Baoye Group Company Limited - Proxy Solicitation & Information Statement 2003

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Plus Holdings Limited, you should at once hand this circular with the enclosed form of proxy to the purchaser(s) or other transferee(s) or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

Plus Holdings Limited �� *

(the “Company”)

(Incorporated in Bermuda with limited liability)

MAJOR TRANSACTION INVESTMENT OF BAPEF INVESTMENTS II LIMITED INTO THE SUBSIDIARY OF THE COMPANY

Financial Adviser to Plus Holdings Limited

TANRICH CAPITAL LIMITED

A notice convening a special general meeting of Plus Holdings Limited to be held at 10:00 a.m. on 25 June 2003 at Salisbury Room, 7th Floor, Conrad Hotel, Pacific Place, 88 Queensway, Hong Kong is set out on page 90 of this circular. A form of proxy for use at the special general meeting is enclosed. Whether or not you intend to attend the meeting, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it as soon as possible to the office of the share registrar of Plus Holdings Limited in Hong Kong, Tengis Limited at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong and in any event not less than 48 hours before the time appointed for the holding of the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjourned meeting should you so wish.

31 May 2003

* For identification purpose only

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Details of the Subscription Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Reasons for and Benefits of entering into the Subscription Rights Agreement . . . . . . .	9
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Appendix I – Financial information relating to the Group. . . . . . . . . . . . . . . . . . . . . . .	15
Appendix II – The Mechanism for the Exercise of the Subscription Right. . . . . . . . . .	73
Appendix III – Rights of the Preferred Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	75
Appendix IV – Statutory and General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	82
Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	90

– i –

DEFINITIONS

In this circular, unless the context otherwise required, the following expressions have the following meanings:

“Audited Financial Statements”

the full year consolidated audited financial statements of the TPTHL Group and the full year individual audited financial statements of each TPTHL Group Company, in each case, prepared in accordance with Hong Kong GAAP, (in respect of entities incorporated in PRC) PRC GAAP or such other generally accepted accounting principles or practices of the jurisdiction of the place of incorporation of the relevant member of the TPTHL Group (as the case may be)

“BAPEF Group” BARING and its wholly-owned Subsidiaries from time to time

“BARING” BAPEF Investments II Limited, a company incorporated in the British Virgin Islands with limited liability and an existing shareholder of the Company, other than holding approximately 4.88% of the Company’s entire issued share capital, BARING and its ultimate beneficial owners are not connected with any of the Directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or their respective associates as defined in the Listing Rules

“Beijing HollyBridge” Beijing HollyBridge System Intergration Co., Ltd., a sinoforeign equity joint venture established in the PRC on 8 November 1996, a subsidiary owned as to 51% by the Company
“Business Day” A day (other than a Saturday or a Sunday) on which banks are generally open for business in Hong Kong
“Company” Plus Holdings Limited (formerly known as Telecom Plus Holdings Limited), a company incorporated in Bermuda with limited liability and whose shares are listed on the Stock Exchange

“Completion” completion of an exercise of the whole or part of the Subscription Right

– 1 –

	DEFINITIONS
“Directors”	directors of the Company
“Drag Along Notice”	the written notice to be tendered by BARING to the
	Company specifying (a) the Drag Along Sale Price; (b) the
	Drag Along Sale Terms and (c) the Relevant Number of
	Shares
“Drag Along Sale Price”	the sale price of the Sale Shares
“Drag Along Sale Terms”	the terms ascribed under the Drag Along Right illustrated in
	Appendix III
“Exercise Date(s)”	has the meaning ascribed to the term as stated in Clause
	3(F) of the Subscription Rights Agreement
“Group”	the Company and its subsidiaries
“HK$”	Hong Kong dollars
“Holy HK”	Holy (Hong Kong) Universal Limited, a company
	incorporated in Hong Kong on 11 December 1998, a wholly-
	owned subsidiary of the Company
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Independent Shareholders”	Shareholders other than BARING and its associates
“Latest Practicable Date”	27 May 2003, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information
	contained in this circular
“Listing Rules”	the rules governing the listing of securities on the Stock
	Exchange from time to time in effect
“Loan”	the non-interest bearing loan of HK$42,000,000 advanced
	by the Company to TPTHL as at the date of the Subscription
	Rights Agreement, or as the context requires, the aggregate
	amount of the loan owing by TPTHL to the Company at any
	relevant time after the mandatory conversion of such amount
	of the loan into Preferred Stock

– 2 –

DEFINITIONS

“Parties”	the collective name of BARING, the Company and TPTHL
	that entered into the Subscription Rights Agreement
“PRC”	the People’s Republic of China
“Preferred Stock”	a maximum of 7,200 million shares of the preferred stock
	with a par value of HK$0.01 per share in TPTHL to be
	issued, of which a maximum of 3,000 million shares will be
	issued to BARING pursuant to the Subscription Rights
	Agreement and the remaining 4,200 million shares will be
	issued to the Company
“Relevant Number of Shares”	the number of shares held by BARING and the Company to
	be sold to a third party under the Drag Along Right ascribed
	in Appendix III
“Sale Shares”	the shares owned by BARING after its exercise of the
	Subscription Right
“Shareholders”	holders of issued shares in the Company
“Shares”	TPTHL Shares and shares of Preferred Stock
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong)
“SGM”	the special general meeting of the Company to be convened
	and held as contemplated hereunder at 10:00 a.m. on 25
	June 2003 at Salisbury Room, 7th Floor, Conrad Hotel,
	Pacific Place, 88 Queensway, Hong Kong, notice of which
	is set out on page 90 of this circular
“Scheme”	the share option scheme adopted by the Shareholders in
	general meeting on 22 January 2001
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscription Notice”	has the meaning ascribed to the term in Clause 3(F) of the
	Subscription Rights Agreement

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DEFINITIONS

“Subscription Right” the rights granted to BARING by TPTHL to subscribe up to HK$30,000,000 (or such higher amount as TPTHL may agree) for 3,000 million shares at HK$0.01 per share out of 7,200 million shares of Preferred Stock with a par value of HK$0.01 each to be issued by the Company “Subscription Rights Agreement” the conditional subscription rights agreement entered into by BARING, the Company and TPTHL on 6 March 2003, pursuant to which BARING is granted the right to subscribe for the Preferred stock of TPTHL for an aggregate amount not exceeding HK$30,000,000 or such higher amount as TPTHL may agree

“TPTHL Group” TPTHL, the TPTHL subsidiaries and TPTHL associated companies; and “TPTHL Group Company” means any one of them individually; and “TPTHL Group Companies” means any member(s) of the “TPTHL Group” “TPTHL” Telecom Plus Technology Holdings Limited, a company incorporated in Hong Kong with limited liability on 25 July 2001, which is a wholly-owned subsidiary of the Company “TPTHL Shares” ordinary share(s) of HK$1.00 each in the share capital of TPTHL or such other nominal amount as shall result from a subdivision, consolidation or reclassification or reconstruction of the share capital of TPTHL from time to time

– 4 –

LETTER FROM THE BOARD

Plus Holdings Limited �� *

(the “Company”)

(Incorporated in Bermuda with limited liability)

Executive Directors: Mr. Weng Xianding Mr. Zou Yishang Mr. Ma Hongyao Mr. Zhang Keqiang Ms. Chow King Lin Theresa

Non-executive Director:

Mr. Chang Zhenming

Independent Non-executive Directors:

Mr. Zhao Renwei Mr. Leung Wai Man, Roger

Registered Office: Clarendon House 2 Church House Hamilton HM 11 Bermuda

Principal place of business in Hong Kong: Unit 01A, 24th Floor Bank of America Tower 12 Harcourt Road, Central Hong Kong

31 May 2003

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION

INVESTMENT OF BAPEF INVESTMENTS II LIMITED INTO THE SUBSIDIARY OF THE COMPANY

INTRODUCTION

In the announcement dated 29 April 2003, the Board announced that, on 6 March 2003, the Company and TPTHL, a wholly-owned subsidiary of the Company entered into a conditional Subscription Rights Agreement with BARING in which BARING is granted the right by TPTHL to subscribe for the Preferred Stock of TPTHL for an aggregate amount not exceeding HK$30,000,000 or such higher amount as TPTHL may agree.

* For identification purpose only

– 5 –

LETTER FROM THE BOARD

TPTHL is a company incorporated in Hong Kong with an authorized share capital of HK$10,000 divided into 10,000 shares of HK$1.00 each (“TPTHL Shares”) of which 2 TPTHL Shares have been issued and are fully paid as at the Latest Practicable Date. The Company beneficially holds 2 TPTHL Shares representing 100% of the entire issued share capital of TPTHL.

Pursuant to the Subscription Rights Agreement, the Company and TPTHL procure that the Loan of HK$42 million as at the Latest Practicable Date advanced by the Company to TPTHL, shall be mandatorily converted into Preferred Stock of TPTHL upon the full exercise of the Subscription Right by BARING. The Preferred Stock of TPTHL to be issued to the Company and BARING with a par value of HK$0.01 each will rank pari passu in all respects. The maximum number of the Preferred Stock of TPTHL to be issued and subscribed by BARING is 3,000 million shares, representing approximately 42% of the enlarged issued share capital in TPTHL upon the full exercise of the Subscription Right. The maximum number of the Preferred Stock of TPTHL to be issued to the Company upon full conversion of the Loan is 4,200 million shares, representing approximately 58% of the enlarged issued share capital in TPTHL.

As at the Latest Practicable Date, BARING is the holder of 61,995,547 shares of the Company, representing approximately 4.88% of the Company’s entire issued share capital. BARING and its ultimate beneficial owners are not connected with any of the Directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or their respective associates

In consideration of (i) the improvement of the Group’s financial condition by the cash consideration of the Subscription Rights Agreement; (ii) the synergy effect obtained from working with the portfolio companies of BARING; (iii) the enhancement of earning base by penetration into new markets, the Directors take the view that the terms of the Subscription Rights Agreement are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. The Subscription Rights Agreement constitutes a major transaction for the Company under the Listing Rules. The grant of the Subscription Rights contemplated under the Subscription Rights Agreement and the issue of the Preferred Stock by TPTHL to BARING shall be subject to the approval of the Independent Shareholders at the special general meeting to be convened in accordance with Rule 14.10 of the Listing Rules in which BARING and their respective associates will abstain from voting.

The purpose of this circular is to provide you with further information relating to the investment of BARING into TPTHL and to seek your approval of the grant of the Subscription Rights contemplated under the Subscription Rights Agreement and the issuance of the Preferred Stock by TPTHL to BARING at the SGM.

– 6 –

LETTER FROM THE BOARD

DETAILS OF THE SUBSCRIPTION RIGHTS AGREEMENT

Date : 6 March 2003

Parties

(1) BARING
(2) The Company (3) TPTHL

TPTHL is the wholly-owned subsidiary of the Company. Pursuant to the Subscription Rights Agreement, TPTHL has agreed to grant the Subscription Right to BARING to subscribe a maximum of 3,000 million shares of Preferred Stock of TPTHL at HK$0.01 per share.

A non-interest bearing loan of HK$42,000,000 advanced by the Company to TPTHL will be subject to mandatory conversion into a maximum of 4,200 million shares of Preferred Stock of TPTHL at HK$0.01 per share upon full exercise of the Subscription Right by BARING.

A maximum of an aggregate amount of 7,200 million shares of Preferred Stock of TPTHL with a par value of HK$0.01 per share will be issued to BARING and the Company upon the full exercise of the Subscription Right by BARING and the full conversion of the Loan by the Company. The 3,000 million shares and 4,200 million shares of Preferred Stock represent approximately 42% and 58% respectively of the enlarged issued share capital of TPTHL to be held by BARING and the Company respectively.

The consideration of the subscription of the Preferred Stock by BARING will be satisfied by cash and the Subscription Right may be exercised before 31 December 2004.

Conditions Precedent

The Subscription Rights Agreement is conditional upon:

(i) the passing of resolutions by the Independent Shareholders of the Company at a SGM approving the entering into of the Subscription Rights Agreement, the granting of the Subscription Right and all other transactions concerning the Company and its Subsidiaries contemplated thereunder being fulfilled on or before 5:00 p.m. on 31 July 2003 (or such later time and date as the parties shall agree in writing);

– 7 –

LETTER FROM THE BOARD

(ii) the passing of the necessary special and/or other resolutions of the shareholders of TPTHL approving the necessary amendments to the memorandum and articles of association of TPTHL to (1) create the Preferred Stock with the rights set out in Schedule 1 to the Subscription Rights Agreement or such other rights as may be agreed by BARING, the Company and TPTHL and (2) subdivide the Shares of HK$1.00 each into TPTHL Shares of HK$0.01 each;
(iii) the passing of the necessary ordinary and/or other resolutions of TPTHL approving the entering into of the Subscription Rights Agreement and the granting of the Subscription Right to BARING pursuant to the Subscription Rights Agreement; and
(iv) the passing of resolutions of the board of Directors of TPTHL to allot and issue such number of Preferred Stock which may fall to be issued pursuant to the Subscription Rights Agreement and all other transactions contemplated thereunder.

Subscription Rights

After the conditions referred to in the paragraph headed “Conditions Precedent” above are fulfilled by 5:00 p.m. on 31 July 2003 or such later time and date as the Parties may agree in writing, the grant of the Subscription Right shall become unconditional. The expiry date of the Subscription Rights Agreement falls on 31 December 2004.

By exercising the Subscription Right, BARING may subscribe an aggregate amount of up to HK$30,000,000 (or such higher amount as TPTHL may agree) for shares of Preferred Stock of HK$0.01 each of TPTHL in the manner as set out in Appendix II. The subscription price per Share of HK$0.01 is equivalent to the par value of HK$0.01 for each TPTHL Preferred Stock and upon subscription, the Shares will be paid up at par. The maximum number of Preferred Stock to be subscribed by BARING is 3,000 million shares, representing 42% of the enlarged issued share capital of TPTHL.

Mandatory Conversion of the Loan

As at the Latest Practicable Date, the Company has made a non-interest bearing loan of HK$42,000,000 (the “Loan”) to TPTHL. On each occasion upon BARING’s exercise of the Subscription Right, the Company is subject to a mandatory conversion of the Loan into shares of Preferred Stock for the same amount as per the respective exercise. The maximum number of the Preferred Stock of TPTHL to be issued and subscribed by BARING is 3,000 million shares, representing approximately 42% of the enlarged issued share capital in TPTHL upon the full exercise of the Subscription Right. The maximum number of the Preferred Stock of TPTHL to be issued to the Company upon full conversion of the Loan is 4,200 million shares, representing approximately 58% of the enlarged share capital in TPTHL. In this regard, TPTHL is a wholly-

– 8 –

LETTER FROM THE BOARD

owned subsidiary of the Company before the exercise of the Subscription Right by BARING and will become a non wholly-owned subsidiary holding only 58% of TPTHL upon BARING’s full exercise of the Subscription Right and the full mandatory conversion of the Loan by the Company.

In respect of the Loan, the Company has undertaken that:

(i) no interest shall accrue on any amount of the Loan which remains outstanding at any time; and
(ii) no demand for the repayment of any amount of the Loan which remains outstanding shall be made against TPTHL or any other party, for as long as the Subscription Right remains exercisable.

The principal rights of the Preferred Stock are set out in Appendix III.

Completion

Completion of an exercise of the whole or part of the Subscription Right shall take place after all the conditions in relation to the exercise of the Subscription Right have been fulfilled.

BUSINESS OF THE GROUP AND TPTHL

The Group is principally engaged in the provision of network and systems integrations, business/operation support system, telecommunications value-added services/solutions and other application on software systems in the PRC.

TPTHL is the investment holding company of the Group which carries out information technology business of the Company in the PRC.

REASONS FOR AND BENEFITS OF ENTERING INTO THE SUBSCRIPTION RIGHTS AGREEMENT

China Bancassurance Business Opportunities

China, is one of the most robust economies in the world with an average annual growth rate of about 7% in the recent years. According to the data available on the official web pages of Chinese Insurance Regulatory Commission on the Latest Practicable Date, the premiums written in China’s life insurance market has increased from RMB100 billion in 2000 to RMB142 billion in 2001 and RMB227 billion in 2002. Based on the figures available on the official web pages of the People’s Bank of China on the Latest Practicable Date, the total domestic savings deposits in China

– 9 –

LETTER FROM THE BOARD

swelled to RMB7.4 trillion by the end of 2001 and grew another 18% in 2002 to almost RMB8.7 trillion. Both the banking and insurance industries are expected to expand at a rapid pace as the PRC economy grows and income level continues to rise.

Notably, banks in China are facing keen competition when the sector further opens on China’s WTO membership whilst the insurance companies are eager to gain market share in the shortest possible time. Consequently, there is a trend for the tie-ups of banks and insurance companies to cross-sell their products and services (commonly known as “Bancassurance”) for the benefits of additional income and reduction of reliance on competitive spreads as the major source of income from the banks’ perspective; and mass distribution channels and cost-saving from the elimination of huge traditional sales force from the insurance companies’ perspective.

The Directors believe that new forms of information technology infrastructure and operation technology are required by banks and insurance companies as a result of such tie-ups popularization in which the Company and BARING find enormous business potentials.

Strategic Partner

BARING is one of the investment vehicles of the Baring Asia Private Equity Fund (“the Fund”) which manages direct investment and venture capital funds. The Fund is formed to invest in companies developing products or services that take advantage of the large market opportunities being created by the growth of data communications and information technology in Asia. A key driver of the Fund’s investment strategy is to seek companies that are developing technology that directly helps customers reduce costs and increase revenues. The Directors believe that the partnership with BARING and its portfolio companies will enhance the technology strength and sales and marketing arms of the Company.

As at the date of this circular, BARING is the holder of 61,995,547 ordinary shares of the Company, representing approximately 4.88% of the Company’s entire issued share capital. Upon full exercise of the Subscription Right, BARING will hold approximately 3,000 million shares of Preferred Stock of TPTHL, representing 42% of TPTHL’s entire issued share capital.

Financial Improvement

TPTHL, a company incorporated in Hong Kong with limited liability on 25 July 2001 and a wholly owned subsidiary of the Company, upon restructuring of the Group in early 2002 has been functioning as a holding company owning all the subsidiaries, including Holy (HK) and Telecom Plus Technology Ltd., which carry out information technology business of the Company in the PRC.

TPTHL is a company with limited liability incorporated in Hong Kong on 25 July 2001. Accordingly, no financial information is available for the year ended 31 March 2001.

– 10 –

LETTER FROM THE BOARD

Based on the unaudited management accounts for the year ended 31 March 2002, TPTHL’s profit before and after taxation were approximately HK$24,906,000 and HK$23,022,000 respectively, contributing 140% and 145% of the Company’s total profit before and after taxation amounting to approximately HK$17,748,000 and HK$15,864,000 respectively.

Based on the unaudited management accounts for the six months ended 30 September 2002, TPTHL’s loss before and after taxation were approximately HK$5,991,000 and HK$5,601,000 respectively, contributing 26% and 25% of the Company’s total loss before and after taxation amounting to approximately HK$22,924,000 and HK$22,534,000 respectively.

TPTHL does not have any consolidated net tangible assets as at both dates. Based on the unaudited management accounts of TPTHL as at 30 September 2002 and 31 March 2002, its net liabilities were approximately HK$4,218,000 and HK$8,736,000 respectively.

With reference to the unaudited consolidated results as at 30 September 2002, TPTHL is expected to have a gearing ratio of about 0.77 times calculated on the combined liabilities of approximately HK$117.9 million and on the combined assets of approximately HK$153.7 million of the enlarged share capital upon BARING’s full exercise of the Subscription Right as compared to a gearing ratio of about 0.95 times calculated on the combined liabilities of approximately HK$117.9 million and on the combined assets of approximately HK$123.7 million prior to the exercise of the Subscription Right.

Having considered that (i) the loss suffering by TPTHL; (ii) the improvement of the gearing ratio; and (iii) the business potential of the new markets to be jointly explored by BARING and the Company, the Directors believe that the subscription price of HK$0.01 per share for 3,000 million TPTHL Preferred Stock to be subscribed by BARING, is fair and reasonable so far as the Independent Shareholders are concerned.

Assuming that the entering into the Subscription Rights Agreement and the contemplated transactions thereunder are approved, TPTHL would become a non wholly-owned subsidiary of the Company upon BARING’s partial or full exercise of the Subscription Right pursuant to the Subscription Rights Agreement. A maximum of 3,000 million shares of the Preferred Stock of TPTHL, representing approximately 42% of the enlarged issued share capital of TPTHL will be issued to BARING. The shareholding of the Company in TPTHL will be diluted from the current level of 100% to 58%.

In view of the current financial position of the Group and any borrowings may incur interest expenses, the Directors consider that the dilution of the shareholding interest in TPTHL arisen from the exercise of the Subscription Right is acceptable.

The total cash proceeds of HK$30,000,000 which may be received by the Group upon full exercise of the Subscription Right by BARING will be used as the general working capital of the Group. As at the Latest Practicable Date, the Group has no particular plan in respect of the use of the proceeds.

– 11 –

LETTER FROM THE BOARD

Corporate structure of TPTHL before BARING’s exercise of the Subscription Right

==> picture [236 x 237] intentionally omitted <==

----- Start of picture text -----

Plus Holdings Ltd.
100%
TPTHL
100% 100%
Holy (HK) Telecom Plus Technology Ltd.
100%
��
Allnet Co., Ltd.
��
��
��
13.07%
35.93%
Beijing HollyBridge
51%
----- End of picture text -----

Corporate structure of TPTHL upon full exercise of the Subscription Right by BARING

==> picture [235 x 245] intentionally omitted <==

----- Start of picture text -----

BARING Plus Holdings Ltd.
42% 58%
TPTHL
100% 100%
Holy (HK) Telecom Plus Technology Ltd.
100%
��
Allnet Co., Ltd.
��
��
��
13.07%
35.93%
Beijing HollyBridge
51%
----- End of picture text -----

Both �� and �� are incorporated in PRC.

– 12 –

LETTER FROM THE BOARD

Mr. Ma Hongyao who is an Executive Director of the Company is the sole director and holding 80% stake of �� . The shareholder of the remaining 20% of � �� and directors and shareholders of �� are not connected with any of the directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or their respective associates (as defined in the Listing Rules).

SGM

A notice of the SGM to be held at 10:00 a.m. on 25 June 2003 at Salisbury Room, 7th Floor, Conrad Hotel, Pacific Place, 88 Queensway, Hong Kong is set out on page 90 of this circular.

A form of proxy is enclosed with this circular. Whether or not you intend to attend the SGM, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon to the office of the share registrar of the Company in Hong Kong, Tengis Limited, G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as practicable but in any event not less than 48 hours before the time appointed for the holding of the SGM. Completion and delivery of the proxy form will not prevent you from attending, and voting at the SGM if you so wish.

The Subscription Rights Agreement constitutes a major transaction for the Company under the Listing Rules. The Subscription Rights Agreement, the grant of the Subscription Right contemplated thereunder and the issue of the Preferred Stock by TPTHL to BARING shall be subject to the approval of the Independent Shareholders of the Company at the general meeting to be convened. BARING and their respective associates (as defined in the Listing Rules) will abstain from voting in respect of the resolution to be proposed at the SGM.

RECOMMENDATION

The Directors consider the investment of BARING into TPTHL will bring the following benefits to the Group:

Introduction of additional working capital by the cash proceeds payable by BARING for the Preferred Stocks of TPTHL;
Reduce further borrowings that may incur more interest expenses;
A good opportunity to develop the Bancassurance related business with BARING to enhance the Group’s earning base.

In view of the aforementioned benefits, the Directors consider that the entering into the Subscription Rights Agreement is in the best interest of the Company, and that the terms of the Agreement are air and reasonable so far as the Independent Shareholders are concerned. As stated

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LETTER FROM THE BOARD

in the section headed “Working Capital Statement” in Appendix II to the Circular, the Directors are of the opinion that, the strategic investment of BARING into TPTHL will alleviate the liquidity problem of the Group and is in the interests of the Group and the Shareholders as a whole. The Directors therefore recommend you to vote in favour of the resolutions.

ADDITIONAL INFORMATION

Your attention is drawn to the information set out in the appendices and the notice of the SGM set out in this circular.

Yours faithfully, For and on behalf of the Board of Plus Holdings Limited Zou Yishang Director

– 14 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

A. SHARE CAPITAL OF THE COMPANY

(a) Authorised and issued share capital

The authorised and issued share capital of the Company as at the Latest Practicable Date were as follows:

Authorised:

No of shares ‘000 3,000,000 ordinary shares of HK$0.10 each Issued and fully paid up 1,271,163 ordinary shares of HK$0.10 each	HK$’000 300,000

	127,116

122,780,000 shares have been issued since 31 March 2002 being the end of the last audited financial year of the Company and up to the Latest Practicable Date. All the issued Shares rank pari passu in all respects including as to dividends, voting rights and capital.

(b) Listing

The Shares are listed and traded on the Stock Exchange. No part of the issued share capital of the Company is listed or dealt in, nor is any listing of or permission to deal in the Shares being or proposed to be sought on, any other stock exchange.

– 15 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

B. FINANCIAL INFORMATION

(a) Summary of audited results for the three years ended 31 March 2002

The following is a summary of the audited combined results for the three years ended 31 March 2002 of the Group extracted from its audited consolidated financial statements:

Turnover Continuing operations Discontinued operations Cost of sales Continuing operations Discontinued operations Gross profit Continuing operations Discontinued operations Other operating income Selling and distribution expenses Administrative expenses Other operating expenses	2002 HK$’000 323,763 – 323,763 (264,705) – (264,705) 59,058 – 59,058 10,325 (14,226) (31,351) (460)	2001 HK$’000 30,628 472 31,100 (24,030) (430) (24,460) 6,598 42 6,640 283,197 (12) (41,722) (1,935)	2000 HK$’000 – 159,276 159,276 – (132,517) (132,517) – 26,759 26,759 15,617 (11,399) (61,615) (72,357)

– 16 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Profit/(Loss) from operating activities Continuing operations Discontinued operations Finance costs Profit/(Loss) before taxation Taxation Profit/(Loss) before minority interest Minority interest Profit/(Loss) attributable to shareholders Earnings/(Loss) per share Basic Diluted	2002 HK$’000 23,346 – 23,346 (5,598) 17,748 (1,884) 15,864 (6,649) 9,215 0.88 cents 0.85 cents	2001 HK$’000 5,839 240,329 246,168 (8,741) 237,427 – 237,427 – 237,427 40.08 cents 34.40 cents	2000 HK$’000 – (102,995) (102,995) (47,278) (150,273) – (150,273) – (150,273) (34.24 cents) N/A

(b) Summary of audited financial results for the two years ended 31 March 2002

The audited consolidated income statement of the Group for each of the two years ended 31 March 2002, the audited consolidated balance sheets of the Group as at 31 March 2002 and 2001 and the audited consolidated cash flow statements of the Group for the two years ended 31 March 2002 have been extracted from the audited consolidated financial statements of the Company for the year ended 31 March 2002 and set out below.

– 17 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Consolidated Income Statement

Notes Turnover Continuing operations 4 Discontinued operations Cost of sales Continuing operations Discontinued operations Gross profit Continuing operations Discontinued operations Other operating income 6 Selling and distribution expenses Administrative expenses Other operating expenses Profit from operating activities 7 Continuing operations Discontinued operations Finance costs 9 Profit before taxation Taxation 10 Profit before minority interest Minority interest Profit attributable to shareholders Earnings per share 11 Basic Diluted	2002 HK$’000 323,763 – 323,763 (264,705) – (264,705) 59,058 – 59,058 10,325 (14,226) (31,351) (460) 23,346 – 23,346 (5,598) 17,748 (1,884) 15,864 (6,649) 9,215 0.88 cents 0.85 cents	2001 HK$’000 30,628 472 31,100 (24,030) (430) (24,460) 6,598 42 6,640 283,197 (12) (41,722) (1,935) 5,839 240,329 246,168 (8,741) 237,427 – 237,427 – 237,427 40.08 cents 34.40 cents

– 18 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Consolidated Statement of Recognised Gains and Losses

Exchange differences arising from translation of financial statements of operations in the People’s Republic of China (“PRC”) Deficit on revaluation of property, plant and equipment Profit attributable to shareholders Total recognised gains	2002 HK$’000 27 – 9,215 9,242	2001 HK$’000 – (1,121) 237,427 236,306

– 19 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Consolidated Balance Sheet

Notes ASSETS AND LIABILITIES Non-current assets Property, plant and equipment 12 Development costs 13 Goodwill 14 Interest in an associate 16 Current assets Inventories 17 Trade and other receivables 18 Other investments 19 Amount due from an associate Pledged bank deposits 32 Bank balances and cash Current liabilities Trade and other payables 20 Amount due to a relate company 37 Amounts due to shareholders Taxation payable Deferred taxation 21 Bank and other borrowings – due within one year 22 Convertible bonds – due within one year 23 Net current assets/(liabilities) Total assets less current liabilities Minority interest Non-current liabilities Bank and other borrowings – due after one year 22 Convertible bonds – due after one year 23 NET ASSETS/(LIABILITIES) CAPITAL AND RESERVES Share capital 24 Reserves 26 SHAREHOLDERS’ FUNDS/(DEFICIENCY IN SHAREHOLDERS’ FUNDS)	2002 HK$’000 11,288 8,142 28,402 – 48,895 34,580 101,299 8,051 932 4,446 8,127 175,435 77,096 – – 1,131 1,229 51,390 14,040 144,886 12,549 60,381 12,379 8,710 7,020 15,730 32,272 114,838 (82,566) 32,272	2001 HK$’000 677 – 20,228 – 20,905 – 43,749 – – – 5,901 49,650 35,421 20,390 3,789 – – 25,340 7,008 91,948 (42,298) (21,393) – 11,314 21,023 32,337 (53,730) 89,151 (142,881) (53,730)

– 20 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Consolidated Cash Flow Statement

Notes NET CASH OUTFLOW FROM OPERATING ACTIVITIES 27 RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest paid Interest received NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE TAXATION Taxation paid in PRC Hong Kong Profits Tax paid CASH OUTFLOW FROM TAXATION INVESTING ACTIVITIES Deposits paid to an independent third party Purchase of other investments Acquisition of a subsidiary, net of cash and cash equivalents acquired 28 Additions of development costs Purchase of property, plant and equipment Increase in pledged bank deposits Repayment of amounts due to shareholders Proceeds from disposal of other investments Proceeds from disposal of property, plant and equipment Advances from shareholders Disposal of subsidiaries, net of cash and cash equivalents disposed of 29 NET CASH (OUTFLOW)/INFLOW FROM INVESTING ACTIVITIES	2002 HK$’000 (7,867) (4,566) 246 (4,320) (499) – (499) (14,151) (9,905) (9,170) (8,142) (4,643) (4,446) (3,789) 2,518 448 – – (51,280)	2001 HK$’000 (110,565) (384) 126 (258) – (76) (76) – – 5,568 – (739) – – – 3,145 3,789 (701) 11,062

– 21 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Notes NET CASH OUTFLOW BEFORE FINANCING ACTIVITIES FINANCING ACTIVITIES 31 Issue of new shares New borrowings raised Repayments of bank and other borrowings Repurchase of shares Share issue expenses NET CASH INFLOW FROM FINANCING ACTIVITIES INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Bank balances and cash Bank overdrafts Other borrowings	2002 HK$’000 (63,966) 64,800 45,328 (21,362) (9,703) (1,030) 78,033 14,067 (16,847) (2,780) 8,127 – (10,907) (2,780)	2001 HK$’000 (99,837) 63,500 132,806 (13,768) – (603) 181,935 82,098 (98,945) (16,847) 5,901 (2,195) (20,553) (16,847)

– 22 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Balance Sheet

Notes ASSETS AND LIABILITIES Non-current assets Plant and equipment 12 Interest in subsidiaries 15 Current assets Other receivables Amounts due from subsidiaries Current liabilities Other payables Amounts due to a shareholder Amounts due to subsidiaries Bank and other borrowings – due within one year 22 Convertible bonds – due within one year 23 Net current liabilities Total assets less current liabilities Non-current liabilities Bank and other borrowings – due after one year 22 Convertible bonds – due after one year 23 NET LIABILITIES CAPITAL AND RESERVES Share capital 24 Reserves 26 DEFICIENCY IN SHAREHOLDERS’ FUNDS	2002 HK$’000 37 10 47 109 3,591 3,700 12,753 – 15 4,287 14,040 31,095 (27,395) (27,348) 8,483 7,020 15,503 (42,851) 114,838 (157,689) (42,851)	2001 HK$’000 51 10 61 118 – 118 33,024 1,870 501 4,502 7,008 46,905 (46,787) (46,726) 11,021 21,023 32,044 (78,770) 89,151 (167,921) (78,770)

– 23 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Notes to Financial Statements

1. General

The Company is incorporated in Bermuda as an exempted company with limited liability and its shares are listed on The Stock Exchange of Hong Kong Limited (the ‘Stock Exchange’).

The Company is an investment holding company. The principal activities of its subsidiaries are set out in note 38 to the financial statements.

2. Adoption of Statements of Standard Accounting Practice

In the current year, the Group has adopted for the first time a number of new and revised Statements of Standard Accounting Practice (‘SSAP(s)’) issued by the Hong Kong Society of Accountants. The adoption of these new and revised SSAPs has led to a number of changes in the Group’s accounting policies. The revised accounting policies are set out in note 3. In addition, the new and revised SSAPs have introduced additional and revised disclosure requirements which have been adopted in these financial statements. Comparative amounts and disclosures have been restated in order to achieve a consistent presentation.

The adoption of these new and revised SSAPs has not resulted in any major changes to the Group’s accounting policies that have affected the amounts reported for the current or prior periods.

3. Significant accounting policies

The financial statements have been prepared under the historical cost convention, as modified for the revaluation of other investments, and in accordance with accounting principles generally accepted in Hong Kong. The principal accounting policies adopted are as follows:

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 31 March, each year.

The results of subsidiaries and associates acquired or disposed of during the year are included in the consolidated income statement from the effective dates of acquisition or up to the effective dates of disposal, as appropriate.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary or an associate at the date of acquisition.

Goodwill is capitalised and amortised on a straight-line basis over its useful economic life. Goodwill arising on the acquisition of an associate is included within the carrying amount of the associate. Goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet.

– 24 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

On disposal of a subsidiary or an associate, the attributable of unamortised goodwill is included in the determination of the profit or loss on disposal.

Negative goodwill

Negative goodwill represents the excess of the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary or an associate at the date of acquisition over the cost of acquisition.

Negative goodwill is presented as a deduction from assets and is released to income based on an analysis of the circumstances from which the balance resulted.

Negative goodwill arising on the acquisition of an associate is deducted from the carrying value of that associate. Negative goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet as a deduction from assets.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Depreciation is provided to write off the cost of items of property, plant and equipment over their estimated useful lives, using the straight-line method, at the following rates per annum:

Buildings	2% to 4%
Leasehold improvements	20% or over the terms of the lease, whichever is the shorter
Furniture, fixtures and office equipment	20%
Motor vehicles	20%

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the income statement.

Impairment

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Development costs

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

– 25 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

An internally-generally intangible asset arising from development expenditure is recognised only if it is anticipated that the development costs incurred on a clearly defined project will be recovered through future commercial activity. The resultant asset is amortised systematically over its useful life by using the unit of production method.

Where no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.

Investments in subsidiaries

Investments in subsidiaries are included in the Company’s balance sheet at cost less any identified impairment loss.

Interests in associates

The consolidated income statement includes the Group’s share of the post-acquisition results of its associates for the year. In the consolidated balance sheet, interests in associates are stated at the Group’s share of the net assets of the associates less any identified impairment loss.

The results of associates are accounted for by the Company on the basis of dividends received and receivable during the year.

Other investments

Investments other than held-to-maturity debt securities are classified as investment securities and other investments.

Investment securities, which are securities held for an identified long-term strategic purpose, are measured at subsequent reporting dates at cost, as reduced by any impairment loss that is other than temporary.

Other investments are measured at fair value, with unrealised gains and losses included in net profit or loss for the year.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost of inventory is based on the specific identification cost formula and comprises all cost of purchase, cost of conversion and other cost incurred in bringing the inventories to their present location and condition.

Operating lease

Annual rentals are charged to the income statement on a straight-line basis over the relevant lease term.

Revenue recognition

Sales of goods are recognised when the goods are delivered and title has passed.

– 26 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Integration service, services income and contract income are recognised upon receipt of acceptance from outside customers.

Consultancy income is recognised when services are provided.

Interest income from bank deposit is accrued on a time basis, by reference to the principal outstanding and at the interest rate applicable.

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised as an expense in the period in which they are incurred.

Taxation

The charge for taxation is based on the results for the year after adjusting for items which are nonassessable or disallowed. Timing differences arise from the recognition for tax purposes of certain items of income and expense in a different accounting period from that in which they are recognised in the financial statements. The tax effect of the resulting timing differences, computed under the liability method, is recognised as deferred taxation in the financial statements to the extent that it is probable that a liability or an asset will crystallise in the foreseeable future.

Foreign currencies

Transactions in currencies other than Hong Kong dollar are translated at the rates ruling on the dates of the transactions. Monetary assets and liabilities denominated in currencies other than Hong Kong dollar are retranslated at the rates ruling on the balance sheet date. Profits and losses arising on exchange are dealt with in the income statement.

On consolidation, the financial statements of operations outside Hong Kong are translated into Hong Kong dollars at the rates ruling on the balance sheet date. All exchange differences arising on translation are dealt with through the exchange reserve.

Retirement benefit schemes

The retirement benefit costs charged in the income statement represent the contribution payable in respect of the year to the Group’s defined contribution schemes.

– 27 –

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

4. Turnover

Continuing operations: – sales and integration service – services income – contract income Discontinued operations_(note 5)_: – sales of toy products	2002 HK$’000 291,283 26,652 5,828 323,763 – 323,763	2001 HK$’000 30,628 – –
		30,628 472
		31,100

5. Business and geographical segments

Business segments

For management purposes, the Group is currently organised into three operating divisions – sales and integration service, services income and contract income. These divisions are the basis on which the Group reports its primary segment information.

Principal activities are as follows:

Continuing operations

Sales and integration service	–	income from sales and provision of integration services of computer
		and communication systems
Services income	–	income from design, consultation and production of information
		system software
Contract income	–	income in connection with the sale of intelligent building and
		communication system equipment and provision of installation
		services

Discontinued operations

The Group was involved in the manufacture and sales of toy products. As the Group’s production facilities in the PRC were seized under court orders in prior years, the Group had discontinued its business of manufacture and sales of toy products thereafter.

– 28 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Segmental information about these businesses is presented below.

Sales and integration service HK$’000 TURNOVER 291,283 RESULT Segment results 17,720 Unallocated corporate expenses Profit from operations Finance costs (4,044) Profit before taxation Taxation Profit before minority interest Minority interest Profit attributable to shareholders	Year ended 31 March 2002 Services Contract Unallocated income income corporate Consolidated HK$’000 HK$’000 HK$’000 HK$’000 26,652 5,828 – 323,763 10,898 (688) – 27,930 (4,584) 23,346 (501) (110) (943) (5,598) 17,748 (1,884) 15,864 (6,649) 9,215	Year ended 31 March 2002 Services Contract Unallocated income income corporate Consolidated HK$’000 HK$’000 HK$’000 HK$’000 26,652 5,828 – 323,763 10,898 (688) – 27,930 (4,584) 23,346 (501) (110) (943) (5,598) 17,748 (1,884) 15,864 (6,649) 9,215

		27,930 (4,584)
		23,346 (5,598)
		17,748 (1,884)
		15,864 (6,649)
		9,215

OTHER INFORMATION

	Sales and
	integration	Services	Contract
	service	income	income	Others	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Capital additions	10,942	396	87	1,360	12,785
Depreciation and
amortization	2,973	275	60	1,103	4,411

– 29 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

BALANCE SHEET

ASSETS Segment assets Unallocated corporate assets Consolidated total assets LIABILITIES Segment liabilities Unallocated corporate liabilities Consolidated total liabilities TURNOVER RESULT Segment results Unallocated corporate expenses Gain on disposal of subsidiaries Profit from operations Finance costs Profit before taxation Taxation Profit attributable to shareholders	Sales and integration service HK$’000 142,352 103,171 Sales and integration service HK$’000 30,628 5,615 (320)	As at 31 March 2002 Services Contract income income HK$’000 HK$’000 6,757 9,069 8,343 3,550 Year ended 31 March 2001 Toy products Unallocated (discontinued) corporate HK$’000 HK$’000 472 – 102,666 – (347) (8,074)	Consolidated HK$’000 158,178 47,089 205,267 115,064 45,552 160,616 Consolidated HK$’000 31,100 108,281 (11,173) 149,060 246,168 (8,741) 237,427 – 237,427

– 30 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

OTHER INFORMATION

	Sales and
	integration	Toy products
	service	(discontinued)	Others	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000
Capital additions	739	–	–	739
Depreciation and amortisation	270	5,712	3,228	9,210

BALANCE SHEET

		As at 31 March 2001	As at 31 March 2001
	Sales and	Toy products
	integration service	(discontinued)	Consolidated
	HK$’000	HK$’000	HK$’000
ASSETS
Segment assets	60,292	248	60,540
Unallocated corporate assets			10,015
Consolidated total assets			70,555

LIABILITIES
Segment liabilities	40,942	399	41,341
Unallocated corporate liabilities			82,944
Consolidated total liabilities			124,285

Geographical segments

No geographical segment analysis is provided as substantially all of the Group’s turnover and contribution to results were derived from the PRC.

The following is an analysis of the carrying amount of segment assets and additions to property, plant and equipment and development costs, analysed by the geographical area in which the assets are located.

Hong Kong PRC	Carrying amount of segment assets 2002 2001 HK$’000 HK$’000 73,844 70,072 131,423 483 205,267 70,555	Additions to property, plant and equipment and development costs 2002 2001 HK$’000 HK$’000 48 366 12,737 373 12,785 739	Additions to property, plant and equipment and development costs 2002 2001 HK$’000 HK$’000 48 366 12,737 373 12,785 739
			739

– 31 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

6. Other operating income

Included in other operating income are the following:

Gain on disposal of subsidiaries_(note 29) Gain on disposal of other investments Gain on waiver of bank and other borrowings(note 31 (a)) Gain on waiver of former directors’ emoluments Gain on waiver of obligations under finance leases(note 31 (b))_ Consultancy income Interest income Rental income Unrealised gain on other investments Write-back of provision for guarantee Write-back of over accrued interest Write-back of long outstanding trade and other payables Others	THE GROUP 2002 2001 HK$’000 HK$’000 – 149,060 231 – – 101,442 1,551 – – 13,356 1,259 – 246 126 245 125 433 – – 5,904 – 5,231 2,659 – 3,701 7,953 10,325 283,197	THE GROUP 2002 2001 HK$’000 HK$’000 – 149,060 231 – – 101,442 1,551 – – 13,356 1,259 – 246 126 245 125 433 – – 5,904 – 5,231 2,659 – 3,701 7,953 10,325 283,197
		283,197

7. Profit from operations

Profit before taxation has been arrived after charging: Auditors’ remuneration Amortisation of goodwill (including in administrative expenses) Depreciation Loss on disposal of property, plant and equipment Loss on write-off on net assets of a subsidiary Write-off of obsolete property, plant and equipment Staff costs including directors’ emoluments Contributions to retirement benefit schemes Total staff costs	THE GROUP 2002 2001 HK$’000 HK$’000 820 900 1,861 256 2,550 8,954 103 495 – 386 – 43 17,006 8,901 445 30 17,451 8,931	THE GROUP 2002 2001 HK$’000 HK$’000 820 900 1,861 256 2,550 8,954 103 495 – 386 – 43 17,006 8,901 445 30 17,451 8,931
		8,931

– 32 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

8. Directors’ and employees’ emoluments

Particulars of the emoluments of the directors and the five highest paid individuals for the year were as follows:

(a) Directors’ emoluments

Fees Other emoluments: Salaries and other benefits Contributions to retirement benefit schemes Total emoluments	2002 HK$’000 – 2,983 18 3,001 3,001	2001 HK$’000 2,397
		2,483 6
		2,489
		4,886

No fees or other emoluments were paid to independent non-executive directors during the year.

The emoluments of the directors were within the following bands:

		Number of directors	Number of directors
		2002	2001
HK$1,000,000	or below	7	8
HK$1,000,001	– HK$1,500,000	–	1
HK$2,000,001	– HK$2,500,000	1	–

(b) Employees’ emoluments

The five highest paid individuals included two (2001: five) directors, details of their emoluments are set out above. The emoluments of the remaining three (2001: Nil) individuals are as follows:

Salaries and other benefits Contributions to retirement benefit schemes	2002 HK$’000 1,871 36 1,907	2001 HK$’000 – –
		–

– 33 –

APPENDIX I

FINANCIAL INFORMATION RELATING TO THE GROUP

The emoluments of the employees were within the following bands:

HK$1,000,000 or below 9. Finance costs Interest on: bank loans and overdrafts wholly repayable within one year Convertible bonds Other borrowings Finance leases Finance charges 10. Taxation The charge comprises Taxation in PRC Deferred taxation_(note 21)_	Number of directors 2002 2001 3 – THE GROUP 2002 2001 HK$’000 HK$’000 739 2,269 857 4,931 2,970 667 – 206 4,566 8,073 1,032 668 5,598 8,741 2002 2001 HK$’000 HK$’000 655 – 1,229 – 1,884 –	Number of directors 2002 2001 3 – THE GROUP 2002 2001 HK$’000 HK$’000 739 2,269 857 4,931 2,970 667 – 206 4,566 8,073 1,032 668 5,598 8,741 2002 2001 HK$’000 HK$’000 655 – 1,229 – 1,884 –
		8,073 668
		8,741

		2001 HK$’000 – –
		–

No provision for Hong Kong Profits Tax has been made in the financial statements as the Group had no assessable profits for both years.

Taxation in PRC is calculated as the rates prevailing in the PRC. Certain subsidiaries of the Group operating in the PRC are eligible for certain tax exemptions and concessions. Accordingly, PRC income tax has been provided taking into account of these tax exemptions and concessions.

Details of deferred taxation are set out in note 21.

– 34 –

APPENDIX I

FINANCIAL INFORMATION RELATING TO THE GROUP

11. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

Profit attributable to shareholders and earnings for the purposes of basic earnings per share Effect of dilutive potential ordinary shares: – interest on convertible bonds Earnings for the purposes of diluted earnings per share Weighted average number of ordinary shares for the purposes of basic earnings per share Effect of dilutive potential ordinary shares: – convertible bonds – options Weighted average number of ordinary shares for the purposes of diluted earnings per share Earnings per share Basic Diluted	2002 HK$’000 9,215 857 10,072 1,052,996,000 115,191,000 14,183,000 1,182,370,000 0.88 cents 0.85 cents	2001 HK$’000 237,427 4,931
		242,358

		592,407,000 112,124,000 –
		704,531,000

		40.08 cents

		34.40 cents

– 35 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

12. Property, plant and equipment

Leasehold Buildings improvements HK$’000 HK$’000 THE GROUP COST At 1 April 2001 – 384 Exchange adjustments – 5 Additions – 738 Acquired on acquisition of a subsidiary 2,103 1,135 Disposals – (9) At 31 March 2002 2,103 2,253 DEPRECIATION At 1 April 2001 – 85 Exchange adjustments – 1 Provided for the year 83 754 Eliminated on disposals – (6) At 31 March 2002 83 834 NET BOOK VALUES At 31 March 2002 2,020 1,419 At 31 March 2001 – 299	Furniture, fixtures and office equipment HK$’000 447 4 3,523 4,784 (70) 8,688 69 1 1,613 (15) 1,668 7,020 378	Motor vehicles HK$’000 94 – 382 1,040 (666) 850 94 – 100 (173) 21 829 –	Total HK$’000 925 9 4,643 9,062 (745) 13,894 248 2 2,550 (194) 2,606 11,288 677

The buildings are situated in the PRC and the Group is in the process of obtaining the building ownership certificate.

– 36 –

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

		Furniture, fixtures and
		office equipment
		HK$’000
	THE COMPANY
	COST
	At 1 April 2001 and 31 March 2002	71
	DEPRECIATION
	At 1 April 2001	20
	Provided for the year	14
	At 31 March 2002	34
	NET BOOK VALUES
	At 31 March 2002	37
	At 31 March 2001	51
13.	Development costs
		THE GROUP
		HK$’000
	COST
	Additions during the year and 31 March 2002	8,142

Development costs represent cost incurred for developing a broadband network system and a call centre system. Amortisation will commence when the assets are available for use.

– 37 –

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

14. Goodwill

COST At 1 April 2001 Arising on acquisition of a subsidiary At 31 March 2002 AMORTISATION At 1 April 2001 Charge for the year At 31 March 2002 NET BOOK VALUES At 31 March 2002 At 31 March 2001	THE GROUP HK$’000 20,484 10,035
	30,519
	256 1,861
	2,117
	28,402

	20,228

The amortisation period adopted for goodwill is between 10 to 20 years.

15. Investments in subsidiaries

Unlisted shares, at cost _Less:_Impairment loss	THE COMPANY 2002 2001 HK$’000 HK$’000 108,202 109,202 (108,192) (109,192) 10 10	THE COMPANY 2002 2001 HK$’000 HK$’000 108,202 109,202 (108,192) (109,192) 10 10
		10

Particulars of the Company’s subsidiaries as at 31 March 2002 are set out in note 38.

– 38 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

16. Interest in an associate

	THE	GROUP
	2002	2001
	HK$’000	HK$’000
Share of net assets	–	–

Details of the Group’s associate at 31 March 2002 are as follows:

			Percentage of
	Country of	Principal place	equity interest	Nature of
Name of entity	establishment	of operation	held by the Group	business
��	PRC	PRC	25.5%	Provide technical
��				development and
				consulting service

The Group has no further commitment to invest in this associate.

17. Inventories

Materials and consumables Work in progress	THE GROUP 2002 2001 HK$’000 HK$’000 959 – 33,621 – 34,580 –	THE GROUP 2002 2001 HK$’000 HK$’000 959 – 33,621 – 34,580 –
		–

The raw materials and consumables are carried at net realisable value.

– 39 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

18. Trade and other receivables

According to the contracts entered into with trade customers, an average of 80% of the contract revenue is normally repayable within 90 days from the date of receipt of customers’ acceptance, whereas the remaining 20% trade receivables represent retentions held by customers which are normally due for settlement within one year. The following is an aged analysis of trade receivables included in trade and other receivables at the balance sheet date:

Trade receivables: Within 30 days Over 30 days but within 90 days Over 90 days but within 180 days Other receivables_(note)_	THE GROUP 2002 2001 HK$’000 HK$’000 37,782 13,230 9,871 16,285 32,680 10,761 80,333 40,276 20,966 3,473 101,299 43,749	THE GROUP 2002 2001 HK$’000 HK$’000 37,782 13,230 9,871 16,285 32,680 10,761 80,333 40,276 20,966 3,473 101,299 43,749
		40,276 3,473
		43,749

Note: Included in other receivables are deposits paid to an independent third party of HK$14,151,000 (equivalent to RMB15,000,000) (2001: Nil) for certain proposed investments including but not limited to projects as set out in note 36 (e) and (f).

19. Other investments

	2002	2001
	HK$’000	HK$’000
Equity securities listed in Hong Kong , at market value	8,051	–

Other investments represents 3,390,000 shares of Dynamic Holdings Limited (“Dynamic”). Dynamic is engaged in property investment and development business in the PRC and Hong Kong.

– 40 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

20. Trade and other payables

The following is an aged analysis of trade payables included in trade and other payables at the balance sheet date:

Trade payables: Within 90 days Over 90 days but within 180 days Over 180 days Other payables 21. Deferred taxation Charge for the year and balance as at 31 March	THE GROUP 2002 2001 HK$’000 HK$’000 20,939 – 12,931 – – 462 33,870 462 43,226 34,959 77,096 35,421 THE GROUP 2002 2001 HK$’000 HK$’000 1,229 –

The amount mainly represented the tax effect arising from the timing difference in revenue recognition for accounting and tax reporting purposes.

Neither the Group nor the Company had any other significant unprovided deferred taxation for the year or at the balance sheet date.

– 41 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

22. Bank and other borrowings

Bank and other borrowings comprise: Bank loans Bank overdrafts Other borrowings Analysed as: Secured Unsecured Bank and other borrowings are repayable as follows: Bank loans and overdrafts are repayable within one year Other borrowings are repayable: Within one year More than one year but not exceeding two years More than two years but not exceeding five years After five years _Less:_Amount repayable within year and shown under current liabilities Amount due after one year	THE GROUP 2002 2001 HK$’000 HK$’000 14,151 457 – 2,195 45,949 34,002 60,100 36,654 1,126 – 58,974 36,654 60,100 36,654 14,151 2,652 37,239 22,688 2,604 2,604 6,106 7,813 – 897 45,949 34,002 60,100 36,654 one 51,390 25,340 8,710 11,314	THE COMPANY 2002 2001 HK$’000 HK$’000 – 457 – 1,949 12,770 13,117 12,770 15,523 – – 12,770 15,523 12,770 15,523 – 2,406 4,287 2,406 2,538 2,538 5,945 7,614 – 869 12,770 13,117 12,770 15,523 4,287 4,502 8,483 11,021	THE COMPANY 2002 2001 HK$’000 HK$’000 – 457 – 1,949 12,770 13,117 12,770 15,523 – – 12,770 15,523 12,770 15,523 – 2,406 4,287 2,406 2,538 2,538 5,945 7,614 – 869 12,770 13,117 12,770 15,523 4,287 4,502 8,483 11,021
			15,523

			– 15,523
			15,523

			2,406
			2,406 2,538 7,614 869
			13,117
			15,523 4,502
			11,021

Details of the assets of the Group pledged to secure bank and other borrowings are set out in note 32.

– 42 –

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

During the year ended 31 March 2001, the Group had rearranged the terms of the finance lease obligations with the respective lessors and it was agreed that all the finance lease charges would be waived. Accordingly, finance lease obligations of HK$13,449,000 and HK$13,117,000 originally stated in the 2001 financial statements of the Group and the Company, respectively, have been reclassified as other borrowings. At 31 March 2002, balances of other borrowings of the Group and the Company reclassified from finance lease obligations were HK$11,314,000 and HK$11,021,000, respectively. Excluding these finance lease obligations, other borrowings bear interest at rates ranging from 8% to 12% per annum.

23. Convertible bonds

Pursuant to the subscription letter dated 20 May 1998 made between Baring Asia Flagship Investments B.V. and the Company, the convertible bonds (the ‘Bonds’) in the principal amount of US$6,000,000 (equivalent to approximately HK$46,476,000) were issued by the Company at the direction of Baring Asia Flagship Investments B.V. on 30 June 1998 to Baring Asia Investments II B.V. The Bonds were transferred in or about July 2000 to BAPEF Investments II Limited (the “Bondholder”).

The Bonds were, at the option of the Bondholder, convertible on or after 1 July 1998 up to and including 30 June 2001, into fully paid ordinary shares of the Company with a par value of HK$0.10, at an initial conversion price of HK$0.588 per share, subject to adjustment under certain events.

Unless previously redeemed, converted, purchased or cancelled, the Company is required to redeem the Bonds on the original maturity date at 133.75%. An amount of US$2,400,000 (equivalent to approximately HK$18,600,000) was cancelled upon repurchase by the Company during the year ended 31 March 1999. As at 31 March 2000 and 31 March 2001, the outstanding balance of the Bonds was US$3,600,000 (equivalent to approximately HK$28,031,000).

On 7 June 2001, the Company entered into an agreement with Able Technology Limited and the Bondholder pursuant to which the maturity date of the convertible bonds would be extended to June 2003. The conversion price has been revised to HK$0.25 per share, subject to adjustment under certain events. The conversion time of the Bonds is fixed at 31 December 2001, 30 June 2002, 31 December 2002 and 30 June 2003 (or such other time as the Company and Bondholder may agree) to convert US$900,000 (equivalent to approximately HK$7,020,000) on each date. In addition, all accrued interest from 30 June 1998 to the completion of the agreement was waived by the Bondholder in August 2001 upon issuance of 6.88 million ordinary shares of the Company to the Bondholder (note 24(g)) . In accordance with the supplemental deed entered into by the Company and the Bondholder on 9 August 2001, subject to the due performance by the Company and there being no event of default or potential event of default, the Bonds will not bear any interest. In the circumstances where there is any event of default or potential event of default, interest will be payable on the outstanding principal amount of the Bonds at 2% per annum.

On 28 December 2001, approximately 30.7 million ordinary shares of the Company at a conversion price of HK$0.2366 were issued to the Bondholder to convert the principal amount of Bonds of US$900,000 (equivalent to approximately HK$7,020,000) together with the administrative charges of US$31,770 (equivalent to approximately HK$248,000) (note 24(g)) .

– 43 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

The movements of the convertible bonds are as follows:

Balance as at 1 April 2000 and 31 March 2001 Exchange adjustments Conversion into ordinary shares on 28 December 2001 Balance as at 31 March 2002	USD’000 3,600 – (900) 2,700	HK$’000 equivalent 28,031 49 (7,020)
		21,060

As at 31 March 2002, the outstanding convertible bonds will be converted into the ordinary shares of the Company as follows:

Within one year More than one year but not exceeding two years	USD’000 1,800 900 2,700	HK$’000 equivalent 14,040 7,020
		21,060

24. Share Capital

Number of shares ’000 Ordinary shares of HK$0.10 each Authorised: At 1 April 2000 1,000,000 Increase on 24 November 2000_(note a) 500,000 At 1 April 2001 1,500,000 Increase on 12 July 2001(note b) 1,500,000 At 31 March 2002 3,000,000 Issued and fully paid: At 1 April 2000 438,900 Issued in consideration for the acquisition of Holy (Hong Kong) Universal Limited(note c) 60,000 Issued on private placements(note d) 190,000 Conversion of debts(note e) 202,608 At 1 April 2001 891,508 Issued on private placements(note f) 240,000 Conversion of debts(note g) 39,625 Shares repurchased and cancelled(note h)_ (22,750) At 31 March 2002 1,148,383	Share capital HK$’000 100,000 50,000
	150,000 150,000
	300,000

	43,890 6,000 19,000 20,261
	89,151 24,000 3,962 (2,275)
	114,838

– 44 –

APPENDIX I

FINANCIAL INFORMATION RELATING TO THE GROUP

Notes:

(a) On 24 November 2000, the authorised share capital of the Company was increased from 1,000,000,000 to 1,500,000,000 ordinary shares of HK$0.10 each by the creation of an additional 500,000,000 ordinary shares of HK$0.10 each.
(b) On 12 July 2001, the authorised share capital of the Company was increased from 1,500,000,000 to 3,000,000,000 ordinary shares of HK$0.10 each by the creation of an additional 1,500,000,000 ordinary shares of HK$0.10 each.
(c) On 8 January 2001, pursuant to a shareholders’ resolution, the Company allotted 60,000,000 new ordinary shares as consideration of the acquisition of Holy (HK), which was HK$24,000,000.
(d) During the year ended 31 March 2001, the Company allotted new ordinary shares through private placements and details are as follows:

	Number of issued
Issue date	ordinary shares	Issue price
		HK$
17 July 2000	80,000,000	0.35
14 August 2000_(note)_	50,000,000	0.35
2 March 2001	60,000,000	0.30
	190,000,000

Note: The allotment of these shares was made to Able Technology Limited, a substantial shareholder of the Company, and not in proportion to other shareholders of the Company. Such allotment had not been specifically authorised by the shareholders. These shares were allotted pursuant to a general mandate granted by the shareholders at the annual general meeting of the Company held on 31 May 2000.

(e) During the year ended 31 March 2001, the Company converted certain of its debts into subscription shares and details are as follows:

Date of conversion 20 December 2000 2 January 2001 9 January 2001_(note) 17 January 2001(note) 19 January 2001(note)_	Number of ordinary shares Issue price HK$ 69,106,376 1.00 19,797,041 1.00 2,925,171 1.00 41,651,428 approximately 0.35 69,128,171 approximately 0.35 202,608,187

– 45 –

APPENDIX I

FINANCIAL INFORMATION RELATING TO THE GROUP

Note: These shares were allotted pursuant to a general mandate granted by the shareholders at the special general meeting of the Company held on 3 November 2000.

(f) During the current year, arrangements were made for private placements and details are as follows:

Issue date 5 June 2001_(note i) 19 December 2001(note ii)_	Number of ordinary shares Issue price HK$ 160,000,000 0.18 80,000,000 0.45 240,000,000

Notes:

(i) During the year, the Company entered into two private placements with two independent third parties. The proceeds were used to finance the acquisition by the Group of 51% interest in Beijing HollyBridge and provide additional working capital for the Group. These new shares were allotted pursuant to a general mandate granted by the shareholders at the annual general meeting of the Company held on 22 January 2001.
(ii) The allotment of these shares was made to Able Technology Limited, a substantial shareholder of the Company, and not in proportion to other shareholders of the Company. Such allotment has not been specifically authorised by the shareholders. The proceeds were used to provide additional working capital for the Group. These new shares were allotted pursuant to a general mandate granted by the shareholders at the annual general meeting of the Company held on 21 September 2001.
(g) During the current year, the Company converted certain of its debts into subscription shares and details are follows:

Date of conversion 11 June 2001_(note) 29 June 2001(note) 22 August 2001(note 23) 28 December 2001(note 23)_	Number of ordinary shares Issue price HK$ 1,600,000 approximately 0.305 427,000 approximately 1.000 6,880,000 approximately 2.110 30,717,692 0.2366 39,624,692

Note: During the current year, the Company entered into two debt-equity conversion agreements with its other creditors, resulting in an issue of 1,600,000 and 427,000 ordinary shares of HK$0.10 each at issue prices of approximately HK$0.305 and approximately HK$1.00 each respectively.

– 46 –

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

These new shares were allotted pursuant to a general mandate granted by the shareholders at the annual general meeting of the Company held on 22 January 2001.

All the issued shares rank pari passu with other existing shares in issue in all respects.

(h) During the year, a subsidiary of the Company repurchased certain shares of the Company through the Stock Exchange and these shares were cancelled as follows:

Month/year December 2001 January 2002	Aggregate No of share Price share price paid repurchased Lowest Highest (before expenses) HK$ HK$ HK$’000 19,750,000 0.405 0.450 8,362 3,000,000 0.435 0.435 1,305 22,750,000 9,667	Aggregate No of share Price share price paid repurchased Lowest Highest (before expenses) HK$ HK$ HK$’000 19,750,000 0.405 0.450 8,362 3,000,000 0.435 0.435 1,305 22,750,000 9,667
		9,667

An amount of approximately HK$36,000, representing the brokerage expenses on the aforesaid repurchase, was charged against share premium account.

25. Share Option Scheme

The Company’s Scheme was adopted pursuant to a resolution passed on 22 January 2001.

Summary of the Scheme

(a) Purpose of the Scheme

The purpose of the Scheme is to provide incentives and rewards to eligible participants who contribute to the success of the Group and to retain the services of the employees who will continue to make valuable contribution to the Group.

(b) Participants of the Scheme

Pursuant to the Scheme, the board of directors of the Company (the ‘Board’) may grant options to any full-time employees of the Company or of its subsidiaries, including executive directors in fulltime employment of the Company or any subsidiary, to subscribe for shares in the Company.

(c) Total number of shares available for issue under the Scheme

As at 31 March 2002, the total number of shares of the Company available for issue under the options granted pursuant to the Scheme was 96,584,000, representing approximately 8.41% and 7.6% of the issued share capital of the Company as at 31 March 2002 and 26 July 2002 respectively.

– 47 –

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

The total number of shares in respect of which options may be granted under the Scheme is not permitted to exceed 10% of the shares of the Company in issue at any point of time.

(d) Maximum entitlement of each participant

No participant shall be granted an option which, if exercised in full, would result in such person’s maximum entitlement exceeding 25% of the aggregate number of shares of the Company for the time being issued and issuable under the Scheme.

(e) Time of exercise of options

Pursuant to the Scheme, an option may be exercised in accordance with the terms of the Scheme at any time during a period to be notified by the Board to each grantee and in any event shall not exceed 10 years from the date of offer of the option.

(f) Payment on acceptance of option

Pursuant to the Scheme, HK$1 is payable by each grantee to each Company on acceptance of the option within the period to be notified by the Board.

(g) Basis of determining the subscription price

The subscription price per share under the Scheme is determined by the directors of the Company and notified to the grantee and shall be no less than the higher of:

(i) 80% of the average closing price of the shares of the Company as stated in the daily quotation sheets issued by the Stock Exchange for the five business days immediately preceding the date of grant; and
(ii) the nominal value of the share of the Company.

Effective from 1 September 2001, in accordance with the new rule 17.03 of the Listing Rules, the subscription price of the share options must not be less than the higher of (i) the average closing price of the Company’s shares as quoted on the Stock Exchange for the five trading days immediately preceding the date of grant and (ii) the closing price of the Company’s shares as quoted on the Stock Exchange on the date of grant and (iii) the nominal value of the share of the Company.

(h) Remaining life of the Scheme

The Scheme will remain valid until 21 January 2011.

– 48 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Share Options

The following share options were outstanding under the Scheme during the year:

Name and category of participants Directors Mr. Zou Yishang Mr. Ma Hongyao Mr. Chen Jian Other employees in aggregate		Number of share options	Number of share options	At 31 Date of grant of Exercise period Subscription March 2002 share options of share options price per share 20,000,000 29 August 2001 29 August 2001 to 0.3520 28 August 2011 (Note a) 15,000,000 29 August 2001 29 August 2001 to 0.3520 28 August 2011 (Note a) 17,000,000 29 August 2001 29 August 2001 to 0.3520 28 August 2011 (Note a) 52,000,000 4,500,000 3 August 2001 3 August 2001 to 0.3672 2 August 2011 (Note b) 40,084,000 29 August 2001 29 August 2001 to 0.3520 28 August 2011 (Note a) 44,584,000 96,584,000
	At 1 April 2001 – – – – – – – –	Granted during the year 20,000,000 15,000,000 17,000,000 52,000,000 4,500,000 40,670,000 45,170,000 97,170,000	Lapsed during the year – – – – – (586,000) (586,000) (586,000)

Note a: The options will vest in four tranches in the proportion of 15% : 25% : 30% : 30%. The first tranche of the options has vested on 1 April 2002. The second, third and fourth tranche will vest on 1 April 2003, 1 April 2004 and 1 April 2005, respectively.

Note b: The options are immediately vested on the date of grant.

During the year, no options were cancelled by the Company or exercised by the grantees. An aggregate of 586,000 options has lapsed upon termination of employment of the relevant employees with the Group.

The closing price of the Company’s share immediately before 3 August 2001 and 29 August 2001, the dates of grant, was HK$0.455 and HK$0.440 respectively.

– 49 –

APPENDIX I

FINANCIAL INFORMATION RELATING TO THE GROUP

The financial impact of share options granted is not recorded in the Company’s or the Group’s balance sheet until such time as the share options are exercised, and no charge is recorded in the profit and loss account or balance sheet for their cost. Upon the exercise of the shares options, the resulting shares issued are recorded by the Company as additional share capital at the nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares is recorded by the Company in the share premium account. Share options which are lapsed or cancelled prior to their exercise date are deleted from the register of outstanding share options.

The directors do not consider that it is appropriate to disclose a theoretical value of the share options granted during the year, because in the absence of a readily available market value for share options of the Company, the directors were unable to arrive at an accurate assessment of the value of the share options.

At balance sheet date, a total of 96,584,000 (2001: nil) share options granted in August 2001 remained outstanding. These share options entitle the holders thereof to subscribe for shares of HK$0.10 each in the Company at a subscription price of HK$0.3672 and HK$0.3520 per share for option granted on 3 August 2001 and 29 August 2001 respectively during the exercisable period at any time for ten years commencing on the date the options are granted.

26. Reserves

THE GROUP At 1 April 2000 Premium on issue of shares Share issue expenses Disposal of subsidiaries Write-off of plant and machinery Revaluation decrease Profit for the year At 1 April 2001 Exchange differences arising from translation of financial statements of operations in the PRC Premium on issue of shares Share issue expenses Premium on repurchase of shares Profit for the year At 31 March 2002	Share premium HK$’000 115,918 172,841 (603) – – – – 288,156 – 59,531 (1,030) (7,428) – 339,229	Property, plant and machinery revaluation HK$’000 7,741 – – (3,376) (3,244) (1,121) – – – – – – – –	Exchange reserve HK$’000 – – – – – – – – 27 – – – – 27	Accumulated losses HK$’000 (668,464) – – – – – 237,427 (431,037) – – – – 9,215 (421,822)	Total HK$’000 (544,805) 172,841 (603) (3,376) (3,244) (1,121) 237,427 (142,881) 27 59,531 (1,030) (7,428) 9,215 (82,566)

– 50 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

THE COMPANY At 1 April 2000 Premium on issue of shares Share issue expenses Loss for the year At 1 April 2001 Premium on issue of shares Share issue expenses Premium on repurchase of shares Loss for the year At 31 March 2002	Share premium HK$’000 115,918 172,841 (603) – 288,156 59,531 (1,030) (7,428) – 339,229	Contributed Accumulated surplus losses HK$’000 HK$’000 107,992 (435,077) – – – – – (128,992) 107,992 (564,069) – – – – – – – (40,841) 107,992 (604,910)	Total HK$’000 (211,167) 172,841 (603) (128,992) (167,921) 59,531 (1,030) (7,428) (40,841) (157,689)

The contributed surplus of the Company represents the difference between the fair value of the consolidated net assets of Chun Tai (BVI) Limited acquired and the nominal value of the Company’s shares issued in exchange therefore. Under the Bermuda Companies Act, the contributed surplus less accumulated losses is distributable to the shareholders of the Company, which the Company does not currently meet.

The Company did not have any reserve available for distribution to shareholders for both years.

– 51 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

27. Reconciliation of profit before taxation to net cash outflow from operating activities

Profit before taxation Interest income Interest expense Depreciation Amortisation of goodwill Gain on disposal of other investments Unrealised gain on other investments Loss on disposal of property, plant and equipment Gain on disposal of subsidiaries Write-back of provision for guarantee Write-off of obsolete property, plant and equipment Gain on waiver of bank and other borrowings Gain on waiver of obligations under finance leases Loss on write-off of net assets of a subsidiary Increase in trade and other receivables (Increase) /decrease in inventories Increase in amount due from an associate Increase/ (decrease) in trade and other payables Decrease in amount due to a related company Net cash outflow from operating activities	2002 HK$’000 17,748 (246) 4,566 2,550 1,861 (231) (433) 103 – – – – – – (15,690) (2,801) (932) 6,028 (20,390) (7,867)	2001 HK$’000 237,427 (126) 8,741 8,954 256 – – 495 (149,060) (5,905) 43 (101,442) (13,356) 386 (8,600) 212 – (83,344) (5,246) (110,565)

28. Acquisition of a subsidiary

During the year ended 31 March 2002, the Group acquired 51% of the registered capital of Beijing HollyBridge for a cash consideration of HK$16,000,000. This acquisition has been accounted for by the purchase method of accounting. The amount of goodwill arising as a result of the acquisition was HK$10,035,000.

– 52 –

APPENDIX I

FINANCIAL INFORMATION RELATING TO THE GROUP

During the year ended 31 March 2001, the Group acquired the entire share capital of Holy (HK) for a consideration of HK$24,000,000 by the allotment of 60,000,000 ordinary shares of HK$0.10 each at HK$0.40 each.

NET ASSETS ACQUIRED Property, plant and equipment Interest in an associate Inventories Trade and other receivables Bank balances and cash Trade and other payables Taxation payable Bank and other borrowings_(note 31)_ Amounts due to related companies Minority interest Goodwill SATISFIED BY: Shares allotted Cash Net cash (outflow)/inflow arising on acquisition: Cash consideration Bank balances and cash acquired	2002 HK$’000 9,062 – 31,779 27,662 6,830 (51,342) (975) (11,321) – (5,730) 5,965 10,035 16,000 – 16,000 16,000 2002 HK$’000 (16,000) 6,830 (9,170)	2001 HK$’000 – – – 24,591 5,568 (1,007) – – (25,636) – 3,516 20,484 24,000 24,000 – 24,000 2001 HK$’000 – 5,568 5,568

The subsidiary acquired during the current year contributed HK$15,313,000 (2001: HK$20,288,000) to the Group’s net operating cash flows, paid HK$2,387,000 (2001: HK$315,000) in respect of the net returns on investments and servicing of finance, paid HK$499,000 (2001: Nil) in respect of taxation, utilised HK$8,581,000 (2001: Nil) for investing activities and raised HK$23,683,000 (2001: Nil) in respect of financing operations.

– 53 –

APPENDIX I

FINANCIAL INFORMATION RELATING TO THE GROUP

The subsidiary acquired during the year contributed HK$220,775,000 (2001: HK$30,375,000) to the Group’s turnover, and HK$6,921,000 (2001: HK$5,501,000) to the Group’s profit from operations.

29. Disposal of subsidiaries

On 25 September 2000, Chun Tai Industries Limited (“CTI”), a former wholly-owned subsidiary of the Group, was wound up under a court order. The disposal of CTI and its subsidiaries contributed HK$149,060,000 to gain on disposal of subsidiaries.

NET LIABILITIES DISPOSED OF
Property, plant and equipment
Inventories
Trade and other receivables
Bank balances and cash
Trade and other payables
Amounts due to group companies
Obligations under finance leases
Taxation payable
Bank and other borrowings
Revaluation reserve released
Gain on disposal
Total consideration
SATISFIED BY:
Cash
Net cash outflow arising on disposal:
Cash consideration
Bank balances and cash disposed of

2001
HK$’000
102,631
5,166
1,399
701
(203,593)
(38,468)
(813)
(207)
(12,500)
(145,684)
(3,376)
149,060
–
–
–
(701)
(701)

30. Non-cash transactions

During the current year, the Company entered into several debt-equity conversion agreements with its financial and other creditors. Accordingly, other payables and interest payable for the Bonds of approximately HK$915,000 and HK$14,510,000 were settled by the allotment of the Company’s ordinary shares (note 24(g)) .

In addition, convertible bonds of HK$7,020,000 is converted into shares of the Company during the current year (note 23) .

– 54 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

31. Analysis of changes in financing during the year

At 1 April 2000 Issue of shares Share issue expense Disposal of subsidiaries Conversion of debts Acquisition of a subsidiary_(note 28) Waiver of bank and other borrowings(note a) Waiver of obligations under finance leases(note b) New borrowings raised Repayments during the year At 1 April 2001 Issue of shares Share issue expenses Repurchase of shares(note 24(h)) Conversion of debts Acquisition of a subsidiary(note 28)_ New borrowings raised Repayments during the year Share of pre-acquisition reserve by minority interest Share of profits of subsidiary by minority interest At 31 March 2002	Minority interest HK$’000 – – – – – – – – – – – – – – – – – – 5,730 6,649 12,379	Share captial and premium HK$’000 159,808 63,500 (603) – 130,602 24,000 – – – – 377,307 64,800 (1,030) (9,703) 22,693 – – – – – 454,067	Bank and other borrowings HK$’000 153,581 – – (13,313) (130,602) – (101,442) (13,356) 132,806 (13,768) 13,906 – – – – 11,321 45,328 (21,362) – – 49,193

Notes:

(a) On 14 June 2000, the Company made an offer to 16 financial creditors concerning the restructuring of certain outstanding indebtedness owed by the Group to these financial creditors. Pursuant to the offer, the outstanding indebtedness owed by the Group to 9 of the 16 financial creditors was fully settled by paying 20% thereof. These agreements reduced the debts of the Group by a total HK$101,442,000.
(b) During the year ended 31 March 2001, the Group entered into agreements with three of its finance lessors. Pursuant to these arrangements, these financial lessors agreed to accept payments of 20% of the outstanding indebtedness owed by the Group as a final settlement of the debts. These agreements reduced the bank and other borrowings of the Group by HK$13,356,000.

– 55 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

32. Pledge of assets

As at 31 March 2002, bank deposits of HK$4,446,000 (2001: Nil) were pledged to a bank to secure banking facilities granted to the Group.

In addition, other investments of HK$5,035,000 (2001: Nil) were pledged to secure other borrowings of the Group.

33. Operating lease arrangements

As lessee

	THE	GROUP
	2002	2001
	HK$’000	HK$’000
Minimum lease payments paid under operating
leases during the year	3,164	921

At the balance sheet date, the Group had commitments for future minimum lease payments under noncancellable operating leases which fall due as follows:

Within one year In the second to fifth year inclusive	THE GROUP 2002 2001 HK$’000 HK$’000 4,976 1,094 4,811 146 9,787 1,240	THE GROUP 2002 2001 HK$’000 HK$’000 4,976 1,094 4,811 146 9,787 1,240
		1,240

Operating lease payments represent rentals payable by the Group for certain of its office premises. Rentals are negotiated and fixed for an average lease term of 2 years. No arrangement has been entered into for contingent rental payments.

As lessor

Property rental income earned during the year was HK$245,000 (2001: HK$125,000). The Group’s buildings with a net book value of HK$2,020,000 was temporarily leased out and have committed tenants for the next year.

At the balance sheet date, the Group had contracted with tenants for the following future minimum lease payments of HK$192,000 which fall due within one year.

At 31 March 2002, the Company had no commitments under non-cancellable operating leases (2001: Nil).

– 56 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

34. Contingent liabilities

Guarantee given to a bank in respect of bills of exchange discounted with recourse Guarantee given in respect of other loans granted to a former subsidiary Guarantee given in respect of other loans granted to a subsidiary Guarantee given to a bank in respect of warranty bonds issued to a customer	THE GROUP 2002 2001 HK$’000 HK$’000 13,756 – 36,184 35,514 – – 543 – 50,483 35,514	THE COMPANY 2002 2001 HK$’000 HK$’000 13,756 – 36,184 35,514 20,853 – – – 70,793 35,514	THE COMPANY 2002 2001 HK$’000 HK$’000 13,756 – 36,184 35,514 20,853 – – – 70,793 35,514
			35,514

35. Retirement benefit schemes

The Group operates a Mandatory Provident Fund Scheme (“MPF Scheme”) for all qualifying employees in Hong Kong. The MPF Scheme is registered with the Mandatory Provident Fund Scheme Authority under the Mandatory Provident Fund Schemes Ordinance. The assets of the MPF Scheme are held separately from those of the Group in funds under the control of trustees. Under the rule of the MPF Scheme, the employer and its employees are each required to make contributions to the scheme at rate specified in the rules. The only obligation of the Group with respect to the MPF Scheme is to make the required contributions under the scheme. No forfeited contribution is available to reduce the contribution payable in the future years.

During the year the total amount contributed by the Group to the MPF Scheme amounted to approximately HK$126,000 (2001: HK$30,000).

The Group is also required to make contributions to state pension schemes in the PRC based on a certain percentage of the monthly salaries of the employees of its PRC subsidiaries. The Group has no other obligation under the state pension schemes in the PRC other than the contribution payment.

The Group has provided approximately HK$319,000 (2001: Nil) for the year to cover the contributions payable to the state pension schemes.

36. Post balance sheet events

(a) On 2 April 2002, Telecom Plus Investment Limited entered into three acquisition agreements to acquire 15,046,000 ordinary shares of Dynamic, representing approximately 6.87% interest of the entire issued capital of Dynamic at a consideration of HK$40,624,200, which shall be satisfied by the issue of 90,276,000 ordinary shares of the Company. These new shares were allotted pursuant to

– 57 –

APPENDIX I

FINANCIAL INFORMATION RELATING TO THE GROUP

a specific mandate granted by the shareholders at a special general meeting of the Company held on 19 June 2002. Together with the Group’s equity interests in Dynamic as at 2 April 2002, the Group would hold 8.42% in aggregate of the entire issued capital of Dynamic upon completion of this acquisition. The transaction was completed on 24 June 2002.

(b) On 21 April 2002, Telecom Plus Technology Limited signed a memorandum to increase the registered capital of Allnet Co., Ltd. (formerly known as Telecom Plus Technology (Shenzhen) Limited) from HK$2,000,000 to HK$20,000,000 by increasing HK$18,000,000 of the registered capital. HK$2,700,000 and HK$15,300,000 will be paid within 3 months and within 2 years from 8 May 2002, the date of approval of the new registered capital, respectively.
(c) On 22 April 2002, Telecom Plus Technology Holdings Limited has entered into a conditional sale and purchase agreement with shareholders of Glory Choice Investments Limited (“Glory Choice”) to acquire the entire issued capital of Glory Choice at a consideration of HK$44 million which would be satisfied by the issue of 80 million ordinary shares of the Company and a cash payment of HK$8 million. This acquisition was approved by the shareholders at a special general meeting of the Company held on 19 June 2002 and new shares would be allotted pursuant to a specific mandate granted by the shareholders. The transaction has not yet been completed as of 26 July 2002.
(d) On 4 July 2002, approximately 32.5 million ordinary shares of the Company were issued at a conversion price of HK$0.2236 to the Bondholder to convert the principal amount of Bonds of US$900,000 (equivalent to approximately HK$7,020,000) together with the administrative charges of US$31,770 (equivalent to HK$248,000).
(e) On 22 July 2002, the Group entered into a letter of intent with Shenzhen Xili Lake Holiday Resort in respect of the proposed investment on further development of Xili Lake Holiday Resort in Shenzhen, the PRC.
(f) On 22 July 2002, the Group entered into a letter of intent with Poly Southern Group Company Limited in respect of the proposed investment on development of hotel, movie theatre and commercial complex in Shenzhen, the PRC.

37. Related party disclosures

The Group entered into the following significant transactions with related parties:

(a) On 12 February 2001, Holy (HK) entered into an acquisition agreement with the shareholders (the “Vendors”) of Beijing HollyBridge to acquire a 51% interest in Beijing HollyBridge at a consideration of HK$16 million. On 2 April 2001 and 14 May 2001 respectively, Holy (HK) and the Vendors entered into two supplementary agreements. Mr. Ma Hongyao and Mr. Chen Jian, being executive directors of the Company, and Mr. Ma Zhixuan, the son of Mr. Ma Hongyao (therefore an associate of Mr. Ma Hongyao), were three of the Vendors. The transaction was completed on 12 June 2001.
(b) On 20 April 2001, Able Technology Limited, a substantial shareholder, entered into a conditional agreement with the Company that if the proposed placing of shares of the Company to potential independent investors for a total consideration nearest to but not less than HK$20 million at a minimum price of HK$0.155 per share was not completed before the holding of the special general

– 58 –

APPENDIX I

FINANCIAL INFORMATION RELATING TO THE GROUP

meeting convened for approving the acquisition by the Group of 51% interest in Beijing HollyBridge, Able Technology Limited would subscribe for 130,000,000 new shares at HK$0.155 per share for a total consideration of HK$20,150,000 before the completion of the acquisition of Beijing HollyBridge. The purpose of the proposed subscription was to raise funds for the said acquisition. On 30 May 2001, the Company entered into two subscription agreements with 2 independent placees respectively, pursuant to which an aggregate of 160,000,000 new shares were issued and allotted by the Company to the placees for an aggregate consideration of HK$28.8 million at HK$0.18 per share. As such, the proposed subscription by Able Technology Limited mentioned above did not proceed.

(c) As stated in note 23, the Bondholder, Able Technology Limited and the Company entered into an agreement (the “Agreement”) on 7 June 2001 in relation to the restructuring of the convertible bonds of the Company with outstanding principal amount of US$3,600,000 held by the Bondholder. As a part and parcel of the restructuring of the convertible bonds, Able Technology Limited and the Bondholder agreed to enter into a share purchase agreement (the “Share Purchase Agreement”) upon completion of the Agreement, pursuant to which Able Technology Limited would agree to purchase from the Bondholder up to approximately 113.2 million shares of the Company at HK$0.25 each, subject to adjustment, pursuant to the Share Purchase Agreement.

(d) On 5 December 2001, Able Technology Limited entered into a placing agreement with ICEA Capital Limited (“ICEA”), pursuant to which ICEA agreed to place 80,000,000 existing shares held by Able Technology Limited at HK$0.45 per share. On the same date, Able Technology Limited entered into a subscription agreement with the Company pursuant to which Able Technology Limited agreed to subscribe for 80,000,000 new shares at HK$0.45 per share. The subscription was completed on 19 December 2001.
(e) The Group’s deposits paid to an independent third party of HK$14,151,000 (equivalent to RMB15,000,000) are guaranteed by Able Technology Limited.
(f) Mr. Chen Jian pledged 48,000,000 shares of the Company to secure other borrowings of the Group.

The above transactions were carried out in accordance with terms determined and agreed by both parties.

The amount due to a related company at 31 March 2001 represented the balance due to Beijing HollyBridge. The balance was unsecured, non-interest bearing and repayable on demand. Beijing HollyBridge is now a subsidiary of the Company after completion of the acquisition during 2002 (note 28) .

– 59 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

38. Subsidiaries

Particulars of the Company’s subsidiaries as at 31 March 2002 are as follows:

	Place of
	incorporation/
	establishment	Issued share/	Percentage of equity
	and	paid-up	interest attributable
Name of subsidiary	operations	registered capital	to the Company		Principal activities
			Directly	Indirectly
Allnet Co., Ltd.	The PRC	HK$2,000,000	–	100%	Development and
(formerly known as Telecom					trading of
Plus Technology (Shenzhen)					communication
Company Limited)(Note)					and electronic
					Products
Beijing HollyBridge System	The PRC	RMB20,000,000	–	51%	Provide solutions,
Integration Company Limited					software and
(Note)					service
Chun Tai (BVI) Limited	The British	US$100	100%	–	Investment holding
	Virgin Islands
Chun Tai Novelty	Hong Kong	HK$10,000	–	100%	Inactive
Company Limited
Chun Tai Printing Limited	Hong Kong	HK$10,000	–	90%	Investment holding
Full Hope Enterprises Limited	Hong Kong	HK$10,000	100%	–	Investment holding
Holy (Hong Kong) Universal	Hong Kong	HK$300,000	–	100%	Trading of
Limited					communication
					products
Telecom Plus Education Limited	Hong Kong	HK$2	100%	–	Inactive
Telecom Plus Investment Limited	Hong Kong	HK$2	100%	–	Investment holding
Plus Investment & Management	The PRC	HK$1,500,200	–	100%	Inactive
Consulting Company Limited
(Note)
Telecom Plus Technology Holdings	Hong Kong	HK$2	100%	–	Investment holding
Limited
Telecom Plus Technology Limited	Hong Kong	HK$1,000,000	–	100%	Investment holding

– 60 –

APPENDIX I

FINANCIAL INFORMATION RELATING TO THE GROUP

	Place of
	incorporation/
	establishment	Issued share/	Percentage of equity
	and	paid-up	interest attributable
Name of subsidiary	operations	registered capital	to the Company		Principal activities
			Directly	Indirectly
Up Hill Investments Limited	The British	US$1	100%	–	Inactive
	Virgin Islands
Zhongshan Modern Colour	The PRC	HK$11,000,000	–	90%	Inactive
Printing and Packaging
Products Factory Company
Limited_(Note)_

None of the subsidiaries had any debt securities in issue at the end of the year.

Note: The English name is directly translated from the Chinese name shown in the business license.

– 61 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

(B) Unaudited interim results for the six months ended 30 September 2002

The Company’s unaudited interim report 2002 is reproduced in the following:

The Board of Directors (the “Board”) of Plus Holdings Limited (formerly known as Telecom Plus Holdings Limited, the “Company”) is pleased to announce the unaudited consolidated results of the Company and its subsidiaries (the “Group”) for the six months ended 30 September 2002 together with the comparative figures for the last corresponding period as follows:

Condensed Consolidated Income Statement

Notes
Turnover
2
Cost of sales
Gross profit
Other revenue
Selling and distribution expenses
Administrative expenses
Impairment loss on investment
in securities
Other operating expenses
(Loss)/Profit from operating activities
3
Finance costs
(Loss)/Profit before taxation
Taxation
4
(Loss)/Profit before minority interest
Minority interest
(Loss)/Profit attributable to shareholders
(Loss)/Earnings per share
Basic
5
Diluted
5

Unaudited
Six months ended
30 September
2002
2001
HK$’000
HK$’000
57,802
137,854
(45,491)
(111,435)
12,311
26,419
5
265
(4,033)
(3,113)
(20,754)
(4,741)
(7,649)
–
(1,057)
(1,093)
(21,177)
17,737
(1,747)
(2,424)
(22,924)
15,313
390
(1,388)
(22,534)
13,925
2,364
(3,706)
(20,170)
10,219
(1.7 cents)
1.0 cents
N/A
0.9 cents

– 62 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Condensed Consolidated Statement of Changes in Equity

	Share	Share	Exchange	Accumulated
	Capital	Premium	Reserve	losses		Total
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000
At 1 April 2002	114,838	339,229	27	(421,822)		32,272
Issue of shares	12,278	26,135	–	–		38,413
Loss for the period	–	–	–	(20,170)		(20,170)
At 30 September 2002	127,116	365,364	27	(441,992)		50,515

At 1 April 2001	89,151	288,156	–	(431,037)		(53,730)
Currency translation
difference	–	–	235	–		235
Gain not recognised in
the income statement	–	–	235	–		235
Issue of shares	16,891	27,335	–	–		44,226
Profit for the period	–	–	–	10,219		10,219
At 30 September 2001	106,042	315,491	235	(420,818)		950

– 63 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Condensed Consolidated Balance Sheet

As at 30
September 2002
(Unaudited)
Notes
HK$’000
ASSETS AND LIABILITIES
Non-current assets
Property, plant and equipment
10,828
Development cost
10,679
Goodwill
27,388
48,895
Current assets
Inventory
55,052
Trade and other receivables
6
68,609
Other investments
48,844
Amount due from an associate
383
Pledged and bank deposits
1,002
Bank balances and cash
4,414
178,304
Current liabilities
Trade and other payables
7
67,926
Taxation payable
971
Deferred taxation
839
Bank and other borrowings
– due within one year
75,209
Convertible bonds – due within one year
14,040
158,985
Net current assets
19,319
Total assets less current liabilities
68,214
Minority interest
10,015
Non-current liabilities
Bank and other borrowings
– due after one year
7,684
Convertible bonds – due after one year
–
7,684
NET ASSETS
50,515
CAPITAL AND RESERVES
Share capital
8
127,116
Reserves
(76,601)
SHAREHOLDERS’ FUNDS
50,515

As at 31
March 2002
(Audited)
HK$’000
11,288
8,142
28,402
47,832
34,580
101,299
8,051
932
4,446
8,127
157,435
77,096
1,131
1,229
51,390
14,040
144,886
12,549
60,381
12,379
8,710
7,020
15,730
32,272
114,838
(82,566)
32,272

– 64 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Condensed Consolidated Cash Flow Statement

Net cash outflow from operating activities
Net cash outflow from investing activities
Net cash inflow from financing activities
DECREASE IN CASH AND CASH
EQUIVALENTS
Cash and cash equivalents at
beginning of period
Effect of foreign exchange rates changes
CASH AND CASH EQUIVALENTS
AT END OF PERIOD
ANALYSIS OF BALANCES OF CASH
AND CASH EQUIVALENTS
Bank balances and cash
Bank overdrafts
Other borrowings
Bank loans

Unaudited
Six months ended
30 September
2002
2001
HK$’000
HK$’000
(9,968)
(10,238)
(1,776)
(27,699)
350
28,214
(11,394)
(9,723)
(2,780)
(16,848)
–
(170)
(14,174)
(26,741)
4,414
17,567
–
(1,849)
(18,588)
(37,742)
–
(4,717)
(14,174)
(26,741)

– 65 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Notes to the Condensed Financial Statements

1. Principal accounting policies

These interim financial statements have not been audited by the Company’s Auditors but have been reviewed by the Company’s Audit Committee.

The accounting policies and basis of presentation used in the preparation of the interim financial statements are consistent with those used in the annual audited financial statements for the year ended 31 March 2002, except that the following new/revised Statements of Standard Accounting Practice issued by the Hong Kong Society of Accountants (“SSAP”) have been adopted for the first time in the preparation of the current period’s condensed consolidated financial statements:

SSAP 1 (Revised) Presentation of financial statements SSAP 11 (Revised) Foreign currency translation SSAP 15 (Revised) Cash flow statements SSAP 34 Employee benefits

2. Segmental information

The Company is an investment holding company and the following tables present turnover, profit/(loss) and expenditure information for the Group’s business segments. No geographical segment analysis is provided as substantially all of the Group’s turnover and contribution to results were derived from the People’s Republic of China (the “PRC”).

Unaudited

Sales and integration service HK$’000 TURNOVER 50,547 RESULT Segment results (6,698) Unallocated corporate expenses – Impairment loss on investment in securities – Other Loss from operations Finance costs (1,154) Loss before taxation Taxation Loss before minority interest Minority interest Loss attributable to shareholders	Six months ended 30 September 2002 Services Contract Unallocated income income corporate Consolidated HK$’000 HK$’000 HK$’000 HK$’000 4,111 3,144 – 57,802 154 (520) – (7,064) (7,649) (6,464) (21,177) (109) (83) (401) (1,747) (22,924) 390 (22,534) 2,364 (20,170)

– 66 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Sales and integration service HK$’000 TURNOVER 123,684 RESULT Segment results 13,387 Unallocated corporate expenses Profit from operations Finance costs (1,340) Profit before taxation Taxation Profit before minority interest Minority interest Profit attributable to shareholders	Unaudited Six months ended 30 September 2001 Services Contract Unallocated income income corporate Consolidated HK$’000 HK$’000 HK$’000 HK$’000 7,095 7,075 – 137,854 5,260 864 – 19,961 (2,224) 17,737 (17) (17) (1,050) (2,424) 15,313 (1,388) 13,925 (3,706) 10,219

– 67 –

APPENDIX I

FINANCIAL INFORMATION RELATING TO THE GROUP

3. (Loss)/Profit from operations

(Loss)/Profit from operations has been arrived after charging:

Charging: Amortisation of goodwill Depreciation of fixed assets Exchange losses, net Interest on bank loans and overdrafts wholly repayable within one year Interest on convertible bonds wholly repayable within five year Interest on other loans Loss on disposal of fixed assets Operating lease rentals in respect of land and buildings Staff costs including directors; emoluments Contributions to retirement benefit schemes Total staff costs	Unaudited Six months ended 30 September 2002 2001 HK$’000 HK$’000 1,014 600 1,109 645 6 209 470 226 – 857 1,277 1,341 – 69 2,409 913 11,754 5,305 38 161 11,792 5,466	Unaudited Six months ended 30 September 2002 2001 HK$’000 HK$’000 1,014 600 1,109 645 6 209 470 226 – 857 1,277 1,341 – 69 2,409 913 11,754 5,305 38 161 11,792 5,466
		5,466

4. Taxation

The charge/(credit) comprises Taxation in PRC Deferred taxation	Unaudited Six months ended 30 September 2002 2001 HK$’000 HK$’000 – 1,388 (390) – (390) 1,388	Unaudited Six months ended 30 September 2002 2001 HK$’000 HK$’000 – 1,388 (390) – (390) 1,388
		1,388

No provision for Hong Kong Profits Tax has been made in the financial statements as the Group had no assessable profits for both periods.

– 68 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

5. (Loss)/Earnings per share

(a) Basic (loss)/earnings per share

The calculation of basic (loss)/earnings per share is based on the net loss attributable to shareholders for the period of HK$20,170,000 (2001: net profit of HK$10,219,000), and the weighted average of 1,213,351,361 (2001: 997,379,979) ordinary shares in issue during the period.

(b) Diluted (loss)/earnings per share

No diluted loss per share is shown for the six months ended 30 September 2002 as the effect of the Company’s share options and convertible notes outstanding during the period was anti-dilutive.

The calculation of diluted earnings per share for the six months ended 30 September 2001 was based on the unaudited net profit from ordinary activities attributable to shareholders for the period of HK$10,219,000, as used in the basic earnings per share calculation, and the interest on convertible bonds for the period of HK$857,000. The weighted average number of ordinary shares used in the calculation comprises the 997,379,979 ordinary shares in issue during the period, as used in the basic earnings per share calculation, and the weighted average of 125,577,358 ordinary shares assumed to have been issued at no consideration on the deemed exercise of all options outstanding and all outstanding balance of convertible bonds had been converted into shares during the period.

6. Trade and other receivables

The following is an aged analysis of trade receivables included in trade and other receivables at the balance sheet date:

Trade receivables: Within 30 days Over 30 days but within 90 days Over 90 days but within 180 days Other receivables	As at 30 September 2002 (Unaudited) HK$’000 653 2,404 27,751 30,808 37,801 68,609	As at 31 March 2002 (Audited) HK$’000 37,782 9,871 32,680
		80,333 20,966
		101,299

– 69 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

7. Trade and other payables

The following is an aged analysis of trade payables included in trade and other payables at the balance sheet date:

Within 90 days Over 90 days but within 180 days Other payables 8. Share Capital Authorised: Ordinary shares of HK$0.10 each Beginning and end of period Issued and fully paid: Ordinary shares of HK$0.10 each Beginning of period As consideration to acquire 15,046,000 ordinary shares of Dynamic Holdings Limited Conversion of US$900,000 convertible bonds into subscription shares End of period	As at 30 September 2002 (Unaudited) HK$’000 11,254 2,662 13,916 54,010 67,926 No. of shares ’000 3,000,000 1,148,383 90,276 32,504 1,271,163	As at 31 March 2002 (Audited) HK$’000 20,939 12,931
		33,870 43,226
		77,096

		HK$’000 300,000

		114,838 9,028 3,250
		127,116

9. Related party disclosures

As at the balance sheet date, a director of the Company provided guarantee on other loan of the Group.

10. Contingent liabilities

As at 30 September 2002, the Group provided guarantees in respect of other loans granted to a former subsidiary with an amount of approximately HK$36 million.

– 70 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

C. NET TANGIBLE ASSETS

The unaudited consolidated net tangible assets of the Group as at 30 September 2002 amounted to approximately HK$12,448,000, equivalent to HK$0.01026 per Share.

D. STATEMENT OF INDEBTEDNESS

At the close of business on 27 May 2003, being the latest practicable date for the purpose of ascertaining information contained in this indebtedness statement prior to the printing of this circular, the Group had outstanding unsecured bank borrowings of approximately HK$4.72 million, other borrowings of approximately HK$48.61 million, amount due to a related company of approximately HK9.43 million and convertible bonds of approximately HK$14.04 million. As at the same date, the Group has provided guarantees in respect of bills of exchange discounted with recourse for a subsidiary with an amount approximately HK$2 million, guarantees in respect of other loans granted to a former subsidiary with an amount of approximately HK$26 million and guarantees to a bank in respect of warranty bonds issued to a customer of a subsidiary with an amount approximately HK$1 million.

Save as aforesaid of as otherwise disclosed herein, and apart from intra-group liabilities, none of the companies comprising the Group had outstanding at the close of business on 27 May 2003 any mortgages, charges debentures or other loan capital, issued and outstanding or agreed to be issued, bank loans or other similar indebtedness, finance lease commitments or other material contingent liabilities.

E. WORKING CAPITAL STATEMENT

The Company is now experiencing liquidity problem and in the course of negotiating with creditors to reschedule the repayment of liabilities. The solutions of overcoming the cash flow issue lies on the successful implementation of the business plan and full utilization of the Group’s financial resources, including:

i. internally generated funds
ii. available banking facilities

– 71 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

iii. the Placing Subscription obtained from the Placing took place on 27 May 2003
iv. strategic investment in TPTHL by the Subscription Rights Agreement and the further investment into TPTHL pursuant to information disclosed in this Circular or other subsidiaries of the Group

The Directors are of the opinion that, upon the formal consent of the creditors in relation to the acceptance of the proposed debt restructuring and successful completion of the aforementioned capital raising exercises, the Group has sufficient working capital for its present requirement in the absence of unforeseen circumstances.

– 72 –

APPENDIX II

THE MECHANISM FOR THE EXERCISE OF THE SUBSCRIPTION RIGHT

S (S+L) x x 100 S+L V

Where:

“S” equals the aggregate amount of the subscription price payable pursuant to the relevant exercise of the Subscription Right;

“L” equals the aggregate amount of the outstanding Loan to be converted mandatorily under Clause 3(C)(a) of the Subscription Rights Agreement; and

“V” equals the valuation of TPTHL determined in the section headed “Valuation of TPTHL” below, provided that the sum of (S + L) is less than “V”,

if however, (i) the sum of (S + L) is not less than “V”, or (ii) if “V” equals zero, then in either case, the fraction of:

(S+L) V

shall be deemed to be equal to 9,999/10,000.

Valuation of TPTHL

The fully diluted post money valuation of TPTHL will be based on the Price-Earnings ratio of 5.5 times the Earnings of TPTHL for the financial year ended 31 March 2003. Fully diluted post money valuation means the capitalisation of TPTHL (including the shares of Preferred Stock and any other classes of shares, stock or securities on an as converted basis) assuming the conversion in full of the outstanding Loan, the exercise in full of the Subscription Right to Preferred Stock, the exercise in full of any option for shares of Preferred Stock granted to BARING from time to time, the exercise in full of all options to subscribe for TPTHL Shares, shares of Preferred Stock and other classes of shares, stock or securities convertible into TPTHL Shares granted or which TPTHL agreed to grant pursuant to the Scheme or other incentive scheme(s) or arrangement(s) of TPTHL (if any) and the issuance of TPTHL Shares, shares of Preferred Stock and any other classes of shares, stock or securities convertible into TPTHL Shares pursuant to the outstanding warrants and convertible debt of TPTHL (if any). Earnings is defined as the net profit after tax & minority

– 73 –

APPENDIX II

THE MECHANISM FOR THE EXERCISE OF THE SUBSCRIPTION RIGHT

interest of TPTHL based on (i) the final Audited Financial Statements of TPTHL for the financial year ended 31 March 2003, or at the option of BARING in its discretion (ii) the final Audited Financial Statements of TPTHL for the financial year ended 31 March 2004, provided that the final Audited Financial Statements of TPTHL for the financial year ended 31 March 2004 has been prepared and issued, on condition that:–

(i) the operating losses incurred by Allnet Co., Ltd. may be reversed and added back to the amount of net profit for calculating the valuation;
(ii) the relevant amount of the operating losses must be shown as a separate item in the relevant Audited Financial Statements; and
(iii) up to an aggregate amount of HK$8 million of the operating losses incurred by Allnet Co., Ltd. may be reversed.

– 74 –

RIGHTS OF THE PREFERRED STOCKS

APPENDIX III

RIGHTS OF THE PREFERRED STOCK

Liquidation Preference:

In the event of any liquidation or winding up of TPTHL, the holders of Preferred Stock will be entitled to receive, in preference to any distribution to the holders of TPTHL Shares, an amount equal to the subscription price of such Preferred Stock, plus declared but unpaid dividends, if any. After such payment, any remaining balance shall be shared proportionately among all of the holders of the TPTHL Shares and Preferred Stock (on an as-converted basis).

Liquidation Event:

Unless BARING gives its written consent to the relevant event, each of the following events shall be considered a liquidation event which shall entitle the holders of the Preferred Stock to payment of the amounts described above:

(i) a consolidation or merger of, or reorganization involving any of the TPTHL Group Companies or the sale of all or substantially all of the assets of any of the TPTHL Group Companies;
(ii) any transaction (including secondary sales of stock) pursuant to which any person or group becomes the beneficial owner of a majority of the voting power of the capital stock of any of the TPTHL Group Companies;
(iii) any winding up or liquidation of any TPTHL Group Company or the appointment of any receiver, administrator or similar officer;
(iv) any of the TPTHL Group Companies sells all or substantially all of its assets and/or undertaking;
(v) there is an initial public offering of the shares of any of the TPTHL Group Companies; or
(vi) there is an issuance of equity securities (or any securities convertible into, exchangeable for or which confer rights to purchase or acquire equity securities)

– 75 –

RIGHTS OF THE PREFERRED STOCKS

APPENDIX III

of any of the TPTHL Group Companies exceeding 25 per cent of the equity share capital of any of the TPTHL Group Companies in issue as at the date of the Subscription Rights Agreement, other than (a) shares or stock issued pursuant to an approved employee share option program approved by TPTHL and (b) the issuance of shares of Preferred Stock under the Subscription Rights Agreement.

A consent given by BARING, as referred to in the first paragraph of this definition, to any of the events referred to above shall be binding on the holders of all the Preferred Stock and, if given, shall have the effect that the relevant event shall not be considered a liquidation event in respect of any of the Preferred Stock then outstanding.

Redemption Right:

The Preferred Stock shall be redeemed, in whole or in part, upon the demand of the holder of Preferred Stock after five years of the date of the issue of the Preferred Stock, at cost together with any accrued but unpaid dividends.

Dividend Right:

The holder of each Preferred Stock shall be entitled to dividends payable on the TPTHL Shares on an as converted basis.
Conversion/Exchange Rights: The holder of the Preferred Stock shall have the option, at any time within 5 years from the allotment of the Preferred Stock to exchange or to convert each share of Preferred Stock into one TPTHL Share, (but subject to customary adjustments as referred in the Subscription Rights Agreement). The maturity date of such conversion / exchange rights shall expire within 5 years from the issuance date of the Preferred Stock.

Anti-dilution Protection:

The conversion ratio referred to under “Conversion/Exchange Rights” above will be subject to adjustment for stock splits, reverse stock splits, and similar events.

If at any time, TPTHL issues additional shares at a purchase price less than HK$0.01, the conversion ratio will be subject to a full ratchet adjustment.

– 76 –

APPENDIX III

RIGHTS OF THE PREFERRED STOCKS

Main adjustment events:

(i) Consolidation or sub-division
(ii) Capitalization of profits or reserves
(iii) Capital distribution
(iv) Rights issues of shares or options
(v) Rights issue of other securities
(vi) Other offers to shareholders of the Company or TPTHL (as applicable).

Board Seat:

BARING will be entitled to appoint a representative to act as a board observer of TPTHL; and additionally, upon becoming a holder of Preferred Stock, BARING shall be entitled to appoint such number of Directors of TPTHL which when expressed as a percentage of the total number of Directors of TPTHL is equal to the nearest percentage of the issued share capital of TPTHL (on an as converted basis) held by BARING from time to time. In any case, the maximum number of Directors of TPTHL shall be 5 at all times (unless otherwise agreed by BARING). The number of Directors of TPTHL which BARING is entitled to appoint shall be rounded up to the nearest integer at all times. The number of Directors of TPTHL which BARING is entitled to appoint shall be reviewed and adjusted accordingly, if and when there are any transfers or issues of Preferred Stock from time to time. In the event that any of the Preferred Stock held by BARING is converted into TPTHL Shares, BARING shall be entitled to maintain such number of Directors of TPTHL appointed by BARING as a holder of Preferred Stock.

Notwithstanding the above, the majority of the directors will be appointed by the Company given that the Company remains the controlling shareholder of TPTHL, holding at least 58% of the issued share capital of TPTHL

– 77 –

RIGHTS OF THE PREFERRED STOCKS

APPENDIX III

Protective Covenants:

So long as BARING holds at least 17% of the issued share capital of TPTHL (on an as-converted basis), TPTHL will not, in each case without the prior consent by BARING:

(1) make any acquisition or disposal of any material asset or investment, (where for the purposes of this provision, “material” in respect of asset or investment, means the value of an asset or investment exceeding HK$200,000) or any acquisition or consolidation or merger with, or the sale or other disposition of all or substantially all of its assets or assets of any of the TPTHL Group Companies, or set up or substantially expand any new business not related to its existing core business or discontinue or substantially reduce any existing business except, in the case of a disposal of asset or investment or a discontinuance and substantial reduction of a business, the asset, investment or business concerned does not contribute to a significant portion of the profit of the TPTHL Group Companies;
(2) fix or vary the terms of any share incentive scheme of any of the TPTHL Group Companies;
(3) change the core business of TPTHL or the TPTHL subsidiaries;
(4) enter into any connected transaction (as defined in the Listing Rules) (except any transaction with a member of the TPTHL Group, the Company and its subsidiaries entered into the ordinary course of business of the respective companies);
(5) declare any dividend, dividend in specie or other distribution in respect of the TPTHL Shares or other class of shares of TPTHL;
(6) the purchase, redemption or acquisition by TPTHL of any shares or securities of TPTHL;

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APPENDIX III

RIGHTS OF THE PREFERRED STOCKS

(7) the entering into of any contract of a material nature outside the normal course of business of any TPTHL Group Company;
(8) the incurring of any debt by any of the TPTHL Group Companies (except for short term loan facilities with a term of less than one year);
(9) the creation or granting of any mortgage, charge, lien or other encumbrance over any assets of any TPTHL Group Companies;
(10) the amendment of the memorandum or articles of association of TPTHL;
(11) the issuance of additional TPTHL Shares or Preferred Stock, other than the issuance of shares or Preferred Stock pursuant to rights granted or obligations assumed by TPTHL prior to the creation of the Preferred Stock as a share class of TPTHL; and
(12) the approval of or the issuance of equity or debt by any TPTHL Group Company other than short term loan facilities with a term of less than one year for the purposes of normal working capital and operating needs of the business of the TPTHL Group.

Right of First Refusal:

Right of Co-Sale:

Each of the Company and BARING shall have a right of first refusal in respect of any Shares that any other holder of Shares may seek to sell. The right of first refusal must be exercised within 5 Business Days after the date of the notice for the exercise of the right of first refusal.

As long as BARING holds at least 17% of the issued share capital of TPTHL (on an as-converted basis), BARING shall have a right of co-sale (based on BARING’s percentage of the shareholding in the outstanding issued share capital of TPTHL) in the event that the Company wishes to sell any of the Shares to a third party. The Company shall have the same rights of co-sale in respect of Shares held by the Company provided that the Company holds at least 17% of the issued share capital of TPTHL (on an as-converted basis).

– 79 –

RIGHTS OF THE PREFERRED STOCKS

APPENDIX III

Drag Along Right: (i) Subject to paragraph (iv) below, in the event that BARING proposes to sell all or any of the Sale Shares to any third party on normal commercial terms, BARING may at its option require the Company to sell or procure the sale of Relevant Number of Shares calculated as referred to below held by or for the account of the Company to the relevant purchaser at the Drag Along Sale Price and on the Drag Along Sale Terms as those offered to BARING. Provided always that the Drag Along Sale Price shall be payable in the form of cash or cash equivalent (which, for the avoidance of doubt, shall include without limitation liquid shares listed on a recognised stock exchange which are widely held and any part of such shares are not subject to any lock up period or moratorium exceeding 3 months). The Relevant Number of Shares shall be such number of Shares as bears the same proportion to the total number of Shares held by or for the account of the Company at the relevant time as the number of Sale Shares bears to the total number of Shares held by BARING at the relevant time.
(ii) If BARING elects to compel the Company or its nominee to sell their Shares, it shall deliver to the Company the Drag Along Notice specifying: (a) the Drag Along Sale Price, (b) the Drag Along Sale Terms and (c) the Relevant Number of Shares.
(iii) BARING shall be required to participate in such sale on the Drag Along Sale Terms and to tender its Shares on such terms. Any proposed sale pursuant to this section for “Drag Along Right” shall be in compliance with all applicable laws and regulations, including, without limitation, all securities laws and such proposed sale shall be completed within 60 Business Days from the delivery of the Drag Along Notice; provided that if the sale of such Shares is subject to any prior regulatory approval or consent, completion of such sale may be extended (but not to exceed 120 Business Days in the aggregate from the date of

– 80 –

APPENDIX III

RIGHTS OF THE PREFERRED STOCKS

execution of the relevant agreement) until the expiration of 10 Business Days after all such approvals and consents shall have been received. BARING and the Company shall use their respective reasonable endeavours to obtain such consents and approvals as may be required in order for them to comply with the provisions of this section for “Drag Along Right”.

(iv) BARING shall have the right to exercise the Drag Along Right provided that:
(a) BARING holds at least 17% of the issued share capital TPTHL (on an as-converted basis);
(b) the valuation of TPTHL is at least HK$150 million at the time of sale; and
(c) a written consent is given by the Company as to such Drag Along Sale Terms where the Drag Along Sale Price consists of any shares that are subject to a lock up period or moratorium exceeding 3 months.

Voting Right:

Pre-emption Right on new issuances:

A holder of Preferred Stock shall have the right to vote on an as converted basis. Each share of Preferred Stock shall have such number of vote(s) equal to the vote(s) attached to the TPTHL Share(s) converted from one share of Preferred Stock in accordance with the provisions contained herein.

A holder of Preferred Stock shall have rights of pre-emption in relation to any proposed new issues of securities or the opportunity to advance shareholders loans or other facility to TPTHL; provided that no holder of Preferred Stock shall be obliged to participate in any such new issue or other funding.

– 81 –

STATUTORY AND GNERAL INFORMATION

APPENDIX IV

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, the interests of the Directors and chief executive of the Company in the shares and debentures of the Company and its associated corporation (within the meaning of the SFO and the short position within the meaning of the SFO of such persons in the shares of the Company and the associated corporation which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8, stipulated in Section 341 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO) or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules, to be notified to the Company and the Stock Exchange, were as follows:

(i) Interests in Shares

		Number of shares and
		Approximate percentage of
Director	Nature of Interests	Shares interested
Mr. Zou Yishang_(Note 1)_	Corporate	258,130,790 (20.3%)
Ms. Cui Xia_(Note 2)_	Family	406,000 (0.03%)
Mr. Zhang Keqiang	Personal	54,754,000 (4.3%)
Miss Chow King Lin Theresa	Personal	6,000 (0.0%)

Notes:

These 258,130,790 Shares are beneficially owned by Able Technology Limited, which is whollyowned by Mr. Zou Yishang.

Pursuant to the Share Purchase Agreement dated 7 June 2001 in which Able Technology Limited has the right to purchase 58.1 million Sales Shares, at HK$0.25 each (subject to the adjustment which were detailed in the circular to Shareholders dated 8 June 1998). Upon completion of the Share Purchase Agreement, the interest of Able Technology Limited in the Company resulting from the purchase of the Sales Shares will be increased, representing approximately 25% and 24% of the existing and enlarged issued share capital of the Company respectively.

These 406,000 Shares are beneficially owned by Ms. Cui Xia, the spouse of Mr. Zou Yishang.

– 82 –

STATUTORY AND GNERAL INFORMATION

APPENDIX IV

(ii) Directors’ right to acquire Shares

Pursuant to the terms of the Scheme adopted by the Company on 22 January 2001, the Directors are authorized, at their absolute discretion, to grant options to full-time employees, including any executive Directors of any companies in the Group. Options for subscribing the Shares has been granted as follows:–

Number of share

	Number of share
	options outstanding			Exercise price
Name or category	as at the Latest		Exercise period	per share*
of participant	Practicable Date	Date of grant	of share options	(HK$)
Directors
Mr. Zou Yishang	20,000,000	29 Aug 2001	29 Aug 2001 to	0.3520
			28 Aug 2011_(Note a)_
Mr. Ma Hongyao	15,000,000	29 Aug 2001	29 Aug 2001 to	0.352
			28 Aug 2011_(Note a)_
Mr. Chen Jian	17,000,000	29 Aug 2001	29 Aug 2001 to	0.352
			28 Aug 2011_(Note a)_
Ms Chow King Lin	1,000,000	3 Aug 2001	3 Aug 2001 to	0.3672
Theresa			2 Aug 2011_(Note b)_
	1,000,000	29 Aug 2001	29 Aug 2001 to	0.3520
			28 Aug 2011_(Note a)_
	54,000,000
Other employees	3,500,000	3 Aug 2001	3 Aug 2001 to	0.3672
in aggregate			2 Aug 2011_(Note b)_
	36,453,000
		29 Aug 2001	29 Aug 2001 to	0.3520
			28 Aug 2011_(Note a)_
	39,953,000
	93,953,000

Note a: The options will vest in four tranches in the proportion of 15% : 25% : 30% : 30%. The first and second tranches of the options have vested on 1 April 2002 and 1 April 2003, respectively. The third and fourth tranches will vest on 1 April 2004 and 1 April 2005, respectively.

– 83 –

STATUTORY AND GNERAL INFORMATION

APPENDIX IV

Note b: The options are immediately vested on the date of grant.

The exercise price of the share options is subject to adjustment in the case of rights or bonus issues, or other similar changes in the Company’s share capital.

No option was exercised under the Scheme up to the Latest Practicable Date.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short position in the Shares, underlying Shares or debentures of the Company or any of its associated corporation (within the meaning of Part XV of the SFO) which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 or Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO) or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

(iii) Substantial shareholders as defined in the SFO

As at the Latest Practicable Date, shareholders (other than the Directors or chief executive of the Company) who have interests or short positions in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO were as follows:–

Number and approximate Name Percentage of Shares Interested Able Technology Limited (Note 3) 258,136,790 (20.3%) Continental Mariner Investment Co., Ltd. 117,636,000 (9.3%) Kenwin Investments Limited 106,552,000 (8.4%) BAPEF Investments II Limited (Note 4) 120,137,995 (9.45%)

Note:

The interests of Mr. Zou Yishang in Able Technology Limited have been stated in Notes 1 and 2 above.
Pursuant to the supplemental agreement dated 7 June 2001 made between the Company, BARING and Able Technology Limited for the restructuring of the 2% convertible bonds due on 30 June 2001 issued by the Company to Baring Asia Investments II B.V. on 30 June 1998 as disclosed in

– 84 –

STATUTORY AND GNERAL INFORMATION

APPENDIX IV

the circular of the Company dated 16 July 2001, the Company will allot and issue approximately 58.1 million new shares of the Company (“Conversion Shares”) at the conversion price of HK$0.25 per share (subject to the adjustments which were detailed in the circular to Shareholders dated 8 June 1998) to BARING upon exercise in full of the conversion rights attaching to the outstanding Convertible Bonds and settlement of the administrative charges relating thereto for an aggregate amount of approximately US$1.87 million due on 30 June 2003.

The 58.1 million new shares of the Company to be issued before 30 June 2003, together with the 61,995,547 issued ordinary shares currently held by BARING represents approximately 9.45% and 8.63% of the Company’s existing and enlarged issued share capital respectively.

Able Technology Limited and BARING has entered into the Share Purchase Agreement dated 7 June 2001 of which Able Technology Limited has the right to purchase the Conversion Shares from BARING before 30 June 2003 at HK$0.25 (subject to the adjustments which were detailed in the circular to Shareholders dated 8 June 1998).

Save as disclosed herein, as at the Latest Practicable Date, the Directors or chief executive of the Company were not aware of any person (other than the Directors or chief executive of the company) who has an interest or short position in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of part XV of the SFO, or who is interested in 10% or more of the nominal value of any class of the share capital carrying rights to vote in all circumstances at general meeting of any other member of the Group.

3. EXPERT

The following is the qualification of the expert who has given opinion in respect of the statement of working capital sufficiency contained in this circular:

Name Qualification

Tanrich Capital Limited

a deemed licensed corporation for types 1 and 6 regulated activities (dealing in securities and advising on corporate finance) under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

4. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group, save for contracts expiring or determinable by the employer within one year without payment of compensation, other than statutory compensation.

– 85 –

STATUTORY AND GNERAL INFORMATION

APPENDIX IV

5. LITIGATION

Showa Leasing (Hong Kong) Limited (“Showa Leasing”), a hire purchase creditor to which the Company owed indebtedness with an amount approximately HK$6.1 million with related interest approximately HK$0.1 million as at the date of the circular, has filed a winding-up petition against the Company which is scheduled to be heard on 18 June 2003. The Company is seeking the consent of Showa Leasing to settle the principal amount and related interest payable by 50 monthly installments starting July 2003. According to the recent discussions with Showa Leasing, the Company has a good prospect to dismiss the winding-up petition. Further announcement will be issued once the winding-up petition is dismissed or as and when appropriate.

On 25 November 2002, Sino Link (Technology) Trading and Development Company Limited (“Sinolink Technology”), issued legal proceedings against the Company in respect of a dispute regarding the services rendered and materials supplied to the Company. The High Court of the Hong Kong Special Administrative Region ruled in favour of Sinolink Technology and ordered that the unsettled claim of approximately HK$2.6 million together with related interest of HK$0.2 million and legal fee of approximately HK$0.1 million be returned by the Company. The Company and Sinolink Technology have agreed in principle to settle the outstanding claims and interest by end of 2003.

On 18 March 2003, Deloitte Touche Tohmatsu, issued legal proceedings against the Company in respect of a dispute amount of approximately HK$1,340,000 for the services rendered to the Company. The company is in discussion with Deloitte Touche Tohmatsu to settle the amount mutually agreed. Further announcement will be issued once the legal action is discharged or as and when appropriate.

Save as disclosed above, neither the Company nor any of its subsidiaries is engaged in any litigation or claim of material importance that would have a material adverse impact on the financial position of the Company taken as a whole and there is no litigation or claim of material importance which would have a material adverse impact on the financial position of the Group taken as a whole known to the Directors to be pending or threatened by or against the Company or any of its subsidiaries.

6. MATERIAL CONTRACTS

The following contracts, not being contracts entered into during the ordinary course of business carried on by the Group, have been entered into by members of the Group within the two years immediately preceding the date of this circular, and are or may be material:–

(i) Three Placing Agreements were entered by the Company and each of Mr. Zhang Wenbei, Mr. Yuan Canxin and Mr. Jin Jicheng respectively, on 27 May 2003 in respect of the placing of 50,000,000 new Shares, 30,000,000 new Shares and 20,000,000 new Shares respectively at HK$0.10 per Share.

– 86 –

STATUTORY AND GNERAL INFORMATION

APPENDIX IV

(ii) The Subscription Rights Agreement dated 6 March 2003.
(iii) The Supplemental Agreement to the Subscription Rights Agreement dated 11 April 2003 to extend the timing and date of the fulfillment of the Condition Precedent under the Subscription Rights Agreement from 5:00 p.m. on 11 April 2003 to 5:00 p.m. on 31 July 2003.
(iv) The cancellation agreement dated 25 November 2002 entered into by and between the shareholders of Glory Choice and TPTHL to waive their rights to claim against each other consequent on the lapse of the sale and purchase agreement.
(v) The sale and purchase agreement dated 22 April 2002 entered into between the shareholders of Glory Choice Investments Limited (“Glory Choice”) as vendors and TPTHL as purchaser in respect of the sale and purchase of the entire issued share capital of Glory Choice. The total consideration payable by TPTHL to the Glory Choice vendors was HK$44 million to be satisfied by 1) HK$8 million in cash and 2) the allotment and issue of 80 million new shares at an issue price of HK$0.45 each to Glory Choice vendors.
(vi) The sale and purchase agreement dated 24 December 2002 entered into by and between TPTHL as purchaser and Glory Choice as vendor for the sale and purchase of 80% equity interest in Guangzhou Polywise Technology Limited (�� ) (“Polywise”), and since the Company has not been able to fulfill the conditions of the said sale and purchase agreement on the completion date, namely the passing of ordinary resolutions by the Shareholders at the general meeting to approve the proposed acquisition of 80% equity interest in Polywise, as a result of which the said sale and purchase agreement lapse on 17 February 2003.
(vii) The Dynamic Acquisition Agreements dated 2 April 2002 as detailed in the circular of the Company dated 31 May 2002.
(viii) The subscription agreement dated 5 December 2001 entered into between the Company and Able Technology in respect of the subscription of 80,000,000 shares by Able Technology at the subscription price of HK$0.45 per share.
(ix) The supplemental agreement dated 7 June 2001 made between the Company, BAPEF Investments II Limited and Able Technology for the restructuring of the 2% convertible bonds due on 30 June 2001 issued by the Company to Baring Asia Investments II B.V., on 30 June 1998.

– 87 –

STATUTORY AND GNERAL INFORMATION

APPENDIX IV

(x) The subscription agreements dated 30 May 2001 entered into by the Company with New Industries Investment Consultants (HK) Limited and Wireless Asia Limited respectively in respect of the subscription of 100,000,000 Shares and 60,000,000 Shares respectively at HK$0.18 per share.
(xi) The subscription agreement dated 20 April 2001 entered into between the Company and Able Technology in respect of the subscription of 130,000,000 Shares at HK$0.155 per Share for a total consideration of HK$20,150,000, as amended by the supplementary agreement dated 9 May 2001 to extend the completion date of the proposed subscription from on or before 15 May 2001 to on or before 12 June 2001.

7. MATERIAL CHANGE

The Directors are not aware of any material adverse change in financial or trading position of the Group since 31 March 2002, the date to which the latest published audited financial statements of the Group have been made up.

8. GENERAL

As at the Latest Practicable Date, none of the Directors has or has had any direct or indirect material interest in any assets which have been, since 31 March 2002, the date to which the latest published audited accounts of the Group were made up, acquired or disposed of by or leased to, or are proposed to be acquired or disposed of by or leased to, any member of the Group.

None of the Directors is materially interested in any contract or arrangement subsisting at the date of this circular which is significant in relation to the business of the Group taken as a whole.

As at the Latest Practicable Date, none of the Directors has entered or is proposing to enter into a service contract with the Company or any of its subsidiaries, save for contracts expiring or determinable within one year without payment of compensation other than statutory compensation.

The registered office of the Company is situated at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

The branch share registrar of the Company in Hong Kong is Tengis Limited, G/F., Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.

– 88 –

STATUTORY AND GNERAL INFORMATION

APPENDIX IV

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the principal place of business of the Company in Hong Kong at Unit 01A, 24/F, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong on any week day (except public holidays) up to and including 20 June 2003:

(a) the memorandum and bye-laws of the Company;
(b) the Subscription Rights Agreement;
(c) the audited financial statements of the Group for each of the two financial years ended 31 March 2001 and 31 March 2002, respectively;
(d) interim results of the Group for the six months ended 30 September 2002, the text of which is set out in Appendix I to this Circular;
(e) the annual report of the Company for the year ended 31 March 2002;
(f) the material contracts referred to in paragraph 6 of this Appendix; and
(g) all circulars issued by the Company since the date of the latest published audited accounts.

10. MISCELLANEOUS

(a) The registered office of the Company is situated at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda
(b) The branch share registrar of the Company in Hong Kong is Tengis Limited, G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong
(c) The English text of this document and of the Form of Acceptance shall prevail over the Chinese text.

– 89 –

NOTICE OF SGM

Plus Holdings Limited �� *

(the “Company”)

(Incorporated in Bermuda with limited liability)

NOTICE IS HEREBY GIVEN that a special general meeting (the “SGM”) of Plus Holdings Limited (the “Company”) will be held at 10:00 a.m. on 25 June 2003 at Salisbury Room, 7th Floor, Conrad Hotel, Pacific Place, 88 Queensway, Hong Kong for the purpose of considering and, if thought fit, passing with or without amendments, the following resolutions as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT

(a) The grant of right to subscribe the Preferred Stock (as defined in the announcement of the Company dated 29 April 2003 (the “Announcement”), a copy of which has been produced to the SGM marked “A” and signed by the chairman of the meeting for the purpose of identification) pursuant to the Subscription Rights Agreement (as defined in the Announcement), a copy of which has been produced to the SGM marked “B” and signed by the chairman of the meeting for the purpose of identification, be and is hereby approved;
(b) The Subscription Rights Agreement be and is hereby approved; and
(c) The Directors be and are hereby authorized for and on behalf of the Company, amongst other matters, to sign, execute, perfect, deliver or to authorize signing, executing, perfecting and delivering all such documents and deeds, and to do or authorize doing all such acts, matters and things as they may in their discretion consider necessary, expedient or desirable to give effect to and implement the grant of right to subscribe the Preferred Stock pursuant to the Subscription Rights Agreement, and to waive compliance from or make and agree such variations of a non-material nature to any of the terms of the Subscription Rights Agreement as they may in their discretion consider to be desirable and in the interest of the Company.”

By Order of the Board Zou Yishang

Director

Hong Kong, 31 May 2003

* For identification purpose only

– 90 –

NOTICE OF SGM

Principal place of business:

Unit 01A, 24/F Bank of America Tower 12 Harcourt Road, Central Hong Kong

Notes:

A shareholder of the Company (the “Shareholder”) who is the holder of two or more shares (the “Shares”) in the Company may appoint more than one proxy to represent him and vote on his behalf. A proxy need not be a Shareholder. If more than one proxy is so appointed, the appointment shall specify the number and class of Shares in respect of which each such proxy is so appointed.

The instrument appointing proxy and the power of attorney or other authority, if any, under which it is signed, or a certified copy of such power or authority must be lodged with the share registrar of the Company in Hong Kong, Tengis Limited, at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time fixed for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude the Shareholder from attending and voting in person at the SGM or any adjournment thereof should the Shareholder so wish.

– 91 –

AI assistant

Baoye Group Company Limited — Proxy Solicitation & Information Statement 2003

50544_rns_2003-06-05_4acdc030-e8e9-4a16-8d1a-48ce0b8af1c3.pdf

Plus Holdings Limited �������� *

MAJOR TRANSACTION INVESTMENT OF BAPEF INVESTMENTS II LIMITED INTO THE SUBSIDIARY OF THE COMPANY

Financial Adviser to Plus Holdings Limited

TANRICH CAPITAL LIMITED

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

LETTER FROM THE BOARD

Plus Holdings Limited �������� *

MAJOR TRANSACTION

INVESTMENT OF BAPEF INVESTMENTS II LIMITED INTO THE SUBSIDIARY OF THE COMPANY

INTRODUCTION

LETTER FROM THE BOARD

LETTER FROM THE BOARD

DETAILS OF THE SUBSCRIPTION RIGHTS AGREEMENT

Parties

Conditions Precedent

LETTER FROM THE BOARD

Subscription Rights

Mandatory Conversion of the Loan

LETTER FROM THE BOARD

Completion

BUSINESS OF THE GROUP AND TPTHL

REASONS FOR AND BENEFITS OF ENTERING INTO THE SUBSCRIPTION RIGHTS AGREEMENT

China Bancassurance Business Opportunities

LETTER FROM THE BOARD

Strategic Partner

Financial Improvement

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Corporate structure of TPTHL before BARING’s exercise of the Subscription Right

Corporate structure of TPTHL upon full exercise of the Subscription Right by BARING

LETTER FROM THE BOARD

SGM

RECOMMENDATION

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

A. SHARE CAPITAL OF THE COMPANY

(a) Authorised and issued share capital

(b) Listing

B. FINANCIAL INFORMATION

(a) Summary of audited results for the three years ended 31 March 2002

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

(b) Summary of audited financial results for the two years ended 31 March 2002

Consolidated Income Statement

Consolidated Statement of Recognised Gains and Losses

Consolidated Balance Sheet

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Consolidated Cash Flow Statement

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Balance Sheet

Notes to Financial Statements

1. General

2. Adoption of Statements of Standard Accounting Practice

3. Significant accounting policies

Basis of consolidation

Goodwill

Negative goodwill

Property, plant and equipment

Impairment

Development costs

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Investments in subsidiaries

Interests in associates

Other investments

Inventories

Operating lease

Revenue recognition

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Borrowing costs

Taxation

Foreign currencies

Retirement benefit schemes

APPENDIX I

4. Turnover

5. Business and geographical segments

Baoye Group Company Limited Proxy Solicitation & Information Statement 2003

Plus Holdings Limited �� *

Plus Holdings Limited �� *