10:03     FIRST DRAGONCOM<00875> - Announcement (4)                           

    Despite the change in the composition of the Board, there is no           
    material impact on the operation of the Group because the majority        
    of the existing executive directors remain on the Board. The change       
    in the composition of the Board will also not affect the timetable        
    of the release of financial results of the Group for the year ended       
    31 December 2004.                                                         
                                                                              
    RESULT OF THE REVIEW OF INTERNAL CONTROLS                                 
                                                                              
    As mentioned in the announcement of the Company dated 29 June 2004,       
    the Company has engaged an independent professional firm to               
    conduct a review of its accounting and record keeping system and          
    procedures for the Group's books and records.                             
                                                                              
    The relevant part of the results of the independent review is set         
    out as follows:                                                           
                                                                              
    Written Procedures for Financial Reporting                                
                                                                              
    Finding                                                                   
                                                                              
    The Group did not have written procedures for the subsidiaries            
    located in the PRC to report financial information to the Company.        
                                                                              
    The Group did not have detailed system and procedure                      
    documentation.                                                            
                                                                              
    The Group did not have internal control procedures to ensure              
    implementation.                                                           
                                                                              
    Impact                                                                    
                                                                              
    Companies are obliged to keep books and records for a specific            
    period and meet the financial reporting requirements as stipulated        
    by the relevant rules and regulations in both the PRC and Hong Kong.      
    Besides, proper record keeping enable the management to keep track        
    of the transactions and the balances or for future reference in           
    decision making. In addition, certain contracts and documents,            
    government approval documents, approved vouchers are significant          
    evidence of approved transactions or business activities. It would        
    jeopardize the position of the Group in protecting its interests          
    in case of disputes if such documents are lost or cannot be timely        
    located.                                                                  
                                                                              
    Suggestion to Improvement                                                 
                                                                              
    The Group should increase staff awareness on proper, safe and             
    authorized access and application of financial information which          
    are significant assets of the Group. Original documents and               
    significant contracts and documents which are key sources for             
    producing vouchers and journals should be safely and separately           
    kept in order to reduce the risk of being lost. Access of such            
    information should be tracked and approved by authorized person           
    who is preferably senior or experienced staff. Written policies           
    and procedures or guidelines on safe-keeping and access                   
    authorization should be adopted. Management should also carried           
    out inspection to ensure such policies and procedures are properly        
    followed.                                                                 
                                                                              
    Management Response                                                       
                                                                              
    The management agreed to adopt the suggestion.                            
                                                                              
    Staff Planning and Job Handover Procedures                                
                                                                              
    Finding                                                                   
                                                                              
    The Group did not have staff planning on approval of vacation             
    leaves or emergency plan on unexpected staff turnover for the             
    accounting department.                                                    
                                                                              
    Impact                                                                    
                                                                              
    Lack of staff may jeopardize the normal accounting function or            
    expose the Group to the risk of failing to meet the statutory             
    financial reporting deadlines or reporting requirements.