09:24     GUANGDONG KELON<00921> - Results Announcement (2)                   

                                                                              
    (a)     Included in turnover for the year ended 31 December 2004 of       
    approximately RMB8,436 million were recorded sales to two customers in the
    People's Republic of China in the aggregate amount of approximately RMB576
    million of which approximately RMB427 million were recorded in December   
    2004.  One of these customers for which sales of RMB297 million were      
    recorded in December was a new customer with which the Group had not      
    previously traded.  We sought but were unable to obtain direct            
    confirmations from these customers.  We were unable to satisfy ourselves  
    as to the validity of the new customer in December 2004.  Of the aggregate
    amount of sales to these two customers during the year, approximately RMB 
    576 million had not been settled at the balance sheet date and            
    approximately RMB556 million remained unsettled as at the date of this    
    report.  Against this background, we were unable to obtain sufficient     
    evidence to satisfy ourselves concerning either the validity of the above 
    sales or the validity of the related trade receivables  included in the   
    consolidated balance sheet as at 31 December 2004.  Accordingly, we were  
    unable to satisfy ourselves that sales for the year ended 31 December 2004
    and trade receivables as at that date were free from material             
    misstatement.                                                             
                                                                              
    (b)     The Group recorded sales returns of over RMB200 million during the
    year ended 31 December 2004.  Notwithstanding this, the management of the 
    Group considered that no allowance for sales returns at 31 December 2004  
    is necessary.  However, we were unable to obtain sufficient information   
    and explanation to satisfy ourselves that no allowance for sales returns  
    at 31 December 2004 is required to be made.                               
                                                                              
    Any adjustments found to be necessary to the above amounts would affect   
    the net assets of the Group as at 31 December 2004 and the loss of the    
    Group for the year then ended.                                            
                                                                              
    In forming our opinion we also evaluated the overall adequacy of the      
    presentation of information in the financial statements.  We believe that 
    our audit provides a reasonable basis for our opinion.                    
                                                                              
    Qualified opinion arising from limitations of audit scope                 
                                                                              
    Except for any adjustments that might have been found to be necessary had 
    we been able to obtain sufficient evidence concerning the matters  set out
    in the basis of opinion section of the report, in our opinion the         
    financial statements give a true and fair view of the state of affairs of 
    the Company and the Group as at 31 December 2004 and of the loss and cash 
    flows of the Group for the year then ended and have been properly prepared
    in accordance with the disclosure requirements of the Hong Kong Companies 
    Ordinance.                                                                
                                                                              
    In respect alone of the limitations on our work described in the basis of 
    opinion section of this report:                                           
                                                                              
    -       we have not obtained all the information and explanations that we 
    considered necessary for the purpose of our audit; and                    
                                                                              
    -       we were unable to determine whether proper books of account had   
    been kept.                                                                
                                                                              
    For more details, please refer to the press announcement today.