RESULTS UPDATE. AKM Industrial Co. Ltd % Source: Bloomberg

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1 RESULTS UPDATE Ticker: 8298 HK Date: November 14, 2005 Rating: NOT RATED Share Price (HK$):0.405 Sector: Flexible printed circuit (FPC) Key Data Closing Price (HK$): Week High/Low (HK$): 0.600/0.355 Enterprise Value (HK$m): Market Capitalization (HK$m): Shares O/S (m): Avg. Daily Volume (m) 0.06 Substantial sharholder China North Industries Corp 66.67% Turnover (FY04 HK$m): Net Profit (FY04 HK$m): 41.4 Performance (%) 1M 3M 6M 5.2 (3.6) (19.0) HC Kwan (852) AKM Industrial Co. Ltd. For the nine months ended 30SEP, AKM reported HKD140.6mn turnover, a decrease of 26.4% yoy. Gross profit margin for the period was 28.1%, down 2.2ppt from 30.3% in the year ago period. Net profit was HKD19.9mn, down 33.6% yoy. EPS was 3.71 HK cents. Share price performance follows business development. AKM s share price has fallen 32.5% from its peak in April. Global Flex, a newly listed FPC maker, also saw its share price plunged 31% since IPO, reflecting poor market sentiment toward counters in this industry. We are of the view that until investor sentiment towards electronic industry recovers, share price of these counters may not stage a strong rebound. NOT RATED 3Q05 Results Highlights For the nine months ended 30SEP, AKM reported HKD140.6mn turnover, a decrease of 26.4% yoy. Gross profit margin for the period was 28.1%, down 2.2ppt from 30.3% in the year ago period. Net profit was HKD19.9mn, down 33.6% yoy. EPS was 3.71 HK cents. The bulk of AKM s sales remained from the PRC and thus was vulnerable to poor performance of domestic handset makers. Exhibit: AKM sales by geographical market HKD mn 9 months 9 months 3 months 3months to SEP05 to SEP04 to SEP05 to SEP04 PRC other than HK Hong Kong Others Total Source: Company data Exhibit: AKM quarterly sales trend % % % % 30.9% Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 Sales (HKD mn) QoQ growth 40% 30% 20% 10% 0% -10% -13.4% -20% -30% The decrease in net profit was in line with decrease in turnover. Distribution costs were under control, down 47.1% yoy. Administrative expenses amounted to HKD9.1mn, down only 4.4% yoy. Research and development expenses were HKD2.9mn, down 1

2 30.1% yoy. The decrease in research and development expenses was mainly due to HKD1.36mn government grants that offset expenses, otherwise R&D expenses were flat. Sales mix remained essentially unchanged. Sales of the three core products, namely single-sided, double-sided and multi-layer flexible printed circuits in the current nine month period accounted for 13%, 37%, and 50% of total turnover respectively, while the sales of these products for the corresponding period of last year accounted for approximately 13%, 40% and 47% of total turnover respectively. Since the beginning of 2005, the reduction in sales orders and unit selling price from domestic mobile phone manufacturers has been hitting AMK. AKM has managed to reduce its reliance on domestic mobile phone manufacturers and explore new revenue streams. In addition to turnover generated from the sales of flexible printed circuits applied in mobile phones, sales generated from applications in TFT LCD module was reflected during the period. Moreover, new customer like Alcatel has been added to AKM s client list during the period which will mitigate the impact of sluggish business from local handset makers. On 4 July, AKM has formed a joint venture in the PRC, namely (Shenzhen Smart Electronics Co., Ltd.), with independent third parties to provide surface mount technology services for the flexible printed circuits. The registered capital of Shenzhen Smart is approximately HKD10mn with 58% interest owned by AKM through a subsidiary. As at 30 September, AKM has invested HKD4.35mn in Shenzhen Smart for working capital. Share price performance follows business development. AKM s share price has fallen 32.5% from its peak in April. Global Flex, a newly listed FPC maker, also saw its share price plunged 31% since IPO, reflecting poor market sentiment toward counters in this industry. We are of the view that until investor sentiment towards electronic industry recovers, share price of these counters may not stage a strong rebound. NOT RATED. Industry overview Worldwide flex circuits (FPC) market is estimated to be USD5.9bn in 2005, and is expected to grow at an average annual growth rate of 13.5% to reach USD11.2bn in 2010, according to electronics.ca. The research firm expects that the growth will be primarily driven by a strong demand for higher density and smaller-sized devices, which will lead to the rise in demand for flex circuits in digital electronics industry. Moreover, the demand for various electronic products such as cell phones, PDAs, and camcorders is expected to increase over the next five years, particularly in emerging markets, such as India and China. As a result, the flex circuit industry is expected to grow at a high rate. Flex circuits use various base materials/substrates, such as polyimide and polyester. As polyimide provides good all-round properties to the flex circuits, polyimide-based flex circuits dominate the total flex circuit market. Approximately 90% of the flex circuits being produced in the world use polyimide as a substrate. Polyester-based flex circuits are the second most popular in the industry. Flex circuits are also classified on the basis of layer count, which include single-sided, double-sided, and multi-layered. Single- and double-sided flex circuits dominate the market since the trend in the industry is shifting towards producing lighter and high density circuits by reducing line widths. However, the demand for multi-layered 2

3 circuits is also expected to keep on growing at a slow rate due to its demand in niche applications. Japan is currently the world leader in the flex circuit market, followed by the US. However, due to cost reduction benefits in cheap labor countries, especially China, the manufacturing of flex circuits is witnessing a shift to the south Asian countries. A number of manufacturers, especially those from the US, are setting up their manufacturing plants in the region. Despite the fact that flex circuit technology is an enabling technology for several important applications such as telecommunications, computer, automotive, medical, and aerospace. The performance pressure to reduce the size, weight, and assembly time and costs of flex circuits-while continuously enhancing their functionality-has also increased. Performance of FPC makers follows the ups and downs of the electronic cycle. Despite general uptrend in the long term, short term volatility is unavoidable. After a stellar 2004, the FPC industry turned into cyclical downturn in M-Flex Electronix (MFLX), a prominent FPC maker listed on Nasdaq, reported negative growth in 1Q05. But backed by strong orders from Motorola, which saw its global handset market share soared 2.2ppt yoy in 2Q05, M-Flex Electronix staged strong growth in 2Q05 and 3Q05. Exhibit: M-Flex Electronix quarterly sales trend % % -8.3% % 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 Sales (USD mn) QoQ growth % 31.4% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% AKM fared worse for its focus in the domestic handset makers, which are reporting terrible sales due to competition from overseas makers and saw their market share falling fast. For the four handset makers listed in HKEx, China Electronics Corporation (0085HK), ZTE (0763HK), Haier Electronics (1169HK), and TCL Communication (2618HK), they all reported negative growth in either handset sales revenue or volume, or both. Probably the only bright spot is Lenovo (0992HK) that continues to report encouraging growth in market share and profit. 3

4 Exhibit: AKM 3Q05 results Nine months ended 30SEP Three months ended 30SEP HKD mn change % change % Turnover (26.4) (24.8) Cost of sales (101.1) (133.2) (24.1) (34.1) (41.2) (17.2) Gross profit (31.7) (40.3) Other operating income (52.4) Distribution costs (4.5) (8.4) (47.1) (1.6) (3.5) (54.5) Administrative expenses (9.1) (9.5) (4.4) (3.3) (3.4) (3.9) R&D expenses (3.0) (4.3) (30.1) (0.1) (1.7) (94.4) Profit from operations (35.1) (39.1) Finance costs - (0.7) - (0.4) Share of loss of an associate (0.3) - (0.3) - Profit before taxation (34.6) (39.7) Taxation (2.9) (4.9) (40.9) (0.9) (1.7) (48.0) Profit for the period (33.6) (38.3) Earnings per share HK cents HK cents Basic (47.9) (46.0) Diluted 3.69 N/A 1.14 N/A Margin analysis Gross margin Operating margin Net margin

5 ANALYST CERTIFICATION THE RESEARCH ANALYST WHO IS PRIMARILY RESPONSIBLE FOR THE CONTENT OF THIS RESEARCH RERPORT, IN WHOLE OR IN PART, CERTIFIES THAT WITH RESPECT TO THE SECURITIES OR ISSUER THAT THE ANALYST COVERED IN THIS REPORT: (1) ALL OF THE VIEWS EXPRESSED ACCURATELY REFLECT HIS OR HER PERSONAL VIEWS ABOUT THE SUBJECT SECURITIES OR ISSUER; AND (2) NO PART OF HIS OR HER COMPENSATION WAS, IS, OR WILL BE, DIRECTLY OR INDIRECTLY, RELATED TO THE SPECIFIC VIEWS EXPRESSED BY THAT ANALYST IN THIS REPORT. BESIDES, THE ANALYST CONFIRMS THAT NEITHER THE ANALYST NOR HIS/HER ASSOCIATES (AS DEFINED IN THE CODE OF CONDUCT ISSUED BY THE HONG KONG SECURITIES AND FUTURES COMMISSION) (1) HAVE DEALT IN OR TRADED IN THE STOCK(S) COVERED IN THIS RESEARCH REPORT WITHIN 30 CALENDAR DAYS PRIOR TO THE DATE OF ISSUE OF THIS REPORT; (2) WILL DEALT IN OR TRADED IN THE STOCK(S) COVERED IN THIS RESEARCH REPORT 3 BUSINESS DAYS AFTER THE DATE OF ISSUE OF THIS REPORT; (3) SERVE AS AN OFFICER OF ANY OF THE HONG KONG LISTED COMPANIES COVERED IN THIS REPORT; AND (4) HAVE ANY FINANCIAL INTERESTS IN THE HONG KONG LISTED COMPANIES COVERED IN THIS REPORT. RECOMMENDATION DEFINITIONS: BUY: TOTAL RETURN EXPECTED TO BE 20% OR MORE IN THE NEXT 12-MONTH HOLD: TOTAL RETURN EXPECTED TO BE BETWEEN 5% AND 20% IN THE NEXT 12-MONTH SELL: TOTAL RETURN EXPECTED TO BE BELOW 5% IN THE NEXT 12-MONTH NOT RATED: NO SPECIFIC TOTAL RETURN ESTIMATIONS ARE MADE TOTAL RETURN: SUM OF PRICE APPRECIATION AND DIVIDEND YIELD IMPORTANT DISCLOSURES THIS DOCUMENT IS STRICITLY CONFIDENTIAL TO THE RECEIPIENT, MAY NOT BE DISTRIBUTED TO THE PRESS OR OTHER MEDIA, AND MAY NOT BE REPRODUCED IN ANY FORM AND MAY NOT BE TAKEN OR TRANSMITTED INTO THE UNITED STATES OR PROVIDED OR TRANSMITTED TO ANY U.S. PERSON (WITHIN THE MEANING OF REGULATIONS UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED), INCLUDING ANY BRANCH OR AGENCY OF A NON-U.S. PERSON(S) LOCATED IN THE UNITED STATES. FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAWS. THIS REPORT MAY NOT BE SENT INTO CANADA OR TO ANY CANADIAN PERSON. THIS REPORT MAY NOT BE SENT INTO JAPAN. THIS REPORT MAY NOT BE DISTRIBUTED OR PASSED TO ANY PERSON OTHER THAN A PERSON WHOSE ORDINARY BUSINESS IS TO BUY OR SELL SHARES OR DEBENTURES, WHETHER AS PRINCIPAL OR AS AGENT. THE DISTRIBUTION OF THIS REPORT IN OTHER JURISDICTIONS MAY BE RESTRICTED BY LAW, AND PERSONS INTO WHOSE POSSESSION THIS REPORT COMES SHOULD INFORM THEMSELVES ABOUT, AND OBSERVE, ANY SUCH RESTRICTIONS. BY ACCEPTING THIS REPORT, YOU AGREE TO BE BOUND BY THE FOREGOING LIMITATIONS. BARITS HO CHONG SECURITIES COMPANY LIMITED ( BHC ) OR ONE OR MORE OF ITS AFFILIATES, INCLUDING BARITS SECURITITES (HONG KONG) LIMITED ( BSHK ), MAY PARTICIPATE IN OFFERINGS OF SECURITIES OF AKM INDUSTRIAL CO. LTD. (THE COMPANY ) FROM TIME TO TIME. THIS REPORT DOES NOT CONSTITUTE AN INVITATION OR SOLICITATION OF AN OFFER TO SUBSCRIBE FOR OR PURCHASE ANY SECURITIES AND NEITHER THIS DOCUMENT NOR ANYTHING CONTAINED HEREIN SHALL FORM THE BASIS FOR ANY CONTRACT OR COMMITMENT WHATSOEVER. BHC OR ITS AFFLIATES (OR THEIR RESPECTIVE DIRECTORS, OFFICERS OR EMPLOYEES) MAY, TO THE EXTENT PERMITTED BY LAW, OWN OR HAVE A POSITION IN THE SECURITIES OF (OR OPTIONS, WARRANTS OR RIGHTS WITH RESPECT TO, OR INTEREST IN, THE SHARES OR OTHER SECURITIES OF) THE COMPANY. BHC OR ITS AFFLIATES MAY ADD TO OR DISPOSE OF ANY SUCH SECURITIES OR MAKE A MARKET OR ACT AS A PRINCIPAL IN ANY TRANSACTION IN SUCH SHARES OR OTHER SECURITIES. BHC OR ITS AFFLIATES MAY FROM TIME TO TIME PROVIDE INVESTMENT BANKING, UNDERWRITING OR OTHER SERVICE TO, OR SOLICIT INVESTMENT BANKING, UNDERWRITING, OR OTHER BUSINESS FROM, THE COMPANY. BHC OR BSHK, AN AFFILIATE OF BHC, HAS NO FINANCIAL INTERESTS IN THE COMPANY AS AT NOVEMBER 11, BHC DOES NOT ACT AS A MARKET MAKER OF THE COMPANY ON NOVEMBER 11, NO EMPLOYEE OF BHC OR BSHK, AN AFFILIATE OF BHC, SERVES AS AN OFFICER OF THE COMPANY AS AT NOVEMBER 11, BHC OR BSHK, AN AFFILIATE OF BHC, ACTS AS RETAINED SPONSOR AND FINANCIAL ADVISOR FOR THE COMPANY WITHIN PAST 12 MONTHS. THIS REPORT HAS BEEN PREPARED BY BHC TO PROVIDE BACKGROUND INFORMATION ABOUT THE COMPANY. IT HAS BEEN PRODUCED INDEPENDENTLY OF THE COMPANY, AND THE FORWARD-LOOKING STATEMENTS, OPINIONS, AND EXPECTATIONS CONTAINED HEREIN ARE ENTIRELY THOSE OF BHC AND ARE GIVEN AS PART OF ITS NORMAL RESEARCH ACTIVITIES AND NOT IN CONNECTION WITH ANY OFFERING OF SECURITIES OR AS AN AGENT OF THE COMPANY, ITS SHAREHOLDERS OR ANY OTHER PERSON. ACCORDINGLY, NONE OF THE COMPANY, ANY UNDERWRITER OF SECURITIES OF THE COMPANY, OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS OR EMPLOYEES, SHALL IN ANY WAY BE RESPONSIBLE FOR THE CONTENTS HEREOF, OR SHALL BE LIABLE FOR ANY LOSS ARISING FROM USE OF THIS REPORT OR OTHERWISE ARISING IN CONNECTION THEREWITH. IF THE COMPANY SHOULD AT ANY TIME COMMENCE AN OFFERING OF SECURITIES, ANY DECISION TO INVEST IN ANY SUCH OFFER TO SUBSCRIBE FOR OR ACQUIRE SECURITIES OF THE COMPANY MUST BE BASED WHOLLY ON THE INFORMATION CONTAINED IN A FINAL OFFERING MEMORANDUM ISSUED OR TO BE ISSUED BY THE COMPANY IN CONNECTION WITH ANY SUCH OFFER AND NOT ON THE CONTENTS HEREOF. THE READER IS CAUTIONED THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE SET FORTH IN ANY FORWARD-LOOKING STATEMENTS HEREIN. WHILE ALL REASONABLE CARE HAS BEEN TAKEN TO ENSURE THAT THE FACTS STATED HEREIN ARE ACCURATE AND THAT THE FORWARD-LOOKING STATEMENTS, OPINIONS AND EXPECTATION CONTAINED HEREIN ARE BASED ON FAIR AND REASONABLE ASSUMPTIONS AND NEITHER BHC OF ITS AFFILIATES NOR THE COMPANY HAS INDEPENDENTLY VERIFIED ANY OF THE INFORMATION HEREIN. BY ACCEPTING THIS REPORT, YOU AGREE TO BE BOUND BY THE FOREGOING LIMITATIONS. THIS IS NOT AND SHALL NOT BE TREATED AS AN OFFER (OR SOLICITATION OF AN OFFER) TO BUY OR SELL THE SECURITIES/INSTRUMENTS MENTIONED. BHC DOES NOT REPRESENT THIS IS ACCURATE OR COMPLETE AND WE MAY NOT UPDATE THIS. 5