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1997 Annual Report

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Growing into the next generation

We have a clear vision about how the future is to be distinctively different and unique, and have built up a position of significant advantages over the last decade to capture the opportunities ahead.





About Champion

It has been ten years since Champion introduced the world's first multi-lingual pager, and forty years since another member of the Group introduced the world's first tone pager, both making technological history. The revolution that the ever-evolving paging and information technology enabled has enhanced productivity and communication, empowering and enriching people's lives in the workplace, at school, and at home.

Today the Champion Group supplies the paging industry with the chips, boards, systems, software, and service operations that are the "ingredients" of wireless messaging architecture. These products are custom-designed for industry members and mass consumers to produce the most efficient and cost-effective wireless communications means. Capitalising on our information technology and paging platform to embrace other wireless solutions and opportunities, Champion's mission is to be the pre-eminent building block supplier to the new communications, information, and technology industry.

Champion's products and services are available in more than 10 languages, and sold in over 50 countries world-wide, with a primary focus on emerging markets, including China, India and Russia, and an established base in Europe.





Contents



Champion
Directors
Paul KAN Man Lok (Chairman)
James CARTER (Group Managing Director)
Leo KAN Kin Leung
Sunny LAI Yat Kwong
Terry John MILLER*
Jennifer CHEUNG Mei Ha*
* Non-executive Directors

Company Secretary
Jennifer CHEUNG Mei Ha

Principal Place of Business
The Penthouse
Kantone Centre
1 Ning Foo Street
Chaiwan
Hong Kong

Registered Office
P.O. Box 1787
Second Floor
One Capital Place
Grand Cayman
Cayman Islands
British West Indies

Auditors
Deloitte Touche Tohmatsu

Principal Bankers
The Hongkong and Shanghai Banking Corporation Ltd.
National Westminster Bank PLC
Standard Chartered Bank
The Sanwa Bank Ltd.
Dao Heng Bank

Share Registrars
Cayman Islands:
The RHB Trust Co. Ltd.
P.O. Box 1787
2nd Floor
One Capital Place
George Town
Grand Cayman
Cayman Islands
British West Indies

Hong Kong:
Secretaries Limited
5th Floor
Wing On Centre
111 Connaught Road Central
Hong Kong

Depositary
Citibank, N.A.
American Depositary Receipts
111 Wall Street
5th Floor New York, NY 10043
U.S.A.

Information and Enquiries
Investor Relations
Kantone Holdings Limited
Kantone Centre
1 Ning Foo Street
Chaiwan Hong Kong

Internet
http://www.championtechnology.com/





Greater Opportunities
The biggest beneficiary of today's global telecom and information revolution is the wireless sector

Opportunities in wireless telecom and information technology have never been greater. In recent years, the wireless industry has enjoyed high growth rates world-wide, particularly in the emerging markets in Asia and South America. The explosive growth has been helped by inadequate fixed network infrastructure, long wait lists and backlogs for telephone installation, dropping tariffs and handset prices, as well as growing mobile service availability and coverage.

Better Positioned
We have prepared ourselves over the last decade to embrace the competition and opportunities

Over the years we have maintained our singular focus on our core businesses of wireless communications and information software, built up our management team and R & D capability, refined our acquisition strategy and investments, picked the right strategic partners, and undertaken stringent cost control measures.

With our carefully contemplated acquisition and well planned investments, we now enjoy a unique position in the industry. We are fully integrated across the value chain in paging and wireless messaging: we design and develop the microchip, components, cosmetics and assemble the final paging receiver, we write the programme for the paging system software and development infrastructure, and last but not least, we also operate our own paging services, making us sensitive to the requirements and preferences of customers.

More Rewards
The future holds exciting times for champions

The future of telecom products and services lies in software, whether it is applied in bringing together the different building blocks and technologies or networking the different geographical markets, or in tailoring solutions to suit specific customer requirements.

With the spin-off of Kantone, we can focus more sharply on beefing up our microelectronics and software development capabilities, in order to prepare ourselves for the next generation of wireless opportunities. On the other hand, we will continue to expand our international network of paging operations, in order to capitalise on the explosive growth of the emerging markets.



Chairman's Statement

To Our Investors:

1997 was a year of historical significance and continued outstanding performance for Champion. As we entered our tenth anniversary year, we also witnessed Hong Kong's reunification with China, a landmark event that the world scrutinised with wonder and respect, as the jurisdiction of a territory peacefully and voluntarily transferred from one country to another sovereign state.

The political stability and the continuing improvement of China's economic fundamentals in recent years have fuelled the expansion of telecommunications and information services. This factor, coupled with the increasing co-operation and inter-dependence between China and Hong Kong, is unleashing significant opportunities for telecommunications vendors, software and technology developers, equipment manufacturers, operators, and systems integrators like ourselves. But before I look too far into the future, let's look at some numbers for last year.

Strong Financial Performance
Since 1990, the Group has registered an average compound annual growth rate of 70% and 100% respectively in turnover and net profit. The continuing growth has been generated organically as well as from acquisitions. From our modest beginnings as a systems house, we have come a long way to where we are today - a vertically integrated telecommunications and technology group with operations in over 50 countries, offering wireless solutions to industrial customers as well as mass market consumers, from turnkey public and private paging systems to digital cellular and satellite applications.

In fiscal 1997, Group turnover was a record HK$1.157 billion, an increase of 13% over that of last year. Profit for the year was HK$271 million, a 10% improvement. Excluding the spin-off effect (Kantone Holdings Limited was spun-off in January 1997), profit before minority interest was HK$288 million, an increase of 17% compared to the previous year. The results included a net exceptional loss of HK$4 million which was made up of a gain of HK$108 million arising from the distribution of Kantone shares to existing Champion shareholders, and a charge of HK$112 million for provisions and write-offs. Excluding the exceptional items, the Group's profit before taxation was HK$293 million, up 12% from last year.

During the period under review, continued rationalisation of the Group's operations, as well as the successful launch of new products and services, including the PicturePage and the Stock Pager, contributed to improved performance. In light of the current market conditions, the directors decided, as a precautionary measure, to make provisions and write off costs incurred on some new telecom projects, including the Indian paging network operations, which were affected by repeated delays outside our control.

Enhancement of Shareholder Value
As we moved towards 1997, the international financial community revisited the valuation of the Hong Kong stocks, most of which had a lower P/E compared to the region and the international markets, reflecting a certain degree of uncertainty over the handover to China. In particular, telecom stocks like Champion had, for a long time, been trading at around 5 P/E, compared to the double digit figures of its peers listed elsewhere in the world markets. By the end of August this year, Champion and Kantone were valued at approximately HK$4.5 billion and HK$555 million respectively, representing over 100% return (adjusted for distribution of Kantone shares and Champion warrants) to shareholders who held Champion shares at the time of our announcement of corporate restructuring and spin-off of Kantone last December. Even when the Hong Kong stock market plunged by a third amidst an attack on the Hong Kong dollar in October, both Champion and Kantone shares stood up better than their peers. This is a good demonstration of the continuing investor confidence in us. I am confident that our long- term shareholders will continue to be rewarded and share in the continued growth of both Champion and Kantone.

Opportunities in Wireless Telecommunications and Information Technology have never been Greater
The global telecommunications business is experiencing unprecedented structural changes as a result of liberalisation, enhanced competition, globalisation and a rapid advance of a plethora of technologies. In Europe, sweeping liberalisation is being driven by increasingly complex demands from customers for better and lower-cost telecommunications services on the one hand, and by the European Community's 1998 deadline to end state-owned telephone company monopolies, on the other. In the United States, the passing of the Telecom Act of 1996 by Congress meant the removal of the distinction between local and long distance services. Meanwhile, landmark World Trade Organisation (WTO) agreements on basic telecommunications and information technology are expected to spell major changes and unleash promising opportunities in global telecommunications and the information arena.

The biggest beneficiary of this global telecom and information revolution is the wireless sector. In recent years, the wireless industry has enjoyed high growth rates world-wide, particularly in the emerging markets in Asia and South America. The explosive growth has been helped by inadequate fixed network infrastructure, long wait lists and backlogs for telephone installation, dropping tariffs and handset prices, as well as growing mobile service availability and coverage.

China is a typical example of the vast market potential. All the previous forecasts about its paging and cellular penetration have been exceeded by wide margins. With over 50 million paging subscribers today, China has already surpassed the US as the world's biggest paging market. At the same time, China is the world's second largest cellular market with a current base of 10 million subscribers. The comparable figures in 1990 were 500,000 for paging and 48,000 for cellular. At a recent world telecom conference held in Singapore, I met industry leaders who felt that a 10% penetration for both paging and cellular for China is not unreasonable given its economic strength and prospects. I personally feel that China is likely to achieve 10% paging penetration much earlier than the previous forecast of 2005. My bet is 2001, and that means 70,000,000 more pagers in the coming four years, for China alone!

The quantum leap in demand for cost-effective communications is not unique to China, which is by far our largest single market. India, by the same token, has shown every sign of following in China's footsteps. In less than two years of introduction, the paging market has reached 700,000 subscribers. Despite the slower than forecast take-off in the past few years, industry experts expect the market to grow at a healthy 40-50% a year over the next few years, with demand after 2000 accelerating in response to growth in networks and personal income. Considering its population of over 900 million, and growing at 1.6% per annum, the Indian telecom market's immense growth potential is second only to that of China. With such strong demand in the region and elsewhere, I dare say that all of us in the paging and telecom business, as well as in information technology, whether it is equipment, software, or operation, can prosper.

Some of our investors and stock analysts are worried about our prospects, fearing that the cellular and PCS are killing paging. Well, the region's or even the world's telecom markets are highly diverse, ranging from the sophisticated and mature markets such as the US, Europe, Hong Kong, and Singapore, to the underdeveloped but exploding markets like China, India, Vietnam, and even Indonesia, which are striving today to rapidly improve their communication infrastructure. That's why our strategy has always been to focus on emerging markets for rapid growth in volumes, and maintaining our niche market position in value added services in mature markets. More about this in the next section.

Paging is not an end in itself. In our previous annual reports and briefings to analysts and fund managers, I have reiterated that paging or wireless messaging is an important building block of the comprehensive wireless solutions. Paging is a proven technology: it's easy to deploy, at only a fraction of the cost of its other wireless brothers such as cellular and PCS; and above all, the paging technology has demonstrated its readiness to integrate with other technologies. We at Champion have been bundling various services and technologies, and our range spans on-site paging, public wide-area paging, private wide-area paging, cordless communications, private mobile radio, telemetry, industrial monitoring, two-way paging, high speed information paging, satellite paging, and voice paging.

In our opinion, most of the future growth in telecom is expected to come from data, and paging provides an ideal platform to effect transmission of vast amounts of data information cost-effectively. The latest perspective we're working on is related to the Internet, which is sometimes likened to the PC as far as its sweeping influence is concerned. This new Internet perspective is going to release another world of opportunities: connecting paging systems to Internet Servers, interconnecting paging terminals using IP (Internet Protocol) as a cost effective, high performance architecture for international roaming services, e-mail to page, page to e-mail, etc. As a broadcast and messaging medium, paging will evolve into a powerful vehicle for wireless connectivity to the Internet. Similarly we are positioning and packaging our services, so that the growth in cellular becomes an opportunity instead of a threat.

We have Prepared Ourselves over the Last Decade to Embrace the Competition and Opportunities
We at Champion are a prudent team. In fact, we have been criticised by many of our followers as being too conservative. Indeed, we have not joined the competition in launching aggressive marketing campaigns, renting expensive offices, heavily subsidising or cutting our prices to gain market share, indulging in ambitious expansion plans, or branching out into other investments. We have, over the years, maintained our singular focus on our core businesses of wireless communications and information software, built our management team and R & D capability, refined our acquisition strategy and investments, picked the right strategic partners, and undertaken stringent cost control measures.

Prudent as we have always been, there are nevertheless external factors which are beyond our control. This is especially the case for fast growing industries like telecommunications, which is our core business, and emerging markets, our geographical focus. The past decade was marked by a series of events, among which were the stock market crash in 1987; the incident in China in June 1989; the Gulf crisis in 1990; the austerity measures in China in 1994 and 1995; and most recently, the Asian currency turmoil, which caused market uncertainty and volatility, and which resulted in slower growth than expected in some years.

I'll highlight below the major steps we have taken over the last ten years to position ourselves:

Building on our strength as a systems house
The backbone of our operation is a systems house. By integrating ASIC technology with state-of-the-art computer software, hardware, radio engineering, language processing, and electronics engineering, we engage in the full conceptual and production co-ordination process of products and information systems. Over the years we have amassed a strong team of computer experts and telecom professionals to further our product range and find a niche market for ourselves. Kantone, the world's first multi-lingual pager and the associated paging systems introduced by the Group in 1988, was an especially powerful innovation that exemplifies our information software capability and radio expertise, and which provided us the anchor for our future growth and expansion.

Public Flotation of Champion
In 1992, we took Champion public by listing its shares on the Hong Kong Stock Exchange. This was followed by the launching of our ADR (American Depositary Receipt) programme in the US. The progress of the Company has been actively followed by both domestic and international investors and securities firms, and we pride ourselves on having a very strong shareholder base with mostly institutions and long-term investors. Our capital raising and other corporate exercises have consistently received strong support from our shareholders.

Acquisitions and Investments to broaden our product line, expand our global reach, improve our cost structure, and above all, achieve vertical integration into a one-stop-shop
Throughout the years, we have made investments in paging, cellular, information software, and other wireless and telecom-related businesses. These include our cellular venture in Chengdu, China, using the advanced digital technology developed by Hughes Networks Systems of the US; the fax machine manufacturing project in Shanghai in joint venture with Ricoh of Japan and Shanghai Fax Corporation; and investment in paging operations in China, India and Russia. Yet the most significant acquisition has been that of Multitone, the UK-based paging manufacturer which we acquired at the end of 1993.

The Multitone acquisition brought us wide-ranging benefits and synergies, not the least of which are its rich pool of engineering talent and radio experts, strong brand name, strong distribution network in Europe, and 30 years of manufacturing experience. Above all, the integration of Multitone into Champion provided us the much needed strength to consolidate our position as a vertically integrated telecom company for wireless solutions. I have long recognised that customers prefer to purchase a fully integrated system from a single supplier, as they see the advantage of cost savings and compatibility of the different elements. It is not unusual in the computer and telecom industry to come across instances where for each dollar spent on purchasing networking software and hardware from different vendors, the customer would spend $3 or $4 on integrating them and administering them. Worse, when there was a problem, finger pointing occurred, and more often than not, five different vendors would give five different answers.

Another reason why we pursue the one-stop-shop or turnkey solutions is to be able to compete on cost. We do not believe in cutting prices to gain market share, as this can permanently hurt both profits and revenues. We will only do so because of a cost advantage, which is made possible by in-house development and production. I have to disagree with those analysts who prefer to measure a company's success by market share rather than by profitability.

With our carefully contemplated acquisitions and well planned investments, we are now enjoying a unique position in the industry. As far as paging and wireless messaging is concerned, we are involved from start to finish: we design and develop the microchip, components, cosmetics, and assemble the final paging receiver; we write the programme for the paging system software and develop the infrastructure; and we also operate our own paging services, making us sensitive to the requirements and preferences of customers. If required to upgrade and modify the pagers and paging systems to meet specific local market needs, we are in full control and can react promptly to changing market conditions. This contrasts with many other pager assemblers, most of whom purchase kit sets and have no control over the paging software or infrastructure or the programme residing within the pager's microchip, all of which are developed by third parties. We are confident that we can apply the same mix of capabilities in information software and radio expertise to other opportunities with similar success.

Corporate Restructuring
In this fast changing world of telecommunications and information, we have to be constantly on guard to respond to and anticipate changes with speed and flexibility. As we are becoming a larger company, we enjoy the benefits of efficiency in terms of manufacturing, finance, distribution, and the like. At the same time, it is important for us to retain the entrepreneurial spirit and small company mentality to stay focused, flexible and alert. With that in mind, we announced in December 1996 the restructuring of the Group into three different business operations, namely, equipment manufacturing and trading operations under Kantone, which was successfully spun-off in January this year; telecom operations which owns valuable paging licences and engages in revenue sharing arrangements in both paging and cellular projects in various geographical locations; and microelectronics, software and technology division which is involved in developing software for multiple applications for a range of telecom products and services, with the associated turnkey operations and equipment distribution to ensure smooth installation and interoperability of both hardware and software, as well as continuing exploration of new technologies and opportunities.

As I see it, the future of telecom products and services lies in software, whether it is applied in bringing together the different building blocks and technologies, or networking the different geographical markets, or in tailoring solutions to suit specific customer requirements. Data traffic will be the primary driving force. With the spin-off of Kantone, I and my team can focus more sharply on strengthening our microelectronics, software and technology development capabilities, in order to prepare oursel ves for the next generation of wireless and communications opportunities. In addition, we intend to explore other areas of high growth opportunity, including environmental and healthcare services, which are evolving with the advance of new technologies. I'll expand on this later in the chapter Business Strategies for the New Millenium.

The recent improvement in ratings of both Champion and Kantone shares demonstrates the validity of our initiative to restructure and spin-off Kantone to existing shareholders.

Post Balance Sheet Events
In August 1997, an agreement was reached for the sale of 4.8% of the Company's shares held by my family trust to the Chinese Literature Fund of the PRC. The investment in Champion by Chinese capital is a demonstration of continued confidence in us and in Hong Kong through the 1997 transition and beyond.

We welcome our new shareholders, who in the past years have provided us access to many valuable contacts in China, including the MPT (Ministry of Posts and Telecommunications), with whom we are conducting negotiations for business co-operation.

Outlook
These are exciting times for Champion. We are right at the doorsteps of China, the world's largest telecommunications market. As an early entrant to this vast and high-growth market, the Group has established an edge by pioneering Chinese character message paging, and bringing digital wireless technologies to China. Where Chinese regulations permit, we plan to participate more directly in the various telecom and information services. In my recent meetings with senior leaders and heads of Ministries of the State Council to discuss future developments in telecommunications and technology in China, I was very encouraged by the open-mindedness of the Chinese leaders. I am optimistic that the investment environment in both the telecom and technology sectors in China will be more congenial to cross-border participation. I am also confident that China will demonstrate its great sincerity by letting Hong Kong govern itself as part of the "one country, two systems" commitment, and we are really in for a wonderful century.

Blessed with great opportunities ahead, we will continue to enlist the support of our shareholders, suppliers, joint venture partners, customers, bankers, and above all, our employees to help us make it to the new millennium, and keep our leadership position in this dynamic industry.

I would like to take the opportunity specially to thank Jim Carter who will step down as Managing Director of Champion at the forthcoming Annual General Meeting. Jim has been with Champion since March 1992. He greatly deserves our gratitude for his contribution, and we wish him well on his retirement. Jim has kindly consented to stay on as our non-executive director.

As we celebrate our 10th year, we thank our employees who are the spirit of Champion - their creativity, flexibility, responsiveness and belief in, and commitment to, Champion's success have gotten Champion to where it is today, and will ensure its success in this decade and beyond. We at Champion are striving hard to be the champions of the next generation.



Paul KAN Man Lok
Chairman of the Board
November, 1997




Facts & Figures Key Ratios
 
Figures as at 30 June 97 96
Sales/Assets 0.558 0.548
Assets/Equity 1.438 1.420
Long Term Debt/Equity 0.085 0.025
Current Assets/Current Liabilities 3.186 1.943
Earnings Before Interest & Tax/Enquity 0.218 0.207
Net Asset Value Per Share 87 cents 83 cents
Cash Flow Per Share 29.4 cents 25.3 cents
Earnings Per Share 16.7 cents 16.1 cents
Price Earnings Ratio 5.99 5.65
Cash Flow Multiple 3.4 3.6


Tenth Anniversary Report
Highlights of the Decade

1987 - Champion Technology was founded by Mr. Paul Kan, Chairman.

1988 - Developed the world's first Chinese and multi-lingual pager, commenced sales into China.

1992 - IPO on the Hong Kong Stock Exchange.

1993 -

Established an ADR programme in the US.

- Acquired Multitone Electronics PLC, inventor of the world's first tone pager and first digital pager.

1994 - Paging venture in Russia commenced operation.
- Introduced the world's first compact 4-line Chinese language display pager.

1995 - Consortium awarded paging licences in 10 cities in India.

1996 - Commenced Group restructuring; successfully spun-off manufacturing and distribution arm, Kantone Holdings.
- Introduced 8-line display pager for horse-racing information.

1997 - Kantone Holdings was listed on the Hong Kong Stock Exchange.
- Introduced PicturePage, the all-powerful MIIT (Mobile Information and Image Terminal).




The Hong Kong Story
How Champion was born

"Hong Kong is a very fair and equal society. If one works hard, one can set up one's own business. There is very good law and order, yet we never feel overburdened by Government intervention or restriction, nor are our purse strings overstretched by our social benefits. This is an ideal place for the entrepreneur." Chairman Paul Kan was quoted in a recent film "The Hong Kong Story" released on television to mark the historic occasion of Hong Kong's return to Chinese sovereignty, a film where a cross section of Hong Kong people, including taipans, were interviewed to share their views on Hong Kong.

In ten years, Hong Kong has migrated from a manufacturing-based economy to one which is services oriented. Yet its list of achievements in the global economy continues to win world-wide admiration and marvel. According to Fortune (May 26, 1997 issue), Hong Kong scores highly in twelve areas, among which are: the freest economy in the world; the world's third most competitive economy; the busiest container port in the world; average economic growth of around 6% over the past ten years; world's seventh highest foreign reserves of US$66 billion; GDP per capita of US$25,300 (in 1996 terms), which is higher than the UK and Australia; fifth largest banking centre by external banking and foreign exchange transactions; the world's eighth largest stock market (the ranking has recently been revised upwards to sixth largest) with a market capitalisation of US$350 billion (the latest figure is US$595 billion); and some 900 multinational companies with regional headquarters in Hong Kong. In another instance, Merrill Lynch, the US brokerage house, spelt out ten reasons why they like Hong Kong and recommend Hong Kong to their global investors. Their reasons very much revolve around Hong Kong's demonstrated exceptional resilience, strong economic momentum, and the prospect that China will abide by its "one country, two systems" agenda in relation to Hong Kong after its handover.

Hong Kong presents an interesting phenomenon in that it is defined not so much by its place or location, but by its people, who embody an enormous amount of energy, unquenchable ambition, and an uncanny ability to adapt to, and thrive on, adversity. This, combined with an uncanny ability to spot and capitalise on good opportunities, sharp business acumen, single minded focus and commitment towards the goal, and sheer determination to succeed against all odds, has led Hong Kong to become the economic miracle that it is today.

These characteristics are neither unique nor unprecedented, but the laissez-faire attitude of the Hong Kong Government and the refugee mentality of its people have helped produce a rare alchemy that defies any class distinction or social background. As Sir David Ford, Hong Kong's Chief Secretary from 1987 to 1993, once said, "In our society, yesterday's hawker can be today's multi-millionaire; and if he ever over-reaches his cashflow and is forced back to his street stall to begin all over again, nobody will think the worse of him but will admire his courage for trying that hard."

In this respect, there is a certain parallel between Hong Kong and the Silicon Valley of the US. Both are good breeding grounds for entrepreneurs. Silicon Valley has turned many college drop-outs into multi-millionaires in the fields of computer and technology. In Hong Kong, some of our most successful businessmen came from nowhere and had nothing when they first started.

It is against this background of minimal restriction, minimal government support, and minimal social benefits, that Champion, alongside many other Hong Kong enterprises, was born. Ten years ago, when Paul Kan started Champion, he left a much coveted and well- paid position as one of the most senior Chinese executives at an international telecommunications group. As a computer software engineer with a keen interest in language processing, Kan was convinced of the market potential of paging in various languages, including Chinese. His immediate supervisor did not share Kan's ambition to develop what in later years emerged as one of the most widely used communications tools in non-English speaking markets, especially China. As is usual with any start-up venture, Kan encountered enormous setbacks in the initial years. Having completed the initial design, he could not find supporters for his Chinese language pager. After some 200 companies in the US, Japan, and Hong Kong turned down his proposal, Kan turned to family members and personal friends to raise the necessary capital. In 1987, he acquired a 2,000 square foot office and put a team of computer programmers to work, creating the Kantone multi-lingual pager. While putting together the pager prototype was tough, making the transition to commercial production was even more frustrating. No OEM/sub-assembler had the confidence to accept Champion's order for a totally untested product with unproven market potential. Kan had to concede to very tough conditions to get the first batch of Kantone pagers produced.

Nor was it smooth sailing after the fanfare of launching the world's first Chinese character pager in 1988, despite the international attention it attracted. Finding buyers for Kantone pagers proved another nightmare. Until 1991, when Champion was granted its own paging licence, it had to rely on other paging operators for the sale of its pagers. Unlike other electronic items such as the television, video player, or even the computer, pagers need to be made to specific frequencies designated by the individual paging operators, who then sell the pagers to their subscribers. The incident in China in 1989, the Gulf crisis in 1990, the austerity measures in China in 1994 and 1995, as well as the ongoing policy banning foreign companies from participating directly in China's telecom market, were some of the external events beyond the company's control, and put further strains on the start-up business and the newly listed company. In addition, tightened credit in such nervous times of economic crises, even though they may have had nothing to do with the financial condition and reality of the Company, added to the difficulties. Champion learned to ride all these waves, with its fair share of apprehension.

In a class of its own, Champion found a niche in providing its pagers and systems in a package. Although the Kantone pagers were the world's first multi-lingual pagers, Kan was fully cognisant of the fact that once these pagers kicked off in China and Hong Kong, and proved that there was a market, there would be followers. To protect its investment, Champion applied for various patents for its technology and inventions, with its final patent approved just recently. The next step was to attract a captive market, which Champion did by providing turnkey systems to its Chinese customers. This included designing and installing the network, supplying transmission equipment and proprietary software, training the operators, and licensing its partners to sell Kantone pagers. Such a strategy may have been more time consuming and complex, but it helped Champion build enduring relationships with its customers and also brought significantly higher margins.

The strategy of targeting large emerging markets like China, where there is an acute shortage of telephone lines, and selling local language pagers at an affordable price has proved worthwhile and reaped great rewards for Champion. From a market capitalisation of HK$600 million at the time of its initial public offering in 1992, Champion's market value rose to over HK$4.5 billion by August 1997. Turnover has grown seven-fold, and profit has more than tripled. Using paging and information software as its core technology, Champion has branched out into cellular, integrated mobile solutions, and satellite-based applications.

With acquisitions and strategic alliances, Champion has today established a world-wide presence, having operations in over 50 countries. Multilingual capability has been developed in over 10 languages including Chinese, Vietnamese, Cyrillic, English, and the different local Indian dialects. Champion has also established its in-house brandname, Kantone, for its range of products.

Like many other enterprises in Hong Kong, the minimal support from the Hong Kong Government has not dampened the spirit of its entrepreneurs. We continue to export our home-grown technologies and products to world-wide markets, engage in acquisitions of overseas companies (sometimes bigger than our own), and successfully turn around less profitable outfits into highly productive companies. It is certainly not an easy decision to commit to research and development of new products and technologies without financial assistance from the Government or semi-Government organisations. We have often found bidding for major contracts in overseas markets most challenging, especially where considerations other than commercial are involved. Many of our competitors offer government aid in various forms, low-interest government subsidised loans, and export credits. Despite all this, the typical Hong Kong entrepreneur finds innovative solutions, brings the cost down, and creates a competitive advantage.

As Hong Kong takes on its new status as a Special Administrative Region of China, the world's attention is on the people of Hong Kong as to how comfortably we can integrate with a different set of values practised by China. Interesting enough, out of our survivalist instincts comes an uncanny ability to adapt opportunistically to change or adversity, and prosper. Change, and dramatic change, is not new to Hong Kong people. Besides, the China of today is a country of sound economic fundamentals and political stability. Sharing the same language and understanding the culture of the east and the west, we are today strategically positioned right at the doorsteps of China, which, with a quarter of the world's population, represents enormous market potential.

In a recent opinion survey of Hong Kong people, in particular the business community, the general feeling is one of optimism. Most of us have confidence that China will demonstrate its great sincerity by letting Hong Kong govern itself as part of the "one country, two systems" agenda, which in itself is an ingenious and novel concept. As the Chief Executive of the SAR, Tung Chee-hwa, said in his inauguration speech on 1st July, 1997, "The most precious possession of any nation or any people is the ability to chart one's own future, to be master of one's own destiny." Indeed, for the first time in history, we, the people of Hong Kong, will be masters of our own destiny.



Champion's Decade of Technological Developments & Innovative Applications

As a pioneer in the international radio paging market and Chinese language software, the Champion Group has developed most of the core technologies which cover the span of radio signal processing, information systems, telecommunications systems, language processing, and manufacturing technologies. Such core technologies have been adopted over time and further developed into world-class innovative applications.

Multilingual Message Paging (1987-1988)
Using the patented Kantone multilingual message encoding algorithm, coupled with data compression technology, and remote programming of paging receiver, Champion introduced the world's first Chinese character pager in 1988. The multilingual capability embraces a combination of different languages and numbers which can be displayed wirelessly in reduced transmission time, and allows storage and transmission of different groups of messages by applying a segregated mail box address algorithm. Today, Champion has developed pagers in English, Chinese (both simplified and traditional characters), various Indian dialects, Russian (Cyrillic), Korean, Arabic, Vietnamese, and other Asian languages, as well as a range of Romanised languages.

The multilingual pager is a good demonstration of the Group's capability to fulfill unrealised demands by making use of its radio expertise and information technology. Before the introduction of the multilingual pager, the use of paging, for some 30 years after being launched, was confined to the transmission of tone signals, numeric codes, and alphanumeric messages, none of which provided adequate information, especially in non-English speaking markets.

The Group's multilingual pager as introduced in 1988, changed the industry expectations. Comprehensive and self-contained messages in one's mother-tongue could be conveyed wirelessly and reliably without their meaning being distorted through translation. This greatly enhanced the usefulness of the pager.

Kantone World (1992)
This was a powerful personal mobile information system that combined personal messaging with the provision of constantly up-dated financial information (stock quotes, forex, commodities, international stock market indices, etc.), horse racing events and results, news services, and weather forecast. Kantone World was also the first of its kind to introduce the Target Price System, which alerts the user when specified stocks, warrants or currencies reach a specified price.

The Spark-proof Intrinsically Safe Pager (1993)
Many industries, including petrochemical, gas, food and mining, use radio communications for a variety of reasons. Some operations in these industries are in hazardous areas where there is a risk of explosive mixtures being formed in the atmosphere. All equipment used in these areas has to be intrinsically safe, so that there is no possibility of causing an explosion. The Group's spark-proof pager and paging system, under the Multitone brand, met very stringent requirements and enabled instant communication with mobile staff in these potentially hazardous environments.

4-line Chinese Character Display Pager (1994)
The 4-line display pager represented another technological breakthrough, having the largest display capacity of its kind. With improved battery life and compact design, this generation of the Kantone pager greatly expanded the capability to broadcast a wide range of information at little additional cost. It embraced real-time financial quotes, horse betting results, traffic information, news headlines, and personal messaging, segregated into different mail boxes to facilitate retrieval.

Proprietary Lone Worker Paging System (1995)
In today's modern workplace, workers are increasingly exposed to hazardous environments, working unsupervised in dangerous areas or subjected to potential danger in public areas. Health and safety guidelines are placing greater demands on employers to provide improved supervision and protection to workers, especially those working alone. The answer is a communication system that allows the lone worker to request assistance instantly. Should an emergency arise, the worker would simply trigger the alarm on the mobile unit, which would be immediately transmitted to a central monitoring panel along with the user identification and the alarm message. In case a lone worker was rendered unconscious due to physical harm by an attacker, or inhalation of gas or smoke, the pager could detect such occurrences and an alarm signal could be triggered and sent directly to the control station or to a dedicated officer in charge, for fast and immediate action.

The Group's Lone Worker systems, also under the Multitone brand, were designed and tested for the tough environments that workers potentially operate in. The mobile units are small and unobtrusive to a would-be attacker, but provide easy activation by the user and are sensitive to unusual physical states.

8-line English Numeric Display Pager (1996)
The Group's 4-line Chinese character display and 8-line English and numeric display pager enabled an even more comprehensive information package which bundled personal messaging, real-time horse racing information (including declaration list, tote board information, special announcements and racing commentators' comments), financial information (stocks and currency quotes, financial indices), news headlines, traffic alerts, sports events, property transactions, movie guides, riddles and fung-shui of the day, as well as a recommended menu. Taking advantage of the 8-line display, the pager also functioned as a personal organiser by displaying full calendar months.

PicturePage (1997)
Further innovative value-added services have been incorporated to allow transmission of pictures, corporate logos, and graphical and trend analysis of currencies and stock performance. And all these are in addition to comprehensive personal messaging services.

All of the above pioneering initiatives have rewritten the landscape of paging and wireless messaging history. Yet the chain of technological developments and innovative applications does not stop here. The Group is continuously working on new technologies to take paging further up the cyber ladder, and these include high speed paging, Internet paging, and voice paging.

Having ventured into information paging and wireless telecom, and enjoyed success, we are confident that we can continue to build on our capabilities in computing, infotech, and radio engineering to pursue other technology opportunities.



The Building Blocks of Integrated Wireless Solutions

Paging is not an end in itself. It is an important building block of the comprehensive wireless and information access solutions, as well as a platform capable of embracing numerous other applications. Over the years, the Champion Group has demonstrated its capability to successfully integrate a host of different technologies, resulting in tailor-made communications and information despatch solutions to suit different environments and customers' applications.

The technologies that the Group applies cover the extensive telecom spectrum of public wide-area paging, private wide-area paging, on-site paging, private mobile radio, cordless communications, voice paging, telemetry and industrial monitoring, cross-border paging, satellite paging, high speed information paging, voice paging, two-way paging, and Internet paging. Thanks to our systems house foundation, we have expertise across the various segments of the value chain, and are able to combine the different building blocks in an efficient and cost effective manner.



Champion's Heritage of Excellence
In our 10-year history, the Group's achievements in technological development, as demonstrated by the leading edge products it introduced and commercialised - particularly multilingual messaging, enhanced display functions and transmission capacity in a compact paging receiver, and the spark-proof intrinsically safe pager - have earned Champion many awards and recognitions:

Technological Innovations
-

Electronics Design Award for the Group's Kantone Pager (1988)

-

Governor's Award for Industry (1988)

-

1997 Hong Kong Award for Industry - HKITCC Certificate of Merit in Technological Achievement (1997)


Excellence in Process Technologies
- International Trophy for Technology and Quality, Paris, France (1994)
- British Standards Institute - BSI (since 1993)
- ISO 9000 (since 1993)

Successful Market Adoption
-

The Enterprise Trophy in Business Awards for Kantone Paging (1993)

-

Endorsement of service quality of Kantone Paging's service quality by a published consumer survey (1996)

-

Reported as best Paging & Telecommunications Equipment Company amongst 20 Best Enterprises in Hong Kong (Capital, March 1997)




Our Guiding Principles for Continued Growth and Success
When Champion was founded a decade ago, we had only one mission in mind, which was to apply our software capability and radio technology to multi-lingual wireless messaging, and grow that market both to fulfill unrealised demands and to meet specific customer needs. We have never wavered from that mission statement. As the years go by, our horizons have broadened, and together with the management, we have set down the following ten guiding principles:

1. Business Focus

We only focus on what we do best, and channel all our resources towards that end, striving for excellence within our area of competence. For Champion, our core business is information and radio technology being applied to wireless telecommunications, starting with Chinese character paging, and expanding to cellular and other areas of telecommunications and wireless technologies.

2. Emphasis on Profitability, Recurrent Revenue and Strong Cashflow

Our profitability is a key to our success, and we will strive to maintain sustainable growth in profits year-on-year. At times, we may slow down our investments in capital expenditure and acquisitions in order to strike a balance between short-term earnings and long-term investments.

An equally important measure of our financial performance is our strong recurrent revenue and cashflow. Champion's involvement and investment in software development and telecommunications operations, such as paging and cellular ventures, are targeted at growing our customer base, which in turn provides a ready market for the Group's equipment manufacturing and infotech expertise. Subscription fees are, above all, a real cash generating machine, and provide evidence of the ability of the wireless business to bring in steady cashflow for many years to come.

3. Stringent Cost Control

The ability to increase profitability and cashflow margins lies in maintaining a cost-efficient operating structure. We do not believe in cutting prices to gain market share, as this can permanently hurt both profits and revenues. We will only do so because of cost advantages, which are made possible by in-house development and production, as in the case with our integrated capabilities in hardware, software, and telecom operations.

4. Value Creation Through Innovation

In technology, if we do not stay ahead of trends, we cannot survive, and our share-holders and employees will both suffer. Changes developing across the economic landscape - driven by the forces of globalisation, deregulation, and consolidation, and by the ongoing revolution in technology - heighten the complexity of the whole world in which corporations, institutions, governments and individuals operate. The risks are greater in this environment, but so are the potential rewards. We at Champion have long recognised the fundamental importance of being able to anticipate and respond innovatively to client needs in an intensely competitive marketplace. Our range of pioneering products and services in wireless messaging and integrated mobile solutions is evidence of our value creation and competitive advantage.

5. Conservative Financial Management, but Aggressive Business Planning

We use debt sparingly as we do not want to over-leverage our balance sheet. This conservatism may affect our results and expansion plans, but we believe we have the responsibility towards our shareholders to be prudent managers of their wealth, and towards our employees to protect their jobs.

6. Proprietary Information and Business Strategies

We would like to borrow the views of the well-respected international investment guru, Warren Buffet. Investment ideas, intellectual assets, and trade secrets, especially in the highly competitive telecom and software industry, are rare, valuable, and subject to being stolen. While we would like to be open and share our future plans and development with the investment community, we need to protect proprietary information which drives our competitive advantage. We therefore ask for your understanding when we decline to give specifics about a particular transaction or product which is under negotiation or development.

7. Functioning as an Enterprise, but Retaining Small Company Mentality

Speed and flexibility are the key ingredients of the wireless and technology industry where historically smaller companies, rather than the traditional telephone and corporate giants, have tended to lead the way in shaping new technologies and products. What we attempt, as we are becoming a larger company with a growing global presence, is to have the best of both worlds. We want to benefit from the economies of scale of a large company in terms of manufacturing, finance, distribution and the like, without losing the entre-preneurial spirit and focus of a small company, to stay competitive.

8. Strategic Partnerships

No-one can count on organic growth forever. We have to rely on distributors, licensees, consultants, manufacturers, and even equipment vendors to help develop and distribute our products. It is better to partner than to compete because it allows time-to-market advantages and, more importantly, it grows the pie bigger for everybody faster. We believe there are five elements that make a strategic partnership work. First, the two parties have to have the same overall vision of where things are going. For example, our key partners agree on the potential for multi-lingual paging and integrated mobile solutions. Second, both sides have to see a short-term benefit in the relationship, which means real sales. Third, both parties also have to see long-term gains or advantages. Fourth, the organisations involved have to have the right chemistry, i.e. sharing similar values. Lastly, the partners complement each other's strengths rather than overlapping in products or technology development. Our alliance with Chinese partners like the MPT and Shanghai Fax, and our acquisition of Multitone, all demonstrate this synergy and complementary partnerships.

9. Our People as Our Most Important Asset

Champion's culture encourages continued learning among its people, free expression of opinions, and independence of business units, and at the same time, instilling a shared vision and a common direction.

Over the years, Champion has demonstrated its unique capability to regenerate itself - by reinvigorating its people, reorganising its corporate structure, reinventing its products, and being responsive to market requirements and preferences.

Within Champion, a rigorous people and performance management system is implemented to attract, develop, and retain the right people. Employees are empowered to take on major responsibilities. Our directors are determined that we have a flat management structure to facilitate open and effective communication throughout the Group, thereby encouraging the flow of ideas and enabling the Group to move at a much faster pace.

10. Teamwork

The fundamental characteristic of the relatively unaligned team is wasted energy. By contrast, when a team becomes more aligned, a commonality of direction emerges, and individuals' energies harmonise. Within the Champion Group, therefore, we stress teamwork in everything we do. There is commonality of purpose, shared vision, and the understanding of how to complement one another's efforts. While individual creativity is encouraged, we do not allow individual members to exercise varying degrees of "personal power", which would result in the energies of the team members working at cross purposes.

We hope the above provides a clue to the investment community's question: "Why bet on Champion?" As you have read about our philosophy and our business, you will agree that we have tremendous properties around the world, good exposure here in China and Asia, Europe, Australia, and South America, and we have a strong record of producing free cashflow. We believe wireless markets will penetrate deeper than most people think. We have the strength to be able to carry out our strategies. Information technology and telecom are our primary focus. There is much management emphasis on being able to do the right job here, and we have the international experience for creating value and going after markets that create value.

Like any corporations, however, even for those which have enjoyed long periods of success and even seeming invincibility, we are not immune to making mistakes or misjudging market situations. We constantly review our investments and projects, and if we find the results deviate from our goals, or if there is a change in the market prospects, we are able to make quick decisions to rectify the situation. A case in point is Russia, where Champion incurred a loss of HK$4.6 million in fiscal 1995 due to sluggish sales and complications involved in operating the paging joint-venture in Moscow. Thereafter, with the skilful management and perseverance of my team, we have seen a significant turnaround in our Russian operation, and the subscriber base is now showing strong growth. We have plans for further expansion, and a number of corporate moves are being considered.

It is the ability to stand up again when the rough times are over, and the ability to reduce damages to a minimum in times of crises that counts.



Business Strategies for the New Millennium

Ten years ago when we founded Champion, we identified information software and computing technology as our core business. This was the origin of Champion as a systems house. As a strategic and an initial step, we applied our systems house capability to wireless communications which we identified as a fast-growing sector, and devoted our energies and efforts to developing a comprehensive range of communications products and services under in-house labels. Such product range embraced integrated paging solutions, multi-lingual messaging, cordless communications, private mobile radio, cellular, satellite applications, and telemetry. It has proved to be a very rewarding decade for the Group as we witnessed an age of fast growth and revolutionary changes in communications, information accessibility, and personal computer usage. We have seen Champion emerge from a small systems development house with a Hong Kong base to become an international telecom and technology company covering markets worldwide.

The technology revolution has just started and still has a long way to go. The personal computer (with computing power enhanced by microchips doubling in power almost every 18 months), networking and software that foster incremental strides in capacity and interconnectivity, and access to information, are all part of this revolution. Digitised data, wireless communication, enhanced spectrum and bandwidth, satellite networks, smart digital radios, videophones, interactive TVs, radio and electronic media, and numerous other products and technologies are the driving forces along the new information superhighway. According to industry experts, data traffic will be the fastest-growing segment in the years to come, and most of the future growth in telecom is expected to come from data: sound, images, and computer files that will travel on high-speed networks modelled on Internet technology.

To prepare ourselves for the new era of technology and continued growth for the Group, we have identified several key areas of business as our next course of direction. First and foremost, we will continue to capitalise on our radio telecom and information technology expertise in transforming paging technology to embrace total mobile and data solutions. Beyond that, we intend to explore other areas of high growth opportunities, including environmental and healthcare services which are evolving with the advance of new technologies. Our strategy for growth is in line with the global trends of people demanding more information and faster communications, and also becoming ever more conscious of the environment and their health.

In the past year, we have looked at a number of project proposals related to environmental and healthcare technologies, and have kept ourselves abreast of developments in these fields. Depending on the progress of the new projects, we intend to set up special task forces and put aside funds to pursue these new opportunities. It is critical however, that while exploring these existing new opportunities, we should not lose sight of our continuing role in enhancing paging as a primary messaging and information medium, and drive its transformation.

Transforming Paging Technology : the New Age of Wireless Communications
It is not unreasonable to say that today's pagers merely scratch the surface of what is possible in mobile messaging. The ability to send alphanumeric or multilingual messages, transmit real-time financial and horse racing information, and to even roam across borders, will be only a few of the features of the pagers of tomorrow. After all, message paging and information paging are the primary contents of data traffic.

Among the various wireless communications tools, the pager is the most versatile, cost effective, and reliable. Within the wireless industry, which embraces cellular, PCS, satellite communications, and mobile data, paging has continued to demonstrate its unique position as a genuinely integratable technology, around which a set of existing technologies are combined to make one of the most powerful communications vehicles. At Champion, we have been offering one of the most comprehensive wireless information packages of value-added services for consumers, bundling personal messaging, real-time horse racing information (including declaration list, tote board information, special announcements and racing commentators' comments), financial information, news headlines, traffic situations, sports events, property transactions, movie guides, and Champion's recent innovation, PicturePage, where photos, corporate logos, and graphics are scanned onto the Kantone 4-line Chinese display and 8-line English/numeric display pager. This ability to bundle different technologies has transformed the conventional pager into a powerful Mobile Imaging and Information Terminal.

As far as business applications are concerned, we are already a leader in the market offering total mobile solutions for the workplace, by combining variously on-site paging, public wide-area paging, private wide-area paging, voice paging, cordless communications, private mobile radio, telemetry, and industrial monitoring.

In the long term, the potential of paging is only limited by one's imagination. New high-speed paging protocols, availability of high capacity bandwidth, connectivity software, and other technological developments, will continue to boost the industry. Paging has the amazing ability to re-invent itself every six months and to add new applications, which help to sustain its popularity.

An exciting opportunity for paging is related to the Internet, which the industry claims is the single most influential communications tool since the PC. We are currnetly working on a new Internet-oriented perspective which is going to open a world of opportunities: connecting paging systems to Internet Servers, interconnecting paging terminals using IP (Internet Protocol) as a cost effective, high performance architecture for international roaming services, e-mail to page, page to e-mail, etc. As a broadcast and messaging medium, paging will evolve into a powerful platform for wireless connectivity to the Internet. Similarly, we are positioning and packaging our services, so that the growth in cellular becomes an opportunity instead of a threat.

From a commodity product offering one-way basic alert functions, to a highly customised communications tool with countless applications that can be used cross-country and across borders, as well as interactively, the pager presents to us suppliers immense challenges, and to our consumers, compelling advantages. The death knell for paging will not ring unless the dynamism of the industry stops or it is beyond further metamorphosis. We at Champion will focus on strengthening our information and software capabilities to drive the next generation of wireless communications through the millennium and beyond.



Champion's People

"What attracted me to Champion was a dynamic leadership which was ready to give significant freedom and responsibility to be able to make a tangible difference."

"People say that Champion has been lucky. Well if luck holds out year-on-year, for 10 straight years, one begins to think if there isn't more to it."

"Champion is an organisation which has tasted success but is still hungry for more."

"Our technological strength, growing customer base and solid position in emerging markets are our major assets."

"A few years ago when I started to work at Champion, everything was new, exciting and promising. That day has never ended."

"Reputation alone has not got us here. Delivering for our customers did."

"We believe in stretching the limits of what technology can do for people in their daily lives."



Our Commitment to the Community

Through our corporate contributions, which include Technology Assistance, Student Project Sponsorship, Scholarships, and Summer Placement Programme, Champion and its employees invest in the communities where we live and work. Our support of education, youth development, social community services, and the environment is all part of our community service initiative, A Better Tomorrow, which is now into its seventh year.

In China, the Group has committed resources to several education initiatives, including the provision of wireless education assistance to children in remote villages. The Group's interest in Chinese language communication has led to our sponsorship of the Hwa Xia Grand Prize for Chinese literature, which is expected to develop into a prominent literary award of international status.

Other ongoing programmes include supplying Kantone pagers to the underprivileged and social workers at concessional prices, sponsoring a wide variety of community service campaigns, providing discounted pagers to the deaf, and arranging visits to homes for the aged and the needy.



Review of Operations

As set out in our last Annual Report, the Group undertook several corporate strategies which were aimed at long term contributions to the Group's performance. As a result of the Group's restructuring into three different business divisions, Kantone Holdings Limited ("Kantone"), the equipment manufacturing and distribution arm of the Group, was spun off and subsequently listed on the Stock Exchange of Hong Kong Limited on 23 January 1997. The Company retains 57% interest in Kantone.

Results For The Year
During the period under review, the Group continued its effort in the rationalisation programme with the major objective to enhance overall operational efficiency and cost effectiveness. Despite the increasing competition, the Group was able to sustain healthy increases in sales and profit by means of very competitively priced offerings and products. Turnover for the year ended 30 June 1997 was HK$1.157 billion, an increase of 13% over the corresponding period. Approximately 51% of the overall turnover was contributed by Kantone, with the balance split almost equally between Telecommunications Operations and Microelectronics, Software and Technology. Profit for the year amounted to HK$271 million, up 10%, and earnings per share was 16.7 cents, an increase of 3.7% over the previous year's figures. Profit before minority interest was HK$288 million, an increase of 17% from last year.

The results included a net exceptional loss of HK$4 million which was made up of a gain of HK$108 million arising from the distribution of Kantone shares to existing Champion shareholders, and a charge of HK$112 million for provisions and write-off of costs involved in developing some of the new telecom networks and projects, including the Indian paging network operations. Excluding the exceptional items, the Group's profit before taxation was HK$293 million, up 12% from last year.

Final Dividend
Our directors have recommended a final dividend of 0.25 cents per share, subject to the approval of shareholders at the forthcoming Annual General Meeting. The level of dividend has been proposed in light of the current market conditions to preserve cash resources for deployment in the Group's various business opportunities. This, together with the interim dividend of 1.35 cents paid on 19 June 1997, and a special interim dividend of 17.3 cents per share satisfied by the transfer of shares in the capital of Kantone Holdings Limited, gives a total dividend of 18.9 cents per share for the year.

Shareholders will have the option of receiving the dividend in cash or in the form of new shares in the Company. It is expected that the scrip shares and/or dividend warrants will be despatched to those entitled on or before 30 January 1998.

Operations Review
Telecommunications Operations
In Hong Kong, intense competition and pricing pressures from cellular and the newly launched PCS have caused a stagnation of growth for the paging market. The Group's paging operation, Kantone Paging, was able to sustain steady growth of its subscriber base via introduction of innovative features and services.

The launch in February this year of PicturePage, whereby photos, corporate logos, and graphics are scanned onto the Kantone 4-line Chinese display and 8-line English/numeric display pager, has proved successful, as the new service attracted a lot of media attention, and has brought the Group new subscribers. This was followed by the overwhelming response to Kantone's new Stock Pager, which displays real-time price quotations of some 600 stocks currently listed on the Hong Kong Stock Exchange; and the Horse Racing Pager which bundles personal messaging with the most comprehensive horse racing information currently available in the market.

Elsewhere, the Group's involvement in paging operations in China and Russia progressed as planned, although varying degrees of delay had been experienced. In India, intense competition and depressed prices have led the Group to delay the launch of paging operations in its licensed cities, thereby avoiding significant operating losses as suffered by other service providers. As a precaution, the Group has made a provision to write off expenses incurred so far in the project. However, due to the imminent consolidation of the industry and the continued robust growth in the subscriber base in India, the Group continues to be optimistic about the market for the medium and long term, especially for equipment sales, and will reposition ourselves to explore profitable growth opportunities.

Meanwhile, the Group has suspended further investment in the proposed two-way data communications project in China, as a result of market uncertainty caused by repeated delays in the satellite program of our US partner. Provisions have been made to write off related expenses in the project.

As competition is becoming intense in the global telecom markets, and in anticipation of the economic slowdown caused by the recent Asian turmoil, the Group is closely monitoring the progress of its operations and investments world-wide, to ensure that ongoing and new projects meet the Group's profit and growth objectives.

Microelectronics, Software and Technology
The Group owns a number of patents for its proprietary technologies, and continues to be a niche player in multi-lingual messaging, information software, and non-voice wireless transmission. Of the three business divisions within the Group, Microelectronics, Software and Technology is the least affected as far as margins are concerned. The Group's capability in providing total solutions to both on-site and wide-area mobile infrastructure, its expertise in information software, as well as its innovative offerings, has attracted a growing customer base. The Group's latest technological innovation, PicturePage, as referred to above, is a good illustration of the Group's software capabilities and strength in integrating various technologies, which have transformed the conventional pager into an all-powerful Mobile Imaging and Information Terminal.

The Group's research team has also embarked on several new projects related to high-speed paging, wireless networking, two-way messaging, dual-mode and dual-frequency paging, as well as Internet paging. All these efforts are targeted at bringing more comprehensive value-added services to the Group's customers. In addition, other technology sectors including environmental and healthcare services are being explored.

Kantone Holdings - Manufacturing and Distribution
The Group's European operations registered modest growth, apart from in Germany, where the economy's growth was slower than expected. Leveraging on its strong brandname and strength in on-site paging, Kantone has continued to focus on niche markets such as personal security and emergency services. New solutions for people who work in potentially hazardous conditions were introduced. Meanwhile, Kantone has also become more aggressive in acquiring wide-area paging business in Europe, and has introduced a new model of two-line display pager which comes in a range of colours. Major contracts have been obtained, including one for the German market.

Cordless telephony is another growth area. The Group has launched its new DECT (Digital Enhanced Cordless Telecommunications) handset, the CH60, which has all the attributes of a desktop telephone extension and incorporates all the features available through a PBX or PABX.

The strategy to reduce earnings reliance on the mature market in Europe is beginning to bear fruit as shown in the increased turnover and profit contribution from sales in Asia, where demand for telecom products remains encouraging.

In China, the Group's sales of mainly wide-area paging equipment and multi-lingual pagers are steadily increasing. In India, Kantone's joint venture with Bharat Electronics was formally signed. Paging products for private wide-area applications are being produced and distributed.

In Brazil, the Group's project to sell on-site communications systems to the local hospitals and hotels made good progress. Several contracts have been obtained.

Prospects
With telecommunications and information as key drivers of economic growth and prosperity, our directors are confident that the Group is well positioned to benefit from the growing global demand for wireless products. The restructuring and streamlining programme has further boosted its position as a cost-effective provider of equipment and services in an industry that is increasingly regarded as essentially a commodity business. As a result of being in control of both hardware and software, the Group is able to maintain lower operating costs than the industry average, and therefore enjoy a significant competitive advantage over its peers.

Looking ahead, the Group will continue to leverage on its microelectronics and software development skills to further enhance its products and offerings. Under development is a specialised technology which enables different information packages to be tailored to customer preferences, taking advantage of the maximum display of the Kantone receiver and its huge memory capacity. Meanwhile, the Group is also in active discussion with prospective technology and networking partners with a view to exploring further new opportunities in telecom, healthcare, and environmental sectors.

With our information technology and computing background, both of which now enmesh almost every industry, together with our telecom experience, we are confident that we can continue to gain footholds in the fast growing and rapidly evolving telecom and technology business.



Board of Directors and Executive Officers

Board of Directors

Paul KAN Man Lok
Chairman of the Board
President and Chief Executive Officer

James CARTER
Managing Director

Leo KAN Kin Leung
Executive Vice President
Administration

Sunny LAI Yat Kwong
Chief Financial Officer

Jennifer CHEUNG Mei Ha*
Terry MILLER*


* Non-executive Directors


Senior Management

Michael Walker
Chief Executive
Multitone Electronics PLC,
Vice President
Champion Europe

Francis KAN Man Fai
Executive Vice President
Systems Development

Pius CHAN Park Sun
Vice President
China Business

Henry FUNG Kin Leung
Vice President
Microelectronics

Shirley HA Suk Ling
Vice President
Corporate Development

Gaurav JAIN
Vice President
Business Development

Iris KOO Kin Hing
Vice President
Finance

Detlef Krull
Managing Director
Multiton Elektronik GmbH

Luiz Dutra Villa-Lobos
Head of Brazil Business

LAU Yan Kee
Vice President
Radio Business

Brian MACLEAN
Vice President
Corporate and Public Affairs

Cindy MAK Man Yee
Vice President
Administration

NGAN Wai Chuen
Vice President
Radio Projects

Albert TONG
Vice President
Project Finance

Peter WONG
Vice President
Radio Products

Gary CHOY Kin Chung
Head of China Projects

Robert SIA Chun Chung
Head of China Business

ZHUANG Yong Yi
Chief Software Engineer

Joanne CHIU Yim Fan
Business Manager, China



Global Highlights

Overwhelming response to Kantone's new Stock Pager, with real-time price quotations of some 600 stocks currently listed on the Hong Kong Stock Exchange

Multitone signed a Joint Venture with India's Bharat Electronics to form Bel-Multitone Pvt Ltd. to distribute a comprehensive range of communications products

Premier launch of Picture Page in Hong Kong

Successful spin-off of Kantone, listing on the Hong Kong Stock Exchange

Wholly-owned subsidiary set up in Brazil to tap the vast domestic market

Shanghai-Ricoh Fax Co., the Group's Joint Venture in fax manufacturing, opened new plant and began producing plain paper fax machines

Listed in March 1997 issue of Capital Magazine as Best Paging and Telecom Equipment Company amongst 20 Best Enterprises in Hong Kong

Multitone landed a contract with the Fire Services in a major Australian state

Multitone launched the DECT-based products in Europe



Notice of Annual General Meeting

CHAMPION TECHNOLOGY HOLDINGS LIMITED
(Incorporated in the Cayman Islands with limited liability)

NOTICE IS HEREBY GIVEN that the Annual General Meeting of the abovenamed company (the "Company") will be held at 3rd Floor, Kantone Centre, 1 Ning Foo Street, Chaiwan, Hong Kong on 23 December 1997 at 10:00 a.m. for the following purposes:-

1.

To receive and consider the audited financial statements and the reports of the directors and auditors for the year ended 30 June 1997.

2.

To declare a final dividend of 0.25 cents per share for the year ended 30 June 1997.

3.

To elect directors and to authorise the board of directors to fix their remuneration.

4.

To appoint auditors and to authorise the board of directors to fix their remuneration.

5.

As special business, to consider and, if thought fit, pass the following resolutions as ordinary resolutions:-

A. "THAT:-

(a)

subject to paragraph (c), the exercise by the directors of the Company during the Relevant Period of all the powers of the Company to allot, issue and deal with additional shares in the capital of the Company and to make or grant offers, agreements and options which might require the exercise of such power be and is hereby generally and unconditionally approved;

(b)

the approval in paragraph (a) shall authorise the directors of the Company during the Relevant Period to make or grant offers, agreements and options which might require the exercise of such power after the end of the Relevant Period;

(c)

the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the directors of the Company pursuant to the approval in paragraph (a), otherwise than pursuant to a Rights Issue or the exercise of the subscription rights under the share option scheme of the Company shall not exceed 20 per cent of the aggregate nominal amount of the share capital of the Company in issue as at the date of this resolution a he said approval shall be limited accordingly; and

(d)

for the purposes of this resolution:-

"Relevant Period" means the period from the passing of this resolution until whichever is the earlier of :-
(i)

the conclusion of the next annual general meeting of the Company;

(ii)

the expiration of the period within which the next annual general meeting of the Company is required by the articles of association of the Company or any applicable law to be held; and

(iii)

the revocation or variation of this resolution by an ordinary resolution of the shareholders of the Company in general meeting; and

"Rights issue" means an offer of shares open for a period fixed by the directors of the Company to holders of shares on the register on a fixed record date in proportion to their then holdings of such shares (subject to such exclusion or other arrangements as the directors of the Company may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in any territory outside Hong Kong)."

B. "THAT:-

(a)

the exercise by the directors of the Company during the Relevant Period of all powers of the Company to purchase its own shares and warrants, subject to and in accordance with all applicable laws, be and is hereby generally and unconditionally approved;

(b)

the aggregate nominal amount of shares and warrants of the Company purchased by the Company pursuant to the approval in paragraph (a) during the Relevant Period shall not exceed 10 per cent of the aggregate nominal amount of the share capital of the Company in issue and 10 per cent of the outstanding warrants of the Company as at the date of this resolution and the said approval be limited accordingly; and

(c)

for the purposes of this resolution:-

"Relevant Period" means the period from the passing of this Resolution until whichever is the earlier of:-

(i)

the conclusion of the next annual general meeting of the Company;

(ii)

the expiration of the period within which the next annual general meeting of the Company is required by the articles of association of the Company or any applicable law to be held; and

(iii)

the revocation or variation of this resolution by an ordinary resolution of the shareholders of the Company in general meeting."

C.

"THAT conditional upon resolution no. 5B above being passed, the aggregate nominal amount of the number of shares in the capital of the Company which are repurchased by the Company under the authority granted to the directors as mentioned in resolution no. 5B above shall be added to the aggregate nominal amount of share capital that may be allotted or agreed conditionally or unconditionally to be allotted by the directors of the Company pursuant to resolution no.5A above."

  By Order of the Board
Jennifer Cheung Mei Ha
Company Secretary

Hong Kong, 15 November 1997

Principal Office:
The Penthouse
Kantone Centre
1 Ning Foo Street
Chaiwan, Hong Kong

Notes:-
(1)

A member entitled to attend and vote at the meeting convened by the above notice is entitled to appoint proxies to attend and, in the event of a poll, vote in his stead. A proxy need not be a member of the Company. In order to be valid, the form of proxy must be deposited at the Company's principal office in Hong Kong together with a power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority, not less than 48 hours before the time holding the meeting or adjourned meeting.

(2)

The register of members of the Company will be closed from 17 December 1997 to 23 December 1997, both days inclusive, during which period no transfer of shares will be effected. In order to qualify for the final dividend to be approved at the annual general meeting, all transfers accompanied by the relevant share certificates must be lodged with the Company's branch share registrars in Hong Kong, Secretaries Limited at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong not later than 4 p.m. on 16 December 1997.





Financial Section

Contents


Directors' Report

The directors present their annual report and audited financial statements for the year ended 30 June 1997.

PRINCIPAL ACTIVITIES
The Company is an investment holding company. Its subsidiaries are principally engaged in the design, development, manufacture and marketing of telecommunications related products including radio paging systems and pagers and the provision of radio paging services.

The Group's turnover and contribution to profit from ordinary activities before taxation are mainly derived from the sales of telecommunications equipment and the provision of telecommunications services, software and licensing to customers.

The Group's turnover and contribution to profit from ordinary activities before taxation by principal activities are as follows:

  Turnover Contribution to
profit from
ordinary activities
before taxation
  HK$'000 HK$'000
Sales of telecommunications equipment 748,312 124,439
Provision of telecommunications services,
   software and licensing
  409,169  168,094
  1,157,481
=======
292,533
Exceptional items     (3,980)
  288,553
=======

The Group's turnover and contribution to profit from ordinary activities before taxation by geographical location of operations are as follows:

  Turnover Contribution to
profit (loss) from
ordinary activities
before taxation
  HK$'000 HK$'000
People's Republic of China, including Hong Kong 860,277 307,606
Europe 284,296 (14,387)
Others      12,908       (686)
  1,157,481
=======
292,533
Exceptional items    (3,980)
  288,553
======

RESULTS AND APPROPRIATIONS
The results of the Group and appropriations of the Company for the year ended 30 June 1997 are set out in the consolidated profit and loss account and in the accompanying notes to the financial statements. An interim dividend in scrip form equivalent to 1.35 cents per share, with a cash option, and a special dividend in specie of 159,170,175 shares in Kantone Holdings Limited, a company incorporated in the Cayman Islands which is 57% owned by the Company after the special dividend in specie, were distributed to the shareholders during the year. A final dividend in scrip form equivalent to 0.25 cents per share, with a cash option, is proposed by the directors. Movements of the retained profits are set out in note 19 to the financial statements.

FIVE YEAR FINANCIAL SUMMARY
A financial summary of the Group for the last five financial years is set out.

SHARE CAPITAL AND WARRANTS
Movements in the share capital and warrants of the Company during the year are set out in note 18 to the financial statements.

RESERVES
Movements in reserves of the Group and the Company during the year are set out in note 19 to the financial statements.

The Company's reserves available for distribution represent the share premium, special reserve and retained profits. Under the Companies Law (Revised) Chapter 22 of the Cayman Islands, share premium of the Company is available for paying distributions or dividends to shareholders subject to the provisions of its Memorandum or Articles of Association and provided that immediately following the distribution or dividend the Company is able to pay its debts as they fall due in the ordinary course of business. In accordance with the Company's Articles of Association, dividends can only be distributed out of the retained profits of the Company of HK$75,505,000.

FIXED ASSETS
During the year, the Group incurred an aggregate of approximately HK$70 million in the acquisition of additional plant and machinery and telecommunications networks including equipment and pagers on loan for business expansion and upgrading of paging facilities. Existing telecommunications networks with an aggregate carrying value of approximately HK$84 million were written off during the year after considering the expected economic benefits to be derived from these networks.

Details of these and other movements in fixed assets of the Group during the year are set out in note 10 to the financial statements.

SUBSIDIARIES
Details of the Company's principal subsidiaries at 30 June 1997 are set out in note 31 to the financial statements.

BORROWINGS
Borrowings which are repayable within one year or on demand are classified as current liabilities. A repayment analysis of the maturity of bank borrowings and obligations under finance leases and sale and lease back arrangements is set out in notes 20 and 21 to the financial statements respectively.

No interest was capitalised by the Group during the year.

DONATIONS
During the year, the Group made charitable and other donations totalling HK$315,000.

DIRECTORS AND SERVICE CONTRACTS
The directors of the Company during the year and up to the date of this report were:

Executive directors :

Paul Kan Man Lok
James Carter
Leo Kan Kin Leung
Lai Yat Kwong

non-executive directors:

Terry Miller
Jennifer Cheung Mei Ha

In accordance with Article 99 of the Company's Articles of Association, James Carter and Terry Miller retire and, being eligible, offer themselves for re-election. All other directors continue in office.

No directors being proposed for re-election at the forthcoming annual general meeting has a service contract with the Company or any of its subsidiaries which is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

The non-executive directors have been appointed for a term subject to retirement by rotation as required by the Company's Articles of Association.

DIRECTORS' INTERESTS IN CONTRACTS AND CONNECTED TRANSACTIONS
After the listing of shares of Kantone Holdings Limited on The Stock Exchange of Hong Kong Limited on 23 January 1997, the Company and its subsidiaries other than the Kantone Holdings Limited and its subsidiaries ("Kantone Group") had the following transactions with the Kantone Group:

Nature of transactions HK$'000
Purchases of pagers and paging systems from the Kantone Group 28,249
Sales of refurbished pagers to the Kantone Group 9,732
Fees received from the Kantone Group for the provision of
  office premises and facilities, and management services
1,200
Interest and other expenses reimbursed from the Kantone Group
  for the utilisation of banking facilities
3,298

In addition, the Kantone Group also sold finished goods amounting to HK$6,633,000 to Multi-Page. The Group holds a 40% interest in the issued capital in Multi-Page, a company incorporated in Russia which is engaged in the provision of paging services.

In the opinion of the directors of the Company, the above transactions were carried out in the usual course of business and on normal commercial terms.

Save as disclosed above, no contracts of significance to which the Company or any of its subsidiaries was a party and in which a director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year.

DIRECTORS' RIGHTS TO ACQUIRE SHARES OR DEBENTURES
The Company and Kantone Holdings Limited, each has an executive share option scheme which enables the directors of the Company and Kantone Holdings Limited to grant to directors and employees options to subscribe for shares in the Company and Kantone Holdings Limited respectively. Details of the share option scheme of the Company are set out in note 18 to the financial statements.

The share options granted by Kantone Holdings Limited are exercisable at any time for a period as may be determined by its directors. The subscription price of the option shares is the higher of the nominal value of the shares and an amount which is 80% of the average of the closing prices of the shares on the five trading days immediately preceding the date of grant of the options. No share options were granted to its employees since the adoption of the scheme.

Other than the share option schemes described above, at no time during the year was the Company or any of its subsidiaries a party to any arrangement to enable the directors of the Company to acquire benefits by means of acquisition of shares in, or debentures of, the Company or any other body corporate.

Save as disclosed above, none of the directors, or their spouse and children under the age of 18, had any right to subscribe for the securities of the Company, or had exercised any such right during the year.

DIRECTORS' INTERESTS IN SECURITIES
As at 30 June 1997, the interests of the directors and their associates in the securities of the Company and its associated corporations as recorded in the register maintained under Section 29 of the Securities (Disclosure of Interests) Ordinance ("SDI Ordinance") were as follows:

Securities of the Company
Name of director Number of shares
Corporate
interest

Number of warrants
Corporate
interest

Paul Kan Man Lok (Notes 1 and 2) 700,000,000 90,000,000
James Carter (Note 2) - -
Leo Kan Kin Leung (Note 2) - -
Lai Yat Kwong (Note 2) - -
Terry Miller (Note 2) - -
Jennifer Cheung Mei Ha

- -
Shares of Kantone Holdings Limited
Name of director Number of shares
Corporate
interest
Paul Kan Man Lok (Note 3) 277,504,187
James Carter (Note 2) -
Leo Kan Kin Leung (Note 2) -
Lai Yat Kwong (Note 2) -
Terry Miller (Note 2) -
Jennifer Cheung Mei Ha -

Notes:
1.

These securities are owned by Lawnside International Limited in which Lanchester Limited has a 45.51% interest. Lanchester Limited is a company beneficially owned by a trust, the discretionary objects of which include Paul Kan Man Lok and his family members.

2.

Guardian Angel Limited, a company beneficially owned by a trust, the discretionary objects of which include staff of the Group, including the above directors (except Paul Kan Man Lok) and Chen Yen Ching (the wife of Paul Kan Man Lok), has a 15.29% interest in Lawnside International Limited.

3.

210,990,117 shares are held by the Company and 66,514,070 shares are held by Lawnside International Limited.

Save as disclosed above and other than certain nominee shares in subsidiaries held by directors in trust for the Company or its subsidiaries, none of the directors or any of their associates had any interest in the securities of the Company or any of its associated corporations as defined in the SDI Ordinance as at 30 June 1997.

SUBSTANTIAL SHAREHOLDERS
As at 30 June 1997, the register of substantial shareholders maintained under Section 16(1) of the SDI Ordinance shows that, other than the interests disclosed above in respect of the directors and of Lawnside International Limited and Guardian Angel Limited, the Company has not been notified of any interests representing 10% or more of the Company's issued share capital.

CONVERTIBLE SECURITIES, OPTIONS, WARRANTS OR SIMILAR RIGHTS
Other than the warrants and share option scheme as set out in note 18 to the financial statements, the Company had no outstanding convertible securities, options, warrants or other similar rights as at 30 June 1997 and there was no exercise of convertible securities, options, warrants or similar rights during the year.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES
Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities during the year.

PRE-EMPTIVE RIGHTS
There are no provisions for pre-emptive rights under the Company's Articles of Association although there are no restrictions against such rights under the laws in the Cayman Islands.

MAJOR CUSTOMERS AND SUPPLIERS
For the year ended 30 June 1997, the aggregate amount of turnover and purchases attributable to the Group's five largest customers and suppliers respectively represented less than 30% of the Group's total turnover and purchases.

CODE OF BEST PRACTICE
In the opinion of the directors, the Company had complied with the Code of Best Practice as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited for the year ended 30 June 1997.

AUDITORS
Messrs. Deloitte Touche Tohmatsu have acted as auditors of the Group for the preceding three years. A resolution will be submitted to the annual general meeting of the Company to re-appoint them as auditors.

On behalf of the Board

Paul KAN Man Lok
Chairman

Hong Kong
15 November 1997



Auditors' Report

TO THE SHAREHOLDERS OF CHAMPION TECHNOLOGY HOLDINGS LIMITED
(incorporated in the Cayman Islands with limited liability)

We have audited the financial statements which have been prepared in accordance with accounting principles generally accepted in Hong Kong.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The Company's directors are responsible for the preparation of financial statements which give a true and fair view. In preparing financial statements which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently.

It is our responsibility to form an independent opinion, based on our audit, on those statements and to report our opinion to you.

BASIS OF OPINION
We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the circumstances of the Company and the Group, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free from material misstatement. 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.

OPINION
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 30 June 1997 and of the profit 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.

Deloitte Touche Tohmatsu
Hong Kong, 15 November 1997



Consolidated Profit And Loss Account

For the year ended 30 June 1997
    1997 1996
    HK$'000 HK$'000
TURNOVER   1,157,481
=======
1,025,187
=======
PROFIT FROM ORDINARY ACTIVITIES BEFORE TAXATION      
Continuing operations excluding exceptional items   292,533 261,203
Exceptional items       (3,980)    (16,027)
    288,553 245,176
TAXATION            373     (1,207)
PROFIT BEFORE MINORITY INTERESTS   288,180 246,383
MINORITY INTERESTS       17,361               -
PROFIT FOR THE YEAR   270,819
=======
246,383
=======
DIVIDENDS   312,531
=======
54,690
=======
EARNINGS PER SHARE   16.7 cents
=======
16.1 cents
=======




Consolidated Balance Sheet

At 30 June 1997
    1997 1996
    HK$'000 HK$'000
FIXED ASSETS   444,686 566,006
INTEREST IN TELECOMMUNICATIONS PROJECTS   371,064 285,495
OTHER LONG TERM INVESTMENTS   7,568 7,568
NET CURRENT ASSETS      858,999    491,040
    1,682,317
=======
1,350,109
=======
Financed by:      
SHARE CAPITAL   166,680 158,528
RESERVES   1,276,466 1,158,583
SHAREHOLDERS' FUNDS   1,443,146 1,317,111
MINORITY INTERESTS   116,734 5
BANK BORROWINGS - AMOUNT DUE AFTER ONE YEAR   100,620 -
OBLIGATIONS UNDER FINANCE LEASES AND
  SALE AND LEASE BACK ARRANGEMENTSB
  - AMOUNT DUE AFTER ONE YEAR
  18,045 26,704
DEFERRED TAXATION          3,772        6,289
    1,682,317
=======
1,350,109
=======

The financial statements were approved by the Board of Directors on 15 November 1997 and are signed on its behalf by:

Paul KAN Man Lok Lai Yat Kwong
DIRECTOR DIRECTOR




Balance Sheet
At 30 June 1997
    1997 1996
    HK$'000 HK$'000
INTEREST IN SUBSIDIARIES   918,967 999,714
NET CURRENT ASSETS      302,781      30,235
    1,221,748
=======
1,029,949
=======
Financed by:      
SHARE CAPITAL   166,680 158,528
RESERVES      954,448    871,421
SHAREHOLDERS' FUNDS   1,121,128 1,029,949
BANK BORROWINGS - AMOUNT DUE AFTER ONE YEAR      100,620               -
    1,221,748
=======
1,029,949
=======

Paul KAN Man Lok Lai Yat Kwong
DIRECTOR DIRECTOR

*   Notes to the Financial Statements are contained in the Annual Report, copy of which can be obtained from the Company's Registered Office.



Five year financial summary

RESULTS
  Year ended 30 June
  1993
HK$'000
1994
HK$'000
1995
HK$'000
1996
HK$'000
1997
HK$'000
TURNOVER 298,618
======
553,229
======
766,436
======
1,025,187
=======
1,157,481
=======
OPERATING PROFIT          
Continuing operations excluding
  exceptional items
143,059 181,600 207,866 261,203 292,533
Exceptional items      5,714             -             -  (16,027)    (3,980)
  148,773 181,600 207,866 245,176 288,553
SHARE OF LOSS OF AN ASSOCIATED COMPANY             -             -    (4,607)             -             -
PROFIT FROM ORDINARY ACTIVITIES          
  BEFORE TAXATION 148,773 181,600 203,259 245,176 288,553
TAXATION     9,104     1,283      2,869     (1,207)         373
PROFIT BEFORE MINORITY INTERESTS 139,669 180,317 200,390 246,383 288,180
MINORITY INTERESTS             -             -             -             -   (17,361)
PROFIT For the year 139,669
======
180,317
======
200,390
======
246,383
======
270,819
======
DIVIDENDS 53,556
======
64,430
======
42,436
======
54,690
======
312,531
======
ASSETS AND LIABILITIES
  At 30 June
  1993
HK$'000
1994
HK$'000
1995
HK$'000
1996
HK$'000
1997
HK$'000
TOTAL ASSETS 898,107 1,205,174 1,494,284 1,870,557 2,075,242
TOTAL LIABILITIES AND MINORITY INTERESTS    95,683   404,027    512,315    553,446    632,096
SHAREHOLDERS' FUNDS 802,424
======
801,147
=======
981,969
=======
1,317,111
=======
1,443,146
=======

Note: The results for the year ended 30 June 1993 have been prepared on a combined basis to indicate the Group's results as if the group structure, at the time of the Company's shares were listed on The Stock Exchange of Hong Kong Limited, had been in existence throughout the year ended 30 June 1993.


Champion's Global Reach

Worldwide Offices

Registered Office
P.O. Box 1787
Second Floor
One Capital Place
Grand Cayman
Cayman Islands
British West Indies

Corporate Headquarters
Champion Technology
Holdings Limited

Kantone Centre
1 Ning Foo Street
Chaiwan
Hong Kong

European Headquarters
Multitone Electronics PLC
Kimbell Road
Lister Road Industrial Estate
Basingstoke
Hampshire
RG22 4AD
U.K.

Manufacturing Facilities
King's Lynn, Norfolk
U.K.

Malacca
West Malaysia
Regional Offices

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Basingstoke, Hampshire
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Scotland
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Dublin

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Dusseldorf
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