Advertising spending in the PRC is forecast to grow a further 30% to RMB348,623 million in 2005. ACNielson AdQuest estimates that about 72% of total advertising revenues were generated through TV media in 2004. CVSC - TNS Research further reports that about 48% of such expenditures on TV media were spent on TV drama series.

Effective November 28, 2004, foreign investors are allowed to form TV production joint ventures with Chinese media firms as a first step to open up China's burgeoning media sector. Dr Leung Anita Fung Yee Maria, CEO of Qin Jia Yuan, said: "Equipped with good track records in the industry, Qin Jia Yuan is ready to capitalize on the opportunity through identifying quality production companies and talents. Through working with these companies in various forms of partnership we have gained good understanding of their operations strengths. We plan to invest directly in the production of TV programmes through formation of TV production joint ventures. We will maintain our focus on the one-stop service from TV drama series production, distribution, advertising to marketing, paving the way for the Group to establish its brand name and capture a bigger market share."

In the year, TV drama series "Second Chance (第二春)" and "Come with Me (但願人長久)" of total 58 hours were completed with broadcast commenced. Licensing fees from granting of distribution license rights rose 11% year on year to HK$21 million. TV programme and advertising related incomes were derived from TV drama series "The Well （自流井）" which is in post-production stage, as well as "Story of a Pretty Girl （花魁劫）" and "Love with No Promise （無約之戀）" which are in preparation stage.

During the year under review, the Group further strengthened its complementary value-adding services for sponsors of TV drama series, in a bid to cement its core competency in the provision of TV programme services.

To further strengthen the Group's competitiveness in the market, it is studying the possibility and feasibility of setting up joint ventures with production and advertising companies in the near future to expand its one-stop media service offerings, with a view to expanding the Group's income base.

It is looking at acquisition of original storylines, creative ideas, scripts and story concepts for quality TV programmes, as well as strengthening internal script audit and creation efforts. The Group will also apply part of the proceeds from IPO in the coming year to establish a production service centre in the PRC and to study the feasibility of other production programmes.

As at September 30, 2004, the Group's total cash and bank balances amounted to HK$113 million (2003: HK$ 15.6 million) with outstanding bank borrowings of approximately HK$31.2 million (2003: HK$ 41.7 million). Gearing ratio, or total liabilities over total assets, improved to 20% as at September 30, 2004 (2003: 50%). Debtors' turnover days improved to 143 days (2003: 255 days).

About Qin Jia Yuan
Qin Jia Yuan Media Services Company Limited (SEHK: 2366) is a China-focused one-stop shop for TV media services, providing integrated programme, distribution, advertising and marketing and public relations services to production houses, advertising agencies and advertisers. The Group was listed on the main board of the Stock Exchange of Hong Kong on June 30, 2004 following a successful initial public offering. Its strategic shareholders include Aegis Group plc, a public company listed on the London Stock Exchange and one of the world's five largest media groups.

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