AND DEBENTURES
As at 31 December 2007, the interests or short positions
of the Directors and chief executive 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 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 provisions of the
SFO), or which were recorded in the register required to
be kept by the Company under Section 352 of the SFO,
or which were required, pursuant to the code of conduct
regarding securities transactions by Directors adopted
by the Company, to be notified to the Company and the
Exchange, were as follows:
Long positions in the ordinary shares of the Company
Percentage of
the Company’s
issued share
capital
Note (3)
Capacity and Number of &I!
nature of interest ordinary shares pI
Name of Director Notes wp
+ W B/ ppf W (3)
Mr. Yip Heon Wai (1) Interest of a controlled corporation 100,000,000 16.76%
j[ aS!B
Mr. Yip Heon Keung (2) Interest of controlled corporations 404,280,619 67.74%
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15:p"!Prosten Technology Holdings Limited
ZggVKg86SThird Quarterly Report 2007
Notes:
(1) These shares are held by Uniright Group Limited (“Uniright”)
and its entire issued share capital is held by Mr Yip Heon Wai
and Mr. Yip Heon Keung in equal shares. By virtue of the SFO,
Mr. Yip Heon Wai is deemed to be interested in 100,000,000
shares of the Company held by Uniright.
(2) Among these shares, an aggregate of 304,280,619 shares are
held through Greenford Company Limited, Century Technology
Holding Limited and Bakersfield Global Corporation as trustees
of The Greenford Unit Trust, The Century Unit Trust and The
Bakersfield Unit Trust, respectively. All the units of which
are held by Ace Central Group Limited (“Ace Central”) as the
trustee of The New Millennium Trust, a discretionary family
trust and Mr. Yip Heon Keung is the sole director and sole
shareholder of Ace Central. 100,000,000 shares are held by
Uniright and its entire issued capital is held by Mr. Yip Heon
Wai and Mr. Yip Heon Keung in equal shares. By virtue of
the SFO, Mr. Yip Heon Keung is deemed to be interested
in 304,280,619 shares of the Company held by Ace Central
and 100,000,000 shares of the Company held by Uniright,
respectively.
(3) Based on 596,775,000 shares in issue as at 31 December 2007.
(4) Mr. Yip Seng Mun and Mr. Yip Heon Ping, former Directors,
have retired as Directors of the Company but remained as
members of an advisory committee of a subsidiary of the Group
since 6 June 2007.
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_Greenford Company Limitede
Century Technology Holding Limited
Bakersfield Global Corporation
9The Greenford Unit TrusteThe
Century Unit TrustThe Bakersfield
Unit Trusta[5d
i_Ace Central Group
LimitedAce CentralThe New
Millennium TrustS
a[5dv[
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16:p"!Prosten Technology Holdings Limited
ZggVKg86SThird Quarterly Report 2007
Long positions in underlying shares of the Company
Share Options
The Company operates a share option scheme for the
purpose of providing incentives and rewards to eligible
participants who contribute to the success of the Group’s
operations. Eligible participants include the Company’s
Directors and employees of the Group. Under the terms
of the share option scheme adopted by the Company on
7 March 2000, the Board was authorised, at its absolute
discretion, to grant options to the Company’s Directors
and employees of the Group, to take up options to
subscribe for ordinary shares of the Company. The share
option scheme became effective for a period of 10 years
commencing on the listing of the Company’s shares on
the GEM of the Exchange on 28 March 2000 (the “Old
Scheme”).
At the annual general meeting held on 27 July 2001,
ordinary resolutions were passed by the shareholders to
approve the cancellation and the re-grant of the share
options under the Old Scheme.
At the extraordinary general meeting of the Company
held on 9 April 2002 (the “EGM”), ordinary resolutions
to approve the termination of the Old Scheme and
the adoption of a new share option scheme (the “New
Scheme”) were duly passed by the shareholders. Upon
termination of the Old Scheme, no further options will be
granted thereunder but in all other respects, the provisions
of the Old Scheme shall remain in force and all options
granted prior to such termination shall continue to be valid
and exercisable in accordance therewith. The New Scheme
became effective for a period of 10 years commencing on
23 April 2002. Under the New Scheme, the Directors may,
at their sole discretion, grant to any eligible participants
under the New Scheme options to subscribe for ordinary
shares of the Company at the higher of (i) the closing price
of shares of the Company on the GEM as stated in the
Exchange’s daily quotation sheet on the date of the offer
of grant; or (ii) the average closing price of the shares of
the Company on the GEM as stated in the Exchange’s
daily quotation sheets for the five trading days immediately
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17:p"!Prosten Technology Holdings Limited
ZggVKg86SThird Quarterly Report 2007
preceding the date of the offer of grant; and (iii) the nominal
value of the share. The offer of a grant of options may
be accepted within 21 days from the date of the offer. A
nominal consideration of HK$1 is payable on acceptance of
the grant of an option.
At the annual general meeting of the Company held on 25
July 2006 (the “AGM”), an ordinary resolution was passed
by the shareholders to approve the refreshing of the 10%
general limit on the grant of share options under the New
Scheme.
The total number of shares which may be allotted and
issued upon exercise of all options to be granted under the
New Scheme is an amount equivalent to 10% of the shares
of the Company in issue as at the date of the AGM.
The maximum number of securities to be allotted and
issued upon the exercise of all outstanding options granted
and yet to be exercised under the New Scheme and any
other share option schemes of the Group must not in
aggregate exceed 30% of the relevant class of securities of
the Company in issue from time to time.
In accordance with the terms of the relevant share option
schemes, the exercise period of the options granted is
determinable by the Directors, and commences after
certain vesting period and ends in any event not later than
10 years from the respective date when the share options
are granted, subject to the provisions for early termination
thereof.
A total of 20,000,000 share options exercisable at an
exercise price of HK$0.396 per share and a total of
1,500,000 share options exercisable at an exercise price
of HK$0.878 per share were granted by the Company on 6
July 2007 and 23 November 2007 respectively. During the
nine months ended 31 December 2007, a total of 900,000
share options lapsed under the New Scheme. As at 31
December 2007, the Company had outstanding options
to subscribe for up to 25,365,000 shares and 35,530,000
shares under the Old Scheme and the New Scheme,
respectively.
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18:p"!Prosten Technology Holdings Limited
ZggVKg86SThird Quarterly Report 2007
The following Directors were granted share options under
the Old Scheme to subscribe for shares of the Company,
details of which are as follows:
Number of share options
ppf
At Date of Exercise period Exercise price
At 1 April Lapsed Transferred 31 December share options of share options of share options
2007 during during 2007 re-granted re-granted re-granted
Name of Director ZggV the period the period ZggV p p p
+ ,S 0 7a dZgdS 4" 4
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Mr. Yip Seng Mun 6,000,000 – (6,000,000) – 22 August 2001 22 August 2001 to 0.40
tO[ ZggS 21 August 2011
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Mr. Yip Heon Ping 6,300,000 – (6,300,000) – 22 August 2001 22 August 2001 to 0.40
;[ ZggS 21 August 2011
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Mr. Yip Heon Wai# 5,300,000 – – 5,300,000 22 August 2001 22 August 2001 to 0.40
j[# ZggS 21 August 2011
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Mr. Yip Heon Keung 5,300,000 – – 5,300,000 22 August 2001 22 August 2001 to 0.40
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19:p"!Prosten Technology Holdings Limited
ZggVKg86SThird Quarterly Report 2007
Mr. Yip Seng Mun and Mr. Yip Heon Ping have retired as
Directors of the Company but remained as members of an
advisory committee of a subsidiary of the Group since 6 June
2007. Pursuant to the Old Scheme, they are still entitled to their
share options to subscribe for 6,000,000 shares and 6,300,000
shares of the Company respectively in their capacity as
employees of the Group.
# In addition to the options to subscribe for up to 5,300,000
shares personally held by Mr. Yip Heon Wai, he is also deemed
to be interested in the share options held by his spouse (in
her capacity as an employee of the Company) to subscribe
for 4,300,000 shares of the Company at an exercise price of
HK$0.40 within the meaning of Part XV of the SFO, and whose
exercise period is from 22 August 2001 to 21 August 2011.
None of the Directors were granted share options under the
New Scheme to subscribe for shares of the Company.
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20:p"!Prosten Technology Holdings Limited
ZggVKg86SThird Quarterly Report 2007
INTERESTS AND SHORT POSITIONS OF
SUBSTANTIAL SHAREHOLDERS
As at 31 December 2007, shareholders (other than the
Directors or chief executive of the Company) who had
interests or short positions in the shares or underlying
shares 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 which were recorded in the register
required to be kept by the Company under Section 336 of
the SFO were as follows:
Interest or short positions in the ordinary shares or
underlying shares of the Company
Percentage of
Number of the Company’s
ordinary shares or issued share
underlying shares capital
Note (12) Note (13)
Capacity and wp &I!
nature of interest p pI
Name of shareholder Notes ppf
pH W B/ W(12) W(13)
Greenford Company Limited (1) Directly beneficially owned 122,597,702 (L) 20.54%
\B
Century Technology Holding Limited (2) Directly beneficially owned 122,597,701 (L) 20.54%
\B
Bakersfield Global Corporation (3) Directly beneficially owned 59,085,216 (L) 9.90%
\B
Ace Central Group Limited (4) Trustee of a discretionary 304,280,619 (L) 50.99%
(as trustee of The New family trust & through
Millennium Trust) controlled corporations
The New Millennium Trust
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21:p"!Prosten Technology Holdings Limited
ZggVKg86SThird Quarterly Report 2007
Percentage of
Number of the Company’s
ordinary shares or issued share
underlying shares capital
Note (12) Note (13)
Capacity and wp &I!
nature of interest p pI
Name of shareholder Notes ppf
pH W B/ W(12) W(13)
Mr. Yip Heon Ping (1), (4) & (5) Object of a discretionary 310,580,619 (L) 52.04%
;[ family trust & through
a controlled corporation
Me@
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Mr. Yip Seng Mun (2), (3), (4) & (6) Founder of a 310,280,619 (L) 51.99%
tO[ discretionary family trust,
beneficially owned & through
controlled corporations
l[dB
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Knicks Capital Inc. (7) Directly beneficially owned 51,125,000 (L) 8.57%
\B
Mr. Zhang Xingsheng (7) & (8) Beneficially owned & through 51,625,000 (L) 8.65%
ut[[ a controlled corporation
B
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Uniright Group Limited (9) & (11) Directly beneficially owned 100,000,000 (L) 16.76%
\B 57,142,857 (S) 9.58%
Tallmany Enterprises Limited (10) & (11) Directly beneficially owned 244,742,857 (L) 41.01%
\B
22:p"!Prosten Technology Holdings Limited
ZggVKg86SThird Quarterly Report 2007
Notes:
1. Greenford Company Limited is a company incorporated in the
British Virgin Islands and its entire issued share capital is held
by Mr Yip Heon Ping, a former Director of the Company and a
Director during part of the period under review.
2. Century Technology Holding Limited is a company incorporated
in the British Virgin Islands and its entire issued share capital
is beneficially owned by Mr Yip Seng Mun, a former Director
of the Company and a Director during part of the period under
review.
3. Bakersfield Global Corporation is a company incorporated in
the British Virgin Islands and its entire issued share capital is
beneficially owned by Mr Yip Seng Mun, a former Director of
the Company and a Director during part of the period under
review.
4. An aggregate of 304,280,619 shares are held through
Greenford Company Limited, Century Technology Holding
Limited and Bakersfield Global Corporation as trustees of
The Greenford Unit Trust, The Century Unit Trust and The
Bakersfield Unit Trust, respectively. All the units of which are
held by Ace Central Group Limited as the trustee of The New
Millennium Trust, a discretionary family trust established with
Mr Yip Seng Mun as the founder and Mr Yip Heon Ping as one
of the discretionary objects for the time being. Both of them are
the former Directors of the Company and Directors during part
of the period under review.
Mr Yip Heon Keung, a Director of the Company, is the sole
director and sole shareholder of Ace Central Group Limited.
5. By virtue of the SFO, Mr. Yip Heon Ping is deemed to be
interested in 304,280,619 shares of the Company as one of
the discretionary objects of The New Millennium Trust. In
addition, he is also entitled to his share options to subscribe
for 6,300,000 shares of the Company in his capacity as an
employee of the Group.
Wj
1. Greenford Company LimitedS
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3. Bakersfield Global CorporationS
n~Wm!d
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4. 304,280,619pp_Greenford
Company LimitedeCentury
Technology Holding Limited
Bakersfield Global Corporation
9The Greenford Unit TrusteThe
Century Unit TrustThe Bakersfield
Unit Trusta[5f
i_Ace Central
Group LimitedThe New Millennium
Trusta[5dThe New
Millennium TrustStO
[l[;[I
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Millennium TrustISM
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23:p"!Prosten Technology Holdings Limited
ZggVKg86SThird Quarterly Report 2007
6. By virtue of the SFO, Mr. Yip Seng Mun is deemed to be
interested in 304,280,619 shares of the Company as the
founder of the New Millennium Trust and personally interested
in 2,000,000 shares of the Company. In addition, he is also
entitled to his share options to subscribe for 4,000,000 shares
of the Company in his capacity as an employee of the Group.
7. Knicks Capital Inc. is a company incorporated in the British
Virgin Islands and its entire issued share capital is held by Mr.
Zhang Xingsheng.
8. Mr. Zhang Xingsheng is also personally interested in 500,000
shares of the Company.
9. Uniright Group Limited (“Uniright”) is a company incorporated
in the British Virgin Islands and its entire issued share capital
is held by Mr Yip Heon Wai and Mr Yip Heon Keung in equal
shares, both being Directors of the Company.
10. Tallmany Enterprises Limited (“Tallmany”) is a company
incorporated in the British Virgin Islands and currently holds
30,000,000 shares of the Company. It is a wholly owned
subsidiary of China Broadband Capital Partners, L.P., a fund
established in the Cayman Island as an exempted limited
partnership (the “Fund”). CBC Partners, L.P. (“CBC Partners”)
holds approximately 1.01% of the issued share capital of the
Fund, which in turn is ultimately wholly owned by Dr. Edward
Tian indirectly. Dr. Xu Zhiming, a Director of the Company, is
the sole director of Tallmany.
6. N7dThe New
Millennium Trustl[dtO
[uVI!304,280,619
ppBI!2,000,000
ppH[Bf .du
Ip.I!
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7. Knicks Capital Inc.Sn~
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pH[Bf
9. Uniright Group LimitedUniright
Sn~Wm
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TallmanySn~
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8?China Broadband Capital
Partners, L.P.?
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24:p"!Prosten Technology Holdings Limited
ZggVKg86SThird Quarterly Report 2007
11. Tallmany is also the holder of the Convertible Bonds issued
by the Company on 6 June 2007. If the convertible rights
attached to the Convertible Bonds are exercised in full at
the initial conversion price of HK$0.96 per share, Tallmany
will become interested in a total of 30,000,000 shares of the
Company. If the convertible rights attached to the Convertible
Bonds are exercised in full at the adjusted conversion price of
HK$0.50 per share, Tallmany will become interested in a total of
57,600,000 shares of the Company.
Simultaneously, Tallmany is also the holder of the zero-
coupon exchangeable bonds in the principal amount of
HK$30,000,000 due 2012 (“Exchangeable Bonds”) issued by
Uniright on 6 June 2007. If the exchange rights attached to the
Exchangeable Bonds are exercised in full at the initial exchange
price of HK$1.00 per share, a total of 30,000,000 shares of
the Company will be transferred by Uniright to Tallmany. If
the exchange rights attached to the Exchangeable Bonds are
exercised in full at the adjusted exchange price of HK$0.525
per share, a total of 57,142,857 shares of the Company will be
transferred by Uniright to Tallmany.
It is agreed between the parties to the Exchangeable Bonds
subscription agreement (“EB Subscription Agreement”) that at
completion, Uniright, as a chargor, shall deliver to Tallmany,
as a chargee, a duly executed share charge in respect of the
charging of 100,000,000 ordinary shares of the Company
(“Shares”) by Uniright in favor of Tallmany (“Share Charge”). On
6 June 2007, being the completion date of the EB Subscription
Agreement, Uniright executed and delivered the Share Charge
to Tallmany. Subject to the terms and conditions set out
therein, Uniright pledged 100,000,000 Shares to Tallmany as
the collateral created by this Share Charge.
12. The letter “L” denotes long position in the ordinary shares
of the Company. The letter “S” denotes short position in the
underlying shares of the Company.
13. Based on 596,775,000 shares in issue as at 31 December 2007.
11. Tallmany uJI!ZggV
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25:p"!Prosten Technology Holdings Limited
ZggVKg86SThird Quarterly Report 2007
Save as disclosed above, as at 31 December 2007, the
Company has not been notified by any persons (other
than the Directors or chief executive of the Company) who
had interests or short positions in the shares or underlying
shares 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 which were recorded in the register
required to be kept by the Company under Section 336 of
the SFO.
COMPETING INTERESTS
None of the Directors or the management shareholders
of the Company or their respective associates (as defined
under the GEM Listing Rules) have any interests in a
business which competes or may compete with the
business of the Group, or has any other conflict of interest
with the Group during the period under review.
PURCHASE, REDEMPTION OR SALE OF THE
COMPANY’S LISTED SECURITIES
During the nine months ended 31 December 2007, neither
the Company nor any of its subsidiaries has purchased,
redeemed or sold any of the Company’s listed securities.
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26:p"!Prosten Technology Holdings Limited
ZggVKg86SThird Quarterly Report 2007
CORPORATE GOVERNANCE PRACTICES
Save as the deviation disclosed below, the Company
has complied with all the code provisions set out in the
Code on Corporate Governance Practices as contained
in Appendix 15 of the GEM Listing Rules (“Code on CG
Practices”) throughout the period under review.
With respect to the deviation, the Code provision A.2.1.
provides that the roles of Chairman and Managing Director
should be separate and should not be performed by the
same individual. The division of responsibilities between
the Chairman and Managing Director should be clearly
established and set out in writing. During the period under
review, given that the size of the Group was relatively
small, Mr. Yip Heon Wai served the dual role of Chairman
and Managing Director following his appointment as the
Chairman of the Company on 6 June 2007. The Board
considers that the same person assuming dual roles
could help to command control of the Group’s operations.
Notwithstanding the above, the Board will review the
current organization structure from time to time and will
make appropriate changes when necessary.
DIRECTORS’ SECURITIES TRANSACTIONS
The Company has adopted a code of conduct regarding
securities transactions by Directors on terms no less
exacting than the required standard of dealings as set
out in Rules 5.48 to 5.67 of the GEM Listing Rules. In
response to specific enquiry made by the Company, each
of the Directors gave confirmation that he/she complied
with the required standard of dealings and the code of
conduct regarding securities transactions by the Directors
throughout the nine months ended 31 December 2007.
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27:p"!Prosten Technology Holdings Limited
ZggVKg86SThird Quarterly Report 2007
AUDIT COMMITTEE
The Company established an audit committee (“Audit
Committee”) on 7 March 2000 and has formulated and
from time to time amended its written terms of reference in
accordance with the provisions set out in the Code on CG
Practices. The terms of reference of the Audit Committee
are available on the Company’s website.
As at the date of this report, the Audit Committee
comprises three independent non-executive Directors of
the Company, namely Mr. James T. Siano (Chairman of the
Audit Committee), Ms. Tse Yuet Ling, Justine and Ms. Lai
May Lun.
The primary duties of the Audit Committee include the
review and supervision of the Group’s financial reporting
system and internal control procedures, review of the
Group’s financial information and review of the relationship
with the auditors of the Company.
The Audit Committee has reviewed the draft of this report
and has provided advice and comments thereon.
REMUNERATION COMMITTEE
In accordance with the Code on CG Practices, the
Company established its remuneration committee
(“Remuneration Committee”) on 17 June 2005 with
written terms of reference. The terms of reference of the
Remuneration Committee are available on the Company’s
website.
The Remuneration Committee comprises two independent
non-executive Directors of the Company, namely Ms.
Tse Yuet Ling, Justine (Chairman of the Remuneration
Committee), Ms. Lai May Lun and one executive Director,
Mr. Yip Heon Keung.
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28:p"!Prosten Technology Holdings Limited
ZggVKg86SThird Quarterly Report 2007
The principal responsibilities of the Remuneration
Committee include making recommendations to the Board
on the Company’s policy and structure for all remuneration
of Directors and senior management and reviewing the
specific remuneration packages of all executive Directors
and senior management by reference to corporate goals
and objectives resolved by the Board from time to time.
By Order of the Board
Yip Heon Wai
Chairman
Hong Kong, 4 February 2008
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Prosten Technology Holdings Limited
Room 1506, 15/F., Tai Tung Building
8 Fleming Road, Wanchai, Hong Kong
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www.prosten.com
PROSTEN TECHNOLOGY HOLDINGS LIMITED
(Incorporated in the Cayman Islands with limited liability)
Stock Code p
THIRD QUARTERLY REPORT 2007
ZggVKg86S
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THIRD QUARTERLY REPORT 2007 |
