Central Development Holdings Limited - Proxy Solicitation & Information Statement 2002

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, a bank manager, solicitor, professional accountant or other professional adviser.

If you have sold all your shares in Seapower Resources International Limited (Provisional Liquidators Appointed), you should at once hand this circular and the accompanying form of proxy to the purchaser or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser.

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

LEADER GLORY HOLDINGS LIMITED

SEAPOWER RESOURCES INTERNATIONAL LIMITED 海暉國際實業有限公司

(Incorporated in the British Virgin Islands with limited liability)

AND

(Provisional Liquidators Appointed)

(Incorporated in the Cayman Islands with limited liability) MR. PANG MAN KIN, NIXON

RESTRUCTURING OF SEAPOWER RESOURCES INTERNATIONAL LIMITED (PROVISIONAL LIQUIDATORS APPOINTED) INVOLVING, INTER ALIA, CAPITAL REORGANISATION, DEBT RESTRUCTURING INVOLVING CREDITORS’ SCHEMES OF ARRANGEMENT IN ACCORDANCE WITH SECTION 86 OF THE CAYMAN COMPANIES LAW AND SECTION 166 OF THE COMPANIES ORDINANCE, SUBSCRIPTION OF NEW SHARES AND WARRANTS, WHITEWASH WAIVER, OTHER PROPOSALS REGARDING ADOPTION OF NEW SHARE OPTION SCHEME AND GENERAL MANDATE TO ISSUE NEW SHARES

Financial adviser to Seapower Resources International Limited (Provisional Liquidators Appointed)

==> picture [168 x 47] intentionally omitted <==

Joint financial advisers to Leader Glory Holdings Limited and Mr. Pang Man Kin, Nixon

SOMERLEY LIMITED

Independent financial adviser to the Independent Shareholders

AMS Corporate Finance Limited

A letter from AMS Corporate Finance Limited, the independent financial adviser to the Independent Shareholders, containing its recommendations to the Independent Shareholders, is set out on pages 26 to 37 of this circular.

A notice convening the EGM to be held at 10:00 a.m. on 9th December, 2002 at Plaza V, Lower Lobby, Novotel Century Hong Kong, 238 Jaffe Road, Wanchai, Hong Kong is set out on pages 115 to 119 of this circular. A form of proxy for use at the EGM is enclosed. Regardless of whether you intend to attend the EGM, you must complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Under Article 95 of the New Memorandum and New Articles of Association of the Company, a vote given in accordance with the terms of the proxy shall be valid notwithstanding the revocation of the proxy or power of attorney or other authority under which the proxy was executed provided that no intimation in writing of such revocation shall have been received by the Company at 7th Floor, Allied Kajima Building, 138 Gloucester Road, Wah Chai, Hong Kong not less than two hours before the holding of the EGM or any adjourned EGM.

14th November, 2002

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Provisional Liquidators
Introduction and Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
The Restructuring Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Conditions Precedent to the Restructuring Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Effects of the Restructuring Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Use of Proceeds from the Subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Directors and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Reasons for the Restructuring of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Intention of the Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Termination of the Existing Share Option Scheme and
the Adoption of New Share Option Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
General Mandate to Issue New Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Publication and Despatch of Audited Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Trading Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Creditors’ Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Letter from the Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Appendix I — Financial information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	38
Appendix II — Summary of the Principal Terms of. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	95
the New Share Option Scheme
Appendix III — Valuation reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	103
Appendix IV — General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	109
Notice of Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	115

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DEFINITIONS

In this document, the following expressions have the following meanings:

“Allied National”	Allied National Limited, a wholly owned subsidiary of the Company
	incorporated in the British Virgin Islands with limited liability, and its
	subsidiaries
“AMS”	AMS Corporate Finance Limited, an investment adviser registered
	pursuant to the Securities Ordinance (Chapter 333 of the Laws of Hong
	Kong) and the independent financial adviser giving advice to the
	Independent Shareholders in relation to the Restructuring Proposal and
	the Whitewash Waiver
“Asian Capital”	Asian Capital (Corporate Finance) Limited, an investment adviser and a
	securities dealer registered pursuant to the Securities Ordinance (Chapter
	333 of the Laws of Hong Kong) and the financial adviser to the Company
“Board”	the board of Directors of the Company
“Call Option”	an option to be granted by the Scheme Administrators and/or the Creditors
	to the Investors to purchase part or all of 360,612,679 New Shares at
	HK$0.06 each from any of the Creditors and/or the Scheme Administrators
	within 6 months of the date of Completion
“Capital Reorganization”	the proposed (a) consolidation of every ten issued Shares of HK$0.05
	each into one Share of HK$0.5; (b) reduction of the nominal value of the
	consolidated Shares from HK$0.5 each to New Shares of HK$0.01 each;
	and (c) subdivision of each unissued Share into five New Shares of
	HK$0.01 each
“Cayman Companies Law”	the Companies Law (2002 Revision) of the Cayman Islands as amended
	from time to time
“Cayman Islands Court”	the Grand Court of the Cayman Islands
“CCASS”	the Central Clearing and Settlement System established and operated by
	HKSCC
“CCIF”	Charles Chan, Ip & Fung CPA Ltd., Certified Public Accountants, Hong
	Kong
“Code”	the Hong Kong Code on Takeovers and Mergers
“Companies Ordinance”	the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)
“Company”	Seapower Resources International Limited (Provisional Liquidators
	Appointed), a company incorporated in the Cayman Islands with limited
	liability and the securities of which are listed on the Stock Exchange
“Completion”	the successful implementation of the Restructuring Proposal
“Creditor(s)”	a person or an organisation to whom the Company owes a claim which
	arises before the Schemes become effective
“Creditors’ Indebtedness”	the indebtedness owing to the Creditors by the Company as at the Latest
	Practicable Date and estimated at approximately HK$1,303.25 million
“Debt Restructuring”	the proposed restructuring of the indebtedness and liabilities of the
	Company pursuant to the Restructuring Proposal
“Directors”	directors of the Company

— 1 —

DEFINITIONS

“EGM”	the extraordinary general meeting of the Company to be held at 10:00
	a.m. on Monday, 9th December, 2002, at Plaza V, Lower Lobby, Novotel
	Century Hong Kong, 238 Jaffe Road, Wanchai, Hong Kong, the notice of
	which is set out on pages 115 to 119 of this circular
“Eligible Participant”	means any employee (whether full-time or part-time) or executive, non-
	executive or independent non-executive directors, or consultants or
	advisers who provide advisory services to the Company or any of its
	subsidiaries in connection with their businesses from time to time
“Executive”	the Executive Director of the Corporate Finance Division of the SFC or
	any delegate of the Executive Director
“Existing Share Option	the existing share option scheme of the Company adopted
Scheme”	on 30th September, 1999 pursuant to which the Company has no
	outstanding share options as at the Latest Practicable Date
“Group”	the Company and its subsidiaries
“Guarantors”	the Operators and the Company
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“HKSCC”	Hong Kong Securities Clearing Company Limited
“HK Court”	the Court of First Instance of the High Court of Hong Kong, SAR
“ICEA”	ICEA Capital Limited, a registered dealer under the Securities Ordinance
	(Chapter 333 of the Laws of Hong Kong)
“Independent Shareholders”	Shareholders who are not involved or have no interest in the Restructuring
	Agreement, the Subscription Agreement and the Schemes other than their
	interest as a Shareholder
“Investors”	Leader Glory and Mr. Pang Man Kin, Nixon who currently holds
	approximately 70% of the equity interests in Leader Glory
“Investors’ Option”	an option granted by the Company to the Investors to subscribe for not
	more than 500,000,000 additional New Shares (with one Warrant for
	every five New Shares) with an aggregate value of not more than
	HK$5,000,000 upon Completion in satisfaction of the Investors’ costs
	and expenses incurred in relation to the restructuring of the Company
“iPower”	iPower Warehousing Management System Limited, a company
	incorporated in the British Virgin Islands with limited liability and wholly
	owned by the Company
“Latest Practicable Date”	13th November, 2002, being the latest practicable date prior to the printing
	of this circular for ascertaining certain information referred to this circular
“Leader Glory”	Leader Glory Holdings Limited, a company incorporated in the British
	Virgin Islands with limited liability and is beneficially owned as to 70%
	by Mr. Pang Man Kin, Nixon and 30% by Mr. Wong Chak Wai and
	proposed to be beneficially owned as to 42% by Mr. Pang Man Kin,
	Nixon, 30% by Mr. Wong Chak Wai, 20% by Mr. Michael Szeto Chak
	Wah and the remaining 8% by the Investors’ advisers who provide
	consultancy services in connection with the Restructuring Proposal. All
	the existing and proposed shareholders are independent of and not
	connected with the directors, chief executive or substantial shareholder
	of the Company and its subsidiaries and their respective associates (as
	defined in the Listing Rules)

— 2 —

DEFINITIONS

“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange
“New Share(s)”	ordinary shares of HK$0.01 each in the capital of the Company upon the
	Capital Reorganisation becoming effective
“New Share Option Scheme”	a new share option scheme of the Company proposed to be adopted by
	the Company at the EGM pursuant to which options may be granted by
	the Company to Eligible Participants from time to time to subscribe for
	New Shares representing up to 30% in aggregate of the entire issued
	share capital of the Company immediately after Completion or such
	other number as may be permitted by the Stock Exchange from time to
	time in accordance with the Listing Rules and subject to such terms and
	conditions to the reasonable satisfaction of the Investors and in compliance
	with chapter 17 of the Listing Rules
“Operators”	Yiu Fung Cold Storage & Warehousing Limited (In Compulsory
	Liquidation), Yiu Fai Warehousing Limited (In Compulsory Liquidation)
	and Seapower Resources Cold Storage & Warehousing Limited (In
	Compulsory Liquidation) which are wholly-owned by the Company and
	operated cold storage & warehousing business from three properties over
	which receivers have been appointed
“Pentagon Profits”	Pentagon Profits Limited, the Company’s wholly-owned subsidiary
	incorporated in British Virgin Islands with an investment in 24 townhouses
	in Beijing
“Petitioner”	Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., Hong Kong
	Branch, on its own behalf and as an agent for Wing Hang Bank Limited,
	Wing Lung Bank Limited and Standard Chartered Bank in connection
	with a syndicated loan agreement dated 3rd December, 1998
“Put Option”	an option to be granted by the Investors to the Creditors and/or Scheme
	Administrators to sell part or all of 360,612,679 New Shares issued and
	allotted pursuant to the Restructuring Agreement at HK$0.03 each to the
	Investors within 6 months from the date of Completion
“PRC”	the People’s Republic of China which, for the purpose of this circular,
	excludes Hong Kong, the Macau Special Administrative Region of the
	PRC and Taiwan
“Provisional Liquidators”	collectively Messrs. Cosimo Borrelli and Fan Wai Kuen, Joseph of RSM
	Nelson Wheeler Corporate Advisory Services Limited, the joint and
	several provisional liquidators of the Company
“Receivables”	the Company’s outstanding receivables of approximately HK$200 million
	as at 31st December, 2001
“Relevant Period”	the period commencing on 19th February, 2002 (the date of
	commencement of the six month period prior to the date of the joint
	announcement dated 19th August, 2002 in relation to the Restructuring
	Proposal) and ending on the Latest Practicable Date
“Restructuring Agreement”	the conditional agreement dated 22nd June, 2002 as supplemented by an
	agreement dated 3rd October, 2002 entered into, amongst others, the
	Company, the Provisional Liquidators, the Investors and RSM Nelson
	Wheeler Corporate Advisory Services Limited (as an escrow agent who
	will hold and release the Subscription proceeds to the order of the
	Company in accordance with the terms of the Restructuring Agreement)

— 3 —

DEFINITIONS

“Restructuring Proposal”	the proposed restructuring of the Company to be effected by the Capital
	Reorganisation, the Debt Restructuring involving the Schemes, the Put
	Option and the Call Option, and the Subscription contemplated under
	the Restructuring Agreement and the Subscription Agreement
“Scheme Administrators”	such persons appointed pursuant to the terms of the Schemes
“Scheme(s)”	the proposed schemes of arrangement in relation to the Company under
	section 86 of the Cayman Companies Law and section 166 of the
	Companies Ordinance made between the Company and the Creditors, to
	be approved or imposed by the Courts and the Creditors with or without
	modification
“SDI”	Seapower Development (Indonesia) Limited, the Company’s wholly
	owned subsidiary incorporated in the British Virgin Islands, its sole
	investment being various plots of land in Indonesia
“SDI Ordinance”	Securities (Disclosure of Interests) Ordinance (Chapter 396 of the Laws
	of Hong Kong)
“SFC”	Securities and Futures Commission in Hong Kong
“Share(s)”	ordinary share(s) of HK$0.05 each in the existing capital of the Company
“Shareholders”	the shareholders of the Company
“Somerley”	Somerley Limited, an investment adviser and exempted dealer registered
	under the Securities Ordinance (Chapter 333 of Laws of Hong Kong)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscription”	the Investors’ proposed subscription of 8,500,000,000 New Shares at par
	(with one Warrant for every five New Shares) together with the Investors’
	Option (that is, an option to subscribe for not more than 500,000,000
	additional New Shares (with one Warrant for every five New Shares) at
	HK$0.01 each with an aggregate value of not more than HK$5,000,000
	upon Completion in satisfaction of the Investors’ costs and expenses
	incurred in relation to the restructuring of the Company), representing
	not less than 94.28% of the issued share capital of the Company upon
	Completion pursuant to the Subscription Agreement if the Investors’
	Option is not exercised
“Subscription Agreement”	the conditional agreement dated 13th November, 2002, among others,
	the Company, the Provisional Liquidators and the Investors in connection
	with the Subscription
“Warrant(s)”	the 3-year unlisted and transferrable warrant(s) of the Company to be
	issued to the Investors (with one Warrant for every five New Shares)
	upon Completion pursuant to the Subscription Agreement with each
	warrant entitling the holder thereof to subscribe for one New Share at
	HK$0.01 each
“Whitewash Waiver”	a waiver by the Executive pursuant to Note 1 of the Notes on dispensations
	from Rule 26 of the Code from the obligation of the Investors and parties
	acting in concert with them to make a general offer for all the Shares of
	the Company not already owned or agreed to be acquired by them upon
	Completion or the exercise of the Warrants or Put Option or Call Option
“HK$ and cents”	Hong Kong dollars and cents, the lawful currency of Hong Kong

— 4 —

EXPECTED TIMETABLE

2002

Creditors’ meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m. on Friday, 22nd November Announcement of results of the Creditors’ meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 25th November

The following events are conditional on, amongst other things, the availability of the HK Court and the Cayman Islands Court, the results of the EGM, the submission of a concrete plan by the Investors for restoring the 25% public float to the Stock Exchange before Completion and the restoration of sufficient public float of not less than 10% of the enlarged issued Share Capital of the Company after Completion. Accordingly, there is no guarantee that trading in the shares of the Company can be resumed in accordance with the timetable set out below. Further announcements will be made to update the Shareholders and potential investors as and when appropriate.

Cayman Islands Court hearing of petition to sanction the Scheme . . . . . . . . . . . . . . . . . Friday, 29th November HK Court hearing of petition to sanction the Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 6th December Latest time for lodging forms of proxy for the EGM . . . . . . . . . . . . . . 10:00 a.m. on Saturday, 7th December EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m. on Monday, 9th December Announcement of results of the EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 10th December Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 17th December Announcement of the Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 18th December Existing counter for trading in the Shares in board lots of 5,000 Shares closes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. Wednesday, 18th December Temporary counter for trading in New Shares in board lots of 500 New Shares in the form of existing share certificates for existing Shares opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. Wednesday, 18th December First day of free exchange of existing share certificates for new share certificates for New Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 18th December First day of operation of odd lot trading facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 18th December 2003 Existing counter for trading in New Shares in board lots of 100,000 New Shares in the form of new shares certificates for New Shares re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. Monday, 6th January Parallel trading in New Shares (in the form of new share certificates and existing share certificates) starts . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. Monday, 6th January Temporary counter for trading in New Shares in board lots of 500 New Shares (in the form of existing share certificates) closes . . . . . . . . . . 4:00 p.m. Monday, 27th January Parallel trading in New Shares (in the form of new share certificates and existing share certificates) ends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. Monday, 27th January Last day of operation of odd lot trading facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 27th January Free exchange of existing share certificates for new share certificates for New Shares ends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Tuesday, 4th February

— 5 —

LETTER FROM THE PROVISIONAL LIQUIDATORS

14th November, 2002

To the Shareholders,

Dear Sirs,

RESTRUCTURING OF SEAPOWER RESOURCES INTERNATIONAL LIMITED (PROVISIONAL LIQUIDATORS APPOINTED) INVOLVING, INTER ALIA, CAPITAL REORGANISATION, DEBT RESTRUCTURING INVOLVING CREDITORS’ SCHEMES OF ARRANGEMENT IN ACCORDANCE WITH SECTION 86 OF THE CAYMAN COMPANIES LAW AND SECTION 166 OF THE COMPANIES ORDINANCE, SUBSCRIPTION OF NEW SHARES AND WARRANTS, WHITEWASH WAIVER, OTHER PROPOSALS REGARDING ADOPTION OF NEW SHARE OPTION SCHEME AND GENERAL MANDATE TO ISSUE NEW SHARES

1. INTRODUCTION AND BACKGROUND

The Provisional Liquidators and the Investors jointly announced on 19th August, 2002 that the Restructuring Agreement regarding the Restructuring Proposal for the Company was signed on 22nd June, 2002. The Restructuring Agreement was amended by a supplemental agreement dated 3rd October, 2002. The Subscription Agreement regarding the Subscription by the Investors was entered into on 13th November, 2002.

The Company was incorporated in the Cayman Islands in 1989. It was originally engaged in the cold storage warehousing business and from 1992 to 1995 diversified into financial services, food related businesses, logistic management services and property holding. This rapid expansion into other noncore businesses the resultant utilised substantial financial and human resources. As a result of this and the Asian financial crisis, recession and weakened consumer sentiment, the Group’s turnover and the financial performance of the Company began to deteriorate in 1998. The Group’s turnover decreased to about HK$553.76 million for the financial year ended 31st March, 1999 from HK$956.29 million in the previous financial year. The Group’s net loss increased to HK$977.89 million for the year ended 31st March, 1999 from HK$78.4 million in the previous financial year.

On 11th December, 2001, winding up petitions were served on the Guarantors and South East Asia Overseas Finance Limited (In Compulsory Liquidation) by the Petitioner. This was disclosed in the Company’s announcement dated 14th December, 2001. Pursuant to a loan agreement dated 3rd December, 1998, the Petitioner agreed to make available to South East Asia Overseas Finance Limited (In Compulsory Liquidation) a loan facility of up to HK$480 million, and the Guarantors guaranteed the loan facility. South East Asia Overseas Finance Limited used a total of HK$453 million of the loan facility but failed to repay to the Petitioner in four instalments between December 1999 and October 2000 in accordance with the repayment schedule. As at 5th December, 2001, the outstanding borrowings including interest, approximated HK$491 million. The Petitioner filed the winding-up petition to recover the amount due and outstanding under the loan facility against South East Asia Overseas Finance Limited (In Compulsory Liquidation) as borrower and the Guarantors. On 31st December, 2001, the HK Court ordered the Provisional Liquidators be appointed to the Company, the other Guarantors and South East Asia Overseas Finance Limited (In Compulsory Liquidation).

Prior to the appointment of the Provisional Liquidators, receivers were appointed to the three properties in Hong Kong from which the Group operated its cold storage warehousing business. The three properties were wholly owned by three subsidiaries of the Company. Two of the properties were mortgaged to the Petitioner to secure the loan facility. Due to the non-repayment of the loan of the above HK$453 million, receivers were appointed to the mortgaged properties by notices dated 11th June, 2001. The remaining property was mortgaged to another banks to secure bank loans for an aggregate amount of HK$387.14 million, and as a result of defaulting on their bank loans, a receiver was also appointed over the remaining property by a notice dated 9th August, 2001. The receivers

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LETTER FROM THE PROVISIONAL LIQUIDATORS

disposed of the three properties for a total cash consideration of HK$560 million between 28th January, 2002 and 11th March, 2002 and applied the sale proceeds to repay the indebtedness due to banks, including the Petitioner, which held a first mortgage over the three properties. As at the Latest Practicable Date, about HK$334.3 million of the abovementioned bank loans remains outstanding. As a result of these disposals, the Provisional Liquidators sold the assets of the Operators to the purchasers of the three properties for a total cash consideration of approximately HK$36.04 million between 8th February, 2002 and 4th March, 2002 and the Group discontinuing its cold storage warehousing operation in Hong Kong. Details of these disposals were announced by the Company between 1st February, 2002 and 8th March, 2002. The HK Court ordered the winding up of South East Asia Overseas Finance Limited (In Compulsory Liquidation) on 20th February, 2002, and the Operators on 27th March, 2002.

The Group’s current principal activities are the provision of logistics management services and the operation of warehousing and cold storage businesses. Following their appointment, the Provisional Liquidators focused on carrying on, stabilising and enhancing the operations of the Group, including by facilitating a restructuring of the Company. Following their appointment, the Provisional Liquidators, with the assistance of Asian Capital, invited interested investors to submit restructuring proposals to restructure the Company. After taking into consideration the current financial position of the Group and other alternative restructuring proposals received by the Company, the Provisional Liquidators concluded that the present Restructuring Proposal represented the best available option for the Company, its Creditors and Shareholders. On 27th May, 2002, the Provisional Liquidators, on behalf of the Company, granted an exclusive period for Leader Glory to finalise the terms of the Restructuring Proposal. The Provisional Liquidators and the Investors entered into the Restructuring Agreement on 22nd June, 2002. On 11th November, 2002, the HK Court ordered the hearing of the winding-up petition of the Company be adjourned to 6th January, 2003 to allow more time for the Company to proceed with the Restructuring Proposal and to implement the Schemes. A meeting for the Creditors to consider and approve the Schemes will be held on 22nd November, 2002 for the Creditors to approve the Schemes.

The Restructuring Proposal, if successfully implemented, will, amongst other things, result in:

(i) an adjustment of the nominal value of Shares in the Company through the Capital Reorganisation;
(ii) the Investors’ injection of new capital of HK$85 million into the Company by subscribing for 8,500,000,000 New Shares (with one Warrant for every five New Shares) which represents approximately 94.28% of the enlarged issued share capital of the Company;
(iii) the Creditors’ Indebtedness due by the Company of approximately HK$1,303.25 million being released and discharged in its entirety (as detailed in the subsection headed “Debt Restructuring” under the section headed “The Restructuring Proposal”);
(iv) the Group’s financial position being improved from unaudited net liabilities of approximately HK$438.71 million prior to the completion of the Restructuring Proposal to unaudited net assets of approximately HK$73.38 million immediately upon Completion; and
(v) the resumption of trading in the New Shares of the Company once a sufficient public float is restored after the implementation of the Restructuring Proposal.

The purpose of this circular is to provide you with further information in relation to the Restructuring Proposal, to include a letter from AMS to set out its advice to the Independent Shareholders in respect of the Restructuring Proposal and the Whitewash Waiver and to give you notice of the EGM at which resolutions will be proposed to seek your approval of, amongst other things, (i) the Capital Reorganisation; (ii) the Restructuring Agreement; (iii) the Subscription Agreement; (iv) the Whitewash Waiver; (v) the appointment of new executive Directors and new non-executive Directors as may be nominated by the Investors conditional on Completion; (vi) the removal of all current Directors; (vii) the granting of general mandate to future Directors to exercise the powers of the Company to issue, allot or deal with additional New Shares not exceeding 20% of the enlarged issued share capital of the Company immediately following Completion; and (viii) the termination of the Existing Shares Option Scheme and the adoption of the New Shares Option Scheme. The notice of the EGM is set out on pages 115 to 119 of this circular.

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LETTER FROM THE PROVISIONAL LIQUIDATORS

2. THE RESTRUCTURING PROPOSAL

The Restructuring Proposal contemplated under the Restructuring Agreement and the Subscription Agreement involves the Capital Reorganisation, the Debt Restructuring including the Schemes, the Put Option and the Call Option, and the Subscription.

(A) Capital Reorganisation

The existing authorised share capital of the Company is HK$1,000,000,000 divided into 20,000,000,000 Shares with a par value of HK$0.05 each, 1,547,042,829 Shares with a par value of HK$0.05 each are issued and credited as fully paid up. Under the Restructuring Proposal, the Company’s share capital will be reorganised in the following manner:

(a) every 10 issued Shares of HK$0.05 each will be consolidated into one Share of HK$0.5;
(b) the nominal value of each consolidated issued share will be reduced from HK$0.5 to HK$0.01. Accordingly, the Company’s issued share capital of HK$77,352,141.45 will be reduced by HK$75,805,098.63 to HK$1,547,042.82. A credit of HK$75,805,098.63 arising from such capital reduction will be applied to eliminate HK$75,805,098.63 of the Company’s accumulated losses which was approximately HK$347,815,139 as at 30th September, 2001; and
(c) each of the 18,452,957,171 unissued Shares will be subdivided into five New Shares such that the authorised unissued share capital of the Company will comprise 92,264,785,855 New Shares of HK$0.01 each.

After the completion of the Capital Reorganisation, the authorised share capital of the Company will be HK$924,194,901.37 divided into 92,419,490,137 New Shares comprising 92,264,785,855 unissued New Shares and 154,704,282 issued New Shares.

The Capital Reorganisation will reduce part of the Company’s accumulated loss of approximately HK$347,815,139 as at 30th September, 2001 to HK$272,010,040.37 and therefore enable the Company to declare dividends to the Shareholders once all the accumulated losses have been eliminated.

The Capital Reorganisation is subject to:

(a) the Shareholders’ approval at the EGM;
(b) the publication of the relevant notice in the Cayman Islands and all steps being taken as required by the Cayman Companies Law for the Capital Reorganisation to become effective; and
(c) the Stock Exchange granting the listing of, and permission to deal in, the New Shares in issue upon the Capital Reorganisation becoming effective.

Upon the Capital Reorganisation becoming effective, the trading in the Shares in board lot of 5,000 Shares will be changed to the trading in the New Shares in board lot of 100,000 New Shares.

(B) Debt Restructuring

The total indebtedness due by the Company to the Creditors is estimated at approximately HK$1,303.25 million as at the Latest Practicable Date. The estimate of the Creditors’ Indebtednesses is for indicative purposes only and the Creditors’ claims will be subject to formal adjudication by the Scheme Administrators once the Schemes have been implemented. The Debt Restructuring consists of the Schemes, the Put Option and the Call Option.

(a) the Schemes
(i) Key Terms
- In consideration of the Creditors’ agreement to discharge and waive all their claims against the Company, the Scheme Administrators will receive the following from the Company for distribution to the Creditors pursuant to the Schemes:
HK$70 million in cash;
360,612,679 New Shares of HK$0.01 each, representing approximately 4% of the issued share capital of the Company upon Completion;

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LETTER FROM THE PROVISIONAL LIQUIDATORS

the entire interests in SDI with a published unaudited book value of approximately HK$59.6 million pursuant to the Company’s last interim report for the six months ended 30th September 2001; and
any cash (after deducting the costs and expenses incurred by the Provisional Liquidators during the restructuring period) held by the Company as at the date of Completion (the cash amount was about HK$1.5 million as at the Latest Practicable Date).

All the 360,612,679 New Shares to be issued and allotted to the Creditors pursuant to the Schemes will have the same voting rights, including the receipt of notice of, attending, speaking and voting at all general meetings of the Company. Unless the Creditors, at Completion, authorize the Scheme Administrators to sell their entitlements to New Shares on their behalf, the Scheme Administrators will distribute the New Shares to the Creditors following Completion under the terms of the Schemes. Therefore, after this distribution, the Scheme Administrators will not hold any New Shares or have any voting rights attached to such New Shares.

(ii) Other Terms

In the event that the Company or the Group, following Completion, makes any recoveries or realisations in connection with the Receivables, Pentagon Profits, Allied National or iPower (provided that the sale of Allied National or iPower is completed within 12 months of the date of Completion), after deduction of all costs and expenses incurred in connection with any recovery or realisation or attempted recovery or realisation, the Creditors will be entitled to 50% of the net proceeds from such recovery and/or realisation and the remaining 50% will be retained by the Company. The Company will keep all the net proceeds from these realisations and will distribute to the Scheme Administrators for distribution to the Creditors whenever the aggregate sum of 50% of the net proceeds exceeds HK$200,000. The Investors have undertaken and will procure the proposed Directors of the Company to undertake that the Company will not dispose of any of its assets if such disposal will result in the Company breaching paragraph 38 of its listing agreement with the Stock Exchange, which requires the Company to maintain sufficient operations or tangible assets of sufficient value to warrant the continued listing of the shares of the Company on the Stock Exchange. The Investors have confirmed that they have no intention of disposing of Allied National and iPower but the Restructuring Agreement allows for the sale of Allied National and iPower to protect the interests of the Creditors in the event that there is any sale of the Company’s interests in Allied National or iPower. Should such a sale occur within 12 months of the date of Completion, the Creditors will be entitled to 50% of the net proceeds which result from any such sale.

If the Company has not taken adequate steps to recover any amounts payable to the Group in connection with the Receivables and Pentagon Profits within 12 months of the date of Completion, the Scheme Administrators may, pursuant to the Schemes, within 3 months of the first anniversary of the date of Completion demand the Company transfer any of the Receivables and its entire interest in Pentagon Profits to the Scheme Administrators for the benefit of the Creditors for a total consideration of HK$1.00. Under such circumstances, the Company will be entitled to 30% of the proceeds (after deducting all costs and expenses incurred in connection with any recovery or realisation or attempted recovery or realisation) from any subsequent recovery of the Receivables and realisation from Pentagon Profits by the Scheme Administrators. The Scheme Administrators will keep all the net proceeds and will distribute to the Company whenever the aggregate sum of 30% of the net proceeds exceeds HK$200,000. Any recovery from Pentagon Profits will include any recovery available from the sole investment made by Pentagon Profits in 24 townhouses in Beijing (the value of which was approximately HK$121.4 million as at 31st August, 2002 according to the valuation report in Appendix III of this circular). The Receivables of approximately HK$200 million that remain outstanding as at 31st December,

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LETTER FROM THE PROVISIONAL LIQUIDATORS

2001 are mainly due from the customers of the Company’s former financial services division which was sold in June 1999.

As the Investors intend to focus the Company’s resources on building its principal businesses of providing logistics management services and operating warehousing and cold storage businesses, they will transfer SDI to the Scheme Administrators who will be responsible for the sale of SDI’s assets for the benefit of the Creditors. SDI is a wholly owned subsidiary of the Company and its sole investment is various plots of land in Indonesia. This transfer to the Scheme Administrators is considered to be a cost-effective and efficient way of disposing of these non core assets. As the assets of SDI are not related to or required for the operation of the Company’s principal businesses of logistics management services and cold storage warehousing, this transfer has minimal impact on the Company’s overall business operations.

Allied National, the Company’s wholly owned subsidiary, operates cold storage and warehousing business at two cold storage warehouses in Australia. One of the cold storage warehouses is owned by Allied National’s wholly-owned subsidiary, the value of which was approximately HK$13 million according to the valuation report as at 23rd October, 2002 set out in Appendix III of this circular. The audited value of Allied National consolidated assets as at 31st March, 2001 was about HK$9.9 million. iPower owns the rights to the software programs which provide warehousing management system and services to operators of local and overseas warehouses. It receives license fees from granting non-exclusive rights to the operators to use the software programs. The audited value of iPower assets as at 31st March, 2001 was approximately HK$1 million. The Investors intend to continue to operate the cold storage warehousing business in Australia held by Allied National and the business of iPower.

(b) Put Option

The Investors will grant the Put Option to the Creditors and/or the Scheme Administrators to sell part or all of 360,612,679 New Shares issued and allotted pursuant to the Restructuring Agreement at HK$0.03 per New Share to the Investors within 6 months of the date of Completion. Should the exercise of the Put Option by the Scheme Administrators and/or the Creditors result in the public float falling below 25% of the issued share capital as required under the Listing Rules, the Investors have undertaken and will procure the proposed Directors to undertake that within the first two months following such exercise of the Put Option appropriate steps will be taken to ensure that adequate number of New Shares so put to the Investors will be sold, placed or otherwise disposed of to independent third parties to restore the public float of not less than 25% of the enlarged issued share capital of the Company.

(c) Call Option

The Scheme Administrators and/or the Creditors will grant the Call Option to the Investors to purchase part or all of 360,612,679 New Shares issued and allotted pursuant to the Restructuring Agreement at HK$0.06 each from any of the Creditors and/or the Scheme Administrators within 6 months of the date of Completion. The Investors have undertaken and will procure the proposed Directors to undertake to the Stock Exchange that they will not exercise the Call Option if such action would result in the public float falling below 25% of the issued share capital of the Company as required under the Listing Rules.

(C) Subscription

The Investors will subscribe for 8,500,000,000 New Shares at HK$0.01 (with one Warrant for every five New Shares) for an aggregate amount of HK$85 million in cash together with the Investors’ Option. If the Investors do not exercise the Investors’ Option and the Warrants, the

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LETTER FROM THE PROVISIONAL LIQUIDATORS

number of New Shares to be subscribed by the Investors will be approximately 94.28% of the enlarged issued share capital of the Company immediately upon Completion. If the Investors exercise the Investors’ Option and all Warrants at Completion, the shareholding interest of the Investors in the Company will increase from approximately 94.28% to approximately 95.45% immediately upon Completion.

The subscription price of HK$0.01 each represents a discount of approximately 62.96% to the closing price of the Shares of HK$0.027 each on 28th December, 2001, the last trading day prior to the suspension of the trading in the Shares, and a discount of approximately 58.84% to the average closing price of HK$0.0243 per Share for the period of 10 trading days ended 28th December, 2001. Based on the proposed consolidation of every ten issued Shares into one New Share, the subscription price of HK$0.01 each represents a discount of approximately 96.3% to the theoretical closing price of the consolidated Shares of HK$0.27 each on 28th December, 2001 and a discount of approximately 95.88% to the theoretical closing price of the consolidated Shares of HK$0.243 each for the period of 10 trading days ended 28th December, 2001.

All New Shares to be issued pursuant to the Subscription and upon exercise of the Warrants will rank pari passu in all respects, including all rights as regards dividends, voting and return of capital, with the New Shares in issue upon the Capital Reorganisation becoming effective.

3. CONDITIONS PRECEDENT TO THE RESTRUCTURING PROPOSAL

Completion will be subject to, amongst other things, the following:

(i) the Subscription Agreement being executed;
(ii) all necessary resolutions being passed by the Shareholders (other than those who are not permitted to vote pursuant to the Listing Rules or the Code) approving the implementation of the Restructuring Proposal, the conditional appointment of new Directors as may be nominated by the Investors and the conditional removal of all current Directors at the EGM;
(iii) the HK Court and the Cayman Islands Court sanctioning the Schemes and the Schemes becoming effective;
(iv) the Executive granting the Whitewash Waiver which, if granted, would normally be subject to the approval of the Independent Shareholders at the EGM by poll;
(v) the Stock Exchange granting the resumption of trading in the New Shares, listing of, and permission to deal in, the New Shares in issue and to be issued pursuant to the Restructuring Agreement, the Capital Reorganisation, the Schemes, the Subscription Agreement and the exercise of the Warrants;
(vi) the Grand Court of the Cayman Islands sanctioning the Capital Reorganisation conditional on Completion taking place;
(vii) the Petitioner withdrawing the petition to wind up the Company conditional on Completion taking place; and
(viii) the HK Court and the Cayman Islands Court ordering the discharge and release of the Provisional Liquidators conditional on Completion taking place.

If any of the above conditions have not been fulfilled or waived in writing on or before 18th December, 2002 (that is, within 120 days of the publication of the announcement regarding the Restructuring Proposal) or such later date as extended pursuant to the terms of the Restructuring Agreement, the Restructuring Agreement and the Subscription Agreement will lapse.

The Provisional Liquidators and the Investors have agreed that they will not waive or amend condition (iv), the Whitewash Waiver condition. Hence, the Restructuring Agreement and the Subscription Agreement will lapse if the Whitewash Waiver is not granted by the SFC or approved by the Independent Shareholders.

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LETTER FROM THE PROVISIONAL LIQUIDATORS

4. EFFECTS OF THE RESTRUCTURING PROPOSAL

(a) Share Capital

The proposed changes of the share capital of the Company are illustrated in section 1 of Appendix I to this circular.

(b) Shareholding Structure

The following table shows the estimated changes in the shareholding of the Company upon Completion under different scenarios:

Existing *(million Shares)* Investors and their concert parties — Scheme Administrates/ Creditors_(Note 1)_ — I-China Holdings Limited 426.19 Other Shareholders 1,120.85 Total 1,547.04	Upon completion of the Restructuring Proposal with no Investors’ Option and Warrants exercised % *(million New Shares)* — 8,500.0 — 360.61 27.55 42.62 72.45 112.09 100 9,015.32	Upon completion of the Restructuring Proposal with all Warrants but no Investors’ Option exercised % *(million New Shares)* 94.28 10,200.0 4.0 360.61 0.47 42.62 1.25 112.09 100 10,715.32	Upon Completion with Investors’ Option and all Warrants exercised % *(million New Shares)* 95.19 10,800.00 3.37 360.61 0.39 42.62 1.05 112.09 100 11,315.32	% 95.45 3.18 0.38 0.99
				100.00

Note 1: No single Creditor will hold more than 30% of the voting rights of the Company upon Completion and therefore, none of the Creditors has an obligation under the Code to make a general offer for all the New Shares of the Company other than those already held by the Creditor together with parties acting in concert with it.

As shown from the above shareholding table, the Investors together with parties acting in concert with them will be interested in approximately 94.28% of the enlarged issued share capital of the Company immediately upon Completion but before exercise of the Investors’ Option and Warrants. If the Investors exercise the Investors’ Option and all Warrants at Completion, the shareholding interest of the Investors, together with parties acting in concert with them, will increase from approximately 94.28% to approximately 95.45% of the Company’s enlarged issued share capital of approximately 11,315.32 million New Shares immediately upon Completion. The Investors have applied to the SFC for a waiver from their obligations under the Code to make a general offer for all the New Shares of the Company other than those already held by the Investors together with parties acting in concert with them. The Executive has indicated, subject to the approval of the Independent Shareholders on a vote taken by way of a poll, to waive any obligations to make a general offer which might result from Completion or the exercise of the Warrants or Put Option or Call Option.

Pursuant to Section 7 of Schedule VI of the Code, if the Whitewash Waiver is granted, the Investors and parties acting in concert with them will be deemed to have the lowest percentageholding equal to their percentage-holding immediately after the whitewashed transaction. Any acquisition of additional voting rights by the Investors and parties acting in concert with them, subsequent to the whitewashed transaction shall be subject to the 2% creeper under Rule 26.1 of the Code by reference to the lowest percentage-holding in the 12 month period immediately following Completion.

However, pursuant to Section 8 of Schedule VI of the Code, the Executive will view the Independent Shareholders’ approval for the issue of New Shares and Warrants, the grant of Call Option to the Investors to obtain additional New Shares and the grant of the Put Option to the Creditors to request the Investors to purchase their New Shares, where no immediate voting rights are obtained, as sanctioning maximum subscription at the earliest possible moment without incurring an obligation to make a general offer under Rule 26 of the Code. If the Investors together with the parties acting in concert with them acquire further voting rights after Completion, the Whitewash Waiver will only apply to subscription for such number of voting rights as, when added to the purchases does not exceed the number originally approved by the Independent Shareholders. Accordingly, if the Whitewash Waiver is granted, the Investors

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LETTER FROM THE PROVISIONAL LIQUIDATORS

together with the parties acting in concert with them will be free to acquire further voting rights in the Company after Completion without triggering a general offer obligation even though their aggregate percentage holding of New Shares falls below 50% of the voting rights of the Company as long as their acquisition of further voting rights, through the exercise of the Warrants, Put Option or Call Option, does not exceed the maximum number of voting rights originally approved by the Independent Shareholders.

Completion of the Restructuring Proposal is conditional upon, amongst other things, the Stock Exchange granting the resumption of trading in New Shares, which remains outstanding as at the Latest Practicable Date. The Stock Exchange indicated that the granting of the resumption of trading in New Shares is subject to the Investors being able to restore sufficient level of the public float, in this regard, the Investors will use their best endeavour to achieve sufficient level of public float before Completion.

(c) Dilution of Shareholders’ Interest

As set out in the table above, the interests of the existing Independent Shareholders, in aggregate, will be diluted from 100% to approximately 1.72% immediately upon Completion if the Investors’ Option and all Warrants are not exercised. The interests of the existing Independent Shareholders will be diluted by 98.28% to approximately 1.37% if the Investors exercise the Investors’ Option and all Warrants at Completion.

(d) Maintaining the Listing of the Company

The above shareholding table also shows that the Investors and the parties acting in concert with them will hold in aggregate more than 75% of the enlarged issue share capital of the Company, thus the Company’s public float will fall below 25% of the issued share capital immediately after Completion. In this connection, trading in the New Shares of the Company will remain suspended until a sufficient level of public float is restored. The Investors have undertaken and will procure the proposed Directors to undertake to the Stock Exchange that they will, as soon as practicable after Completion, take appropriate steps to ensure that an adequate number of New Shares will be sold, placed or otherwise disposed of to independent third parties to restore the public float of not less than 25% of the enlarged issued share capital of the Company as required under Rule 8.08 of the Listing Rules.

Trading in the New Shares will be resumed when sufficient public float of not less than 10% of the enlarged issued share capital of the Company is restored after the Completion of the Restructuring Proposal. The Investors are required to submit a concrete plan for restoring the 25% public float to the Stock Exchange before resumption of trading in the New Shares of the Company. The Investors are making arrangements for the restoration of the 25% public float of the enlarged issued share capital of the Company and no underwriting or irrevocable placing agreement has been entered as at the Latest Practicable Date but they will submit a concrete plan for restoring the 25% public float to the Stock Exchange before resumption of trading in the New Shares of the Company.

The Investors have undertaken to the Stock Exchange that they will not exercise the conversion rights of the Warrants and will procure the proposed Directors to undertake to the Stock Exchange that the Company will not issue New Shares pursuant to the exercise of the conversion rights of the Warrants if such conversion would result in the public float falling below 25% as required under the Listing Rules.

If the Stock Exchange believes that a false market exists or may exist in the New Shares or there are insufficient New Shares in public hands to maintain an orderly market, then it will consider exercising its discretion to suspend trading in the New Shares.

The Stock Exchange has further stated that, if the Company remains listed on the Stock Exchange, any asset disposal or acquisitions by the Group will be subject to the provisions of the Listing Rules. The Stock Exchange has the discretion to require the Company to issue an announcement and/or a circular to its shareholders irrespective of the size of the proposed transactions. The Stock Exchange also has the power to aggregate a series of transactions and any such transactions may result in the Company being treated as if it were a new applicant for listing and subject to the requirements for new listing applicants as set out in the Listing Rules.

(e) Working Capital

Approximately HK$5.42 million from the Subscription proceeds will be retained by the Company for the Group’s general working capital after deducting the following from the HK$85 million Subscription proceeds:

(a) the HK$70 million cash payment to the Scheme Administrators for the benefit of the Creditors;

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(b) the restructuring costs of about HK$8.5 million paid at or prior to Completion (Note 1) ; and
(c) the working capital of about HK$1.08 million used to meet part of the Group’s working capital requirments during the course of restructuring up to 18th December, 2002 which is the long-stop date for Completion.

If the Investors do not exercise the Investors’ Option at Completion, the Company will have to pay the Investors’ restructuring costs and expenses of not more than HK$5 million. The Investors have undertaken not to demand the Company to repay to them any such restructuring costs and expenses (of not more than HK$5 million) within 12 months after Completion. In addition, the Investors have undertaken (a) to the Stock Exchange to make financial accommodation available to the Company so that the Group will have sufficient working capital for its operations for a period of 12 months after Completion; (b) to CCIF and Asian Capital that they will procure the Company to observe and abide by its undertaking to CCIF and Asian Capital that the Company shall not increase its borrowing without both of CCIF’s and Asian Capital’s written consents if the incurrence of such additional borrowings by the Company is not matched by fresh funds obtained by the Company from issue of New Shares after Completion and (c) without the prior written consents of CCIF and Asian Capital, the Investors will not dispose of their shares of the Company, or allow new shares to be issued by the Company, and if after such disposal or new issue of new shares of the Company, the Investors’ controlling interest in the Company will be diluted to or below 50% of the enlarged capital of the Company.

The Company has also provided an undertaking to CCIF and Asian Capital that it shall not increase its borrowing without CCIF’s and Asian Capital’s prior written consents if the incurrence of such additional borrowings by the Company is not matched by fresh funds obtained by the Company from issue of New Shares after Completion.

In the opinion of the proposed new executive Directors, as identified in the section “Intention of the Investors” set out in this circular, in the absence of unforeseen circumstances and subject to Completion, the availability of the abovementioned HK$5.42 million and the abovementioned undertakings given by the Investors and the Company, the Group will have sufficient working capital for the 12-month period following Completion based on a number of principal assumptions described on page 90 of this circular.

Note 1: The restructuring costs and expenses are the advisory fees and disbursements of the legal and other advisers who have been or will be involved in the preparation, negotiation, execution and implementation of the Restructuring Proposal and the Schemes. Since the advisory fees will be paid on success and performance basis and the total disbursements to be incurred cannot yet be fully quantified, the amount payable to each of the advisers from the restructuring costs will not be determined until the Completion of the Restructuring Proposal.

(f) Indebtedness

As at the Latest Practicable Date, the Company’s indebtedness (i.e. the Creditors’ Indebtedness) was approximately HK$1,303.25 million. Approximately HK$593.39 million of the Company’s indebtedness is due to outside creditors and is part of the Group’s indebtedness. The balance is due to the Company’s subsidiaries. The indebtedness of the Group was approximately HK$653.29 million as at the Latest Practicable Date. As a result of the Debt Restructuring, all the Company’s indebtedness, including approximately HK$593.39 million of the Group’s indebtedness, will be discharged as against the Company. After the Debt Restructuring, the Group will continue to be liable for approximately HK$19 million which primarily represents the indebtedness of the Company’s subsidiaries due to two secured creditors.

If the Investors exercise the Investors’ Option to subscribe for not more than 500,000,000 additional New Shares at HK$0.01 each to meet their costs and expenses incurred in implementing the Restructuring Proposal, there will be no outstanding debts due from the Company immediately upon Completion.

None of the companies in the Group had any outstanding mortgage, charge or debenture, loan capital, bank overdraft, loan, debt security or other similar indebtedness or any hire purchase commitment, finance lease commitment, guarantee or other material contingent liability at the close of business on the Latest Practicable Date other than those in respect of the above indebtedness and intra-group liabilities.

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LETTER FROM THE PROVISIONAL LIQUIDATORS

(g) Net Assets

As detailed in section 6 headed “Proforma Unaudited Consolidated Balance Sheet of the Group” in Appendix I to this circular, the Pro forma unaudited net assets of the Group upon Completion will be approximately HK$73.38 million, representing approximately 0.81 cents per New Share. This represents an improvement of approximately HK$512.09 million to the unaudited net liabilities of the Group prior to Completion which amounted to approximately HK$438.71 million or 28.36 cents per Share.

5. USE OF PROCEEDS FROM THE SUBSCRIPTION

The proceeds of HK$85 million from the Subscription will be applied as follows:

(a) HK$70 million will be paid to the Creditors in full and final settlement of the Creditors’ Indebtedness pursuant to the Schemes;
(b) approximately HK$8.5 million will be used to pay for the restructuring costs incurred in the implementation of the Restructuring Proposal (Note 1) ;
(c) approximately HK$1.08 million will be used to meet part of the Group’s working capital requirements during the course of restructuring up to 18th December, 2002 which is the long stop date for Completion; and
(d) the remaining proceeds of approximately HK$5.42 million will be used to meet the Group’s future working capital requirements.
Note 1: The restructuring costs and expenses are the advisory fees and disbursements of the legal and other advisers who have been or will be involved in the preparation, negotiation, execution and implementation of the Restructuring Proposal and the Schemes. Since the advisory fees will be paid on success and performance basis and the total disbursements to be incurred cannot yet be fully quantified, the amount payable to each of the advisers from the restructuring costs will not be determined until the Completion of the Restructuring Proposal.

6. DIRECTORS AND MANAGEMENT

The current Board comprises of 6 Directors, Messrs Shirley Choi Siu Lui, Ou Yirong, Norman Choi Sung Fung, Choi Sai Leung, Judy Wong Tak Kwan and Ronald Lau Kin Hon. However, the powers of the Directors have been suspended since the appointment of the Provisional Liquidators. Upon Completion, new executive Directors and new independent non-executive Directors, as may be nominated by the Investors, will be appointed and all current Directors will be removed from the Board.

Details of the proposed new Directors are contained in the section headed “Intention of the Investors regarding the Company” in the Letter from the Investors.

7. REASONS FOR THE RESTRUCTURING OF THE GROUP

After taking into consideration the current financial position of the Group and other alternative restructuring proposals received by the Provisional Liquidators, the Provisional Liquidators considered that the present Restructuring Proposal represents the best available option to the Company, Creditors and Shareholders having regard to all factors including the potential returns to both the Creditors and the Shareholders from the Restructuring Proposal and the likelihood of completion when compared to other restructuring proposals, the alternatives available to the Creditors to recover their debts and the time required to conclude the Restructuring Proposal.

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LETTER FROM THE PROVISIONAL LIQUIDATORS

If the Restructuring Proposal is successfully implemented, all of the Company’s indebtedness of approximately HK$1,303.25 million as at the Latest Practicable Date will be discharged and released pursuant to the Schemes. There will be no outstanding debts due from the Company to the Creditors immediately upon Completion provided that the Investors exercise the Investors’ Option. If the Company is unable to restructure its indebtedness with its Creditors as set out in the Restructuring Proposal, the Provisional Liquidators believe that there is a strong likelihood that the Company will be wound up. Should the Company be wound up, the return to the Creditors will be minimal and there is unlikely to be any return to the Shareholders. On 11th November, 2002, the HK Court ordered the hearing of the winding-up petition issued against the Company be adjourned until 6th January, 2003 to allow the Company to proceed with the Restructuring Proposal and to implement the Schemes.

8. INTENTION OF THE INVESTORS

Further details of the intention of the Investors with respect to the Group after Completion are set out in the Letter from the Investors on pages 21 to 25.

9. TERMINATION OF THE EXISTING SHARE OPTION SCHEME AND THE ADOPTION OF NEW SHARE OPTION SCHEME

In light of recent changes to the Listing Rules in relation to share option schemes and to enable the Group to grant options to selected Eligible Participants as incentive or rewards for their contributions to the Group and to provide the Group with a more flexible means to reward, remunerate, compensate and/or provide benefits to Eligible Participants, the Investors have asked the Company to propose to its Shareholders the termination of the Existing Share Option Scheme and adoption of the New Share Option Scheme.

Of the 155,077,213 share options granted under the Existing Share Option Scheme, none of them were exercised, and all of them lapse as at the Latest Practicable Date.

Under the New Share Option Scheme, the Board will have the right to grant to the Eligible Participants the options to subscribe for New Shares under the New Share Option Scheme, representing up to 10 per cent. of the total number of New Shares in issue immediately after Completion unless the Company obtains an approval from the Shareholders to refresh the 10 per cent. limit. The maximum number of New Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the New Share Option Scheme and any other share option schemes of the Company shall not exceed 30 per cent. of the total number of New Shares in issue from time to time. Once the New Share Option Scheme is adopted, any alterations to the terms and conditions thereof, which are of a material nature, must be approved by the Shareholders, except where the alterations take effect automatically pursuant to the terms originally provided in the New Share Option Scheme.

These is no general requirement in relation to the minimum period for which an option must be held or the performance targets which must be achieved before an option can be exercised under the terms of the New Share Option Sheme. However, the Board will be empowered under the New Share Option Scheme to impose at its discretion such minimum period and/or performance targets at the time of grant of any particular option as it sees fit. In addition, the Board will be empowered under the New Share Option Scheme to determine the exercise price of a New Share in respect of any particular option granted subject to certain restrictions, the basis of which is set out in Appendix II to this circular so that the selected participants are attracted to subscribe for New Shares pursuant to the options granted by the Company as incentives and rewards for their contribution to the Group and will further contribute towards the profitability and success of the Group.

The New Share Option Scheme will take effect upon satisfaction of the following conditions:

(i) the passing of the necessary resolutions approving the termination of the Existing Share Option Scheme and the adoption of the New Share Option Scheme by the Shareholders in a general meeting and authorizing the Board to grant an option to subscribe for New Shares thereunder and to allot, issue and deal with the New Shares which fall to be issued by the Company pursuant to the exercise of the options under the New Share Option Scheme;
(ii) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the New Shares, representing 10% of the issued share capital of the Company upon Completion, to be issued and allotted pursuant to the exercise of the options granted under the New Share Option Scheme; and

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LETTER FROM THE PROVISIONAL LIQUIDATORS

(iii) Completion of the Restructuring Proposal.

Subject to the Shareholders’ approval of the Restructuring Proposal, an ordinary resolution will be proposed at the EGM for the termination of the Existing Share Option Scheme and the adoption of the New Share Option Scheme immediately after Completion. A summary of the principal terms of the New Share Option Scheme are set out in Appendix II to this circular. Subject to fulfilment of the conditions precedent to adoption of the New Share Option Scheme as set out above, the Existing Share Option Scheme will be terminated and the New Share Option Scheme will take effect immediately after Completion.

An application will be made to the Listing Committee of the Stock Exchange for the listing of and permission to deal in the New Shares representing 10% of the issued share capital of the Company upon Completion which may fall to be issued pursuant to the exercise of the options granted under the New Share Option Scheme.

The maximum number of New Shares which may be issued upon the exercise of all the options to be granted under the New Share Option Scheme and any other share option scheme(s) of the Company (which for this purpose, excludes the Existing Share Option Scheme) must not exceed 10 per cent. of the New Shares in issue as at the date of Completion unless the Company obtains a refresh approval from the Shareholders.

Based on the expected number of 9,015.32 million New Shares (if the Investors’ Option is not exercised at Completion) or 9,515.32 million New Shares (if the Investors’ Option is exercised at Completion) in issue immediately after Completion as shown in the shareholding table under point (b) of section 4 headed “Effects of the Restructuring Proposal” in this letter, the maximum number of New Shares issuable pursuant to the New Share Option Scheme on the date of its adoption will be 901.532 million New Shares if the Investors’ Option is not exercised at Completion or 951.532 million New Shares if the Investors’ Option is exercised at Completion unless the Company obtains a refresh approval from the Shareholders.

The rules of the New Share Option Scheme will be available for inspection as set out in Appendix II to this circular and at the EGM.

The results of the ordinary resolutions to be proposed at the EGM in relation to the termination of the Existing Share Option Scheme and the adoption of the New Share Option Scheme will not affect Completion.

10. GENERAL MANDATE TO ISSUE NEW SHARES

At the EGM, an ordinary resolution will be proposed to grant a general mandate to the future Directors to allot, issue and deal with additional New Shares not exceeding 20% of the aggregate nominal amount of the issued share capital of the Company as at the date of Completion of the Restructuring Proposal. Based on the expected number of 9,015.32 million New Shares (if the Investors’ Option is not exercised at Completion) or 9,515.32 million New Shares (if the Investors’ Option is exercised at Completion) in issue immediately after Completion as shown in the shareholding table under point (b) of section 4 headed “Effects of the Restructuring Proposal” in this letter, the maximum number of New Shares issuable pursuant to the general mandate will be 1,803.06 million New Shares if the Investors’ Option is not exercised or 1,903.06 million New Shares if the Investors’ Option is exercised.

The results of the resolution to be proposed at the EGM in relation to such general mandate will not affect Completion.

11. PUBLICATION AND DESPATCH OF AUDITED RESULTS

In light of the Company’s financial difficulties, it cannot afford the substantial audit fees which will divert the Company’s limited financial resources from its current operations. Accordingly, the Company has not been able to prepare and despatch the annual report and audited results for the year ended 31st March, 2002 within 4 months after the end of its financial year and as required under paragraph 8(1) and 11 of the Listing Agreement. With the Investors’ new capital injection, audit work on final results for the year ended 31st March, 2002 will begin immediately after Completion. The Investors have undertaken to the Stock Exchange to procure the Company to publish the Company’s audited accounts for the financial year ended 31st March, 2002 within 4 months after Completion.

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LETTER FROM THE PROVISIONAL LIQUIDATORS

12. GENERAL

The Restructuring Agreement, the Capital Reorganisation, the Subscription Agreement, the Whitewash Waiver and all the transactions contemplated thereunder will be subject to the approval by the Independent Shareholders at the EGM according to the Code.

Asian Capital has been appointed as the financial adviser to the Company. Somerley and ICEA have been appointed as joint financial advisers to the Investors. AMS has been appointed as an independent financial adviser in respect of the Restructuring Proposal. Details of the advice and recommendations of AMS, together with the principal factors and reasons considered in arriving at such advice and recommendations, are set out on pages 26 to 37 of this circular.

An application will be made to the Stock Exchange for the listing of, and permission to deal in, the New Shares which will be issued pursuant to the Restructuring Agreement, the Schemes, the Subscription Agreement, the exercise of the Warrants and the exercise of the options which may be granted under the New Share Option Scheme. The New Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in such New Shares on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the general rules of CCASS and CCASS Operational Procedures in effect from time to time.

All New Shares to be issued upon the exercise of the Warrants and the options granted under the New Share Option Scheme will rank pari passu in all respects, including all rights as regards dividends, voting and return of capital, with the New Shares in issue upon the Capital Reorganisation becoming effective.

Except for the Warrants, the options which may be granted under the New Share Options Scheme and the option granted to the Investors to subscribe for not more than 500,000,000 additional New Shares (with one Warrant for every five New Shares) in satisfaction of the Investors’ costs and expenses incurred in relation to the restructuring of the Company, the Company has no other outstanding securities convertible into New Shares, no share or loan capital of the Company has been put under option or agreed conditionally or unconditionally to be put under option, and no other conversion right affecting the New Shares or other derivatives in respect of securities which are being offered for or which carry voting rights have been issued or granted or agreed conditionally or unconditionally to be issued or granted.

No part of the equity or debt securities of the Company is listed or dealt in or is proposed for listing or dealing in on any stock exchange other than the Stock Exchange.

13. TRADING ARRANGEMENTS

The Investors have undertaken and the proposed Directors will undertake to the Stock Exchange that the Company will consolidate the New Shares of the Company if the price of the New Shares after the Completion of the Restructuring Proposal trades at a closing price of HK$0.01 or approaches to HK$0.01 for 30 consecutive trading days immediately following the resumption of trading of the New Shares of the Company or such other period as the Stock Exchange may reasonably consider to be appropriate under paragraph 30 of Appendix 7(b) of the Listing Rules.

Subject to the Capital Reorganisation becoming effective, the Investors have advised that they will procure the Company to adopt the following trading arrangements to facilitate trading in existing Shares and the New Shares by the Shareholders following Completion:

(a) Documents of Title

Upon the Capital Reorganisation becoming effective, the nominal value of the issued Shares will be reduced from $0.05 to $0.01 each. Accordingly, the Provisional Liquidators consider it in the best interests of the Company and the public to reduce the risk of confusion by replacing all existing share certificates (which are light blue in colour) with new share certificates for the purposes of trading on the Stock Exchange.

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LETTER FROM THE PROVISIONAL LIQUIDATORS

Upon completion of the Capital Reorganisation, every certificate for Shares in issue immediately before the Capital Reorganisation will be deemed to be certificates and valid documents of title for one-tenth of that number of New Shares.

(b)

Trading arrangements

Following the effective date of the Capital Reorganisation and subject to the resumption of trading in the New Shares, the Company proposes the following trading arrangements for the Shareholders.

(i) from 18th December, 2002, the present counter for trading in the Shares in board lots of 5,000 Shares will be removed temporarily and a temporary counter for trading in New Shares in board lots of 500 New Shares in the form of existing share certificates for existing Shares will be set up;
(ii) with effect from 6th January, 2003, the present counter for trading in New Shares in board lots of 100,000 New Shares will be re-opened. Only new share certificates for New Shares can be traded at this counter;
(iii) during the period from 6th January, 2003 to 27th January, 2003 (both dates inclusive), there will be parallel trading at the above two counters; and
(iv) the temporary counter for trading in the New Shares in board lots of 500 New Shares (in the form of existing share certificates) will be removed after the close of trading on 27th January, 2003. Thereafter, trading will only be in New Shares in board lots of 100,000 New Shares and existing share certificates will cease to be acceptable for dealing purposes. However such certificates will continue to be good evidence of legal title to the New Shares and may be exchanged for new certificates for New Shares at any time.

Any partial entitlement to a New Share will not be issued but will be aggregated and the resulting New Share(s) will be sold for the benefit of the Company. If any Shareholder holds certificates for Shares in one registered name which are capable of being aggregated in whole multiples of ten Shares, such Shareholder will be entitled to exchange his certificates for Shares for certificate(s) for the New Shares so that his shareholding may be accurately represented by the new share certificate(s).

Shareholders are urged to exchange their certificates for Shares for certificates for New Shares as soon as possible on or after 18th December, 2002. This may be done, at no cost, up to and including 4th February, 2003 by delivering the existing share certificates to the branch share registrar of the Company in Hong Kong, Progressive Registration Limited at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong. Thereafter, existing share certificates will be accepted for exchange only on payment of a fee of HK$2.50 (or such higher amount as may from time to time be allowed by the Stock Exchange) for each certificate for each new certificate issued for New Shares.

The new share certificates are expected to be available for collection on or after the 10th business day from the date of submission of the existing light blue share certificates to the branch share registrar of the Company in Hong Kong. Unless otherwise instructed, new share certificates will be issued in board lots of 100,000 New Shares.

(c) Facilities for odd lot holders

In order to alleviate the difficulties arising from the existence of odd lots as a result of the Capital Reorganisation, the Company has appointed Kingston Securities Limited to assist the Shareholders to match the sale and purchase of odd lots during the period from 10:00 a.m. on 18th December, 2002 to 4:00 p.m. on 27th January, 2003, both dates inclusive. Holders of the New Shares in odd lots (i.e. lots which are not in integral multiples of 100,000 New Shares) may through their broker contact Ms. Rosita Kiu of Kingston Securities Limited (telephone number: 2298 6215) during such period. Holders of the New Shares in odd lots should note that the matching of the sale and purchase of odd lots is not guaranteed.

The Provisional Liquidators recommend that the Shareholders consult their own professional advisers if they are in any doubt about the facility described above.

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LETTER FROM THE PROVISIONAL LIQUIDATORS

Further announcements in relation to the trading arrangement of the New Shares will be made as and when appropriate.

14. CREDITORS’ MEETING

The meeting of Creditors convened at the direction of both the HK Court and the Cayman Islands Court will be held at 10:00 a.m. on 22nd November, 2002 at Plaza V, Novotel Century Hong Kong, 238 Jaffe Road, Wanchai, Hong Kong for the purpose of considering and, if thought fit, approving the Schemes with or without modification.

15. EXTRAORDINARY GENERAL MEETING

Set out on pages 115 to 119 of this circular is a notice convening the EGM to be held at 10:00 a.m. on 9th December, 2002 at Plaza V, Novotel Century Hong Kong, 238 Jaffe Road, Wanchai, Hong Kong at which resolutions will be proposed to consider and approve, inter alia, (i) the Capital Reorganisation; (ii) the Restructuring Agreement; (iii) the Subscription Agreement; (iv) the Whitewash Waiver; (v) the appointment of new executive Directors and new non-executive Directors as may be nominated by the Investors conditional on Completion; (vi) the removal of all current Directors; (vii) the granting of general mandate to the future Directors to exercise the powers of the Company to issue, allot or deal with additional New Shares not exceeding 20% of the enlarged issued share capital of the Company immediately following Completion; and (viii) the termination of the Existing Shares Option Scheme and the adoption of the New Share Option Scheme. The results of the ordinary resolutions to be proposed at the EGM in relation to the general mandate to issue New Shares, the termination of the Existing Share Option Scheme and the adoption of the New Share Option Scheme will not affect Completion.

A form of proxy for use at the EGM is enclosed. Regardless of whether you are able to attend the EGM, you must complete and return the form of proxy in accordance with the instructions printed thereon to the Company c/o the Provisional Liquidators, 7th Floor, Allied Kajima Building, 138 Gloucester Road, Hong Kong (for the attention of Messrs Cosimo Borrelli/Fan Wai Kuen) as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the EGM. Under Article 95 of the New Memorandum and New Articles of Association of the Company, a vote given in accordance with the terms of the proxy shall be valid notwithstanding the revocation of the proxy or power of attorney or other authority under which the proxy was executed provided that no intimation in writing of such revocation shall have been received by the Company at 7th Floor, Allied Kajima Building, 138 Gloucester Road, Wah Chai, Hong Kong not less than two hours before the holding of the EGM or any adjourned EGM.

16. RECOMMENDATIONS

AMS has been appointed as the independent financial adviser to advise the Independent Shareholders in relation to the fairness and reasonableness of the terms of the Restructuring Proposal and the Whitewash Waiver. Details of the advice and recommendations of AMS together with the principal factors and reasons taken into consideration in arriving at such advice and recommendations are set out on pages 26 to 37 of this circular. AMS has recommended that the Independent Shareholders to vote in favour of the relevant resolutions to be proposed at the EGM. Independent Shareholders are strongly advised to consider the letter before deciding to vote in favour of or against the resolutions to be proposed at the EGM.

17. ADDITIONAL INFORMATION

Please refer to the Appendices to this circular for additional information.

Yours faithfully, For and on behalf of

SEAPOWER RESOURCES INTERNATIONAL LIMITED (Provisional Liquidators Appointed) Cosimo Borrelli Fan Wai Kuen

Joint and Several Provisional Liquidators

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LETTER FROM THE INVESTORS

Leader Glory Holdings Limited

Suite 107, 1/F., St. George’s Building, 2 Ice Street, Central, Hong Kong Telephone: 2801-7329 Facsimile: 2801 7829

14th November, 2002

To the Shareholders and

For information only the Creditors,

Dear Sir or Madam,

BACKGROUND

On 11th December, 2001, winding up petitions were served on the Guarantors and South East Asia Overseas Finance Limited (In Compulsory Liquidation) by the Petitioner pursuant to a loan extended to South East Asia Overseas Finance Limited (In Compulsory Liquidation) and guaranteed by the Guarantors. As a result of the default of the loan facility on 5th December, 2001, the Petitioner filed the winding up petition against South Asia Overseas Finance Limited (In Compulsory Liquidation) and the Guarantors to recover the amount due and outstanding under the loan facility.

On 31st December, 2001, the Provisional Liquidators were appointed with immediate effect. Following the appointment, the Provisional Liquidators focused on carrying on, stabilizing and enhancing the operations of the Group, including facilitating the restructuring of the Company. Further details in relation to the background of the Restructuring Proposal are set out in the letter from the Provisional Liquidators on pages 6 to 20 of the circular of the Company dated 14th November, 2002 (the “Circular”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Circular unless the context hereunder states otherwise.

The Investors entered into the Restructuring Agreement and the supplemental agreement to the Restructuring Agreement and the Subscription Agreement regarding the Restructuring Proposal with the Company and the Provisional Liquidators on 22nd June, 2002, 3rd October, 2002 and 13th November, 2002. The Restructuring Agreement involves, among other things, the Capital Reorganisation, the Schemes, the Put Option, the Call Option and the Subscription. Details of the Restructuring Agreement are set out in the letter from the Provisional Liquidators contained in the Circular.

COMPLETION OF THE RESTRUCTURING AGREEMENT

Completion of the Restructuring Agreement will be subject to the fulfillment of various conditions precedent. Details of the conditions precedent of the Restructuring Agreement are set out in the Letter from the Provisional Liquidators contained in the Circular from pages 6 to 20. If any of the conditions precedent have not been fulfilled or waived in writing on or before 18th December, 2002 or such later date as extended pursuant to the terms of the Restructuring Agreement, the Restructuring Agreement and the Subscription Agreement will lapse. The Provisional Liquidators and the Investors have agreed that the Restructuring Agreement will lapse if the Whitewash Waiver is not granted by the Executive or approved by the Independent Shareholders.

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LETTER FROM THE INVESTORS

INVESTORS’ INTEREST IN THE COMPANY AFTER COMPLETION

The shareholding structure of the Company immediately after Completion and the exercise by the Investors of their rights under the Warrants and the Investors’ Option are set out in the schedule below:

Investors and concert parties Creditors I-China Holdings Limited Other Shareholders Total	Upon Completion before exercise of any Warrants and the Investors’ Option (million New Shares) 8,500.00 360.61 42.62 112.09 9,015.32	Upon Completion and after exercise of all the Warrants and the Investors’ Option (million % New Shares) 94.28 10,800.00 4.00 360.61 0.47 42.62 1.25 112.09 100.00 11,315.32	% 95.45 3.18 0.38 0.99
			100.00

TAKEOVERS CODE IMPLICATION

As the Investors and their concert parties will be interested in approximately 94.28% of the enlarged issued share capital of the Company immediately after Completion, as such the Investors will be obliged under Rule 26 of the Takeovers Code to make a general offer to all the Shareholders for all the New Shares that are not already owned by them or parties acting in concert with them. The Investors have made an application to the SFC for a waiver from strict compliance with the Rule 26 of the Takeovers Code, which if granted, would be subject to approval of the Independent Shareholders by poll at the EGM. The Restructuring Agreement is conditional upon the grant of the Whitewash Waiver by the Executive to the Investors and the parties acting in concert with them.

RESTORATION OF PUBLIC FLOAT

As the Investors and the parties acting in concert with them will hold more than 75% of the enlarged issued share capital of the Company upon Completion, therefore less than 25% of the New Shares will be in public hands after Completion. The Investors have undertaken and will procure the proposed Directors to undertake to the Stock Exchange that they will as soon as practicable after Completion to take appropriate steps to ensure that adequate number of New Shares will be sold, placed or otherwise disposed of to independent third parties to restore the public float of not less than 25% of the enlarged issued share capital of the Company as required under Rule 8.08 of the Listing Rules. Trading in the New Shares will be resumed when sufficient public float of not less than 10% of the enlarged issued share capital of the Company is restored after Completion. The Investors are required to submit a concrete plan for restoring the 25% public float to the Stock Exchange before resumption of trading in the New Shares of the Company. The Investors are making arrangements for the restoration of the 25% public float of the enlarged issued share capital of the Company and no underwriting or irrevocable placing agreement has been entered into as at the Latest Practicable Date. The Investors will submit a concrete plan for restoring the 25% public float to the Stock Exchange before resumption of trading in the New Shares of the Company.

Pursuant to the Restructuring Agreement, the Investors will grant the Put Option to the Creditors and/or the Scheme Administrators. Should the exercise of the Put Option by the Scheme Administrators and/or the Creditors result in the public float of the Company falling below 25% of the issued share capital as required under the Listing Rules, the Investors have undertaken and will procure the proposed Directors to undertake to the Stock Exchange that within the first two months following such exercise of the Put Option, appropriate

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LETTER FROM THE INVESTORS

steps will be taken to ensure that adequate number of New Shares so put to the Investors will be sold, placed or otherwise disposed of to independent third parties to restore the public float of the Company to not less than 25% of the enlarged issued share capital of the Company.

Under the Restructuring Agreement that the Scheme Administrators and/or the Creditors will grant the Call Option to the Investors. The Investors have undertaken and will procure the proposed Directors to undertake to the Stock Exchange that they will not exercise the Call Option if such action would result in the public float falling below 25% of the issued share capital of the Company as required under the Listing Rules.

TRADING ARRANGEMENTS

The Investors have undertaken and the proposed Directors will undertake to the Stock Exchange that the Company will consolidate the New Shares of the Company if the price of the New Shares after the Completion of the Restructuring Proposal trades at a closing price of HK$0.01 or approaches to HK$0.01 for 30 consecutive trading days immediately following the resumption of trading of the New Shares of the Company or such other period as the Stock Exchange may reasonably consider to be appropriate under Paragraph 30 of Appendix 7(b) of the Listing Rules.

INTENTION OF THE INVESTORS

It is the intention of the Investors that, after Completion, the Company will continue with its principal businesses of provision of logistics management services in Hong Kong and the PRC and the operation in warehousing and cold storage businesses in Australia. The Investors will retain Allied National pursuant to the Restructuring Agreement, a wholly owned subsidiary of the Company and to continue its operation in two cold storages in Australia. The Investors also intend to continue the operation of iPower, a wholly owned subsidiary of the Company, which is principally engaged in the provision of warehousing management system to other warehousing operators.

After Completion, the Investors will conduct a detailed review of the operation of the Group with a view to developing a corporate strategy to revitalise the Group’s existing businesses and to enhance its asset base and broaden its income stream by various means including injecting businesses into the Group should suitable opportunities arise. The Investors have no intention or plans to redeploy any assets of the Group other than Pentagon Profits. If the Company has not taken adequate steps to recover and realise Pentagon Profits within 12 months from the date of Completion, the Scheme Administrators may, pursuant to the Schemes, within 3 months of the first anniversary of the date of Completion request the Company to transfer its entire interest in Pentagon Profits to the Scheme Administrators for the benefit of the Creditors.

The Investors have undertaken and will procure the proposed Directors to undertake to the Stock Exchange that they will procure the Company not to dispose of any of the Company’s assets if such disposal would result in the Company breaching paragraph 38 of its listing agreement with the Stock Exchange, which requires the Company to maintain sufficient operations or tangible assets of sufficient value to warrant the continued listing of the shares of the Company on the Stock Exchange.

The Investors will re-establish a strong professional management and working team for the Company by focusing on recruiting employees with relevant experience in cold storage warehousing and logistics businesses in Australia, Hong Kong and the PRC after Completion. The Investors will retain the Group’s current key senior managers Ms. Olivia Wai Yee Yung and Ms. Rosie Song Yue to oversee the daily operations of the cold storage warehousing and logistics divisions of the Group. The Group intends to retain Ms. Olivia Wai Yee Yung to oversee the cold storage and warehousing operation in Australia and Ms. Rosie Song Yue to run the logistic operation in the PRC. Ms. Yung joined Australia Division of the Group in 1992. She is currently the executive manager of the Australia division and has over 10 years experience in managing logistic operation in Australia. Ms. Rosie Song Yue is the senior manager of the China business development division of the Group and she has over eight years of experience in sales and marketing and is especially familiar with the business development in the PRC. The Investors believe the Group could capitalize on the experience and contact of Ms. Yue in the PRC in expanding the Group’s the logistic operation.

The Investors, one of whom is also a future executive Director, will not only inject new capital into the Company to turn the current debt-ridden situation around into a financial healthy position, through their extensive business networks, they will also bring in Mr. Li Bai Xiang and Mr. Xu Chengwu to become senior

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LETTER FROM THE INVESTORS

advisors to the Board after Completion. Mr. Li Bai Xiang is the General Manager of China National Storage And Transport (Guangzhou) Corporation (“CNSTC”) which is one of the largest state-owned storage and transport operators in the PRC with major operations in 63 cities in the PRC. Mr. Xu Chengwu is a US citizen and has an extensive business network in the United States. He is an advisor to the Beijing Committee of The Chinese People’s Political Consultative Conference. He is also the Deputy Chairman of the board of Hao Yi Industry (Tianjin), Inc. and the Deputy Director of Overseas Chinese Union in the United States. Previously he had served with the Chinese Academy of Sciences and China Automation Corporation in China. The future Directors together with their proposed senior advisors, Mr. Li and Mr. Xu, will be involved in reviewing the overall operations and business plans of the Group and determining corporate objectives, policy making and strategic planning for future business development of the Group. The Group will continue maintaining 160 cold storages and logistics alliances all over the world, with 48 alliances located in the PRC. The Investors intend to explore suitable business opportunities for the Group with Mr. Li Bai Xiang and Mr. Xu Chengwu to further develop and extend the Group’s businesses, such as exploring broader markets for its cold storage and warehousing management software program and in particular, developing warehousing and logistics business in the PRC.

The Investors believe that the logistic and warehousing business have enormous potential with the PRC’s accession to the World Trade Organisation and will benefit the Group in the long run. The Investors are confident that with the interaction of the Group’s experienced senior management and the strong networks and strategic planning background of the future Directors and proposed senior advisers in the PRC, Taiwan and the United States, the Group will be in an excellent position to explore and capture business opportunities, and effectively implement the corporate plans to further extend its logistics capability in its existing markets to its neighboring cities and other countries.

APPOINTMENT OF NEW DIRECTORS

It is the intention of the Investors that, upon Completion, all existing Directors will be removed from the Board. Messrs. Pang Man Kin Nixon, Wong Chak Wai and Sun Tak Yan Desmond will be appointed executive Directors. Miss Lau Ching Yin Judy will be appointed as an independent non-executive Director. The second independent non-executive Director will be appointed before Completion, and the Company will make an announcement when any new Directors are nominated.

Executive Directors

Mr. Pang Man Kin Nixon 33, is a Hong Kong resident and holds a United Kingdoms and Northern Ireland BNO passport. Over the past ten years Mr. Pang has been engaged in interior designs and project strategic planning for various hotel projects in China. Mr. Pang has also been engaged in the trading of building material to Taiwan.

Mr. Wong Chak Wai, 41 is engaged in investment and development of properties in Hong Kong. Mr. Wong held management position with a major Chinese financial institution in Guangzhou. Mr. Wong held management positions in division of international business development of GITIC, and Bank of China.

Mr. Sun Tak Yan Desmond, 54, a strategic planning advisor. Mr. Sun is an executive director of Northern International Holdings Limited, a listed company in Hong Kong and a director of ZR Capital Limited a registered investment advisor. Mr. Sun previously held management positions in corporate banking and in treasury with a major US bank and a major UK bank in Hong Kong, respectively as well as with the Ford Motor Company in Australia. Mr. Sun holds a bachelor degree in economics and became an associate of the Australian Society of Accountants in 1976.

Independent non-executive Directors

Miss Lau Ching Yin Judy 43, is the Chairman and Founder of the Convergent Business Group, specializing in providing China investment advisory services to overseas business enterprises. Judy was the General Manager, Capital Markets of the China Overseas Venture Capital Ltd. (a subsidiary of a listed company China Overseas Land Investment Ltd.) spearheading equity financing activities for PRC investment projects from 2001-2002. Judy was the Chief Executive Officer of the Good Fellow Group Limited from 2000 to 2001. Judy was the Managing Director of the America Online HK Ltd. from 1999-2000, instrumental to the highly successful launch of America Online’s services to Hong Kong. Before taking up these top level roles,

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LETTER FROM THE INVESTORS

Judy has served a number of blue-chips employers in senior positions, e.g. Senior Vice President of the Pacific Century Group and Assistant General Manager of the Hutchison International Telecommunications. From 1981 to 1992, Judy worked for various multinational Information Technology and Telecommunications companies such as General Electric, Cable & Wireless Plc and Hong Kong Telecom.

INFORMATION ON THE INVESTORS

Mr. Pang Man Kin, Nixon, who will have a controlling interest in the issued share capital of the Company through Leader Glory immediately upon Completion, is a businessman with experience in interior design and project strategic planning in Hong Kong and the PRC as well as trading of building materials to Taiwan.

Leader Glory, a company incorporated in the British Virgin Islands with limited liability, it is beneficially owned as to 70% by Mr. Pang Man Kin, Nixon and 30% by Mr. Wong Chak Wai and is proposed to be beneficially owned as to 42% by Mr. Pang Man Kin, Nixon, 30% by Mr. Wong Chak Wai, 20% by Mr. Michael Szeto Chak Wah and the remaining 8% by the Investors’ advisers (namely Messrs. Lo Bing Kuen, Alfred, Sun Tak Yan Desmond and Lee Kin Keung, Lawrence) who have provided consultancy services to the Investors in connection with the Restructuring Proposal. All the existing and proposed shareholders of Leader Glory are independent of and not connected with the directors, chief executive or substantial shareholder of the Company or its subsidiaries or any of their respective associates (as defined in the Listing Rules). Leader Glory is a special vehicle established solely for the proposed acquisition of the equities of the Company. It has not conducted any business other than entering into the Restructuring Agreement and the Subscription Agreement regarding the Restructuring Proposal with, among others, the Provisional Liquidators, the Company and Mr. Pang Man Kin, Nixon.

OTHER INFORMATION

Your attention is drawn to the Letter from the Provisional Liquidators set out on pages 6 to 20 of the Circular, the letter of advice from the Independent Financial Adviser to the Independent Shareholders in relation to the Restructuring Proposal, the Subscription Agreement and the Whitewash Waiver set out on pages 26 to 37 of the Circular and the additional information set out in the appendices to the Circular.

Yours faithfully, For and on behalf of the board of directors of Leader Glory Holdings Limited Pang Man Kin, Nixon Executive director

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

==> picture [39 x 39] intentionally omitted <==

博資財務顧問有限公司 AMS Corporate Finance Limited

20th Floor

Hong Kong Diamond Exchange Building 8-10 Duddell Street Central, Hong Kong

14th November, 2002

To the Independent Shareholders of

Seapower Resources International Limited

Dear Sirs,

PROPOSED RESTRUCTURING PROPOSAL

We refer to our appointment as the independent financial adviser to the Independent Shareholders in respect of the Restructuring Proposal and the Whitewash Waiver, details of which are set out in the circular to the Shareholders dated 14th November, 2002 (the “Circular”), of which this letter forms part. Unless the context otherwise requires, terms used in this letter have the same meanings as those defined in the Circular.

In formulating our opinion, we have relied upon the accuracy of the information and representations contained in the Circular. We have considered, among others, the financial information of the Group contained in Appendix I to the Circular and, in particular, the pro forma unaudited consolidated balance sheet of the Group set out in section 6 thereof and the agreements related and incidental to the Restructuring Proposal. We have assumed that all statements and representations made or referred to in the Circular were true at the time they were made and will continue to be true as at the date of the Circular and the date of the EGM. We have assumed that all statements of belief and opinions and intention made by the Provisional Liquidators and the Investors in the Circular were reasonably made after due care and enquiry.

We consider that we have reviewed sufficient information to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our opinions. The Provisional Liquidators and the Investors have confirmed that there are no other facts not contained in the Circular the omission of which would make any statement in the Circular misleading. We have no reason to doubt the truth, accuracy or completeness of the information provided to us by the Provisional Liquidators and the advisers of the Company. We have not, however, conducted an independent verification of the information provided, nor have we carried out an in-depth investigation into the affairs of the Group or the prospects of the markets in which the Group operates.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our recommendation, we have taken into consideration the following principal factors and reasons:

A. The restructuring proposal

(i) Background

The principal businesses of the Group were the provision of logistics management services in Hong Kong and the PRC, the operation of cold storage facilities in Hong Kong and Australia and property holding. However, the Group no longer operates cold storage and warehousing businesses in Hong Kong after properties and assets owned by certain subsidiaries were disposed of by their receivers and/or the Provisional Liquidators between January and March 2002.

The Group has been incurring net losses for the past four financial years and continued to record an unaudited net loss for the six months ended 30th September, 2001. As a result of the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

losses sustained over the years, the Group has been operating in a tight liquidity position and receivers were appointed by the Group’s creditors over certain properties of the Group in mid 2001 when it failed to make scheduled repayments. On 11th December, 2001, winding up petitions were served by the Petitioner on the Company and four of its wholly-owned subsidiaries, namely, Yiu Fung Cold Storage & Warehousing Limited (in Compulsory Liquidation), Yiu Fai Warehousing Limited (in Compulsory Liquidation), Seapower Resources Cold Storage & Warehousing Limited (in Compulsory Liquidation) and South East Asia Overseas Finance Limited (in Compulsory Liquidation) and the Provisional Liquidators were appointed by orders of the HK Court on 31st December, 2001. On 22nd June, 2002, the Restructuring Agreement regarding the Restructuring Proposal for the Company was signed by the Company, the Provisional Liquidators and the Investors.

Further information on the events leading to the current situation of the Group is described in the letter from the Provisional Liquidators contained in the Circular.

(ii) Current financial position of the Group

(a) Results of operations

The audited and unaudited consolidated results of the Group for the two financial years ended 31st March, 2001 and the six months ended 30th September, 2001, as disclosed in Appendix I to the Circular, are summarised as follows:

	Six months ended	Year ended	31st March,
	30th September, 2001	2001	2000
	unaudited	audited	audited
	(HK$ million)	(HK$ million)	(HK$ million)
Turnover	94.0	201.1	300.3
Net loss attributable
to Shareholders	111.0	239.1	161.5

For the six months ended 30th September, 2001, the Company recorded an unaudited net loss of approximately HK$111.0 million. Such a loss was attributable to the operating loss of approximately HK$36 million, finance costs of approximately HK$48 million and the impairment losses recognised in respect of investment properties and fixed assets of approximately HK$28 million.

Net losses incurred by the Group over the two years ended 31st March, 2001 were mainly attributable to operating losses and finance costs. As set out in the paragraph headed “Background” above, the Group’s cold storage and warehousing businesses in Hong Kong had ceased after the properties on which the Group’s subsidiaries operated and the fixed assets used by them were disposed of by the receivers in early 2002. Having considered the Group’s losses and the shrinkage in business operations, we consider that without implementing any restructuring proposal or taking corporate actions, the Group would not be able to continue as a going concern and may likely be wound up.

(b) Net assets

As at 30th September, 2001, the Group had unaudited net assets of approximately HK$247.7 million, or equivalent to approximately HK$0.16 per Share. Based on the pro forma unaudited consolidated balance sheet of the Group, it would have had unaudited net deficits of approximately HK$686.4 million, or equivalent to a net deficit of approximately HK$0.44 per Share, after adjusting for losses and gains from disposals of assets and for various transactions since 30th September, 2001 but before Completion. Details of the adjustments are set out in section 6 of Appendix I to the Circular.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(c) Indebtedness of the Group

As at 30th September, 2001, the Group had unaudited net current liabilities of approximately HK$1,230.7 million. Total liabilities amounted to approximately HK$1,306.2 million of which approximately HK$1,184.7 million was interest-bearing bank and other borrowings and finance leases due within one year. The total indebtedness due by the Company to the Creditors was estimated by the Provisional Liquidators at about HK$1,303.3 million as at the Latest Practicable Date. Since the Group relies primarily on bank financing, finance costs have been a significant source of cash outflow and expense. As indicated in the pro forma unaudited consolidated balance sheet of the Group set out in section 6 of Appendix I to the Circular, the net liabilities position of the Group prior to implemention of the Restructuring Proposal would be approximately HK$686.4 million.

Based on the above, it can be noted that the financial resources which will be available to the Company as a result of the Restructuring Proposal will significantly improve the Company’s financial predicament and restore its cashflow position.

(iii) The Restructuring Proposal

The Restructuring Proposal involves (a) the Capital Reorganisation; (b) the Debt Restructuring which includes the Schemes, the Put Option and the Call Option; and (c) the Subscription.

(a) Capital Reorganisation

The Capital Reorganisation comprises the consolidation of Shares, the reduction of the nominal value of the consolidated Shares and the subdivision of Shares, details of which are set out in the letter from the Provisional Liquidators contained in the Circular. Each of the above arrangements will be subject to, among other conditions, the passing of the resolutions by the Shareholders at the EGM and whose approval as a whole represents one of the conditions precedent to implementing the Restructuring Proposal.

As a result of the Capital Reorganisation, a credit of approximately HK$75.8 million arising from the capital reduction will be applied to eliminate the Company’s accumulated losses. Furthermore, the Capital Reorganisation will enable the Company to issue New Shares at a price below the par value of the Shares now in issue. We consider such arrangement reasonable in facilitating the implementation of the Restructuring Proposal.

(b) Debt Restructuring

The total indebtedness due by the Company to the Creditors was estimated at approximately HK$1,303.3 million as at the Latest Practicable Date and will be restructured by way of the Schemes, the Put Option and the Call Option. Details of the Debt Restructuring are set out in the letter from the Provisional Liquidators contained in the Circular and a summary of which is set out below:

(i) The Schemes

In exchange for the Creditors’ agreement to discharge and waive all their claims against the Company, the Creditors will receive from the Company, via the Scheme Administrators, (i) HK$70 million in cash; (ii) 360,612,679 New Shares representing approximately 4% of the enlarged issued share capital of the Company upon Completion; (iii) the entire interests in SDI with a book value of approximately HK$59.6 million as at 30th September, 2001; and (iv) any cash (after deducting the costs and expenses incurred by the Provisional Liquidators during the restructuring period) held by the Company as at the date of Completion. In addition, the Creditors will be entitled to 50% of the net proceeds

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

from the recovery and/or realisation in connection with the Receivables, Pentagon Profits, Allied National or iPower made by the Company or the Group (provided that the sale of Allied National or iPower is completed within 12 months of the date of Completion) after deducting all costs and expenses incurred in connection with any recovery or realisation or attempted recovery or realisation. The Investors have confirmed that they have no intention to dispose of Allied National and iPower; however, the Creditors’ interests in the subsidiaries are protected by the Restructuring Agreement as they will be entitled to 50% of the net proceeds if Allied national and iPower are sold. Meanwhile, the remaining 50% of the net proceeds will be retained by the Company.

If the Company has not taken adequate steps to recover any amounts payable to the Group in connection with the Receivables or realise Pentagon Profits within 12 months of the date of Completion, the Scheme Administrators may within three months of the first anniversary of the date of Completion request the Company to transfer any of the Receivables and its entire interest in Pentagon Profits to the Scheme Administrators for the benefit of the Creditors for a total consideration of HK$1. Under such circumstances, the Company will be entitled to 30% of the net proceeds from the recovery of the Receivables and realisation of Pentagon Profits by the Scheme Administrators after deducting all costs and expenses incurred in connection with any recovery or realisation or attempted recovery or realisation.

Particulars of the Receivables, Pentagon Profits, Allied National and iPower are set out in the letter from the Provisional Liquidators contained in the Circular.

We have attempted to quantify the total amount to be received by the Creditors under the Schemes and compared it with the amount to be discharged and waived by the Creditors upon the successful implementation of the Restructuring Agreement and have set out the results in the table below:

	HK$ million
Cash	70.0
360,612,679 New Shares_(note 1)_	2.9
Interests in SDI_(note 2)_	59.6
Cash held by Company at Completion_(note 3)_	1.5
Amount available to Creditors before any
recovery of Receivables or realisation
of Pentagon Profits	134.0	(A)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

	Net book value
	HK$ million
50% net proceeds from full recovery
of Receivables_(note 4)_	100.0
50% net proceeds from realisation
of Pentagon Profits in its net book value_(note 5)_	60.2
Sub-total	160.2	(B)
70% net proceeds from full recovery
of Receivables_(note 4)_	140.0
70% net proceeds from realisation
of Pentagon Profits in its net book value_(note 5)_	84.3
Sub-total	224.3	(C)
Total amount available to the Creditors
— without recovery = (A)	134.0
— with full recovery within 12 months
from Completion = (A) + (B)	294.2	(D)
— with full recovery after 12 months
from Completion = (A) + (C)	358.3	(E)
Total amount to be discharged and waived
by the Creditors	1,303.3	(F)
Amount unrecoverable by the Creditors
— without recovery = (F) – (A)	1,169.3
— with full recovery within 12 months
from Completion = (F) – (D)	1,009.1
— with full recovery after 12 months
from Completion = (F) – (E)	945.0

Notes:

Based on the pro forma unaudited net asset value of the New Shares immediately after Completion of approximately HK$0.008 per New Share.
Based on the its published unaudited book value as at 30th September, 2001.
Assuming that the Company’s cash position at Completion after deducting the relevant costs end expenses incurred by the Provisional Liquidators during the restructuring period will remain unchanged at about HK$1.5 million as at the Latest Practicable Date.
Receivables represent approximately HK$200 million outstanding as at 31st December, 2001.
The realisation of Pentagon Profits refers to the recovery from the investments made by Pentagon Profits in 24 townhouses in Beijing with an unaudited book value of approximately HK$135 million as at 30th September, 2001 after netting off secured debts amounting to approximately HK$14.6 million as at the Latest Practicable Date. The value of these 24 townhouses as at 31st August, 2002 as appraised by Chesterton Petty Limited, an independent firm of property valuers, is approximately HK$121.4 million.

We have used the pro forma unaudited consolidated net asset value per New Share instead of the par value in calculating the value of the 360,612,679 New Shares to be issued to the Creditors as we consider that the net asset value is more indicative of the value to be received by the Creditors upon Completion. As indicated in the above table, the amount to be waived by the Creditors is substantial as compared to the amount to be received and recovered by them under the Schemes. For instance, on the basis as set out in the above table and if the Receivables and Pentagon Profits are realised at their net book value by

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the Scheme Administrators after 12 months from Completion, the amount to be waived by the Creditors will be approximately HK$945.0 million. If the Receivables and Pentagon Profits are realised at their net book value by the Company or the Group within 12 months from Completion, the amount to be waived by the Creditors will increase to approximately HK$1,009.1 million. If nothing at all can be realised from the Receivables and Pentagon Profits, the amount to be waived by the Creditors will further increase to approximately HK$1,169.3 million.

Despite the fact that there are differences between the amounts to be received by the Creditors in different scenarios illustrated above, we are of the opinion that the Schemes in general are in the interests of the Company and the Shareholders as a whole because of the significant amount of indebtedness discharged and waived by the Creditors upon the successful implementation of the Restructuring Proposal.

(ii) Put Option

The Investors agree to grant the Put Option to the Creditors and/or the Scheme Administrators to sell part or all of the 360,612,679 New Shares issued and allotted pursuant to the Restructuring Agreement at HK$0.03 per New Share to the Investors within six months of the date of Completion.

(iii) Call Option

The Creditors and/or the Scheme Administrators will grant the Call Option to the Investors to purchase part or all of the 360,612,679 New Shares issued and allotted pursuant to the Restructuring Agreement at HK$0.06 from any of the Creditors and/or the Scheme Administrators within six months of the date of Completion.

We consider both the Put Option and the Call Option as commercially acceptable arrangements because the Put Option and the Call Option will serve as an incentive for the Creditors to accept the Debt Restructuring in exchange for the full discharge and waiver of the indebtedness owed to them by the Company. These options between the Investors and the Creditors form part of the Restructuring Proposal and the arrangements thereunder, including the exercise price of the Put Option and the Call Option, not only will not adversely affect the interests of the Independent Shareholders, but will relieve the downward pressure of the share price in the open market as the Investors will have the option as well as the obligation to take up the New Shares in the event that the Creditors wish to dispose of their New Shares.

As mentioned above, the Company’s total indebtedness due to the Creditors which was estimated by the Provisional Liquidators at approximately HK$1,303.3 million as at the Latest Practicable Date will be completely discharged and waived by the Creditors upon the successful implementation of the Debt Restructuring and the tight working capital position of the Group will be relieved. However, the Restructuring Proposal will lapse if the Debt Restructuring fails to proceed and the Creditors and the Provisional Liquidators may proceed with the liquidation of the Company if the Restructuring Proposal is not approved by the Shareholders. The Provisional Liquidators have indicated in its letter contained in the Circular that, should the Company be liquidated, the return to the Creditors will be minimal and there will unlikely be any return to the Shareholders. On the basis of the current circumstances, we are of the opinion that the Restructuring Proposal is more likely to provide a higher return to the Shareholders over a shorter time period than if the Company is forced into liquidation and is therefore in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(c) Subscription

Pursuant to the terms of the Subscription Agreement, the Investors will agree to subscribe for 8,500,000,000 New Shares at an issue price of HK$0.01 per New Share (the “Subscription”) to raise an aggregate amount of approximately HK$85 million in cash. The number of New Shares to be issued to the Investors represents approximately 94.3% of the enlarged issued share capital of the Company immediately upon Completion. In addition, a Warrant will be issued for every five New Shares issued and each Warrant will entitle the holder thereof to subscribe for one New Share at HK$0.01 each.

The Company has also granted the Investors an option to subscribe for not more than 500,000,000 additional New Shares (with one Warrant for every five New Shares issued and each Warrant entitling the holder thereof to subscribe for one New Share at HK$0.01 each) at HK$0.01 each with an aggregate value of not more than HK$5,000,000 upon Completion in satisfaction of the Investors’ costs and expenses incurred in relation to the restructuring of the Company.

The issue price per New Share of HK$0.01 each represents a discount of approximately 63.0% to the closing price of the Shares of HK$0.027 each on 28th December, 2001 which was the last trading day prior to the suspension of the trading in the Shares and a discount of approximately 58.8% to the average closing price of HK$0.0243 per Share for the period of ten trading days ended 28th December, 2001. Based on the proposed consolidation of every ten issued Shares into one New Share, the subscription price of HK$0.01 each represents a discount of approximately 96.3% to the theoretical closing price of the consolidated Shares of HK$0.27 each on 28th December, 2001 and a discount of approximately 95.9% to the average theoretical closing price of the consolidated Shares of HK$0.243 each for the period of 10 trading days ended 28th December, 2001.

Despite the substantial discount of the issue price, we consider that given the current financial conditions of the Company, it would unlikely be able to raise any funds from debt or equity issue at the then prevailing market prices of the Shares. As set out in the pro forma unaudited consolidated balance sheet of the Group in section 6 of Appendix I to the Circular, the adjusted consolidated net deficits of the Group prior to implementation of the Restructuring Proposal amounted to about HK$686.4 million or equivalent to about HK$0.44 per Share. The issue price of HK$0.01 per New Share therefore represents a significant premium over the net deficits attributed to each existing Share of the Company. The Group’s net asset position immediately after Completion will be discussed in detail in the section headed “Effects of the Restructuring Proposal” below.

Since the Shares were suspended from trading from 28th December, 2001, the Group’s cashflow problem deteriorated and its cold storage and warehousing businesses in Hong Kong ceased completely subsequent to the disposals of the properties on which the Company’s subsidiaries operated. We consider that the closing price of the Shares prior to the suspension of trading is not reflective of the current financial condition and value of the Company and it is, therefore, inappropriate to use the share prices recorded prior to the suspension on 28th December, 2001 as a benchmark for comparison against the issue price under the Subscription.

In view of the above, as well as the significant amount of financial resources to be provided by the Investors to the Company under the Restructuring Proposal, the positive financial effects as discussed in the section headed “Effects of the Restructuring Proposal” below and the avoidance of a possible involuntary liquidation of the Company, we consider that it is commercially acceptable and typical in a corporate rescue exercise for the subscription price of the New Shares, which was arrived at after arm’s length negotiations, to be lower than the closing price immediately prior to the suspension of trading.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iv) Effects of the Restructuring Proposal

(a) Net assets

Based on the pro forma unaudited consolidated balance sheet of the Group as set out in section 6 of Appendix I to the Circular, the pro forma adjusted and unaudited consolidated net assets of the Group upon Completion will amount to approximately HK$73.4 million, which is equivalent to approximately HK$0.008 per New Share after adjusting for losses and gains on disposals of properties, receivables and for various transactions since 30th September, 2001. This represents a significant improvement compared with the net deficits of approximately HK$686.4 million, or HK$0.44 per Share prior to the implementation of the Restructuring Proposal.

The Restructuring Proposal will accordingly improve the net asset position and the capital base of the Company by an amount of approximately HK$759.8 million, represented by the cash received under the Subscription and indebtedness waived or discharged after accounting for the transfer of the interest in SDI to the Scheme Administrators, restructuring costs and other expenses.

In the event that the Warrants (excluding those associated with the Investors’ Option) to be issued under the Subscription are fully exercised by the Investors, the pro forma unaudited adjusted consolidated net assets of the Group will increase further by HK$17 million to approximately HK$90.4 million.

Independent Shareholders should also note that the pro forma balance sheet of the Group mentioned above has been prepared on a going concern basis whereas the actual value of its assets may depreciate significantly if the Company is forced into liquidation. However, the Restructuring Proposal will be a means to preserve the value of the Company’s assets because it will prevent the Company from being liquidated. Given this benefit and the enhancement of the overall pro forma net asset position of the Group as a result of the Restructuring Proposal, we consider that the Restructuring Proposal is in the interests of the Company and the Shareholders as a whole.

(b) Working capital

The Subscription is expected to raise approximately HK$85 million in cash, of which HK$70 million and approximately HK$9.6 million respectively will be paid to the Scheme Administrators for distribution to the Creditors and applied towards restructuring-related expenses and as the Group’s working capital during the course of the restructuring. The remaining balance of approximately HK$5.4 million will be retained by the Company as the Group’s future general working capital. In addition, assuming that the Warrants (excluding those associated with the Investors’ Option) are exercised in full at the subscription price of HK$0.01 per New Share, an additional equity of HK$17 million will be generated for use by the Group. Furthermore, the Investors have undertaken to the Stock Exchange to make financial accommodation available to the Company so that the Group will have sufficient working capital for its operations for a period of 12 months after Completion.

On the basis that sufficient working capital will be available to the Group for its operations for at least 12 months after Completion, we are of the opinion that the Restructuring Proposal is in the interests of the Company and the Independent Shareholders as a whole.

(c) Operating results

Under the Restructuring Proposal, the Company’s entire interests in SDI and Pentagon Profits will be transferred to the Scheme Administrators and/or realised for distribution to the Creditors. As reported by the Provisional Liquidators, the assets of SDI are various plots of land in Indonesia which are not related to or required for the operation of the Company’s principal businesses of logistics management services and cold storage

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

warehousing. The investment properties of Pentagon Profits in Beijing are also vacant. Therefore, we consider that the transfer and realisation of these assets from the Company will not have any material impact on the Company’s business operations or operating results.

Upon the successful implementation of the Restructuring Proposal, the Company’s indebtedness due to the Creditors of approximately HK$1,303.3 million as at the Latest Practicable Date will be fully discharged and waived and the Company’s interest expenses are expected to decrease significantly as a result of the reduction in the overall level of indebtedness. Assuming a bank borrowing rate at the prevailing prime rate for Hong Kong dollars of 5% per annum, approximately HK$65.2 million of interest expenses on an annualised basis would have been saved on the total indebtedness of approximately HK$1,303.3 million as a result of the Restructuring Proposal.

Nevertheless, Independent Shareholders are advised to note that the Restructuring Proposal does not provide for any concrete plans for revitalising the Company’s remaining principal businesses and, therefore, there is no assurance that the Company’s operating performance will improve or the Company will revert to profitability after implementation of the Restructuring Proposal.

(d) Dilution effect on the shareholding

Details of the existing shareholding structure of the Company and the possible shareholding structure following the Completion are set out in the paragraph headed “Shareholding Structure” in the letter from the Provisional Liquidators contained in the Circular. The table below compares the dilution effect of the restructuring exercises carried out by companies listed on the Stock Exchange in the 12-month period immediately before the announcement of the Restructuring Proposal (the “Comparables”):

	% holding of	general public		Amount
	shareholders			of equity	Total
		Immediately		provided by	indebtedness
	Before	after	Dilution	investors	involved
	restructuring	restructuring	effect	(Note 1)	(Note 2)
Company	(A)	(B)	(B)/(A)-1	HK$ million	HK$ million
Innovative International	73.85	0.29	-99.60%	65.0	883.0
(Holdings) Limited
Tem Fat Hing Fung	82.33	1.43	-98.26%	48.0	1,472.0
(Holdings) Limited
Kessel International	34.00	0.93	-97.28%	40.0	95.5
Holdings Ltd
CIL Holdings Limited	78.72	5.24	-93.34%	35.0	220.0
Wireless InterNetworks	52.99	3.73	-92.95%	40.0	995.3
Limited
Wah Nam Group Limited	100.00	9.01	-90.99%	40.0	440.7
Kin Don Holdings Limited	72.46	22.91	-68.38%	34.0	157.4
Dransfield Holdings Ltd	50.90	20.72	-59.29%	53.7	131.8
Fu Hui Holdings Limited	62.84	26.53	-57.78%	100.0	125.6
Hung Fung Group	35.78	16.21	-54.71%	30.0	233.8
Holdings Ltd
Wah Lee Resources	50.91	23.89	-53.08%	55.0	212.6
Holdings Limited
The Company	72.45	1.25	-98.28%	85.0	1,303.3

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Notes:

The amount of equity represents the total amount of cash provided by the relevant investor as equity, and does not include the amounts provided as loan capital or to be provided under option, warrant or other convertible instruments.
The amount of indebtedness represent the total amount of outstanding indebtedness estimated by the investor at the time of announcement of the rescue proposal.

As indicated above, the magnitude of the dilution effect of the Restructuring Proposal is the second largest among the Comparables and the shareholding of existing public Shareholders will be diluted from approximately 72.45% to approximately 1.25% of the enlarged issued share capital of the Company immediately upon the Completion but before the exercise of any options or Warrants. Such a dilution is a result of the issue of 8,860,612,679 New Shares to the Investors and the Creditors pursuant to the Restructuring Agreement. As illustrated under the paragraph headed “Effects of the Restructuring Proposal” in the letter from the Provisional Liquidators, if the Warrants (excluding those associated with the Investors’ Option) are exercised in full, an additional 1,700,000,000 New Shares will be issued and the existing public Shareholders’ interests will be diluted further to approximately 1.05% of the enlarged issued share capital of the Company.

Nevertheless, it should be noted from the table above that the amount of equity to be provided by the Investors under the Restructuring Proposal is HK$85 million and is the second largest amount among the Comparables. Given the substantial amount of equity to be provided by the Investors, we consider it logical for them to require a higher percentage of equity interest in the Company in exchange for their investments in the Group. Furthermore, in view of the Company’s indebtedness of approximately HK$1,303.3 million as at the Latest Practicable Date and its net deficit position, it would be very difficult for the Company to raise capital by way of debt issue or from the equity market. In the absence of a viable restructuring proposal which includes a substantial cash injection for settlement of large amount of debts and general operation needs, it is very likely that the Creditors and the Provisional Liquidators may proceed with the liquidation of the Company if the Restructuring Proposal is not approved by the Shareholders. The Provisional Liquidators have indicated that there will unlikely be any return to the Shareholders if the Company is wound up. Taking the above factors into consideration, we consider the dilution effect on Independent Shareholders’ shareholding interests to be reasonable and acceptable.

(v) Future management of the Group and intentions of the Investors

Following the Completion, all existing Directors, namely, Ms Shirley Choi Siu Lui, Ms. Ou Yirong, Mr. Norman Choi Sung Fung, Mr. Choi Sai Leung, Ms. Judy Wong Tak Kwan and Mr. Ronald Lau Kin Hon will be removed from the Board. The composition of the future Board of the Company and particulars of the proposed Directors are contained in the letter from the Investors in the Circular.

Particulars of the Investors, namely Mr. Pang Man Kin, Nixon and Leader Glory, are also contained in the letter from the Investors in the Circular.

As indicated in the letter from the Investors, none of Mr. Pang Man Kin, Nixon and the proposed Directors appear to have any experience in managing cold storage business or logistics management services. However, the Investors propose to appoint Mr. Li Bai Xiang and Mr. Xu Chengwu as senior advisers to the Board upon Completion. Mr. Li Bai Xiang is the General Manager of China National Storage and Transport (Guangzhou) Corporation, one of the largest state-owned storage and transport operations in the PRC. The particulars of Mr. Xu Chengwu are set out in the letter from the Investors contained in the Circular which do not indicate any qualifications or experience directly relevant to the Group’s existing businesses. Mr. Li Bai Xiang and Mr. Xu Chengwu will be involved in exploring suitable business opportunities for the Group to further develop and extend its businesses, such as exploring broader markets for its cold storage and warehousing management software program and, in particular, developing warehousing and logistics business in the PRC. The Investors also intend to re-establish a

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

strong professional management and working team for the Company by recruiting employees with relevant experience in cold storage warehousing and logistics business in Australia, Hong Kong and the PRC after Completion. The Investors will retain the Group’s current senior management to oversee and manage the Group’s existing businesses.

Despite the proposed appointment of senior advisers to the Board, Shareholders should note that there is only one candidate, namely Mr. Li Bai Xiang, among those proposed new Directors and senior advisers who appears to possess relevant experience in managing the Company’s principal businesses. We consider such management structure may place too much reliance on one single individual. Should Mr. Li cease to be involved in the Group’s strategic management and the Group fails to find a replacement for his position, the overall management of the Group’s businesses may be adversely affected. Although it is the intention of the Investors to retain the Group’s current senior management, particulars of whom are described in the letter from the Investors contained in the Circular, there is the possibility that the current senior management could not perform effectively without the guidance of a competent Board. Shareholders are therefore advised to note that the Group’s businesses may not be properly and effectively managed following Completion and there is no guarantee that the Company’s operating results will improve or the Company will revert to profitability in the near future.

The intention of the Investors regarding the business operations and future development of the Group is described in the letter from the Investors contained in the Circular. While we are at present unable to comment on the prospects of the restructured Group, we consider that the Restructuring Proposal will introduce to the Company a new controlling shareholder who has the financial resources to restore the Group to a stable financial condition and continue its normal business operations and is therefore in the interests of the Company and the Shareholders as a whole.

B. THE WHITEWASH WAIVER

Immediately upon Completion, the Investors will be interested in approximately 94.3% of the enlarged issued share capital of the Company and their shareholding will be increased further to approximately 95.5% by the exercise of the Investors’ Option and all Warrants. In accordance with Rule 26 of the Code, the Investors are obliged to make a general offer for all the Shares other than those already held by the Investors and parties acting in concert with them.

The Investors have applied to the Executive for the waiver from their obligations to comply with the requirement pursuant to Note 1 on dispensation from Rule 26 of the Code. The Restructuring Proposal is conditional on the approval of the Whitewash Waiver by the Independent Shareholders by way of a poll at the EGM and on the grant of the Whitewash Waiver by the Executive. The Executive has indicated, subject to the approval by the Independent Shareholders on a vote taken by way of a poll, to waive any obligations of the Investors and the parties acting in concert with them to make a general offer which might result from Completion or the exercise of the Warrants, the Call Options or the Put Options. The Investors have indicated that they will not waive or amend the Whitewash Waiver condition. In the event that the Whitewash Waiver is not approved by the Independent Shareholders, the Restructuring Proposal will not proceed and the Company will not receive the funds from the Subscription. For reasons as discussed under the section headed “The Restructuring Proposal” above, we concur with the Provisional Liquidators that if the Restructuring Proposal is not implemented, the Creditors will likely take legal actions to recover their claims and force the Company to wind up. Under such circumstances and given the current financial conditions of the Group, the Shareholders will unlikely be able to realise any returns. As the requirement for the Whitewash Waiver is a common feature in rescue proposals for companies which are in financial difficulties and revived as a result of injection of funds by new investors, we are in the opinion that the grant of the Whitewash Waiver is in the interests of the Company and its Shareholders as a whole for the purposes of implementing the Restructuring Proposal.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

Having considered the factors and reasons set out above and, in particular, the following:

(i) the discharge and waiver of all indebtedness due to the Creditors by the Company immediately after Completion;
(ii) the injection of funds from the Subscription which is critical to the operations of the Group’s existing businesses;
(iii) the improvement in the working capital and financial position of the Group from a net deficit position to a net asset position upon Completion;
(vi) the strong likelihood of an involuntary liquidation of the Company if it fails to restructure its indebtedness; and
(v) there will unlikely be any return to the Shareholders in case of a liquidation of the Company,

we consider that the Restructuring Proposal is in the interests of the Company and the Shareholders as a whole and that the terms of the Restructuring Proposal and the Whitewash Waiver are fair and reasonable so far as the Independent Shareholders are concerned. Independent Shareholders are, however, advised to note the dilution effect of the Restructuring Proposal on their shareholding interests in the Company. On balance, we recommend the Independent Shareholders to vote in favour of the resolutions in relation to the Restructuring Proposal and the Whitewash Waiver to be proposed at the EGM.

Yours faithfully, For and on behalf of AMS Corporate Finance Limited Jinny Mok

Director

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SHARE CAPITAL

The authorised and issued share capital of the Company as at the Latest Practicable Date were, and following Completion, will be as follows:

Authorised:		HK$
20,000,000,000	Shares of HK$0.05 each as at	1,000,000,000.00
	the Latest Practicable Date
92,419,490,137	New Shares of HK$0.01 each upon the Capital	924,194,901.37
	Reorganisation becoming effective
Issued and fully paid:
1,547,042,829	Shares of HK$0.05 each as at	77,352,141.45
	the Latest Practicable Date
154,704,282	New Shares of HK$0.01 each upon the Capital	1,547,042.82
	Restructuring becoming effective
9,015,316,961	New Shares of HK$0.01 each upon Completion	90,153,169.61
	but prior to the exercise of all Warrants and
	the Investors’ Option under the Subscription Agreement

Pursuant to a special resolution at an extraordinary general meeting of the Company held on 6th September, 2001, subject to the approval by and registration with the Grand Court and Registrar of the Cayman Islands, respectively, the shareholders approved the following:

(a) The issued share capital of the Company will be reduced from an amount of HK$77,352,141 to HK$15,470,428 by cancelling paid up capital of the Company to the extent of HK$0.04 on each of the ordinary share in issue so that each issued ordinary share of HK$0.05 in the capital of the Company shall be treated as one fully paid up ordinary share of HK$0.01 in the capital of the Company (the “Capital Reduction”);
(b) The credit arising from the Capital Reduction be set off against accumulated losses of the Company as at 31st March, 2001;
(c) The balance of the accumulated losses of the Company as at 31st March, 2001 which has not been cancelled pursuant to paragraph (b) be eliminated by the cancellation of the same amount standing to the credit of the share premium account of the Company; and
(d) subject to and forthwith upon the Capital Reduction taking effect, all of the authorised but unissued shares of HK$0.05 each in the capital of the Company which shall include, without limitation, those unissued shares resulting from the Capital Reduction be canceled and forthwith upon such cancellation, the authorised share capital be increased to HK$1,000,000,000 by the creation of such additional number of shares of HK$0.01 each.

The issued and unissued ordinary shares resulting from the above changes shall rank pari passu in all respects in accordance with the clauses of the Company’s Articles of Association.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

According to the Company’s announcement dated 3rd January, 2002, the Company has made an application to the Cayman Islands Court to postpone the proceeding of the proposed capital reduction until further notice.

As at the Latest Practicable Date, the Company has not obtained the approval by and completion of the registration with the Grand Court and Registrar of the Cayman lslands, respectively.

Accordingly, there has been no alteration in the number of issued Shares since 31st March, 2001which is the last financial year end date of the Company to the Latest Practicable Date.

As at the Latest Practicable Date, all issued Shares ranked pari passu in all respects, including, in particular, as to dividends, voting rights and return of capital. All New Shares to be issued will rank pari passu in all respects with the Shares, including in particular, as to dividends, voting rights and return of capital.

According to the Company’s last interim report, the Company has share options granted to the Directors under the Existing Share Option Scheme remain outstanding. Pursuant to the Existing Share Option Scheme, if a person ceases to be an employee of the Company, his/her share options will lapse three months after they cease their employment with the Company. The Provisional Liquidators terminated the employee service contracts of all Directors in January 2002. Therefore, no share option granted under the Existing Share Option Scheme remains outstanding as at the Latest Practicable Date.

Except for the Warrants, the options which may be granted pursuant to New Share Option Scheme and the Investors’ Option, the Company has no other outstanding securities convertible into New Shares, and no share or loan capital of the Company has been put under option or agreed conditionally or unconditionally to be put under option and no other conversion right affecting the Shares or other derivatives in respect of securities which are being offered for or which carry voting rights have been issued or granted or agreed conditionally or unconditionally to be issued or granted.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. FINANCIAL SUMMARY

The table set out below summarises the consolidated results of the Group for the preceding five financial years ended 31st March, 2001, as derived from the audited consolidated financial statements of the Company.

RESULTS Turnover Profit (loss) from operations Finance costs Other non-operating expenses Extraordinary items Share of results of associates and jointly controlled entities Profit (loss) before taxation Taxation Profit (loss) before minority interests Minority interests Net profit (loss) for the year Dividends Profit (loss) per share Dividend per share ASSETS AND LIABILITIES Total assets Total liabilities Minority interests Shareholders’ funds	1997 HK$’000 806,100 155,781 (103,756) (478) — 8,663 60,210 26,682 33,528 (205) 33,733 24,968 2.8 cents 2.0 cents 1997 HK$’000 4,088,870 (1,934,996) (22,052) 2,131,822	For 1998 HK$’000 956,291 71,218 (147,694) (15,251) — 31,770 (59,957) 16,278 (76,235) 2,172 (78,407) 16,917 (6.2 cents) 1.3 cents 1998 HK$’000 3,740,665 (1,454,310) (13,096) 2,273,259	the year ended 31st March, 1999 2000 HK$’000 HK$’000 553,755 300,259 (832,768) (12,735) (128,659) (124,879) (17,809) (18,361) — — 1,601 (4,694) (977,635) (160,669) 1,837 (270) (979,472) (160,399) (1,583) 1,075 (977,889) (161,474) — — (75.7 cents) (11.2 cents) — — As at 31st March, 1999 2000 HK$’000 HK$’000 2,857,480 2,209,847 (1,603,735) (1,365,820) (4,305) (3,117) 1,249,440 840,910	2001 HK$’000 201,110 (105,888) (121,902) (10,847) — 362 (238,275) (407) (237,868) 1,186 (239,054) — (15.5 cents) — 2001 HK$’000 1,700,616 (1,343,754) (4,303) 352,559

— 40 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. AUDITORS’ REPORT

The following information is extracted from the auditors’ report on the financial statements of the Company for the year ended 31st March, 2001. References to page numbers are to page numbers of such audited financial statements of the Company for the year ended 31st March, 2001.

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To the shareholders of

Seapower Resources International Limited

(Incorporated in the Cayman Islands with limited liability)

We have audited the financial statements on pages 26 to 85 which have been prepared in accordance with accounting principles generally accepted in Hong Kong.

Respective Responibilities of Directors and Auditors

The Company’s Directors are responsible for the preparation of financial statements which give a true and fair view. In preparing financial statements which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently.

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

Basis of Opinion

We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants, except that the scope of our work was limited as explained below.

An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the circumstances of the Company and of the Group, consistently applied and adequately disclosed.

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

However, the evidence available to us was limited as follows:

(1) Included in the consolidated income statement is a loss on disposal of a subsidiary of approximately HK$3 million. However, we were unable to obtain the sale and purchase agreement or other documentary evidence in respect of the disposal. Also, full provision has been made in respect of the outstanding receivable arising from the disposal of approximately HK$27 million. Against this background, we were unable to satisfy ourselves as to the validity of the disposal and as to whether the recorded loss on disposal and the subsequent provision are fairly stated.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(2) As explained in note 15 to the financial statements, included in the Group’s property, plant and machinery as at 31st March, 2001 were properties held for development of approximately HK$54 million. We were unable to obtain sufficient information and explanations regarding the valuation of the properties under development as at 31st March, 2001 to assess whether any provision is required for impairment in value.

Any adjustments to the figures mentioned above would affect the net assets of the Company and the Group as at 31st March, 2001 and the results of the Group for the year then ended.

In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis

Fundamental Uncertainty Relating to the Going Concern Basis

In forming our opinion, we have considered the adequacy of the disclosures made in note 2 to the financial statements which explain the current liquidity difficulties of the Group.

The Group’s servicing of borrowings from certain financial creditors (the “Financial Creditors”) were not made according to the schedules set by the Financial Creditors such that the Group’s total borrowings from these Financial Creditors have become due for immediate repayment. As a result, receivers have been appointed by certain of the Financial Creditors (the “Banking Syndicate”) in respect of two of the Group’s three cold storage warehouses (the “Properties”). Also, one member of the Banking Syndicate has taken action in connection with their specific security over certain Group assets. At the same time, the Group has put certain of its investment properties to tender with a view for sale so as to repay the borrowings from a secured financial creditor (not a member of Banking Syndicate).

The financial statements have been prepared on a going concern basis on the basis that in the context of the events described above, agreement can be reached with the Financial Creditors to provide the Group with sufficient funding for its requirements.

The financial statements have been prepared on a going concern basis, the validity of which depends upon future funding being available. The financial statements do not include any adjustments that may result from the failure to obtain such funding. We consider that the fundamental uncertainty has been adequately disclosed in the financial statements and our opinion is not qualified in this respect.

Qualified Opinion Arising from Limitations of Audit Scope

Except for any adjustments that might have been found to be necessary had we been able to obtain sufficient evidence concerning the disposal of a subsidiary and concerning the valuation of properties held for development, in our opinion the financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31st March, 2001 and of the loss and cash flows of the Group for the year then ended and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

In respect alone of the limitations on our work set out in the basis of opinion section of this section of this report:

we have not obtained all the information and explanations that we considered necessary for the purpose for our audit; and
we were unable to determine whether proper books of accounts have been kept.

Deloitte Touche Tohmatsu Certified Public Accountants

Hong Kong, 26th July, 2001

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. AUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT

The following information is extracted from the audited consolidated financial statements of the Company for the year ended 31st March, 2001:

Consolidated Income Statement

For the year ended 31st March, 2001

Notes TURNOVER 4 Direct operating expenses Other revenue 5 Selling and administrative expenses Other operating expenses 6 LOSS FROM OPERATIONS 7 Finance costs 8 (Loss) gain on disposal of subsidiaries Share of results of associates Share of results of jointly controlled entities Provision for diminution in value of associates and jointly controlled entities 10 LOSS BEFORE TAXATION Taxation credit 11 LOSS BEFORE MINORITY INTERESTS Minority interests NET LOSS FOR THE YEAR 12 & 29 Loss per share Basic 13	2001 HK$’000 201,110 (152,963) 64,891 (91,099) (127,827) (105,888) (121,902) (10,847) 362 — — (238,275) (407) (237,868) 1,186 (239,054) (HK15.45 cents)	2000 HK$’000 300,259 (220,268) 95,746 (120,293) (68,179) (12,735) (124,879) 59,043 (3,328) (1,366) (77,404) (160,669) (270) (160,399) 1,075 (161,474) (HK11.82 cents)

— 43 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Balance Sheet

At 31st March, 2001

Notes NON-CURRENT ASSETS Investment properties 14 Property, plant and equipment 15 Goodwill 16 Interests in associates 18 Interests in jointly controlled entities 19 Other investments 20 CURRENT ASSETS Inventories – goods for resale Trade and other receivables 21 Amounts due from I-China Group 22 Other investments 20 Taxation recoverable Pledged bank deposits Bank balances and cash CURRENT LIABILITIES Trade and other payables 23 Amount due to I-China Group 22 Amount due to a jointly controlled entity Taxation payable Obligations under finance leases — due within one year 24 Bank and other borrowings — due within one year 25 NET CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES MINORITY INTERESTS NON-CURRENT LIABILITIES Obligations under finance leases — due after one year 24 Bank and other borrowings — due after one year 25 Deferred taxation 26 CAPITAL AND RESERVES Share capital 27 Reserves 29	2001 HK$’000 323,910 1,275,419 — — — 25,100 1,624,429 — 40,257 — 565 6,013 17,378 11,974 76,187 92,580 — 1,007 846 283 1,248,624 1,343,340 (1,267,153) 357,276 4,303 414 — — 414 352,559 77,352 275,207 352,559	2000 HK$’000 352,900 1,625,462 — 40,815 2,916 27,271 2,049,364 1,764 104,897 13,253 6,708 8,446 17,331 8,084 160,483 76,058 3,834 67 846 1,627 673,050 755,482 (594,999) 1,454,365 3,117 742 609,096 500 610,338 840,910 77,352 763,558 840,910

— 44 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 31st March, 2001

Notes NET CASH INFLOW FROM OPERATING ACTIVITIES 30 RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest paid Interest on obligations under finance leases paid CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE TAXATION Hong Kong Profits Tax refunded Hong Kong Profits Tax paid Overseas tax paid NET CASH INFLOW (OUTFLOW) FROM TAXATION INVESTING ACTIVITIES Proceeds from disposal of other investments Net cash inflow on disposal of subsidiaries 31 Proceeds from disposal of property, plant and equipment Net cash inflow on acquisition of subsidiaries (net of cash and cash equivalents acquired) 32 Purchase of property, plant and equipment Increase in pledged bank deposits Proceeds from disposal of investment properties Amount advanced to a jointly controlled entity Acquisition of additional interests in subsidiaries	2001 HK$’000 36,424 (92,575) (232) (92,807) 3,233 (890) — 2,343 70,599 26,968 2,977 10 (13,167) (47) — — —	2000 HK$’000 91,138 (127,063) (310) (127,373) 1,787 (8,052) (71) (6,336) 101,458 91,810 1,677 — (2,424) (17,331) 1,700 (5,206) (248)

— 45 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Cash Flow Statement (Continued)

For the year ended 31st March, 2001

Notes NET CASH INFLOW FROM INVESTING ACTIVITIES NET CASH INFLOW BEFORE FINANCING FINANCING 33 Repayment of bank borrowings Repayment of obligations under finance leases New bank borrowings raised Proceeds from issue of shares NET CASH (OUTFLOW) INFLOW FROM FINANCING INCREASE IN CASH AND CASH EQUIVALENTS EFFECT OF CHANGES IN EXCHANGE RATES CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT END OF THE YEAR ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS Bank and cash balances Short-term bank borrowings with less than three months to maturity when raised Bank overdrafts	2001 HK$’000 87,340 33,300 (14,693) (2,049) — — (16,742) 16,558 (231) (155,322) (138,995) 11,974 (147,452) (3,517) (138,995)	2000 HK$’000 171,436 128,865 (131,469) (3,136) 150,000 12,800 28,195 157,060 — (312,382) (155,322) 8,084 (155,171) (8,235) (155,322)

— 46 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Financial Statements

1. GENERAL

The Company is an exempted company incorporated in the Cayman Islands with limited liability. Its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The Company is an associate of I-China Holdings Limited (“I-China”, formerly known as Seapower International Holdings Limited) which, as at 31st March, 2001, held an equity interest of approximately 36% in the Company. The shares of I-China are also listed on the Stock Exchange. I-China together with its subsidiaries is hereinafter referred to as the “I-China Group”.

The Company is an investment holding company. The Group is principally engaged in cold storage warehousing and logistic management and related services, property investment and money lending.

The Group’s subsidiaries which were engaged in food retailing and distribution and financial services business other than money lending were gradually disposed of during the years ended 31st March, 2001 and 2000. Accordingly, the activities of food retailing and distribution and financial services business other than money lending were classified as discontinued operations for the years ended 31st March, 2001 and 2000.

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

In preparing the financial statements, the Directors of the Company have given careful consideration to the future liquidity of the Group in the light of the Group’s net current liabilities of approximately HK$1,267 million.

As explained in note 25, the Group’s servicing of borrowings from certain financial creditors (the “Financial Creditors “) were not made according to the schedules set by the Financial Creditors such that the Group’s total borrowings from these Financial Creditors have become due for immediate repayment. This has given rise to the steps described in (i) to (iii) below.

(i) On 11th June, 2001, notices were received by the Group to appoint receivers for two of the Group’s cold storage warehouses in Hong Kong (the “Properties”), which have been mortgaged to a banking syndicate (the “Banking Syndicate”) to secure facilities granted to the Group (the “Syndicated Loans”), pursuant to the provisions in the mortgage documents dated 17th December, 1998 for the legal charges of the Properties and as a result of the failure of the Group to make repayment in accordance with the schedule. On 13th July, 2001, the Banking Syndicate issued writs of summons to another subsidiary of the Group as a guarantor to the abovementioned Syndicated Loans and which operates the Group’s remaining cold storage warehouse in Hong Kong, demanding immediate repayment of the Syndicated Loans. As at the date of this report, the Properties continue to be used by the Group for its cold storage warehousing businesses. The outstanding borrowings from the Banking Syndicate as at 31st March, 2001, excluding interest, amounted to approximately HK$453,000,000.
(ii) Subsequent to the balance sheet date, the Group was requested by one of the Financial Creditors (a member of the Banking Syndicate) to deliver (i) certain of its investment properties and other land and buildings with carrying values at valuation of approximately HK$160,400,000 as at 31st March, 2001; and (ii) share certificates of certain listed investments with book value of approximately HK$12,550,000 as at 31st March, 2001, for disposal of these secured assets to repay the outstanding borrowings due to this financial creditor. The outstanding borrowings from this financial creditor as at 31st March, 2001, excluding interest, amounted to approximately HK$263,007,000.
(iii) Subsequent to the balance sheet date, the Group put certain of its investment properties with valuation of approximately HK$89,000,000 as at 31st March, 2001 for sale by tender so as to repay the associated secured borrowings from a financial creditor (not a member of the Banking Syndicate). Any sales are subject to the approval of that financial creditor, the relevant outstanding secured borrowings from which as at 31st March, 2001, excluding interest, amounted to approximately HK$69,044,000.

3. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared under the historical cost convention as modified for the revaluation of investment properties, properties held for development, cold storage warehouses, other land and buildings and certain investments in securities.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The financial statements have been prepared 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 31st March each year.

The results of subsidiaries, associates and jointly controlled entities 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.

All significant intercompany transactions and balances within the Group have been eliminated on consolidation.

Goodwill and capital reserve

Goodwill represents the excess of the purchase consideration over the fair value ascribed to the Group’s share of the separable net assets at the date of acquisition of a subsidiary and is capitalised and amortised on a straight line basis over its useful economic life not exceeding twenty years.

Goodwill is capitalised as an asset and amortised on a straight line basis over its useful economic life where it is probable that the future economic benefits that are attributable to the goodwill will flow to the Group over the estimated useful life of the goodwill, which is assessed by the Directors with reference to the probability of future economic benefits using reasonable and supportable assumptions that represent the Directors’ best estimate of the set of economic conditions that will exist over the useful life of the goodwill.

Goodwill is recognised as an asset and amortised on a systematic basis over its useful economic life less impairment losses recognised.

Capital reserve, which represents the excess over the purchase consideration of the fair value ascribed to the Group’s share of the separable net assets at date of acquisition of a subsidiary, is credited to reserves.

Any premium or discount arising on the acquisition of an interest in an associate, representing the excess or shortfall respectively of the purchase consideration over the fair value ascribed to the Group’s share of the separable net assets of an associate at the date of acquisition, is dealt with in the same manner as that described above for goodwill.

On disposal of investments in subsidiaries and associates, the attributable amount of unamortised goodwill or goodwill previously credited to reserves is included in the determination of the profit or loss on disposal.

Investments in subsidiaries

A subsidiary is an enterprise in which the Company, directly or indirectly, holds more than half of the issued share capital or controls more than half of the voting power, or where the Company controls the composition of its board of directors or equivalent governing body.

Investments in subsidiaries are included in the Company’s balance sheet at cost, as reduced by any impairment losses recognised.

Investments in associates

An associate is an enterprise over which the Group is in a position to exercise significant influence, including participation in financial and operating policy decisions of the investee.

The consolidated income statement includes the Group’s share of post-acquisition results of the associates for the year and the consolidated balance sheet includes the Group’s share of net assets of the associates.

When the Group transacts with its associates, unrealised profits and losses are eliminated to the extent of the Group’s interest in the relevant associates, except where unrealised losses provide evidence of an impairment of the assets transferred.

Joint ventures

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity which is subject to joint control and over which none of the participating parties has unilateral control.

Jointly controlled entities

Joint venture arrangements which involve the establishment of a separate entity in which each venturer has an interest are referred to as jointly controlled entities.

The Group’s interests in jointly controlled entities are included in the consolidated balance sheet at the Group’s share of the net assets of the jointly controlled entities. The Group’s share of post-acquisition results of jointly controlled entities is included in the consolidated income statement.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

When the Group transacts with its jointly controlled entities, unrealised profits and losses are eliminated to the extent of the Group’s interest in the relevant joint venture entities, except where unrealised losses provide evidence of an impairment of the assets transferred.

Revenue recognition

Rental income under operating leases is recognised on a straight line basis over the terms of the respective leases.

Sales of securities, foreign exchange, commodities and bullion are recognised when the contracts of the relevant transaction are entered into.

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

Interest income is recognised on a time basis, by reference to the principal outstanding and at the rate applicable.

Dividend income from investments is recognised when the Group’s right to receive payment has been established.

Investment properties

Investment properties are completed properties which are held for their investment potential, any rental income being negotiated at arm’s length.

Investment properties are stated at their open market values based on independent professional valuations at each balance sheet date. No depreciation or amortisation is provided for investment properties with an unexpired term, including the renewable period, of more than twenty years.

Any surplus or deficit arising on the revaluation of investment properties is credited or charged to the investment property revaluation reserve unless the balance of this reserve is insufficient to cover a deficit, in which case the excess of the deficit over the balance of the investment property revaluation reserve is charged to the consolidated income statement. Where a deficit has previously been charged to the consolidated income statement and a revaluation surplus subsequently arises, this surplus is credited to the consolidated income statement to the extent of the deficit previously charged.

On the subsequent disposal of investment properties, the balance on the investment property revaluation reserve attributable to the disposed properties is transferred to the consolidated income statement.

Property, plant and equipment

Properties held for development, which are those properties being developed for production, rental or administrative purposes or for purposes not yet determined, are stated at valuation less provision for permanent diminution in value, if necessary. Cost comprises the acquisition cost and other incidental costs. Depreciation of these assets, on the same basis as other property assets, commences when the assets are put into use.

Property, plant and equipment, other than properties held for development, are stated at cost or valuation less depreciation or amortisation. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use. Expenditure incurred after the asset has been put into operation, such as repairs and maintenance and overhaul costs, is normally charged to the consolidated income statement in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of asset, the expenditure is capitalised as an additional cost of the asset.

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

Where the recoverable amount of an asset has declined below its carrying amount, the carrying amount is reduced to reflect the decline in value. In determining the recoverable amount of assets, expected future cash flow are not discounted to their present values.

Cold storage warehouses and other land and buildings are stated at their revalued amount, being the fair value on the basis of their existing use at the date of revaluation less any subsequent accumulated depreciation and amortisation. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date.

Any surplus arising on revaluation of property, plant and equipment is credited to the asset revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised as an expense, in which case this surplus is credited to the consolidated income statement to the extent of the deficit previously charged. A decrease in the net carrying amount arising on revaluation of such properties is charged to the consolidated income statement to the extent that it exceeds the surplus, if any, held in the asset revaluation reserve relating to previous revaluation of that particular asset. On the subsequent disposal of such asset, the attributable revaluation surplus not yet transferred to deficit in prior years is transferred to deficit.

Amortisation is provided to write off the valuation of leasehold land over the terms of the respective leases using the straight line method. Freehold land is not amortised.

— 49 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The valuation of buildings is depreciated over their estimated useful lives of fifty years or, where shorter, the terms of the respective leases using the straight line method.

Depreciation and amortisation are provided to write off the cost of other assets over their estimated useful lives, using the straight line method, at the following rates per annum:

Furniture, machinery and equipment 10% to 33% Motor vehicles 20%

Assets held under finance leases are depreciated over their estimated useful lives on the same basis as assets owned by the Group or, where shorter, the terms of the respective leases.

Investments in securities

Investments in securities are recognised on a trade-date basis and are initially measured at costs.

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 held for resale are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the first-in, first-out method. Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

Assets held under finance leases

Assets are classified as being held under finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the assets conserved to the Group. Assets held under finance leases are capitalised at their fair value at the date of acquisition. The corresponding liability to the lessor, net of interest charges, is included in the consolidated balance sheet as obligations under finance leases. Finance costs, which represent the difference between the total leasing commitments and the outstanding principal amount at the inception of the finance leases, are charged to the consolidated income statement over the periods of the respective leases so as to produce a constant periodic rate of charge on the remaining balances of the obligations for each accounting period.

All other leases are classified as operating leases and the rentals payable are charged to the consolidated income statement on a straight line basis over the terms of the respective leases.

Taxation

The charge for taxation is based on the results for the year as adjusted for items which are non-assessable or disallowed. The tax effect of timing differences, which 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, is computed under the liability method and is recognised as deferred taxation in the financial statements to the extent that it is probable that a liability or asset will crystallise in the foreseeable future.

Retirement benefit scheme

The amount of the contributions payable in respect of the current year to the Group’s defined contribution retirement benefit scheme is charged to the consolidated income statement.

Certain of the Group’s employees have been enrolled in a Mandatory Provident Fund scheme (“MPF”). The contributions payable in respect of the current year to the fund are charged as an expense as they fall due.

Foreign currencies

Transactions in currencies other than Hong Kong dollars are translated into Hong Kong dollars at the rates ruling on the dates of the transactions. Monetary assets and liabilities denominated in currencies other than Hong Kong dollars are re-translated into Hong Kong dollars at the rates ruling on the balance sheet date. Gains and losses arising on exchange are dealt with in the consolidated income statement.

In preparing consolidated financial statements, the financial statements of overseas operations are translated into Hong Kong dollars at the rates ruling on the balance sheet date. All exchange differences arising on translation are dealt with in reserves.

— 50 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Cash equivalents

Cash equivalents represent short-term, highly liquid investments which are readily convertible into known amounts of cash and which were within three months of maturity when acquired, less advances from banks repayable within three months from the date of the advances.

4. SEGMENTAL INFORMATION

The Group’s turnover and contribution to results from operations for the year ended 31st March, 2001, analysed by principal activity and geographical location, are as follows:

By principal activity: Continuing operations: Cold storage warehousing, logistics management and related services Financial services — money lending business: Interest income_(note) Rental income Discontinued operations: Food retailing and distribution Financial services other than money lending business: Interest income(note) Fees and related income securities, corporate finance and related services Unallocated corporate items: — Other revenue — Selling and administrative expenses — Other operating expenses Loss from operations _Note: Interest income received and receivable from: Banks and others I-China Group_(note 40)_ _Less:_Interest income from discontinued operations Interest income from continuing operations	Turnover 2001 2000 HK$’000 HK$’000 178,861 205,848 2,207 4,749 12,906 11,935 193,974 222,532 7,136 61,819 — 6,443 — 9,465 7,136 77,727 201,110 300,259		Contribution to results from operations 2001 2000 HK$’000 HK$’000 34,209 51,962 2,207 4,749 9,969 8,327 46,385 65,038 1,762 2,037 — 6,443 — 6,473 1,762 14,953 48,147 79,991 64,891 95,746 (91,099) (120,293) (127,827) (68,179) (105,888) (12,735) 2001 2000 HK$’000 HK$’000 1,811 5,580 396 5,612 2,207 11,192 — (6,443) 2,207 4,749

— 51 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Contribution to results Turnover from operations 2001 2000 2001 2000 HK$’000 HK$’000 HK$’000 HK$’000 By geographical location: Continuing operations: Hong Kong 176,850 201,074 41,725 58,567 Australia 17,124 21,458 4,660 6,471 193,974 222,532 46,385 65,038 Discontinued operations: Australia 7,136 27,607 1,762 85 Hong Kong — 50,120 — 14,868 7,136 77,727 1,762 14,953 201,110 300,259 48,147 79,991 5. OTHER REVENUE 2001 2000 HK$’000 HK$’000 Other revenue comprises: Net realised gain on other investments 51,088 62,694 Unrealised gain on other investments 11,197 5,411 Sundry income 2,606 7,642 Surplus arising on revaluation of investment properties — 17,357 Surplus arising on revaluation of other land and buildings — 2,642 64,891 95,746 6. OTHER OPERATING EXPENSES 2001 2000 HK$’000 HK$’000 Other operating expenses comprises: Provision for bad and doubtful debts 59,260 13,413 Deficit arising on revaluation of cold storage warehouses and other land and buildings 30,933 — Deficit arising on revaluation of investment properties 28,990 — Bank charges 8,559 5,153 Provision for impairment losses of goodwill 85 30,134 Amortisation of goodwill — 14,992 Write down of investment in convertible notes to net realisable value and provision for accrued interest — 4,487 127,827 68,179	Contribution to results Turnover from operations 2001 2000 2001 2000 HK$’000 HK$’000 HK$’000 HK$’000 By geographical location: Continuing operations: Hong Kong 176,850 201,074 41,725 58,567 Australia 17,124 21,458 4,660 6,471 193,974 222,532 46,385 65,038 Discontinued operations: Australia 7,136 27,607 1,762 85 Hong Kong — 50,120 — 14,868 7,136 77,727 1,762 14,953 201,110 300,259 48,147 79,991 5. OTHER REVENUE 2001 2000 HK$’000 HK$’000 Other revenue comprises: Net realised gain on other investments 51,088 62,694 Unrealised gain on other investments 11,197 5,411 Sundry income 2,606 7,642 Surplus arising on revaluation of investment properties — 17,357 Surplus arising on revaluation of other land and buildings — 2,642 64,891 95,746 6. OTHER OPERATING EXPENSES 2001 2000 HK$’000 HK$’000 Other operating expenses comprises: Provision for bad and doubtful debts 59,260 13,413 Deficit arising on revaluation of cold storage warehouses and other land and buildings 30,933 — Deficit arising on revaluation of investment properties 28,990 — Bank charges 8,559 5,153 Provision for impairment losses of goodwill 85 30,134 Amortisation of goodwill — 14,992 Write down of investment in convertible notes to net realisable value and provision for accrued interest — 4,487 127,827 68,179	Contribution to results Turnover from operations 2001 2000 2001 2000 HK$’000 HK$’000 HK$’000 HK$’000 By geographical location: Continuing operations: Hong Kong 176,850 201,074 41,725 58,567 Australia 17,124 21,458 4,660 6,471 193,974 222,532 46,385 65,038 Discontinued operations: Australia 7,136 27,607 1,762 85 Hong Kong — 50,120 — 14,868 7,136 77,727 1,762 14,953 201,110 300,259 48,147 79,991 5. OTHER REVENUE 2001 2000 HK$’000 HK$’000 Other revenue comprises: Net realised gain on other investments 51,088 62,694 Unrealised gain on other investments 11,197 5,411 Sundry income 2,606 7,642 Surplus arising on revaluation of investment properties — 17,357 Surplus arising on revaluation of other land and buildings — 2,642 64,891 95,746 6. OTHER OPERATING EXPENSES 2001 2000 HK$’000 HK$’000 Other operating expenses comprises: Provision for bad and doubtful debts 59,260 13,413 Deficit arising on revaluation of cold storage warehouses and other land and buildings 30,933 — Deficit arising on revaluation of investment properties 28,990 — Bank charges 8,559 5,153 Provision for impairment losses of goodwill 85 30,134 Amortisation of goodwill — 14,992 Write down of investment in convertible notes to net realisable value and provision for accrued interest — 4,487 127,827 68,179
		65,038
		85 14,868
		14,953
		79,991

		2000 HK$’000 62,694 5,411 7,642 17,357 2,642
		95,746

		2000 HK$’000 13,413 — — 5,153 30,134 14,992 4,487
		68,179

— 52 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. LOSS FROM OPERATIONS

Loss from operations has been arrived at after charging: Directors’ emoluments excluding retirement benefit scheme and MPF contributions of approximately HK$722,000 (2000: HK$775,000) Retirement benefit scheme contributions, net of forfeited contributions of approximately HK$254,000 (2000: HK$102,000) and MPF contributions Other staff costs Total staff costs Auditors’ remuneration: Current year Under(over)provision in previous years Depreciation and amortisation: Owned assets Assets held under finance leases Loss on disposals of property, plant and equipment Management fees payable to I-China Group_(note 40) Rental expenses under operating leases(note) and after crediting: Gain on disposal of investment properties Rental income _Note: Rental expenses under operating leases in respect of: Premises Others Rental expenses payable to I-China Group_(note 40)_ Rental expenses payable to outsiders 8. FINANCE COSTS Interest payable on: Bank and other borrowings wholly repayable within five years Bank and other borrowings not wholly repayable within five years Obligations under finance leases	2001 HK$’000 9,836 2,333 61,512 73,681 1,146 294 49,364 224 5,985 2,336 3,599 — 12,906 2001 HK$’000 2,907 692 3,599 (2,213) 1,386 2001 HK$’000 121,670 — 232 121,902	2000 HK$’000 12,600 3,691 73,368 89,659 969 (784) 57,456 1,078 297 4,652 13,406 29 11,935 2000 HK$’000 11,937 1,469 13,406 (3,285) 10,121 2000 HK$’000 100,166 24,403 310 124,879

— 53 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

9. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

Particulars of the emoluments of the Directors and the five highest paid employees are as follows:

(a) Directors’ emoluments

Fees: Executive Directors Non-executive Director Independent Non-executive Directors Other emoluments: Executive Directors Salaries and other benefits Performance related incentive payments Retirement benefit scheme and MPF contributions Non-executive Director Salaries and other benefits Retirement benefit scheme and MPF contributions The emoluments of the Directors are within the following bands: Nil to HK$1,000,000 HK$1,000,001 – HK$1,500,000 HK$2,000,001 – HK$2,500,000 HK$2,500,001 – HK$3,000,000 HK$3,000,001 – HK$3,500,000 HK$3,500,001 – HK$4,000,000 HK$5,000,001 – HK$5,500,000	2001 2000 HK$’000 HK$’000 55 57 12 — 24 24 91 81 6,940 9,896 — 2,623 491 775 2,805 — 231 — 10,467 13,294 10,558 13,375 Number of Directors 2001 2000 4 4 2 — 2 — — 1 1 — — 1 — 1	2000 HK$’000 57 — 24
		81
		9,896 2,623 775 — —
		13,294
		13,375

(b) Employees’ emoluments

During the year, the five highest paid individuals included four (2000: three) Directors, details of whose emoluments are set out above. The emoluments of the remaining one (2000: two) individuals are as follows:

Salaries and other benefits Retirement benefit scheme and MPF contributions The emoluments of the employees are within the following bands: HK$2,000,001 — HK$2,500,000	2001 2000 HK$’000 HK$’000 1,920 4,224 96 182 2,016 4,406 Number of employees 2001 2000 1 2	2000 HK$’000 4,224 182
		4,406

During the years ended 31st March, 2001 and 2000, no emoluments were paid by the Group to the five highest paid individuals, including Directors, as an inducement to join or upon joining the Group or as compensation for loss of office. In addition, during the years ended 31st March, 2001 and 2000, no Directors waived any emoluments.

— 54 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. PROVISION FOR DIMINUTION IN VALUE OF ASSOCIATES AND JOINTLY CONTROLLED ENTITIES

Provision for diminution in value of: Associates Jointly controlled entities TAXATION CREDIT The (credit) charge comprises: Under(over)provision of Hong Kong Profits Tax in prior years Overseas taxation Deferred taxation_(note 26)_ Taxation attributable to the Company and its subsidiaries Share of taxation on results of associates	2001 HK$’000 — — — 2001 HK$’000 91 — 91 (500) (409) 2 (407)	2000 HK$’000 69,904 7,500 77,404 2000 HK$’000 (191) 71 (120) (209) (329) 59 (270)

11. TAXATION CREDIT

No provision for Hong Kong Profits Tax has been made in the financial statements as the Company and its subsidiaries did not have any assessable profits for both years.

Overseas taxation is calculated at the rates prevailing in the respective jurisdictions.

Details of deferred taxation are set out in note 26.

12. NET LOSS FOR THE YEAR

Of the Group’s net loss for the year of approximately HK$239,054,000 (2000: HK$161,474,000), a loss of approximately HK$398,814,000 (2000: a profit of HK$60,900,000) has been dealt with in the financial statements of the Company.

13. LOSS PER SHARE

The calculation of the basic loss per share is based on the net loss for the year of approximately HK$239,054,000 (2000: HK$161,474,000) and on 1,547,042,829 (2000: weighted average of 1,366,583,813) shares in issue during the year.

No amount has been presented for the diluted loss per share for the years ended 31st March, 2001 and 2000 as the exercise of the outstanding share options of the Company during the year 31st March, 2001 and 2000 would result in reducing loss per share.

14. INVESTMENT PROPERTIES

At beginning of the year Disposals Reclassified from other land and buildings (Deficit) surplus on revaluation At end of the year	THE GROUP 2001 2000 HK$’000 HK$’000 352,900 297,600 — (1,671) — 39,614 (28,990) 17,357 323,910 352,900

— 55 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The carrying value of the Group’s investment properties at the balance sheet date comprises:

Held in Hong Kong under medium-term lease Held outside Hong Kong under long lease	THE GROUP 2001 2000 HK$’000 HK$’000 188,700 229,000 135,210 123,900 323,910 352,900	THE GROUP 2001 2000 HK$’000 HK$’000 188,700 229,000 135,210 123,900 323,910 352,900
		352,900

The investment properties of the Group, which are rented out or to be rented under operating leases, were revalued at 31st March, 2001 on an open market existing use basis by Debenham Tie Leung and Chesterton Petty Limited (“Chesterton”), independent firms of professional property valuers, at approximately HK$135,210,000 and approximately HK$188,700,000, respectively. The deficit arising on revaluation amounting to approximately HK$28,990,000 has been charged to the consolidated income statement.

Certain investment properties of the Group have been pledged to secure banking facilities granted to the Group.

The Group is in the process of obtaining Certificate for Housing Ownership in respect of the Group’s investment properties amounting to approximately HK$135,210,000 (2000: HK$123,900,000).

15. PROPERTY, PLANT AND EQUIPMENT

Properties held for development HK$’000 THE GROUP COST OR VALUATION At 1st April, 2000 73,626 Exchange adjustments (20,080) Additions — Acquisition of subsidiaries — Disposal of subsidiaries — Other disposals — Deficit on revaluation — At 31st March, 2001 53,546 Comprising: At cost — At valuation — 2001 53,546 53,546 DEPRECIATION AND AMORTISATION At 1st April, 2000 — Exchange adjustments — Provided for the year — Disposal of subsidiaries — Eliminated on other disposals — Write back on revaluation — At 31st March, 2001 — NET BOOK VALUES At 31st March, 2001 53,546 At 31st March, 2000 73,626	Cold storage warehouses HK$’000 1,428,433 (6,882) 47 — — — (276,873) 1,144,725 — 1,144,725 1,144,725 — — 38,238 — — (38,238) — 1,144,725 1,428,433	Other land and buildings HK$’000 101,542 (868) — — — (4,147) (32,907) 63,620 — 63,620 63,620 — — 2,408 — (187) (2,221) — 63,620 101,542	Furniture, machinery and equipment HK$’000 51,947 (3,114) 12,897 20 (7,805) (15,215) — 38,730 38,730 — 38,730 30,835 (1,473) 8,764 (1,365) (11,034) — 25,727 13,003 21,112	Motor vehicles HK$’000 3,847 (313) 928 — — (1,466) — 2,996 2,996 — 2,996 3,098 (160) 178 — (645) — 2,471 525 749	Total HK$’000 1,659,395 (31,257 13,872 20 (7,805 (20,828 (309,780
					1,303,617
					41,726 1,261,891
					1,303,617
					33,933 (1,633 49,588 (1,365 (11,866 (40,459
					28,198
					1,275,419

					1,625,462

— 56 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Furniture, machinery and equipment HK$’000 THE COMPANY COST At 1st April, 2000 16,362 Additions 84 Disposals (11,610) At 31st March, 2001 4,836 DEPRECIATION At 1st April, 2000 8,586 Provided for the year 3,343 Eliminated on disposals (9,066) At 31st March, 2001 2,863 NET BOOK VALUES At 31st March, 2001 1,973 At 31st March, 2000 7,776	Motor vehicles HK$’000 1,658 145 (145) 1,658 1,658 11 (11) 1,658 — —	Total HK$’000 18,020 229 (11,755
		6,494
		10,244 3,354 (9,077
		4,521
		1,973

		7,776

The net book value of properties held by the Group at the balance sheet date comprises:

Held in Hong Kong under medium-term lease Held outside Hong Kong under: Freehold Long lease Medium-term lease		2001	THE GROUP Properties Other held for land and develop- buildings ment HK$’000 HK$’000 60,700 — — — 1,620 — 1,300 73,626 63,620 73,626	THE GROUP Properties Other held for land and develop- buildings ment HK$’000 HK$’000 60,700 — — — 1,620 — 1,300 73,626 63,620 73,626	2000
	Properties held for develop- ment HK$’000 — — — 53,546 53,546	Cold Storage ware- houses HK$’000 1,120,000 24,725 — — 1,144,725		Properties held for develop- ment HK$’000 — — — 73,626 73,626	Cold storage ware- houses HK$’000 1,395,000 33,433 — — 1,428,433	Other land and buildings HK$’000 93,617 4,015 1,860 2,050
						101,542

Properties held for development in Indonesia were revalued in May 2000 by PT. DIAN ANDILTA UTAMA, appraisal and property consultants, on a fair market value basis, at approximately Indonesian Rupiah 66,932,588,000. In the opinion of the Directors, the fair market value of these properties as at 31st March, 2001 would not be significantly different from that in May 2000. Accordingly, these properties were stated at Indonesian Rupiah 66,932,588,000 (equivalent to approximately HK$53,546,000) as at 31st March, 2001. The Group will proceed to obtain the legal title of the properties held for development in Indonesia when an extensive plan for development is formulated.

The Group’s cold storage warehouses located in Hong Kong were revalued by Debenham Tie Leung, as at 28th March, 2001 at an open market existing use basis at approximately HK$1,120,000,000. Cold storage warehouses located outside Hong Kong were revalued as at 2nd April, 2001, by David Nelson & Partners, on an open market existing use basis, at approximately HK$24,725,000. In the opinion of the Directors, the fair market value of these properties as at 31st March, 2001 would not be significantly different from that as at 28th March, 2001 and 2nd April, 2001. Accordingly, these properties were stated at an aggregate value of approximately HK$1,144,725,000 as at 31st March, 2001. The deficit arising on revaluation of these properties amounted to approximately HK$238,635,000, of which approximately HK$238,507,000 and approximately HK$128,000 have been debited to the asset revaluation reserve as set out in note 29 and charged to the consolidated income statement, respectively.

Other land and buildings of the Group located in Hong Kong were revalued by Debenham Tie Leung, as at 31st March, 2001 at an open market existing use basis, at approximately HK$60,700,000. Certain other land and buildings of the Group located outside Hong Kong were revalued by Chesterton as at 31st March, 2001, on an open market existing use basis, at the amount of approximately HK$1,620,000. The deficit arising on revaluation

— 57 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

of these other land and buildings as at 31st March, 2001 amounted to approximately HK$30,686,000, of which approximately HK$119,000 and approximately HK$30,805,000 have been credited to the asset revaluation reserves as set out in note 29 and charged to the consolidated income statement, respectively. The remaining other land and buildings located outside Hong Kong were valued as at 31st March, 2001 by the Directors at approximately HK$1,300,000, with no resulting revaluation surplus/deficit.

At 31st March, 2001, had the Group’s cold storage warehouses and other land and buildings been carried at cost less accumulated depreciation and amortisation, the carrying value would have been approximately HK$720,251,000 (2000: HK$746,860,000) and approximately HK$173,209,000 (2000: HK$179,640,000), respectively.

At 31st March, 2001, the net book value of the property, plant and equipment of the Group includes an amount of approximately HK$839,000 (2000: HK$4,756,000) in respect of assets held under finance leases.

16. GOODWILL

COST At 1st April, 2000 Acquisition of subsidiaries At 31st March, 2001 AMORTISATION At 1st April, 2000 Provision for impairment loss At 31st March, 2001 NET BOOK VALUES At 31st March, 2001 At 31st March, 2000	THE GROUP HK$’000 75,110 85
	75,195
	75,110 85
	75,195
	—

	—

17. INTERESTS IN SUBSIDIARIES

INTERESTS IN SUBSIDIARIES
Unlisted shares, at cost Amounts due from subsidiaries _Less:_Impairment losses recognised	THE COMPANY 2001 2000 HK$’000 HK$’000 408,087 482,452 2,193,236 2,092,404 2,601,323 2,574,856 (913,751) (586,731) 1,687,572 1,988,125
		2,574,856 (586,731)
		1,988,125

Particulars of the Company’s principal subsidiaries as at 31st March, 2001 are set out in note 42.

The amounts due from subsidiaries are unsecured, interest free and have no fixed terms of repayment.

None of the subsidiaries had any loan capital outstanding at the end of the year or at any time during the year.

18. INTERESTS IN ASSOCIATES

INTERESTS IN ASSOCIATES
Share of net assets Amount due from an associate _Less:_Impairment losses recognised	THE GROUP 2001 2000 HK$’000 HK$’000 — 77,454 — 10,361 — 87,815 — (47,000) — 40,815
		87,815 (47,000)
		40,815

— 58 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

19. INTERESTS IN JOINTLY CONTROLLED ENTITIES

INTERESTS IN JOINTLY CONTROLLED ENTITIES
Share of net assets Amounts due from jointly controlled entities less provision	THE GROUP 2001 2000 HK$’000 HK$’000 — 81 — 2,835 — 2,916
		2,916

20. OTHER INVESTMENTS

Listed shares in Hong Kong Unlisted shares and investments in Hong Kong Market value of listed securities at 31st March Carrying amount analysed for reporting purposes as: Non-current Current	THE GROUP 2001 2000 HK$’000 HK$’000 25,665 6,708 — 27,271 25,665 33,979 25,665 6,708 25,100 27,271 565 6,708 25,665 33,979	THE COMPANY 2001 2000 HK$’000 HK$’000 513 5,984 — — 513 5,984 513 5,984 — — 513 5,984 513 5,984	THE COMPANY 2001 2000 HK$’000 HK$’000 513 5,984 — — 513 5,984 513 5,984 — — 513 5,984 513 5,984
			5,984

			5,984

			— 5,984
			5,984

21. TRADE AND OTHER RECEIVABLES

Included in the Group’s trade and other receivables were trade receivable and short-term loans receivable as follows:

(a) Trade receivables

The Group allows an average credit period of 60 days to its trade customers.

Details of the aged analysis of trade receivables of the Group are as follows:

0 – 30 days 31 – 60 days 61 – 180 days More than 180 days	THE GROUP 2001 2000 HK$’000 HK$’000 12,535 16,538 7,247 10,775 4,297 6,618 215 2,706 24,294 36,637	THE GROUP 2001 2000 HK$’000 HK$’000 12,535 16,538 7,247 10,775 4,297 6,618 215 2,706 24,294 36,637
		36,637

(b) At 31st March, 2001, the Group and the Company had short-term loans receivable of approximately HK$3,519,000 (2000: HK$18,904,000) and approximately HK$180,000 (2000: HK$990,000), respectively.

At the balance sheet date, the majority of the securities held as collateral for short-term loans receivable were re-pledged to financial institutions to secure general credit facilities granted to the Group.

— 59 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

22. AMOUNTS DUE FROM (TO) I-CHINA GROUP

Particulars of the amounts due from (to) I-China Group are as follows:

Nature of the advances Amounts due from I-China Group — Interest bearing_(note)_ Secured Unsecured — Interest-free Unsecured _Less:_Provision Amount due to I-China Group — Interest-free Unsecured	THE GROUP Balance Balance at at 31.3.2001 1.4.2000 HK$’000 HK$’000 1,655 1,655 4,465 2,147 932 9,451 7,052 13,253 (7,052 ) — — 13,253 — 3,834	Maximum debit balance outstanding during the year HK$’000 1,655 4,465 9,451	THE COMPANY Balance Balance at at 31.3.2001 1.4.2000 HK$’000 HK$’000 — — — 2,147 158 8,722 158 10,869 (158 ) — — 10,869 — 3,656	Maximum debit balance outstanding during the year HK$’000 — 2,147 8,722

Note: The amount represents secured loans granted by Seapower Finance Limited, a subsidiary of the Company and a licensed money lender whose principal activity is money lending. The loans bear interest at prevailing market rates and are secured by collateral of shares and property, plant and equipment with an aggregate carrying value of approximately HK$12,468,000 (2000: HK$65,899,000) as at 31st March, 2001.

The amounts due from (to) I-China Group at 31st March, 2000 had no fixed terms of repayment. The amounts due to I-China Group were repaid during the year.

23. TRADE AND OTHER PAYABLES

Included in trade and other payables were trade payables of approximately HK$8,166,000 (2000: HK$8,854,000) with aged analysis as follows:

0 – 30 days 31 – 60 days 61 – 90 days More than 90 days	THE GROUP 2001 2000 HK$’000 HK$’000 6,046 6,117 1,365 1,355 263 345 492 1,037 8,166 8,854	THE GROUP 2001 2000 HK$’000 HK$’000 6,046 6,117 1,365 1,355 263 345 492 1,037 8,166 8,854
		8,854

24. OBLIGATIONS UNDER FINANCE LEASES

Obligations under finance leases are repayable as follows: Within one year More than one year, but not exceeding two years More than two years, but not exceeding five years _Less:_Amount due within one year and shown under current liabilities Amount due after one year	THE GROUP 2001 2000 HK$’000 HK$’000 283 1,627 97 343 317 399 697 2,369 (283) (1,627 414 742	THE GROUP 2001 2000 HK$’000 HK$’000 283 1,627 97 343 317 399 697 2,369 (283) (1,627 414 742
		2,369 (1,627
		742

— 60 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

25. BANK AND OTHER BORROWINGS

Bank and other borrowings comprise: Bank and other loans Bank overdrafts Analysed as: Secured Unsecured The bank and other borrowings are repayable as follows: Within one year or on demand More than one year, but not exceeding two years More than two years, but not exceeding five years Over five years _Less:_Amount due within one year or on demand and shown under current liabilities Amount due after one year	THE GROUP 2001 2000 HK$’000 HK$’000 1,245,107 1,273,911 3,517 8,235 1,248,624 1,282,146 1,230,713 1,259,138 17,911 23,008 1,248,624 1,282,146 1,248,624 673,050 — 290,943 — 182,870 — 135,283 1,248,624 1,282,146 (1,248,624) (673,050) — 609,096	THE COMPANY 2001 2000 HK$’000 HK$’000 756,981 769,690 2,070 5,392 759,051 775,082 758,906 775,082 145 — 759,051 775,082 759,051 444,524 — 134,805 — 60,470 — 135,283 759,051 775,082 (759,051) (444,524) — 330,558

During the year, the Group’s and the Company’s borrowings from certain banks were not repaid according to the schedules set by the banks and, consequently, have become due for immediate repayment, and accordingly, the entire outstanding amounts have been reclassified as current liabilities.

26. DEFERRED TAXATION

Balance at beginning of the year Credit for the year_(note 11)_ Balance at end of the year	THE GROUP 2001 2000 HK$’000 HK$’000 500 709 (500) (209) — 500	THE COMPANY 2001 2000 HK$’000 HK$’000 308 503 (308) (195) — 308

The deferred taxation at the balance sheet date mainly represents the tax effect of timing differences attributable to the excess of tax allowances over depreciation.

No provision for deferred taxation has been made in the financial statements in respect of the surplus or deficit arising on the revaluation of the properties of the Group situated in Hong Kong as, in the opinion of the Directors of the Company, any profit or loss arising on the disposal of these assets is capital in nature and would not be subject to taxation. Accordingly, the valuation surplus or deficit in respect of these properties does not constitute a timing difference for tax purposes. In addition, no provision for deferred taxation has been made in respect of the surplus or deficit arising on the revaluation of properties outside Hong Kong as the amount involved is not significant.

The Group and the Company did not have any other significant unprovided deferred taxation in respect of timing differences arising during the year or as at the balance sheet date.

— 61 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

27. SHARE CAPITAL

Authorised: At 1st April, 1999, at HK$0.50 each Capital reduction_(note 1(a)) Capital reduction(note 1(b)) Increase during the year ended 31st March, 2000(note 1(a)) At 31st March, 2000 and 31st March, 2001, at HK$0.05 each Issued and fully paid: At 1st April, 1999, at HK$0.50 each Capital reduction(note 1(b)) Issue of shares during the year ended 31st March, 2000(note 2)_ At 31st March, 2000 and 31st March, 2001, at HK$0.05 each	Number of shares 2,000,000,000 (708,957,171) 1,291,042,829 — 1,291,042,829 18,708,957,171 20,000,000,000 1,291,042,829 — 1,291,042,829 256,000,000 1,547,042,829	Value HK$’000 1,000,000 (354,479) 645,521 (580,969) 64,552 935,448 1,000,000 645,521 (580,969) 64,552 12,800 77,352

Notes:

(1) Pursuant to a special resolution passed at an extraordinary general meeting of the Company held on 30th September, 1999, the following changes in the Company’s share capital had taken place:
(a) The then 708,957,171 unissued shares of HK$0.50 each, which amounted to approximately HK$354,479,000, were cancelled and subsequently increased to the original share capital of HK$1,000,000,000 by the creation of 18,708,957,171 new shares of HK$0.05 each.
(b) The par value of each of the then existing 1,291,042,829 issued shares were reduced from HK$0.50 each to HK$0.05 each, resulting in a credit of approximately HK$580,969,000 which was applied to write off part of the Company’s deficit; and
(c) The share premium of the Company, which had a balance of approximately HK$478,085,000, was applied to reduce the remaining balance of the deficit of the Company of approximately HK$45,363,000 as at 31st March, 1999 (note 29).
(2) Pursuant to two placement agreements both dated 25th November, 1999, 256,000,000 new shares of HK$0.05 each were issued to independent investors in December 1999 at an issue price of HK$0.05 per share so as to broaden the shareholder base of the Company. The net proceeds of approximately HK$12,800,000 were used to provide additional working capital of the Group. These newly issued shares rank pari passu with other shares in issue in all aspects. Details were disclosed in an announcement issued by the Company on 25th November, 1999.

28. SHARE OPTION SCHEME

Pursuant to the Company’s share option scheme adopted on 30th September, 1999 (the “Scheme”), the Board of Directors of the Company may, at their discretion, grant options to any eligible employees of the Company or any of its subsidiaries (including Executive Directors and other officers of the Company or its subsidiaries) to subscribe for shares in the Company in accordance with the terms of the Scheme.

The exercise price of the options shall be determined by the Directors of the Company, being not less than 80% of the average closing prices of the shares in the Company for the five trading days immediately preceding the date of offer of the option, or the nominal value of the shares, whichever is higher. The maximum number of shares in respect of which options may be granted under the Scheme shall not exceed 10% of the issued share capital of the Company from time to time.

— 62 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

A summary of the movements in the share options granted under the Scheme during the year is as follows:

Balance in issue at 1st April, 1999 Granted during the year ended 31st March, 2000_(note (a)) Adjustment due to change in capital structure during the year ended 31st March, 2000(note (a)) Lapsed during the year ended 31st March, 2000 Balance in issue at 31st March, 2000 Granted during the year(note (b))_ Lapsed during the year Balance in issue at 31st March, 2001	Share options with an exercise price of HK$0.125 per share HK$0.223 per share Number Value Number Value HK$’000 HK$’000 — — — — 128,400,000 19,260 — — 25,447,213 (29) — — (717,827) (90) — — 153,129,386 19,141 — — 830,000 104 200,000 45 (30,000) (4) — — 153,929,386 19,241 200,000 45	Share options with an exercise price of HK$0.125 per share HK$0.223 per share Number Value Number Value HK$’000 HK$’000 — — — — 128,400,000 19,260 — — 25,447,213 (29) — — (717,827) (90) — — 153,129,386 19,141 — — 830,000 104 200,000 45 (30,000) (4) — — 153,929,386 19,241 200,000 45
		— 45 —
		45

Notes:

(a) On 22nd November, 1999, 128,400,000 options were granted at a consideration of HK$1 for each grantee and can be exercised at a price of HK$0.150 per share, subject to adjustment, during the period of four and a half years commencing from six months after the respective dates of acceptance. During the year ended 31st March, 2000, the exercise price of the outstanding share options was adjusted to HK$0.125 per share, subject to adjustment, and the number of outstanding share options was also adjusted as a result of the change in the Company’s capital structure during the year ended 31st March, 2000 pursuant to the terms of the share option scheme.
(b) On 19th October, 2000 and 5th August, 2000, 830,000 and 200,000 share options, respectively, were granted at a consideration of HK$1 for each grantee and can be exercised at any time during the period of four and a half years, commencing six months after their respective dates of acceptance at an exercise price of HK$0.125 per share and HK$0.223 per share, respectively, subject to adjustment.

29. RESERVES

THE GROUP At 1st April, 1999 Exchange differences arising from translation of overseas operations Capital reduction_(note 27)_ Realised on disposal of subsidiaries Deficit on revaluation Net loss for the year At 31st March, 2000 Exchange differences arising from translation of overseas operations Deficit on revaluation Surplus on revaluation Realised on disposal of subsidiaries Realised on disposal of a property Net loss for the year At 31st March, 2001 Attributable to: — the Company and subsidiaries — associates — jointly controlled entities	Share premium HK$’000 478,085 — (45,363 ) — — — 432,722 — — — — — — 432,722 432,722 — — 432,722	Capital redemption reserve HK$’000 3,800 — — — — — 3,800 — — — — — — 3,800 3,800 — — 3,800	Capital reserve HK$’000 49,991 — — — — — 49,991 — — — (3 ) — — 49,988 49,988 — — 49,988	Asset revaluation reserve HK$’000 997,471 — — — (278,583 ) — 718,888 — (238,507 ) 119 — (1,684 ) — 478,816 478,816 — — 478,816	Translation reserve HK$’000 (16,184 ) 17,944 — 783 — — 2,543 (20,716 ) — — 9,810 — — (8,363 ) (8,557 ) — 194 (8,363 )	Deficit HK$’000 (909,244 ) — 626,332 — — (161,474 ) (444,386 ) — — — — 1,684 (239,054 ) (681,756 ) (685,939 ) 7,900 (3,717 ) (681,756 )	Total HK$’000 603,919 17,944 580,969 783 (278,583 (161,474
							763,558 (20,716 (238,507 119 9,807 — (239,054
							275,207

							270,830 7,900 (3,523
							275,207

— 63 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

THE COMPANY At 1st April, 1999 Capital reduction_(note 27) Net profit for the year(note 12) At 31st March, 2000 Net loss for the year(note 12)_ At 31st March, 2001	Capital Share redemption Contributed premium reserve surplus HK$’000 HK$’000 HK$’000 478,085 3,800 64,314 (45,363) — — — — — 432,722 3,800 64,314 — — — 432,722 3,800 64,314	(Deficit) retained profits HK$’000 (626,332) 626,332 60,900 60,900 (398,814) (337,914)	Total HK$’000 (80,133) 580,969 60,900 561,736 (398,814) 162,922

The contributed surplus of the Company represents the difference between the consolidated shareholders’ funds of subsidiaries when they were acquired by the Company and the nominal amount of the Company’s share capital issued for the acquisition.

In accordance with the provision of the Company’s Articles of Association, the reserve available for distribution to shareholders of the Company as at 31st March, 2000 was its retained profits of approximately HK$60,900,000. There were no reserve available for distribution to shareholders of the Company as at 31st March, 2001.

30. RECONCILIATION OF LOSS BEFORE TAXATION TO NET CASH INFLOW FROM OPERATING ACTIVITIES

Loss before taxation Interest expenses Depreciation and amortisation Amortisation of goodwill Net realised gain on other investments Provision for bad and doubtful debts Share of results of associates and jointly controlled entities Deficit arising on revaluation of investment properties Deficit arising on revaluation of cold storage warehouses and other land and buildings Loss on disposal of property, plant and equipment Loss (gain) on disposal of subsidiaries Unrealised gain on other investments Surplus arising on revaluation of other land and buildings Gain on disposal of investment properties Provision for diminution in value of associates and jointly controlled entities Write down of investment in convertible notes to net realisable value and provision for accrued interest Provision for impairment losses of goodwill Surplus arising on revaluation of investment properties Decrease in inventories Decrease in trade and other receivables Decrease in amounts due from I-China Group Increase in bank and cash balances_(note)_ Increase in trade and other payables Decrease in amount due to I-China Group Increase in amount due to a jointly controlled entity Decrease in bills payable Net cash inflow from operating activities	2001 HK$’000 (238,275) 121,902 49,588 — (51,088) 59,260 (362) 28,990 30,933 5,985 10,847 (11,197) — — — — 85 — 1,764 19,192 6,166 — 4,757 (3,063) 940 — 36,424	2000 HK$’000 (160,669) 124,879 58,534 14,992 (62,694) 13,413 4,694 — — 297 (59,043) (5,411) (2,642) (29) 77,404 4,487 30,134 (17,357) 11,003 15,553 42,816 (6,381) 14,270 (6,721) — (391) 91,138

Note: The amount represented trust monies held on behalf of securities and futures broking customers.

— 64 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

31 . DISPOSAL OF SUBSIDIARIES

Net assets disposed of: Property, plant and equipment Interests in an associate Trade and other receivables Other investments Inventories Amounts due from group companies Taxation recoverable Trust monies Bank and cash balances Trade and other payables Amounts due to group companies Amount due to I-China Group Taxation payable Bank overdraft Minority interests Translation reserve realised on disposal Capital reserve realised on disposal (Loss) gain on disposal of subsidiaries Satisfied by: Cash consideration received Other investments Total consideration	2001 HK$’000 6,440 41,175 586 — — 345 — — 3 (6,613) (13,154) (771) — — — 28,011 9,810 (3) (10,847) 26,971 26,971 — 26,971	2000 HK$’000 280 — 44,698 11,367 14 61,856 3,418 46,343 4,011 (106,302) — — (254) (23,766) (2,165)
		39,500 783 — 59,043
		99,326

		72,055 27,271
		99,326

Analysis of the net inflow of cash and cash equivalents in respect of the disposal of subsidiaries:

Cash consideration received Bank and cash balances disposed of Bank overdraft disposed of	2001 HK$’000 26,971 (3) — 26,968	2000 HK$’000 72,055 (4,011) 23,766
		91,810

The subsidiaries disposed of during the year did not make a material contribution to the net cash flows or results of the Group for the year.

32. ACQUISITION OF SUBSIDIARIES

Net assets acquired: Property, plant and equipment Trade and other receivables Amount due from I-China Group Taxation recoverable Bank and cash balances Other payable Amounts due to group companies Goodwill Satisfied by: Increase in amount due to I-China Group	2001 HK$’000 20 36 270 1 10 (14) (103) 220 85 305 305	2000 HK$’000 — — — — — — —
		— —
		—

		—

— 65 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Analysis of the net outflow of cash and cash equivalents in respect of the acquisition of subsidiaries:

	2001	2000
	HK$’000	HK$’000
Bank and cash balances acquired	10	—

The subsidiaries acquired during the year did not have significant impact on the Group’s cash flows, turnover and operating results of the Group for the year.

33. ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR

At 1st April, 1999 Exchange adjustments Capital reduction Issue of shares Inception of finance leases Borrowings raised Repayments during the year At 31st March, 2000 Exchange adjustments Inception of finance leases Repayments during the year At 31st March, 2001	Obligations under Share Bank finance capital borrowings leases HK$’000 HK$’000 HK$’000 645,521 1,100,802 5,345 — (593) (32 (580,969) — — 12,800 — — — — 192 — 150,000 — — (131,469) (3,136 77,352 1,118,740 2,369 — (6,392) (328 — — 705 — (14,693) (2,049 77,352 1,097,655 697	Obligations under Share Bank finance capital borrowings leases HK$’000 HK$’000 HK$’000 645,521 1,100,802 5,345 — (593) (32 (580,969) — — 12,800 — — — — 192 — 150,000 — — (131,469) (3,136 77,352 1,118,740 2,369 — (6,392) (328 — — 705 — (14,693) (2,049 77,352 1,097,655 697
		2,369 (328 705 (2,049
		697

34. NON-CASH TRANSACTIONS

During the year, the Group entered into finance leases in respect of the acquisition of property, plant and equipment with an aggregate capital value of approximately HK$705,000 (2000: HK$192,000) at the inception of the leases.

35. RETIREMENT BENEFIT SCHEMES

(a) The Company together with certain subsidiaries operates a defined contribution retirement benefit scheme for all qualifying employees. The assets of the scheme are held separately under a provident fund managed by an independent trustee. Pursuant to the rules of the scheme, the employer is required to make contributions to the scheme calculated at the range of 5% to 10% of the employees’ basic salaries on a monthly basis. The employees are entitled to 100% of the employer’s contributions and the accrued interest after ten complete years service, or at an increasing scale of between 30% to 90% after completion of three to nine years service.

Where there are employees who leave the scheme prior to vesting fully in the contributions in accordance with the terms of the scheme, the contributions payable by the Group are reduced by the amount of forfeited employer’s contributions.

As at the balance sheet date, there were no significant forfeited contributions, which arose when employees left the retirement benefit scheme before they were fully vested in the contributions and which were available to reduce the contributions payable by the Group in future years.

(b) With effect from 1st December, 2000, the Group has also joined a MPF Scheme for all 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 an independent trustee. 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 MPF Scheme is to make the required contributions under the scheme.

The MPF Scheme is available to all employees aged 18 to 64 and with at least 60 days of service under the employment of the Group in Hong Kong. Contributions are made by the Group at 5% based on the staff’s relevant income. The maximum relevant income for contribution purpose is HK$20,000 per month. Staff members are entitled to 100% of the Group’s contributions together with accrued returns irrespective of their length of service with the Group, but the benefits are required by law to be preserved until the retirement age of 65.

— 66 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Staff who joins the Group after the operation of the MPF Scheme automatically joins this Scheme. The Group also makes contributions for all qualified staff covered by the retirement benefit scheme to both the MPF Scheme and the retirement benefit scheme. The aggregate contributions for these staff are limited to the benefits that would be enjoyed by them under the retirement benefit scheme.

36. CAPITAL COMMITMENTS

Capital expenditure in respect of the acquisition of property, plant and equipment authorised but not contracted for Capital expenditure in respect of the acquisition of property, plant and equipment contracted for but not provided in the financial statements	THE GROUP 2001 2000 HK$’000 HK$’000 94 — — 3,900 94 3,900	THE GROUP 2001 2000 HK$’000 HK$’000 94 — — 3,900 94 3,900
		3,900

The Company did not have any significant capital commitments as at the balance sheet date.

37. OPERATING LEASE COMMITMENTS

At the balance sheet date, the Group and the Company had outstanding commitments under non-cancellable operating leases. The portion of these commitments which is payable in the following year is as follows:

Operating leases which expire: Within one year In the second to fifth years inclusive	2001 Others HK$’000 — 177 177	THE GROUP 2000 Premises Others HK$’000 HK$’000 1,145 335 — 224 1,145 559	Total HK$’000 1,480 224 1,704	THE COMPANY 2001 2000 Premises Premises HK$’000 HK$’000 — 1,145 — — — 1,145	THE COMPANY 2001 2000 Premises Premises HK$’000 HK$’000 — 1,145 — — — 1,145
					1,145

38. CONTINGENT LIABILITIES

CONTINGENT LIABILITIES
			THE COMPANY
		2001			2000
	Facilities		Amount	Facilities		Amount
	granted		utilised	granted		utilised
	HK$’000		HK$’000	HK$’000		HK$’000
Guarantees given to financial institutions
in respect of credit facilities granted
to subsidiaries	556,577		483,932	562,829		498,409

39. PLEDGE OF ASSETS

At the balance sheet date, the following assets of the Group are pledged to secure credit facilities granted to the Group:

Other property, plant and equipment Investment properties Other investments Bank deposits	THE GROUP 2001 2000 HK$’000 HK$’000 1,208,841 1,535,310 188,700 229,000 25,665 33,221 17,378 17,331 1,440,584 1,814,862	THE GROUP 2001 2000 HK$’000 HK$’000 1,208,841 1,535,310 188,700 229,000 25,665 33,221 17,378 17,331 1,440,584 1,814,862
		1,814,862

At 31st March, 2001, the Company had pledged its share in a subsidiary holding investment properties amounting to approximately HK$135,210,000 (2000: HK$123,900,000) in the People’s Republic of China (the “PRC”) to a bank for general banking facilities granted to the Group.

— 67 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

40. RELATED PARTY TRANSACTIONS

Details of significant related party transactions during the year disclosed pursuant to Statement of Standard Accounting Practice 20 “Related party disclosures” issued by the Hong Kong Society of Accountants are as follows:

(a) Interest income on Convertible Notes from I-China Group Interest income other than those on Convertible Notes from I-China Group Interest expense to I-China Group Management fee to I-China Group Rental expenses to I-China Group Secretarial fee to I-China Group Purchase of property, plant and equipment from I-China Group	THE GROUP 2001 2000 HK$’000 HK$’000 — 2,536 396 3,076 263 83 2,336 4,652 2,213 3,285 — 183 145 —	THE COMPANY 2001 2000 HK$’000 HK$’000 — 2,536 — 232 263 83 2,336 4,652 2,213 3,400 — 30 145 —

Interest income and expense were calculated in accordance with the terms of the Convertible Note or with reference to prevailing market rates. Management fee and secretarial fee were based on time spent and cost incurred. Rental expenses were determined based on market rates and floor area. Purchase of property, plant and equipment and subsidiaries was carried out at terms determined and agreed by both parties.

(b) During the year, the Group purchased three subsidiaries from the I-China Group at aggregate consideration of HK$305,000.
(c) The Group’s bank borrowings amounting to approximately HK$38,660,000 (2000: HK$38,740,000) were guaranteed by I-China.
(d) During the year ended 31st March, 2000, the Group paid service fees amounting to approximately HK$515,000 to Joyful Plan Development Limited (“Joyful”) in connection with the provision of transportation services to the Group. Mr. Michael Ho Hoi Yu, a former Vice Chairman of the Company, has significant beneficial interest in Joyful. The service fees was negotiated by reference to prices of similar transactions.

Save as disclosed above and in note 22, there were no other significant transactions with related parties during the year or significant balances with them at the end of the year.

Details of the balances with related parties are set out in the consolidated balance sheet on pages 27 and 28 and its accompanying notes.

41. LITIGATIONS

On 14th April, 2000, the Company entered into a written agreement of US$628,000 (equivalent to approximately HK$4,898,000) with an independent third party (the “Third Party”) as amended by an amendment agreement on 9th November, 2000 (the agreement as amended by the amendment agreement, is called the “Agreement”) whereby the Third Party agreed, inter alia, to design and implement e-commerce solutions. On 29th May, 2000, the Company entered into a master lease agreement as amended on 23rd June, 2000 (the agreement as amended, the “Master Lease Agreement”) with the Third Party and subsequently two lease agreements totalling US$460,000 (equivalent to approximately HK$3,588,000) under the Master Lease Agreement were entered with the Third Party.

During the year, the Third Party delivered certain incomplete solutions under the Agreement to the Company which were found to be not up to the requirements set out in the Agreement.

The Directors of the Company have become concerned about the deficiency of the part of items and services delivered and ceased to make instalments to the Third Party. In addition, the Directors of the Company are of the opinion that the Third Party has failed and/or refused to comply with the Agreement, accordingly, the Company issued writ of summons to the Third Party on 15th March, 2001, claiming for damages, interests and costs on the system.

On 17th May, 2001, the Third Party denied the claims and filed a defence and counterclaim against the Company, demanding immediate repayment of the remaining sum under the lease agreements together with damages of approximately US$557,000 (equivalent to approximately HK$4,345,000) and interests accrued thereon. The Company filed and served a reply and defence to counterclaim on 12th July, 2001.

The Directors intend to pursue the claim strongly and, while the final outcome of the proceedings is uncertain up to the date of this report, it is the Directors’ belief that there would not be any liability incurred for this case and accordingly, no provision has been made in the financial statements for the year ended 31st March, 2001.

— 68 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

42. PARTICULARS OF PRINCIPAL SUBSIDIARIES

Particulars of the Company’s principal subsidiaries as at 31st March, 2001 are as follows:

			Percentage of	Percentage of
			issued share capital
	Place of	Issued and	held by the	attribu-
	incorporation/	fully paid	*Company/**	table to	Principal
Name of subsidiary	operation	ordinary share	subsidiaries	the Group	activities
			%	%
Australian Service Cold	Australia	A$2,500,002	100	100	Cold storage
Storage (NSW) Pty Ltd		shares			warehousing
Billion Limited	British Virgin	US$1	100*	100	Investment
	Islands/PRC	share			holding
Fu Shing Realty	Hong Kong	HK$1,000,000	100*	100	Property holding
Development		shares
Company Limited
Gainful Company Limited	British Virgin	US$1	100*	100	Property holding
	Islands/	share
	Hong Kong
Gold Enterprise Holdings	Hong Kong	HK$2	100*	100	Property holding
Limited		shares
Grand United Holdings	Hong Kong	HK$2	100*	100	Property holding
Limited		shares
iPowerB2B.com Limited	Hong Kong	HK$2	100	100	Investment
		shares			holding
iPower Holdings Limited	British Virgin	US$45,000	100	100	Investment
	Islands/	shares			holding
	Hong Kong
iPower Website Limited	British Virgin	US$1	100	100	Domain names
	Islands/	share			holding
	Hong Kong
iPower Warehousing	British Virgin	US$1	100	100	Warehousing
Management System	Islands/	share			management
Limited	Hong Kong				system holding
iPower Logistics	British Virgin	US$1	100	100	Logistics
Management System	Islands/	share			management
Limited	Hong Kong				system holding
iPower Alliances Limited	British Virgin	US$1	100	100	Cold storage
	Islands/	share			alliances
	Hong Kong				contracts
					holding
iPower Services Limited	British Virgin	US$1	100	100	Marketing
	Islands/	share			services
	Hong Kong
Jolly Target Limited	Hong Kong	HK$1,000	100*	100	Property holding
		shares
Manfair Holdings Limited	Hong Kong	HK$2	100*	100	Property holding
		shares
New Success Investments	British Virgin	US$1	100	100	Investment
Limited	Islands/	share
	Hong Kong
Ocean World Holdings	Hong Kong	HK$2	100*	100	Property holding
Limited		shares

— 69 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

			Percentage of	Percentage of
			issued share capital
	Place of	Issued and	held by the	attribu-
	incorporation/	fully paid	*Company/**	table to	Principal
Name of subsidiary	operation	ordinary share	subsidiaries	the Group	activities
			%	%
Pearlway Holdings Limited	Hong Kong	HK$2	100*	100	Property holding
		shares
Pentagon Profits Limited	British Virgin	US$1	100*	100	Property holding
	Islands/PRC	share
Seapower China	Hong Kong/	HK$2	100	100	PRC
Investments Limited	PRC	shares			representative
					offices holding
Seapower Corporate	Hong Kong	HK$2	100	100	Property holding
Finance (China)		shares
Company Limited
Seapower Developments	British Virgin	US$1	100*	100	Land
(Indonesia) Limited	Islands/	share			development
	Indonesia
Seapower Finance Limited	Hong Kong	HK$171,000,000	100	100	Money lending
		shares
Seapower Financial	Hong Kong	HK$100,000	98	98	Investment
Services Group Limited		shares			holding
Seapower Goodland	Hong Kong/	HK$1,000	65	65	Cold storage
Holding Limited	PRC	shares			warehousing
					and logistics
					management
Seapower Logistics	Hong Kong	HK$30,000	100	100	Logistics
Limited		shares			management
Seapower Resources	Australia	A$7,000,002	100	100	Investment
Australia Pty Ltd		shares			holding
Seapower Resources Cold	Hong Kong	HK$2	100*	100	Cold storage
Storage & Warehousing		shares			warehousing
Limited					and ice-making
Seapower Resources	Hong Kong	HK$1,000,000	100	100	Logistics and
Freight Forwarding		shares			freight
Limited					forwarding
Seapower Resources	Australia	A$4,200,002	100	100	Cold storage
Gosford Pty Ltd		shares			warehousing
Seapower Resources	Hong Kong	HK$500,000	100	100	Warehousing
Management Company		shares			facilities
Limited					management
Seapower Resources	Cayman	US$1,000	100*	100	Group financing
Overseas Finance	Islands/	shares
Limited	Hong Kong
Shing Wai Holdings Limited	Hong Kong	HK$2	100*	100	Property holding
		shares
Siu Wai Holdings Limited	Hong Kong	HK$2	100*	100	Property holding
		shares
South East Asia Overseas	British Virgin	US$25,000	100*	100	Group financing
Finance Limited	Islands/	shares
	Hong Kong

— 70 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

			Percentage of	Percentage of
			issued share capital
	Place of	Issued and	held by the	attribu-
	incorporation/	fully paid	*Company/**	table to	Principal
Name of subsidiary	operation	ordinary share	subsidiaries	the Group	activities
			%	%
Topcrown Investments	Hong Kong/	HK$10,000	100	100	Property holding
Limited	PRC	shares
Toppy Luck Limited	British Virgin	US$1	100*	100	Property holding
	Islands/	share
	Hong Kong
Wandy Holdings Limited	Hong Kong	HK$2	100*	100	Property holding
		shares
Winbond Holdings Limited	Hong Kong	HK$2	100*	100	Property holding
		shares
Yiu Fai Warehousing	Hong Kong	HK$100,000	100*	100	Cold storage
Limited		shares			warehousing
Yiu Fung Cold Storage &	Hong Kong	HK$2	100*	100	Cold storage
Warehousing Limited		shares			warehousing

The above tables list the subsidiaries of the Company and of the Group which, in the opinion of the Directors of the Company, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries, associates and jointly controlled entities would, in the opinion of the Directors of the Company, result in particulars of excessive length.

— 71 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. PUBLISHED UNAUDITED INTERIM REPORT

The following is an extract of the unaudited interim report of the Company for the six months ended 30th September, 2001 published on 2nd January, 2002 and should be read in that context.

The board of directors (the “Directors”) of Seapower Resources International Limited (the “Company”) is pleased to announce the unaudited consolidated results of the Company and its subsidiaries (the “Group”) for the six months ended 30th September, 2001 together with the unaudited comparative figures for the corresponding period of 2000, as follows:

Condensed Consolidated Income Statement

Notes
Turnover
Direct operating expenses
Other revenue
5
Selling and administrative expenses
Other operating expenses
6
(Loss) profit from operations
Finance costs
Impairment losses recognised in respect of
investment properties
Impairment losses recognised in respect of
property, plant and equipment
Loss on disposal of subsidiaries
Share of results of associates
Loss before taxation
Taxation credit
7
Loss before minority interests
Minority interests
Net loss for the period
Dividend
Loss per share — basic and diluted
9
Dividend per share

For the six months
ended 30th September,
2001
2000
HK$’000
HK$’000
(Unaudited)
(Unaudited)
94,033
113,806
(64,350)
(86,996)
3,388
69,801
(34,056)
(48,020)
(34,599)
(36,624)
(35,584)
11,967
(47,987)
(60,106)
(17,293)
—
(10,407)
—
—
(3,063)
—
362
(111,271)
(50,840)
—
(190)
(111,271)
(50,650)
(246)
1,213
(111,025)
(51,863)
—
—
(7.18 cents)
(3.35 cents)
—
—

— 72 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed Consolidated Balance Sheet

Notes NON-CURRENT ASSETS Investment properties 10 Property, plant and equipment 10 Other investments CURRENT ASSETS Trade and other receivables 11 Other investments Taxation recoverable Pledged bank deposits Bank balances and cash CURRENT LIABILITIES Trade and other payables 12 Amount due to a former jointly controlled entity Taxation payable Obligations under finance leases — due within one year Bank and other borrowings — due within one year Net current liabilities Total assets less current liabilities Minority interests Non-current liability Obligations under finance leases — due after one year Capital and reserves Share capital 13 Reserves 14	30th September, 2001 HK$’000 (Unaudited) 217,617 1,253,504 11,637 1,482,758 44,119 605 6,013 17,204 7,327 75,268 119,433 1,007 846 881 1,183,781 1,305,948 (1,230,680) 252,078 4,057 282 247,739 77,352 170,387 247,739	31st March, 2001 HK$’000 (Audited) 323,910 1,275,419 25,100 1,624,429 40,257 565 6,013 17,378 11,974 76,187 92,580 1,007 846 283 1,248,624 1,343,340 (1,267,153) 357,276 4,303 414 352,559 77,352 275,207 352,559

— 73 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Condensed Consolidated Financial Statements

1. ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared under the historical cost convention, as modified for the revaluation of investment properties, properties held for development, cold storage warehouses, other land and buildings and certain investments in securities.

The accounting policies adopted are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31st March, 2001, except for the following:

In the current period, the Group has adopted, for the first time, a number of new and revised Statement of Standard Accounting Practice (“SSAP”) issued by the Hong Kong Society of Accountants. SSAPs that have an impact on the condensed consolidated financial statements are as follows:

Segment reporting

In the current period, the Group has changed the basis of identification of reportable segments to that required by SSAP 26 “Segment Reporting”. Segment disclosures for the six months ended 30th September, 2000 have been amended so that they are presented on a consistent basis.

Goodwill

The new SSAP 30 “Business combinations” prescribes the treatment of goodwill and negative goodwill on acquisition of a subsidiary. Under the transitional provisions set out in SSAP 30, the Group has elected not to restate negative goodwill previously credited to reserves. Therefore, negative goodwill arising on acquisitions prior to 1st April, 2001 continues to be held in reserves and will be credited to the income statement at the time of disposal of the relevant subsidiary.

Negative goodwill arising on acquisitions after 1st April, 2001 is presented as a deduction from assets and will be released to the income statement based on an analysis of the circumstances from which the balances resulted.

2 . BASIS OF PREPARATION OF UNAUDITED INTERIM FINANCIAL REPORT AND SUMMARY OF THE INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

In preparing the unaudited interim financial report, the Directors have given careful consideration to the future liquidity of the Group in the light of the Group’s net current liabilities of approximately HK$1,231 million as at 30th September, 2001.

The Group’s servicing of borrowings from certain financial creditors (the “Financial Creditors”) were not made according to the repayment schedules set by the Financial Creditors such that the Group’s total borrowings from these Financial Creditors have become due for immediate repayment. This has given rise to the events described below:

Receivers (the “Receivers”) have been appointed by certain of the Financial Creditors (the “Banking Syndicate”) and a secured financial creditor (the “Third Property Creditor”, not being a member of the Banking Syndicate) in respect of the Group’s three cold storage warehouses (the “Cold Storage Warehouses”) in Hong Kong. The outstanding borrowings from the Banking Syndicate and the Third Property Creditor as at 30th September, 2001, excluding interest, amounted to approximately HK$453 million and HK$234.2 million respectively. The aggregate carrying amount of the Cold Storage Warehouses were approximately HK$1,106 million as at 30th September, 2001.

During the reporting period, the Banking Syndicate issued a writs of summons to a subsidiary of the Group in its capacity as a guarantor to the facilities granted to the Group (the “Syndicated Loan”) demanding immediate repayment of the Syndicated Loan. This subsidiary operates one of the Cold Storage Warehouses (the “Third Property”).

Subsequent to the period end, the Banking Syndicate filed winding-up petitions (the “Winding-up Petitions”) against a subsidiary of the Group as a borrower, the Company and three subsidiaries of the Group as guarantors of the Syndicated Loan. Out of the four subsidiaries of the Company, three subsidiaries are principal operating subsidiaries of the Company carrying on the cold storage and warehousing operations of the Group. As at the date of the report, the three Cold Storage Warehouses of the Group in Hong Kong continue to be used by the Group for its cold storage warehousing businesses.

Further, letters of interests were received by the Receivers to dispose of three Cold Storage Warehouses. Up to the date of this report, the Receivers have not yet responded to the letters of interest and accordingly the terms and conditions have not yet to be finalised.

During the period under review, one of the Financial Creditors (the “Third Property Second Mortgage Creditor”, not being a member of the Banking Syndicate), issued originating summons to a subsidiary of the Group demanding to deliver vacant possession of the Third Property as a result of the failure of the Group to make repayment in accordance with schedule. The outstanding borrowings from the Third Property Second Mortgage Creditor as at 30th September, 2001, excluding interest, amounted to approximately HK$73.5 million.

— 74 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

During the period, the Group was requested by one of the Financial Creditors (the “Secured Assets Creditor”, being a member of the Banking Syndicate) to deliver (a) certain of its investment properties and other land and buildings (the “Charged Properties”) with an aggregate carrying amount of approximately HK$132 million as at 30th September, 2001; and (b) share certificates of certain other investments with a net book value of approximately HK$11.6 million as at 30th September, 2001, for disposal of these secured assets to repay the outstanding borrowings due to the Secured Assets Creditor. The outstanding borrowings from the Secured Assets Creditor as at 30th September, 2001, excluding interest, amounted to approximately HK$258.8 million. Subsequent to the period ended, the Company was informed that an offer to purchase dated 1st November, 2001 was executed by the Secured Assets Creditor for the disposal of the Charged Properties at a consideration of approximately HK$132 million. The net book value of the Charged Properties as at 30th September, 2001 was approximately HK$132 million.

Against this background, the Directors are in the process of exploring with the Group’s Financial Creditors ways to restructure the Group’s borrowings. Provided that the Financial Creditors continue to support the Group until such time as agreement can be reached for the restructuring of the Group’s borrowings and provided that the Winding-up Petitions would not be proceeded, the Directors consider that the Group will have sufficient financial resources to meet in full its financial obligations as they fall due for the foreseeable future. Accordingly, the interim financial report has been prepared on a going concern basis.

The Independent Accountants’ review report

The Independent Accountants have reviewed the unaudited interim financial statements for the six months ended 30th September, 2001 which does not constitute an audit. The Independent Accountants were not able to reach a review conclusion as to whether material modifications that should be made to the interim financial report for the six months ended 30th September, 2001 because of the following matters:

(a) Fundamental uncertainties relating to the going concern basis

On 12th December, 2001, the Winding-up Petitions were served on the Company and four whollyowned subsidiaries of the Company. Out of the four subsidiaries of the Company, three subsidiaries are principal operating subsidiaries of the Company carrying on the cold storage and warehousing operations of the Group at the Cold Storage Warehouses.

In addition to the appointment of the Receivers, certain of the financial creditors of the Group have taken action in connection with their specific security over certain assets of the Group.

The interim financial report has been prepared on a going concern basis, the validity of which depends upon sufficient future funding being available. The interim financial report does not include any adjustments that may result from the failure to obtain such funding. The Independent Accountants consider that appropriate disclosures have been made.

(b) The evidence of certain items available to the Independent Accountants was limited as follows:
(1) Included in the Group’s property, plant and machinery as at 31st March, 2001 and 30th September, 2001 were properties held for development of approximately HK$54 million and HK$60 million, respectively. The Independent Accountants were unable to obtain sufficient information and explanations regarding the fair value of the properties held for development as at 31st March, 2001 and 30th September, 2001 and to assess whether any impairment loss should be recognised in respect of the properties.
(2) On 11th June, 2001 and 9th August, 2001, the Receivers have been appointed by certain of the Financial Creditors of the Group in respect of the Cold Storage Warehouses with an aggregate carrying amount of approximately HK$1,106 million as at 30th September, 2001. The Receivers are in progress of disposing of the Cold Storage Warehouses. The Independent Accountants were unable to obtain sufficient information and explanations regarding the fair value of these warehouses as at 30th September, 2001 in order to assess whether any impairment loss should be recognised in respect of these warehouses.

Any adjustments to the above amounts as at 30th September, 2001 would affect the net assets of the Group as at 30th September, 2001 and the results of the Group for the six months ended 30th September, 2001.

— 75 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. BUSINESS AND GEOGRAPHICAL SEGMENT INFORMATION

Business Segments

For the six months ended 30th September, 2001

Continuing operations Cold storage warehousing, Financial logistics services - management money and related lending services business HK$’000 HK$’000 REVENUE External revenue 88,430 783 Inter-segment revenue — 91,488 Total revenue 88,430 92,271 SEGMENT RESULTS 25,592 783 Unallocated corporate items — other revenue — selling and administrative expenses — other operating expenses Loss from operations	Rental income HK$’000 4,820 — 4,820 3,308	Discontinued operations food retailing and distribution HK$’000 — — — —	Eliminations HK$’000 — (91,488) (91,488) —	Consolidation HK$’000 94,033 — 94,033 29,683 3,388 (34,056) (34,599) (35,584)

For the six months ended 30th September, 2000

Continuing operations Cold storage warehousing, Financial logistics services - management money and related lending services business HK$’000 HK$’000 REVENUE External revenue 98,495 970 Inter-segment revenue — 110,012 Total revenue 98,495 110,982 SEGMENT RESULTS 18,869 970 Unallocated corporate items — other revenue — selling and administrative expenses — other operating expenses Profit from operations	Rental income HK$’000 6,356 2,203 8,559 4,888	Discontinued operations food retailing and distribution HK$’000 7,985 — 7,985 2,083	Eliminations HK$’000 — (112,215) (112,215) —	Consolidation HK$’000 113,806 — 113,806 26,810 69,801 (48,020) (36,624) 11,967

Profit from operations

— 76 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Geographical Segments

For the six months ended 30th September, 2001

Continuing operations Hong Kong Australia HK$’000 HK$’000 REVENUE External revenue 88,385 5,648 Inter-segment revenue 91,488 — Total revenue 179,873 5,648 SEGMENT RESULTS 29,022 661 Unallocated corporate items — other revenue — selling and administrative expenses — other operating expenses Loss from operations	Discontinued operations Hong Kong Australia HK$’000 HK$’000 — — — — — — — —	Eliminations HK$’000 — (91,488) (91,488) —	Consolidation HK$’000 94,033 —
			94,033

			29,683 3,388 (34,056 (34,599
			(35,584

For the six months ended 30th September, 2001

Continuing operations Hong Kong Australia HK$’000 HK$’000 REVENUE External revenue 96,026 9,795 Inter-segment revenue 112,215 — Total revenue 208,241 9,795 SEGMENT RESULTS 21,943 2,784 Unallocated corporate items — other revenue — selling and administrative expenses — other operating expenses Profit from operations	Discontinued operations Hong Kong Australia HK$’000 HK$’000 — 7,985 — — — 7,985 — 2,083	Eliminations HK$’000 — (112,215) (112,215) —	Consolidation HK$’000 113,806 —
			113,806

			26,810 69,801 (48,020 (36,624
			11,967

4. DEPRECIATION AND AMORTISATION

During the period, depreciation and amortisation of approximately HK$18,532,000 (for the six months ended 30th September, 2000: HK$24,502,000) was charged in respect of the Group’s property, plant and equipment.

5. OTHER REVENUE

Other revenue comprises: Net realised gains on other investments Unrealised gains on other investments Others	For the six months ended 30th September, 2001 2000 HK$’000 HK$’000 779 41,982 — 26,953 2,609 866 3,388 69,801	For the six months ended 30th September, 2001 2000 HK$’000 HK$’000 779 41,982 — 26,953 2,609 866 3,388 69,801
		69,801

— 77 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. OTHER OPERATING EXPENSES

Other operating expenses comprise: Loss on disposals of investment properties Unrealised losses on other investments Provision for bad and doubtful debts Others	For the six months ended 30th September, 2001 2000 HK$’000 HK$’000 28,838 — 3,859 — — 33,092 1,902 3,532 34,599 36,624	For the six months ended 30th September, 2001 2000 HK$’000 HK$’000 28,838 — 3,859 — — 33,092 1,902 3,532 34,599 36,624
		36,624

7. TAXATION CREDIT

TAXATION CREDIT
Deferred taxation Share of taxation on results of associates	For the six months ended 30th September, 2001 2000 HK$’000 HK$’000 — 192 — (2 — 190
		190

No provision for Hong Kong Profits Tax has been made as the Company and its subsidiaries did not have any assessable profits during either period.

No provision for deferred taxation has been made as the Company and its subsidiaries did not have any significant timing differences during either period.

8. DIVIDEND

No dividend was paid during either period.

9. LOSS PER SHARE

The calculation of the basic loss per share is based on the net loss for the period of approximately HK$111,025,000 (for the six months ended 30th September, 2000: HK$51,863,000) and on 1,547,042,829 shares in issue during the period.

The computation of the diluted loss per share does not assume the conversion of the outstanding share options of the Company as they would reduce the loss reported for both periods.

10. INVESTMENT PROPERTIES, PROPERTIES, PLANT AND EQUIPMENT

Among other movements, during the period, the Group disposed of investment properties with a carrying amount of approximately HK$89 million for a total consideration (net of expenses) of approximately HK$60.2 million, resulting in a loss of approximately HK$28.8 million. There was no disposal of investment properties in the six months ended 30th September, 2000.

During the period, impairment losses of approximately HK$17.3 million and HK$10.4 million (for the six months ended 30th September, 2000: Nil) were recognised in respect of investment properties and property, plant and equipment, respectively.

11. TRADE RECEIVABLES

The Group allows an average credit period of 60 days to its trade customers.

Details of the ageing analysis of trade receivables are as follows:

0-30 days 31-60 days 61-180 days More than 180 days	30th September, 2001 HK$’000 15,312 10,619 3,745 427 30,103	31st March, 2001 HK$’000 12,535 7,247 4,297 215
		24,294

— 78 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12. TRADE PAYABLES

Details of the ageing analysis of trade payables are as follows:

0-30 days 31-60 days 61-90 days More than 90 days	30th September, 2001 HK$’000 5,049 2,379 465 622 8,515	31st March, 2001 HK$’000 6,046 1,365 263 492
		8,166

13. SHARE CAPITAL

There were no movements in the share capital of the Company for both periods.

(a) The issued share capital of the Company will be reduced from an amount of HK$77,352,141 to HK$15,470,428 by cancelling paid up capital of the Company to the extent of HK$0.04 on each of the ordinary share in issue so that each issued ordinary share of HK$0.05 in the capital of the Company shall be treated as one fully paid up ordinary share of HK$0.01 in the capital of the Company (the “Capital Reduction”);
(b) The credit arising from the Capital Reduction be set off against accumulated losses of the Company as at 31st March, 2001;
(c) The balance of the accumulated losses of the Company as at 31st March, 2001 which has not been cancelled pursuant to paragraph (b) be eliminated by the cancellation of the same amount standing to the credit of the share premium account of the Company; and
(d) subject to and forthwith upon the Capital Reduction taking effect, all of the authorised but unissued shares of HK$0.05 each in the capital of the Company which shall include, without limitation, those unissued shares resulting from the Capital Reduction be canceled and forthwith upon such cancellation, the authorised share capital be increased to HK$1,000,000,000 by the creation of such additional number of shares of HK$0.01 each.

The issued and unissued ordinary shares resulting from the above changes shall rank pari passu in all respects in accordance with the clauses of the Company’s Articles of Association.

Up to the date of this report, the Company has not obtained the approval by and completion of the registration with the Grand Count and Registrar of the Cayman lslands, respectively.

— 79 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. RESERVES

At 1st April, 2000 Exchange differences arising from translation of overseas operations Deficit on revaluation Surplus on revaluation Realised on disposal of subsidiaries Realised on disposal of a property Net loss for the year At 31st March, 2001 Exchange differences arising from translation of overseas operations Net loss for the period At 30th September, 2001	Share premium HK$’000 432,722 — — — — — — 432,722 — — 432,722	Capital redemption reserve HK$’000 3,800 — — — — — — 3,800 — — 3,800	Capital reserve HK$’000 49,991 — — — (3 ) — — 49,988 — — 49,988	Asset revaluation reserve HK$’000 718,888 — (238,507 ) 119 — (1,684 ) — 478,816 — — 478,816	Translation reserve HK$’000 2,543 (20,716 ) — — 9,810 — — (8,363 ) 6,205 — (2,158 )	Deficit HK$’000 (444,386 ) — — — — 1,684 (239,054 ) (681,756 ) — (111,025 ) (792,781 )	Total HK$’000 763,558 (20,716) (238,507) 119 9,807 — (239,054)
							275,207 6,205 (111,025)
							170,387

15. PLEDGE OF ASSETS

The following assets of the Group are pledged to secure credit facilities granted to the Group Other property, plant and equipment Investment properties Other investments Bank deposits	30th September, 2001 HK$’000 1,182,889 82,407 12,242 17,204 1,294,742	31st March, 2001 HK$’000 1,208,841 188,700 25,665 17,378
		1,440,584

At the balance sheet date, the Company had pledged its share in a subsidiary holding investment properties of approximately HK$135,210,000 (31st March, 2001: HK$135,210,000) in the People’s Republic of China to a bank for general banking facilities granted to the Group.

16. LITIGATIONS

(a) In respect of a written agreement of approximately US$628,000 (equivalent to approximately HK$4,898,000) entered into by the Company with an independent third party (the “Third Party”) as amended by an amendment agreement on 9th November, 2000 as detailed in the Company’s annual report for the year ended 31st March, 2001, the Company, subsequent to the period ended 30th September, 2001 agreed to settle the claim with the Third Party by providing, supplying or procuring to provide or supply to the Third Party and/or its nominees for a maximum value equivalent to US$236,000 (equivalent to approximately HK$1.8 million) and within the time limit of one year from the date hereof the storage services and advertising services in one of the Group’s Cold Storage Warehouses.
(b) In 1999, the Group entered into a sales and purchase agreement to dispose of the entire issued share capital of certain former subsidiaries (the “Former Subsidiaries”) to another third party. On 10th November, 2001, a writ of summons was issued by the third party claiming against the Group in respect of:
(i) indemnity granted to the third party in respect of the claims (the “Claims”) and the tax liabilities (the “Tax Liabilities”) of these Former Subsidiaries prior to the completion of the agreement;

— 80 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) deposit an amount of HK$12 million into an escrow account or payment of HK$12 million to the third party as security for the payment of the Claims; and
(iii) deposit an amount of approximately HK$5 million into an escrow account or payment of approximately HK$6 million to the third party as security for the payment of the Tax Liabilities.

The Company is currently discussing with its legal advisers regarding as to the appropriate course of action to be taken.

17. POST BALANCE SHEET EVENTS

Details in respect of the putting up the Cold Storage Warehouses on sale by the Receivers; the Winding-up Petitions against the Company and four wholly-owned subsidiaries of the Company, a sales of the Charged Properties have been set out in the Company’s announcements dated 8th November, 2001 and 14th December, 2001.

Directors’ Interests in Securities

As at 30th September, 2001, the interests of the Directors of the Company and their associates in the securities of the Company or any of its associated corporations, within the meaning of the Securities (Disclosure of Interests) Ordinance (“SDI Ordinance”), as recorded in the register maintained by the Company pursuant to section 29 of the SDI Ordinance or as otherwise notified to the Company and the Stock Exchange of Hong Kong Limited (the “Stock Exchange”) pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”) were as follows:

Name of Director	Nature of interests	Number of shares held
Ms. Shirley Choi Siu Lui	Personal interests	500,000
Mr. Choi Sai Leung	Personal interests	9,000,000

Save as disclosed above and under the section headed “Directors’ Rights to Acquire Shares or Debentures” below, as at 30th September, 2001, none of the Directors, Chief Executives or their associates had any interests in any securities of the Company or any of its associated corporations, within the meaning of the SDI Ordinance.

Directors’ Rights to Acquire Shares or Debentures

The Directors or their associates had interests in share options to subscribe for shares in the Company at an exercise price of HK$0.125 per share, subject to adjustment, and exercisable within the period from 23rd May, 2000 to 22nd November, 2004.

		Outstanding
		share options at
Name of Director	Nature of interests	30th September, 2001
Ms. Shirley Choi Siu Lui	Personal interests	38,584,795
Ms. Ou Yirong	Personal interests	11,981,846
Mr. Norman Choi Sung Fung	Personal interests	10,784,435
Mr. Dennis Hon King Sang	Personal interests	1,197,411
Mr. Choi Sai Leung	Personal interests	38,584,795
Mr. Choi Sai Leung_(note 1)_	Family interests	38,584,795
Mr. Michael Ho Hoi Yu	Personal interests	3,114,197
(former director)(note 2)

Notes:

These share options were granted to Madam Hui Kam Yip, the wife of Mr. Choi Sai Leung.
These share options subsequently lapsed on 1st June, 2001 pursuant to the terms of the share option scheme.

No options were exercised by the Directors of the Company and their associates during the period.

— 81 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Save as disclosed above, at no time during the six months ended 30th September, 2001 was the Company or any of the subsidiaries a party to any arrangement to enable the Directors of the Company to acquire benefits by means of the acquisition of shares in or debt securities, including debentures, of the Company or any other body corporate, and none of the Directors, Chief Executives or their spouses or children under the age of eighteen had any right to subscribe for the securities of the Company, or had exercised any such right during the period.

Substantial Shareholders

The register of substantial shareholders maintained by the Company pursuant to section 16(1) of the SDI Ordinance shows that the following shareholders had an interest of 10% or more of the issued share capital of the Company as at 30th September, 2001:

				Percentage
	Number of shares of the Company		held	of issued
Name of	Direct	Deemed	Total	share
shareholder	interest	interest	interest	capital
				%	Notes
I-China Holdings	—	426,191,518	426,191,518	27.54	1
Limited
Seapower International	—	426,191,518	426,191,518	27.54	1
(B.V.I.) Limited
Seapower Consortium	—	426,191,518	426,191,518	27.54	1
Company Limited
Felcasa International	53,000,000	373,191,518	426,191,518	27.54	2
Limited (“Felcasa”)
Fordit Limited	373,191,518	—	373,191,518	24.12	3
(“Fordit”)

Notes:

These represented the deemed interest in 426,191,518 shares in the Company held by Felcasa and Fordit which are wholly-owned subsidiaries of these companies.
This included the deemed interest in 373,191,518 shares in the Company held by Fordit which is a whollyowned subsidiary of Felcasa.
This included 159,315,000 shares in the Company held by Peregrine Brokerage Limited as chargee.

Save as disclosed above, the Company had not been notified of any other interests representing 10% or more of the issued share capital of the Company as at 30th September, 2001.

Purchase, Sale or Redemption of the Company’s Listed Securities

During the six months ended 30th September, 2001, neither the Company or any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

Compliance with Code of Best Practice

None of the Directors of the Company is aware of any information that would reasonably indicate that the Company is not, or was not for any part of the six months ended 30th September, 2001, in compliance with the Code of Best Practice as set out in Appendix 14 of the Listing Rules.

By Order of the Board Shirley Choi Chairman

Hong Kong, 20th December, 2001

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET OF THE GROUP

In light of the Company’s financial difficulties, it cannot afford the substantial audit fees which will divert the Company’s limited financial resources from its current operations. Accordingly, the Company has not been able to prepare and despatch the annual report and audited results for the year ended 31st March, 2002 within 4 months after the end of its financial year as required under paragraph 8(1) and 11 of the Listing Agreement. With the Investors’ new capital injection, audit work on the final results for the year ended 31st March, 2002 will begin after the Completion of the Restructuring Proposal. Hence, it is expected that the Company will be able to publish its audited accounts for the financial year ended 31st March, 2002 within 4 months after Completion. The Investors have undertaken to the Stock Exchange to publish the Company’s audited accounts for the financial year ended 31st March, 2002 within 4 months after Completion.

The following pro forma unaudited consolidated balance sheet of the Group upon Completion is based on the published audited consolidated balance sheet as at 31st March, 2001 and the unaudited consolidated balance sheet of the Group as at 30th September, 2001 and has been adjusted to reflect the financial position of the Group subsequent to 30th September, 2001 and further adjusted to reflect the financial effects of the Restructuring Proposal.

Adjustments subsequent to the Unaudited unaudited Audited Balance Sheet balance sheet as at Balance Sheet as at 30th September, 2001 as at 31st 30th September, 2001 and up to March, 2001 (Note 1) 30th September 2002 HK$’000 HK$’000 HK$’000 Note Non-current assets Investment properties 323,910 217,617 (96,217 ) 2 Property, plant and equipment 1,275,419 1,253,504 (1,181,504 ) 3 Other investments 25,100 11,637 (11,637 ) 4 1,624,429 1,482,758 (1,289,358 ) Current assets Trade and other receivables 40,257 44,119 (34,166 ) 5 Other investments 565 605 (553) 6 Taxation recoverable 6,013 6,013 (6,009) 7 Bank balances and cash 29,352 24,531 (12,851 ) 8 Restructuring Proceeds 0 0 0 76,187 75,268 (53,579 ) Current liabilities Trade and other payables 92,580 119,433 (18,089 ) 9 Provision for net realisations payable to the Creditors — — — Amounts due to a jointly controlled entity 1,007 1,007 (1 ) Taxation payable 846 846 33,507 7 Obligations under finance leases - due within one year 283 881 (881) 10 Bank and other borrowings - due within one year 1,248,624 1,183,781 (667,198) 11 1,343,340 1,305,948 (652,662)	Adjustments arising from the implementation of the Restructuring Proposal HK$’000 Note 0 (54,135 ) 14 0 (54,135 ) (4,116 ) 15 (52) 15 (4 ) 15 (7,335 ) 16 5,420 17 (6,087 ) (99,015 ) — (144) (34,255 ) 0 (497,293) (630,707) 18, 19	Profoma Balance Sheet upon Completion of the Restructuring Proposal HK$’000 Note 121,400 21 17,865 22 0 139,265 5,837 0 0 4,345 5,420 15,602 2,330 53,400 26 862 98 0 19,290 23 75,980

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Adjustments
subsequent to the
unaudited
Adjustments
balance sheet
arising
Unaudited
as at 30th September, 2001
from the
Audited
Balance Sheet
and prior
implementation
Balance Sheet
as at
to the implementation
of the
as at
30th September, 2001
of the Restructuring
Restructuring
31st March, 2001
(Note 1)
Proposal
Proposal
HK$’000
HK$’000
HK$’000
Note
HK$’000
Note
Net current assets/ (liabilities)
(1,267,153)
(1,230,680 )
(599,083 )
624,620
Minority Interests
4,303
4,057
(3,548 )
12
0
Non-current liability
Obligations under finance leases -
due after one year
414
282
(282)
13
0
Amount due to Investors
0
0
0
5,000
20
Net Assets/ (Liabilities)
before restructuring
352,559
247,739
(686,447 )
Pro forma adjusted and
unaudited consolidated
net assets at Completion
Pro forma adjusted and
unaudited consolidated
net assets per New Share
upon Completion
Issue of New Shares upon
exercise of all Warrants
Pro forma adjusted and
unaudited consolidated
net assets upon exercise
of all Warrants
Pro forma adjusted and
unaudited consolidated
net assets per New Share
upon exercise of all Warrants

Profoma
Balance Sheet
upon Completion
of the
Restructuring
Proposal
HK$’000
Note
(60,378)
509
0
5,000
73,378
0.00814
24
17,000
90,378
0.00843
25

Notes:

(1) The financial figures are extracted from the Company’s published interim report for 6 months ended 30th September, 2001.

(2) Before the appointment of the Provisional Liquidators to the Company, the secured bank disposed of the investment properties at Silver Fortune Plaza with carrying amount of approximately HK$82.4 million for a total consideration (net off expenses) of approximately HK$77.8 million, resulting in a loss of approximately HK$4.6 million.

The sole investments of Pentagon Profits in 24 townhouses in Beijing were revalued by Chesterton Petty Limited, independent firms of professional property valuer, at 31st August, 2002 on an open market value basis at approximately HK$121,400,000 (a copy of the valuation report is set out in Appendix III to this circular). There is approximately HK$13,810,000 in deficit on revaluation when compared to the book value of approximately HK$135,210,000 as at 31st March, 2001.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(3)
Main adjustments to property, plant and equipments are summarised as follows:
Property, plant and equipments
Disposal of Silver Fortune Plaza
Disposal of a cold storage warehouse in Australia by mortgagee
Disposal of cold storage properties in Hong Kong and plant and equipment
situated at those properties by receivers and the subsequent sale of
the assets of the Operators by the Provisional Liquidators
Revaluation surplus of a cold storage warehouse in Australia
Depreciation from 1st October, 2001 to 31st March, 2002
Revaluation of Indonesian land since 30th September, 2001
as a result of exchange rate movements
Total Reduction of property, plant and equipment
before implementation of Restructuring Proposal
(4)
The adjustment is due to the disposal of listed securities.
(5)
Main adjustments in trade and other receivables
Disposal of accounts receivables of the Operators and one subsidiary
Prepayment of rental for a cold storage warehouse in Australia
Receipt of consideration by iPower for granting licenses of software programs
Disposal of membership of Clearwater Bay Golf Club
Provision for trade and other receivables
Movements due to normal operations from 1 October 2001
to the Latest Practicable Date and due to the sale of iPower’s licences
(6)
Adjustments in other investments
Realised loss on revaluation of listed securities
The disposal of listed securities
(7)
Taxation
Tax assessment imposed by the Inland Revenue Department
Change in tax recoverable
Change in tax payable
(8)
The reduction in the bank and cash balances is mainly due to the transfer of the Operators’
liquidators for the distributions to their creditors.
(9)
Main adjustments in trade and other payables
Movements as a result of the Provisional Liquidators’ costs and
expenses incurred and normal operations from 30th September, 2001
to the Latest Practicable Date
Distribution of ordinary dividends by the Operators to their creditors
Waive of debt due to the unsecured creditors of the Operators
after the distribution of ordinary dividends
Provision for claims by staff and creditors

Book Value
HK$’000
49,593
16,369
1,096,154
(2,370)
14,236
6,429
1,180,411
HK$
(25,972,914)
1,324,400
(3,400,000)
(1,700,000)
(4,541,502)
123,860
(34,166,156)
(61,696)
(491,490)
(553,186)
(6,008,454)
(33,507,772)
funds to their
(18,864,983)
(21,129,876)
(19,528,879)
41,434,624
(18,089,114)

(10) Decrease in obligations under finance leases due within one year is due to the repayment during the period.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(11) Various banks have applied the proceeds (net of disposal costs) from the disposal of the 3 properties in Hong Kong and the Australian cold storage warehouse to settle part of the outstanding loans due from the Group.
(12) The movement in the minority interests is due to the Company’s acquisition of shares in its non wholly-owned subsidiary Seapower Financial Services Group Ltd. prior to the appointment of the Provisional Liquidators.
(13) Decrease in obligations under finance leases due after one year is due to the repayment.

(13)
Decrease in obligations under finance leases due after one year is due to the repayment.

(14)
Details of adjustments to property, plant and equipment are summarised as follows:
Property, plant and equipments
Disposal of SDI to Scheme Administrators pursuant to Restructuring Proposal
Retirement of property, plant and equipment as a result
of the proposed transfer of inactive or dormant subsidiaries
to the Provisional Liquidators to be held on behalf
of the Creditors following Completion
Total reduction of property, plant and equipment
after implementation of the Restructuring Proposal

Book Value
HK$’000
53,141
994

54,135

(15) The adjustments in trade receivables, other investments and taxation recoverable were due to the proposed transfer of the Group’s subsidiaries to the Scheme Administrators (as described in note (19) below) to be held on behalf of the Creditors at a total consideration of HK$1.00 prior to the Completion of the Restructuring Proposal.
(16) It includes the cash balance held by the Company to be transferred to the Scheme Administrators for the benefit of the Creditors pursuant to the Schemes and the funds retained by the inactive or dormant subsidiaries (which are to be transferred to the Scheme Administrators prior to Completion) for the settlement of their outstanding liabilities.
(17)

(17)
		HK$’000
	Proceeds from issue of Subscription New Shares	85,000
	Cash payment to the Creditors	(70,000)
	Estimated restructuring costs and expenses paid at and prior to Completion	(8,500)
	Estimated cash payment to meet part of the Group’s interim working capital,
	such as the administrative, employee and trade expenses during the course of the restructuring	(1,080)
	Total	5,420

(18)	Approximately HK$593.39 million of the Group’s indebtedness which includes all the indebtedness of the
	Company will be discharged and waived pursuant to the Restructuring Proposal.

(19) It is proposed that the Company’s entire interests in 62 inactive or dormant subsidiaries be transferred to the Scheme Administrators to be held on behalf of the Creditors for a total consideration of HK$1.00 prior to completion of the Restructuring Proposal. The 62 subsidiaries have debts of approximately HK$37.32 million as at the Latest Practicable Date.
(20) If the Investors do not exercise the Investors’ Option, the Company will bear an additional liability of not more than HK$5,000,000 to the Investors at Completion.
(21) The value of the 24 townhouses in Beijing in accordance with the valuation report as at 31st August, 2002 by Chesterton Petty Limited as set out in Appendix III of this circular.
(22) The book value mainly comprises the buildings located in Australia and the PRC. Allied National owns one cold storage warehouse in Australia, the book value of which was approximately HK$13.02 million according to the valuation report as at 23rd October, 2002 set out in Appendix III to this circular. The remaining HK$4.845 million mainly comprises the Group’s plant and equipment.
(23) HK$19 million represents the indebtedness of the Company and its subsidiaries due to two secured creditors. The indebtedness consists of primary obligations of the subsidiaries which have been guaranteed by the Company and a secured primary obligation of the Company. This indebtedness will be discharged as against the Company as a result of the Debt Restructuring. However, this indebtedness will continue to be part of the Group’s consolidated liabilities and will remain in the pro forma consolidated balance sheet of the Group upon Completion.
(24) Based on the enlarged issued share capital of approximately 9,015.32 million New Shares after Completion but prior to the exercise of the Warrants and the Investors’ Option.
(25) Based on the enlarged issued share capital of approximately 10,715.32 million New Shares after Completion and exercise of the Warrants (excluding the Investors’ Option and the associated Warrants).
(26) If Pentagon Profits or its assets are sold by the Company at its estimated value as at 31st August, 2002, the creditors will be entitled to about HK$53.7 million of the net estimated proceeds, which is 50% of the net proceeds as set out in the Restructuring Agreement.

— 86 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. COMFORT LETTER FROM CCIF IN RELATION TO THE GROUP’S FINANCIAL ADJUSTMENTS SUBSEQUENT TO THE AUDITED BALANCE SHEET AS AT 31ST MARCH, 2001

Set out below is the text of the letter received by the Provisional Liquidators and Asian Capital from CCIF, in connection with the Group’s financial adjustments subsequent to the audited balance sheet as at 31st March, 2001 and is prepared for the purpose of inclusion in this circular.

==> picture [46 x 67] intentionally omitted <==

Charles Chan, Ip & Fung CPA Ltd.

37th Floor, Hennessy Centre 500 Hennessy Road Causeway Bay, Hong Kong

The Directors and/or The Provisional Liquidators of Seapower Resources International Limited (Provisional Liquidators Appointed) The board of directors of Asian Capital (Corporate Finance) Limited

14th November, 2002

Dear Sirs

INTRODUCTION

We have reviewed the unaudited consolidated adjustments of Seapower Resources International Limited (Provisional Liquidators Appointed) (the “Company”) and its subsidiaries, set out on note 42 of Section 3 in Appendix I of this circular (hereinafter collectively referred to as the “Group”) for the 18 months period from 1 April 2001 (subsequent to the published audited consolidated balance sheet as at 31 March 2001) to 30 September 2002 and the adjustments arising from the implementation of the Restructuring Proposal (hereinafter collectively referred to as “Unaudited Consolidated Adjustments”). The Unaudited Consolidated Adjustments are set out in the section headed “Pro Forma Unaudited Consolidated Balance Sheet” in this circular issued by the Company in connection with the capital reorganisation, debt restructuring involving creditors’ schemes of arrangement in accordance with Section 86 of the Cayman Companies Law and Section 166 of Hong Kong Companies Ordinance, subscription of new shares and warrants and whitewash waiver and other proposals regarding adoption of new share option scheme and general mandate to issue new shares.

PROVISIONAL LIQUIDATORS’ RESPONSIBILITIES

The unaudited consolidated adjustments made for the first 9 months of the period covered by the Unaudited Consolidated Adjustments (i.e. prior to the appointment of the Provisional Liquidators to the Company) are based on the published unaudited interim report for the six months ended 30 September 2001 and the books and records available to the Provisional Liquidators. The unaudited consolidated adjustments made for the remaining 9 months of the period covered by the Unaudited Consolidated Adjustments and the adjustments arising from the implementation of the Restructuring Proposal have been compiled and approved by the Provisional Liquidators.

REVIEW WORK PERFORMED

We conducted our review of the Unaudited Consolidated Adjustments in accordance with the Statement of Auditing Standards 700 “Engagement to review interim financial reports” issued by the Hong Kong Society of Accountants. In addition to the review of the Group’s available management accounts subsequent to 31 March 2001, our review consists principally of making enquiries of management of

— 87 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

the Group and the Provisional Liquidators, and applying analytical procedures to the underlying financial data and bases thereon, assessing whether the accounting policies have been consistently applied. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the Unaudited Consolidated Adjustments.

REVIEW CONCLUSION

On the basis of our review which does not constitute an audit:

so far as the accounting policies and calculation are concerned, the Unaudited Consolidated Adjustments have been prepared on a basis consistent in all material respects with the accounting policies normally adopted by the Group; and
we are not aware of any material modifications that should be made to the Unaudited Consolidated Adjustments as presented in the circular.

Yours faithfully

Charles Chan, Ip & Fung CPA Ltd. Certified Public Accountants Hong Kong Chan Wai Dune, Charles Practising Certificate Number P00712

— 88 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. COMFORT LETTER FROM ASIAN CAPITAL IN RELATION TO THE GROUP’S FINANCIAL ADJUSTMENTS SUBSEQUENT TO THE AUDITED BALANCE SHEET AS AT 31 MARCH 2001

Set out below is the text of the letter received by the Company from Asian Capital in connection with the Group’s financial adjustments subsequent to the audited balance sheet as at 31 March 2001 and is prepared for the purpose of inclusion in this circular.

==> picture [129 x 42] intentionally omitted <==

Suite 3104, 31/F Nine Queen’s Road Central, Central, Hong Kong

14th November, 2002

The Directors and/or The Provisional Liquidators of Seapower Resources International Limited (Provisional Liquidators Appointed)

Dear Sirs,

Seapower Resources International Limited (Provisional Liquidators Appointed) (the “Company”) and its subsidiaries (collectively the “Group”)

We refer to the unaudited consolidated adjustments of Seapower Resources International Limited (Provisional Liquidators Appointed) (the “Company”) and its subsidiaries set out on note 42 of Section 3 in Appendix I to this circular (hereinafter collectively referred to as the “Group”) for the 18 months period from 1 April 2001 (subsequent to the published audited consolidated balance sheet as at 31st March 2001) to 30 September 2002 and the adjustments arising from the implementation of the Restructuring Proposal (hereinafter collectively referred to as “Unaudited Consolidated Adjustments”). The Unaudited Consolidated Adjustments are set out in the section headed “Pro Forma Unaudited Consolidated Balance Sheet” on page pages 83 and 84 of this circular issued in connection with the restructuring of the Company involving, inter alia, capital reorganisation, debt restructuring involving Creditors’ schemes of arrangement in accordance with Section 86 of the Cayman Companies Law and Section 166 of the Companies Ordinance, subscription of new shares and warrants and whitewash waiver (the “Restructuring Proposal”).

CCIF has reviewed the Unaudited Consolidated Adjustments. We have considered the letter dated 14th November, 2002 from CCIF to the Provisional Liquidators and us in respect of the Unaudited Consolidated Adjustments and noted the following:

The review of the Unaudited Consolidated Adjustments undertaken by CCIF has been substantially less in scope than an audit performed and therefore provides a lower level of assurance than an audit. Accordingly, CCIF does not express an audit opinion on the Unaudited Consolidated Adjustments.
Based on the review undertaken by CCIF, so far as the accounting policies and calculations are concerned, the Unaudited Consolidated Adjustments have been prepared on basis consistent in all material respects with the accounting policies normally adopted by the Group and CCIF is not aware of any material modifications that are required to be made to the Unaudited Consolidated Adjustments.

Subject to the foregoing, and on the basis of the accounting policies adopted in preparing the Unaudited Consolidated Adjustments and the review performed by CCIF, we are satisfied that the Unaudited Consolidated Adjustments have been compiled with due care and consideration by the Provisional Liquidators of the Company.

Yours truely, For and on behalf of Asian Capital (Corporate Finance) Limited

Patrick K.C. Yeung Managing Director

— 89 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

9. CASH FLOW PROJECTIONS

In assessing the adequacy of working capital of the Group, the proposed Directors, as identified in the section “Intention of the Investor” set out in this circular, have prepared the cash flow projections of the Group for the 12-month period after Completion based on the following principal assumptions. Actual cash flows may differ substantially from the prospective financial information contained in the cash flow projections since actual events frequently do not occur as expected and such variation may be material.

Principal assumptions:

The Restructuring Proposal is successfully implemented.
The remaining proceeds (after the cash payment to the Scheme Administrators for the benefits of the Creditors and all the costs and expenses paid by the Company at Completion for the implementation of the Restructuring Proposal) of approximately HK$5.42 million from the Subscription will be retained by the Company as general working capital for the Group.
The Group will continue to engage in the existing businesses upon Completion.
The expected net cash inflow from operating activities of the Group represents the proposed Directors’ best estimate of the operating results of the existing businesses of the Group.
No material expenditure for purchases of fixed assets, investments or other acquisitions will be incurred during the period for the 12 months after Completion other than with the provision of funding from the Investors.
There are no contingent liabilities.
There will be no material changes in the existing political, legal, fiscal, foreign trade or economic conditions in Hong Kong or other countries in which the Group carries on or intends to carry on business.
There will be no material changes in the bases or rates of taxation in those countries in which the Group operates or intends to operate.
There will be no disasters, natural, political or otherwise, which would materially disrupt the business or operations of the Group or cause substantial loss, damage or destruction to its facilities.

The following is the cash flow projection of the Group for the 12-month period starting from the date of Completion:

of Completion:
$’ million Expected net proceeds from the Restructuring Proposal_(Note 1) Expected cash inflow from operating activities(Note 2) 22.65 Expected cash outflow from operating activities(Note 2)_ (20.65) Expected net cash inflow from operating activities Increase in cash and cash equivalents	$’ million 5.42 2.00
	7.42

Note 1:

The remaining proceeds (after the cash payment to the Scheme Administrators for the benefits of the Creditors and all the costs and expenses paid by the Company at Completion for the implementation of the Restructuring Proposal) from the Subscription will be retained by the Company as general working capital for the Group. It is estimated to be approximately HK$5.42 million.

Note 2:

Operating activities include the provision of logistic management services in Hong Kong, the PRC and the operation of cold storage warehousing business in Australia.

— 90 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

that the Group will have sufficient working capital for its operations for a period of 12 months after Completion; (b) to CCIF and Asian Capital that they will procure the Company to observe and abide by its undertaking to CCIF and Asian Capital that the Company shall not increase its borrowing without both of CCIF’s and Asian Capital’s written consents if the incurrence of such additional borrowings by the Company is not matched by fresh funds obtained by the Company from issue of New Shares after Completion and (c) without the prior written consents of CCIF and Asian Capital, the Investors will not dispose of their shares of the Company, or allow new shares to be issued by the Company, and if after such disposal or new issue of new shares of the Company, the Investors’ controlling interest in the Company will be diluted to or below 50% of the enlarged capital of the Company.

— 91 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. COMFORT LETTER FROM CCIF IN RELATION TO THE GROUP’S WORKING CAPITAL ADEQUACY

Set out below is the text of the letter received by the Provisional Liquidators and Asian Capital from CCIF, in connection with the Group’s working capital adequacy and is prepared for the purpose of inclusion in this circular.

==> picture [46 x 67] intentionally omitted <==

Charles Chan, Ip & Fung CPA Ltd.

37th Floor, Hennessy Centre 500 Hennessy Road Causeway Bay, Hong Kong

The Directors and/or The Provisional Liquidators of Seapower Resources International Limited (Provisional Liquidators Appointed) The board of directors of Asian Capital (Corporate Finance) Limited

14th November, 2002

Dear Sirs

We refer to the circular dated 14th November 2002 (the “Circular”) issued by Seapower Resources International Limited (Provisional Liquidators Appointed) (the “Company”) in connection with the restructuring of the Company involving, inter alia, capital reorganisation, debt restructuring involving creditors’ schemes of arrangement in accordance with Section 86 of the Cayman Companies Law and Section 166 of the Companies Ordinance, subscription of new shares and warrants and whitewash waiver (the “Restructuring Proposal”).

In accordance with the instructions of the Provisional Liquidators of the Company, we have reviewed the compilation of the cash flow projections of the Company and its subsidiaries (hereinafter collectively referred to as the “Group”) for the 12 months period immediately following Completion (the “Cash Flow Projections”) and the cash flow requirements of the Group for the same period, taking into consideration of the intention of the Investors regarding the Company as described on pages 23 and 24 of this circular. The Cash Flow Projections have been complied on the basis of certain principal assumptions (the “Assumptions”) as set out on page 90 of this circular made by Leader Glory Holdings Limited and Mr. Pang Man Kin, Nixon (the “Investors”) and proposed new executive directors of the Company, Messrs. Pang Man Kin, Nixon, Wong Chak Wai and Desmond Sun (the “Proposed Directors”).

We understand that the Proposed Directors propose to make the following statement on pages 13 and 14 of this circular:

“Approximately HK$5.42 million from the Subscription proceeds will be retained by the Company for the Group’s general working capital after deducting the following from the HK$85 million Subscription proceeds:

(a) the HK$70 million cash payment to the Scheme Administrators for the benefit of the Creditors;
(b) the restructuring costs of about HK$8.5 million paid at or pior to Completion (Note 1) ; and
(c) the working capital of about HK$1.08 million used to meet part of the Group’s working capital requirments during the course of restructuring up to 18th December, 2002 which is the long-stop date for Completion.

— 92 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

We emphasize that the Cash Flow Projections and the Assumptions relate to the future and actual cash flows are likely to be different since anticipated events frequently do not occur as expected and the variation may be material. Accordingly, the Cash Flow Projections cannot be relied upon to the same extent as information derived from the audited financial statements for completed financial accounting periods. For this reason, we express no opinion on how closely the cash flows eventually achieved will correspond with the Cash Flow Projections.

In our opinion, based on our review, so far as the accounting policies and calculations are concerned, the Cash Flow Projections for which the Proposed Directors are solely responsible have been properly complied on the basis of the Assumptions and the above statement as to the sufficiency of working capital has been made by the Proposed Directors with due care and consideration.

Yours faithfully

Charles Chan, Ip & Fung CPA Ltd. Certified Public Accountants Chan Wai Dune, Charles Practising Certificate Number P00712

— 93 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. COMFORT LETTER FROM ASIAN CAPITAL IN RELATION TO THE GROUP’S WORKING CAPITAL ADEQUACY

Set out below is the text of the letter received by the Company from Asian Capital in connection with the Group’s working capital adequacy and is prepared for the purpose of inclusion in this circular.

==> picture [129 x 42] intentionally omitted <==

Suite 3104, 31/F Nine Queen’s Road Central, Central, Hong Kong

14th November, 2002

The Directors and/or The Provisional Liquidators of Seapower Resources International Limited (Provisional Liquidators Appointed)

Dear Sirs,

Seapower Resources International Limited (Provisional Liquidators Appointed) (the “Company”) and its subsidiaries (collectively the “Group”)

We refer to the cash flow projections of the Group for the 12 months immediately following Completion as set out on page 90 (the “Cash Flow Projections”), the assumptions on which the Cash Flow Projections are based (the “Assumptions”) and the statement made by the proposed new executive directors of the Company, Messrs. Pang Man Kin, Nixon, Wong Chak Wai and Sun Tak Yan Desmond (the “Proposed Directors”) as set out on pages 13 and 14 of this circular (the “Statement”).

We have reviewed the Cash Flow Projections, Assumptions and the Statement, for which the Proposed Directors of the Company are solely responsible.

We have considered (a) the intentions of the Investors regarding the Group as described on pages 23 to 24 of this circular; (b) the Investors’ and the Company’s undertakings to us and CCIF as referred to in the letter from CCIF addressed to you and us set out on pages 92 to 93 of this circular; and (c) the letter from CCIF dated 14th November, 2002 addressed to you and us as set out on pages 92 to 93 of this circular.

Since the Cash Flow Projections and the Assumptions relate to the future and may be affected by unforeseen events, actual cash flows may differ from the Cash Flow Projections. We therefore express no opinion on how closely the cash flows eventually achieved will correspond with the Cash Flow Projections because anticipated events frequently do not occur as expected and the variation may be material.

Subject to the foregoing and based on the review performed by CCIF on the Cash Flow Projections, we are satisfied that the Cash Flow Projections for which the Proposed Directors are solely responsible have been made with due care and consideration.

Yours truly, For and on behalf of

Asian Capital (Corporate Finance) Limited

Patrick K.C. Yeung Managing Director

— 94 —

SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX II

NEW SHARE OPTION SCHEME

1. Summary of the terms of the New Share Option Scheme

The purpose of the New Share Option Scheme is to enable the Group to grant options to selected Eligible Participants as incentive or rewards for their contributions to the Group and to provide the Group with a more flexible means to reward, remunerate, compensate and/or provide benefits to the Eligible Participants. The following is a summary of the principal terms of the New Share Option Scheme proposed to be adopted at the EGM:

(a) Who may join

The Board may, at its absolute discretion, offer the Eligible Participants options to subscribe for such number of New Shares as the Board may determine at a subscription price determined in accordance with paragraph (b) below, and subject to the other terms of the New Share Option Scheme summarised below.

An offer of grant of an option shall remain open for acceptance by the Eligible Participant concerned for such period as determined by the Board, which period shall not be more than ten (10) days from the date of the offer, provided that no such offer shall be open for acceptance after the tenth anniversary of the date of adoption of the New Share Option Scheme which is deemed to be the date of Completion (the “Adoption Date”) or after the New Share Option Scheme has been terminated in accordance with the provisions thereof. Upon acceptance of the offer, the grantee shall pay HK$1.00 to the Company by way of consideration for the grant and the option shall be deemed to have been granted and to have taken effect with retrospective effect from the date on which the option is offered.

(b) Price of New Shares

The subscription price for New Shares in respect of any particular option granted under the New Share Option Scheme shall be such price as the Board shall determine, provided that such price shall not be less than the highest of (i) the closing price per New Share as stated in the Stock Exchange’s daily quotation sheet on the date of offer of the option or, where paragraph (c) (v) or (d) (iii) below applies, the closing price per New Share as stated in the Stock Exchange’s daily quotation sheet on the date of the Board meeting proposing such grant (the “Relevant Date”); and (ii) the average closing prices per New Share as stated in the Stock Exchange’s daily quotation sheets for the five business days immediately preceding the date of offer of the option or, where paragraph (c)(v) or (d) (iii) below applies, the average closing prices per New Share as stated in the Stock Exchange’s daily quotation sheets for the five business days immediately preceding the Relevant Date; and (iii) the nominal value of a New Share.

(c) Maximum number of New Shares

(i) Subject to compliance of paragraphs (ii), (iii) and (iv) below, the overall limit on the number of New Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the New Share Option Scheme and any other schemes must not exceed 30% of the issued share capital of the Company from time to time. No options may be granted under the New Share Option Scheme if this will result in such limit being exceeded.
(ii) The aggregate number of New Shares which may be issued upon exercise of all options to be granted under the New Share Option Scheme and any other share option schemes of the Company must not, in aggregate, exceed 10% of the issued share capital of the Company as at the Adoption Date (“Scheme Mandate Limit”) (such 10% being equivalent to 901.532 million New Shares based on the expected number of 9,015.32 million New Shares (if the Investors’ Option is not exercised at Completion) or 951.532 million New Shares based on the expected number of 9,515.32 million New Shares (if the Investors’ Option is exercised at Completion) in issue immediately after Completion as

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX II

shown in the shareholding table under point (b) of section 4 headed “Effects of the Restructuring Proposal” in the “Letter from the Provisional Liquidators” of this circular) unless Shareholders’ approval has been obtained pursuant to paragraph (iii) or (iv) below. Options lapsed in accordance with the terms of the New Share Option Scheme or any other share option schemes of the Company will not be counted for the purpose of calculating the Scheme Mandate Limit.

(iii) The Board may seek approval by Shareholders in general meeting to renew the Scheme Mandate Limit. However, the total number of New Shares which may be issued upon exercise of all options to be granted under the New Share Option Scheme and any other share option schemes of the Company in these circumstances must not exceed 10% of the issued share capital of the Company at the date of approval of the renewed limit (the “renewed Scheme Mandate Limit”). Options previously granted under the New Share Option Scheme and any other share option schemes of the Company (including those outstanding, cancelled, lapsed in accordance with the New Share Option Scheme or any other share option schemes of the Company or exercised options) will not be counted for the purpose of calculating the renewed Scheme Mandate Limit. The Company will send a circular to its shareholders containing the information required under Rule 17.02(2)(d) of the Listing Rules and the disclaimer required under Rule 17.02(4) of the Listing Rules.
(iv) Subject to paragraph (i) above, the Board may seek separate approval of the Shareholders in general meeting to grant options beyond the Scheme Mandate Limit or the renewed Scheme Mandate Limit (as the case may be) provided that the options in excess of the Scheme Mandate Limit or the renewed Scheme Mandate Limit are granted only to participants specifically identified by the Company before such approval is sought and the Company must issue a circular to its Shareholders containing a generic description of the specified participants who may be granted such options, the number and terms of the options to be granted, the purpose of granting options to the specified participants with an explanation as to how the terms of the options serve such purpose, the information required under Rule 17.02(2)(d) of the Listing Rules and the disclaimer required under Rule 17.02(4) of the Listing Rules.
(v) Unless approved by the Shareholders in the manner set out in this paragraph (v), the total number of New Shares issued and to be issued upon exercise of the options granted to each Eligible Participant (including both exercised and outstanding options under the New Share Option Scheme) in any 12-month period must not exceed 1% of the issued share capital of the Company. Where any further grant of options to an Eligible Participant would result in the total number of New Shares issued and to be issued upon exercise of all options granted and to be granted to such Eligible Participant (including exercised, cancelled and outstanding options under the New Share Option Scheme) in the 12-month period up to and including the date of such further grant representing in aggregate over 1% of the issued share capital of the Company as at the date of such further grant, such further grant must be subject to the approval of the Shareholders at a general meeting with such Eligible Participant and his associates abstaining from voting. A circular must be sent to the Shareholders disclosing the identity of the Eligible Participant, the number and the terms of the options previously granted and to be granted and containing the information required under Rule 17.02 (2) (d) of the Listing Rules and the disclaimer required under Rule 17.02 (4) of the Listing Rules. The number and terms (including the subscription price for New Shares) of the options to be granted to such Eligible Participant must be fixed before Shareholders’ approval and the date of the Board meeting for proposing such further grant should be taken as the date of grant for the purpose of calculating the subscription price under paragraph (b) above as required under Note 1 to Rule 17.03 (9) of the Listing Rules.

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX II

(d) Restrictions on grant of options

(i) No offer of the grant of an option shall be made after a price sensitive event has occurred or a price sensitive matter has been the subject of a decision of the Directors, until such price sensitive information has been announced in accordance with the relevant requirements of the Listing Rules and, in particular, no Eligible Participant shall be granted an option during the period commencing one month immediately preceding the earlier of:
(1) the date of the Board meeting (as such date is first notified to the Stock Exchange in accordance with the listing agreement of the Company with the Stock Exchange) for the approval of the annual results or the interim results of the Company; and
(2) the deadline for the Company to publish the announcement of its annual results or interim results under the listing agreement of the Company with the Stock Exchange,

and ending on the date of announcement for such results.

(ii) Any grant of options to a director, chief executive or substantial Shareholder of the Company or any of his/her/its associates must be approved by all of the independent non-executive Directors (excluding any independent non-executive Director who is the grantee of the options).
(iii) Where options are proposed to be granted to a substantial Shareholder or an independent non-executive Director or any of their respective associates, and the proposed grant of options would result in the total number of New Shares issued and to be issued upon exercise of all options already granted and to be granted (including options exercised, cancelled and outstanding) to such person in the 12-month period up to and including the date of such grant representing in aggregate over 0.1% of the total issued New Shares and having an aggregate value, based on the closing price of the New Shares at the date of each grant, in excess of HK$5 million, such grant of options must be subject to the approval of Shareholders taken on a poll in a general meeting. In addition, the date of the Board meeting for proposing such further grant should be taken as the date of grant for the purpose of calculating the subscription price under paragraph (b) above as required under Note 1 to Rule 17.03(9) of the Listing Rules. The connected person involved in such proposed grant and all other connected persons of the Company must abstain from voting in such general meeting (except that any connected person may vote against the proposed grant provided that his intention to do so has been stated in the shareholders’ circular). A shareholders’ circular must be prepared and sent by the Company containing (1) details of the number and terms (including the subscription price) of the options to be granted to each participant, which must be fixed before the shareholders’ meeting; (2) a recommendation from the independent non-executive Directors (excluding independent non-executive Director who is the grantee of the options) to the independent Shareholders as to voting; and (3) the information required under Rules 17.02(2)(c) and (d) of the Listing Rules and the disclaimer required under Rule 17.02(4) of the Listing Rules.

(e) Time of and restrictions on exercise of option

An option may be exercised in whole or in part in accordance with the terms of the New Share Option Scheme at any time during a period to be notified by the Board to each grantee provided that the period within which the New Shares may be taken up under the option must not be more than 10 years from the date of grant of the option.

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX II

There is no general requirement on the minimum period for which an option must be held or the performance targets which must be achieved before an option can be exercised under the terms of the New Share Option Scheme. However, the Board may offer to grant any options subject to such terms and conditions in relation to the minimum period of the options to be held and/or the performance targets to be achieved before such options can be exercised as the Board may determine in its absolute discretion.

(f) Assignment

Options granted under the New Share Option Scheme must be personal to the grantee, which may not be sold, transferred, charged, mortgaged, encumbered or assigned by the grantee to or in favour of any third party over or in relation to any option.

(g) Rights on cessation of employment by death

If the grantee of an option ceases to be an Eligible Participant by reason of death and none of the event sets out in paragraph (h) below which would be a ground for the termination of his/ her employment or appointment arises, his/her personal representative may exercise the option up to the entitlement of the grantee as at the date of death (to the extent not already exercised) within a period of twelve months from the date of death (or such longer period as the Board may determine), failing which the option will lapse.

(h) Rights on cessation of employment by dismissal

If the grantee of an option ceases to be an Eligible Participant by reason of the termination of his/her employment or appointment on any one or more of the grounds that he/she has been guilty of serious misconduct, or appears either to be unable to pay or to have no reasonable prospect of being able to pay his/her debts or has become insolvent or has made any arrangements or composition with his/her creditors generally, or has been convicted of any criminal offence involving his/her integrity or honesty or on any other ground on which an employer would be entitled to terminate his/her employment or appointment at common law or pursuant to any applicable laws or under the service contract or letter of appointment of the grantee with the Company or the relevant subsidiary, his/her option (to the extent not already exercised) will lapse and not be exercisable on the date of termination of his/her employment or appointment. A resolution of the board of directors of the Company or the relevant subsidiary to the effect that the employment or appointment of a grantee has or has not been terminated on one or more of the grounds specified in this paragraph (h) shall be conclusive.

(i) Rights on cessation of employment by resignation

If the grantee of an option ceases to be an Eligible Participant by reason of his/her resignation, his/her option (to the extent not already exercised) will lapse and not be exercisable with effect from the date on which his/her resignation is received by the Company or its subsidiaries (as the case may be).

(j) Right on cessation of employment for other reasons

If the grantee of an option ceases to be an Eligible Participant for any other reason, the grantee may exercise the option up to his/her entitlement at the date of cessation (to the extent not already exercised) within three months following the date of such cessation, which date shall be the last actual appointment day or working day with the Company or the relevant subsidiary, whether salary or compensation is paid in lieu of notice or not, failing which the option will lapse.

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX II

(k) Effects of alterations to share capital

In the event of any capitalisation of profits or reserves, rights issue or other similar offer of securities to holders of New Shares, consolidation, subdivision, or reduction of the share capital of the Company in accordance with legal requirements and the requirements of the Stock Exchange (other than an issue of New Shares as consideration in respect of a transaction to which the Company and/or any of its subsidiaries is a party), the number or nominal amount of New Shares subject to the option granted pursuant to New Share Option Scheme so far as unexercised and/or the subscription price and/or the method of exercise of the options or any combination thereof, shall be adjusted in such manner as the auditors for the time being of the Company or an independent financial adviser to be appointed by the Company for such purpose shall certify in writing to the Board to be in their opinion fair and reasonable provided always that no such alterations shall be made the effect of which would be to enable any New Share to be issued at less than its nominal value or which would give a grantee a different proportion of the issued share capital of the Company to which the grantee was entitled before such alteration; and further provided that the aggregate subscription price to be paid by a grantee after such alterations on a full exercise of the options shall remain as nearly as possible the same as that he/she has to pay before such alterations.

(l) Rights on a general offer

If a general offer (whether by takeover offer or scheme of arrangement or otherwise in like manner) is made to all the holders of New Shares (or all such holders other than the offeror and/or any person controlled by the offeror and/or any person acting in concert with the offeror), the terms of which have been approved by any relevant regulatory authority and are in accordance with the applicable laws and regulatory requirements and becomes, or is declared unconditional prior to the expiry of the option, the Company shall within 7 days of such offer becoming or being declared unconditional give notice thereof to the grantee, whereupon the grantee (or his/her personal representatives) shall be entitled to exercise the option in full or in part (to the extent not already exercised) at any time within 14 days after the date of such notice and, to the extent any of the options have not been so exercised, such option shall upon the expiry of such period lapse.

(m) Rights on winding up

In the event that a notice is given by the Company to its Shareholders to convene a general meeting for the purpose of considering and, if thought fit, approving a resolution to voluntarily wind up the Company, the Company shall forthwith give notice thereof to the grantee (or his/ her personal representatives), who may, by notice in writing to the Company (such notice to be received by the Company not later than five business days prior to the proposed general meeting) accompanied by a remittance for the full amount of the aggregate subscription price for the New Shares in respect of which the notice is given, exercise the option (to the extent not already exercised) either to its full extent or to the extent specified in such notice and the Company shall, as soon as possible and in any event no later than the business day immediately prior to the date of the proposed general meeting, allot and issue such number of New Shares to the grantee which falls to be issued on such exercise, credited as fully paid up and register the grantee as holder thereof. Any options shall, to the extent they have not been so exercised, lapse and determine.

(n) Rights on compromise or arrangement

If a compromise or scheme of arrangement between the Company and its members or creditors is proposed in connection with the reconstruction of the Company or its amalgamation with any other company or companies, the Company shall give notice thereof to all grantees (or to their personal representatives) on the same day as it gives notice to the members or creditors of the Company summoning a meeting to consider such a compromise or scheme of arrangement, and the grantee (or his/her personal representative) may, by notice in writing to the Company accompanied by the remittance for the full amount of the aggregate subscription price for the New Shares in respect of which the notice is given (such notice to be received by the Company

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX II

not later than five business days prior to the proposed meeting), exercise his/her option (to the extent not already exercised) either to its full extent or to the extent specified in such notice and the Company shall, as soon as possible and in any event no later than the business day immediately prior to the date of the proposed meeting, allot and issue such number of New Shares to the relevant grantee which falls to be issued on such exercise, credited as fully paid and register the grantee as holder thereof. Any options shall, to the extent they have not been so exercised, lapse and determine.

(o) Ranking of New Shares

The New Shares to be issued and allotted upon the exercise of an option will be subject to all the provisions of the Articles of Association for the time being in force and will rank pari passu in all respects with the fully paid New Shares in issue on the date on which New Shares are allotted to the grantee (or his or her personal representative(s)) (the “Allotment Date”) and accordingly will entitle the holders to participate in all dividends or other distributions declared paid or made on or after the Allotment Date other than any dividend or other distribution previously declared or recommend or resolved to be paid or made if the record date therefor is before the Allotment Date.

Unless the context otherwise requires, references to “Shares” in the New Share Option Scheme include references to shares in the share capital of the Company of any such nominal amount as shall result from a sub-division or a consolidation, reclassification or reconstruction of the share capital of the Company from time to time forming part of the ordinary equity share capital.

(p) Lapse of option

The right to exercise an option shall lapse automatically (to the extent not already exercised) immediately upon the earliest of:

(i) the expiry of the period referred to in paragraph (e) above;
(ii) the expiry of the periods referred to paragraphs (g), (j), (l), (m) and (n) above;
(iii) subject to paragraph (m) above, the date of the commencement of the winding-up of the Company;
(iv) the date on which the grantee ceases to be an Eligible Participant by reason of the termination of his or her employment or appointment referred to in paragraph (h) above;
(v) the date on which the resignation of the grantee is received by the Company or any of its subsidiaries (as the case may be); or
(vi) the date on which the grantee sells, transfers, charges, mortgages, encumbers, assigns or creates any interest in favour of any third party over or in relation to any option in breach of the New Share Option Scheme.

(q) Period of the New Share Option Scheme

Subject to earlier termination by shareholders’ resolution in general meeting, the New Share Option Scheme shall be valid and effective for a period of ten years commencing from the Adoption Date, after which period no further Options will be offered or granted but the provisions of the New Share Option Scheme shall remain in full force and effect in all other respects with respect to options granted during the life of the New Share Option Scheme.

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX II

(r) Alteration to the New Share Option Scheme and the terms of options granted under the New Share Option Scheme

All provisions of the New Share Option Scheme may subject to the Listing Rules be altered from time to time in any respect by a resolution of the Board save that the following alterations shall require the prior sanction of an ordinary resolution of the Company in general meeting (with all grantees, prospective grantee and their associates abstaining from voting and the votes taken by poll):

(i) alterations of the provisions relating to the matters set out in Rule 17.03 of the Listing Rules to the advantage of the Eligible Participants;
(ii) alterations of the terms and conditions of the New Share Option Scheme which are of a material nature or any change to the terms of options granted under the New Share Option Scheme (except where the alterations take effect automatically under the existing terms of the New Share Option Scheme); and
(iii) any change to the authority of the Board in relation to any alteration to the terms of the New Share Option Scheme.

No such alteration shall operate to affect adversely the terms of issue of any option granted or agreed to be granted prior to such alteration except with the consent or sanction of such majority of the grantees as would be required of the Shareholders under the Articles of Association of the Company for the time being for a variation of the rights attached to the New Shares.

Where there is any proposed change to the terms of any options granted to a connected person of the Company who is also a substantial Shareholder or an independent non-executive Director or any of their respective associates (except where the change takes effect automatically under the existing terms of the New Share Option Scheme), then the proposed change must be subject to the approval of the Shareholders taken on poll at a general meeting and to such other requirements of the Listing Rules. The connected person involved in such proposed change and all other connected persons of the Company must abstain from voting in such general meeting (except that any connected person may vote against the proposed change provided that his intention to do so has been stated in the circular). A shareholders’ circular must be prepared and sent by the Company explaining the proposed change and disclosing the original terms of the options, and containing a recommendation from the independent nonexecutive Directors (excluding an independent non-executive Director who is the holder of the options which terms are to be changed) on whether or not to vote in favour of the proposed change and containing such other information required under the Listing Rules.

(s) Administration of the New Share Option Scheme

The New Share Option Scheme shall be administered by the Board.

Options may be granted on such terms and conditions in relation to their vesting, exercise or otherwise as the Board may determine in its absolute discretion, provided that such terms and conditions shall not be inconsistent with any other terms and conditions of the New Share Option Scheme.

(t) Termination of the New Share Option Scheme

The Company by ordinary resolution in general meeting may at any time terminate the operation of the New Share Option Scheme and in such event no further option shall be offered but the provisions of the New Share Option Scheme shall remain in full force and effect in all other respects in respect of any options granted prior thereto but not yet exercised at the time of termination.

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX II

(u) Cancellation of Options

Any cancellation of options granted but not exercised shall be approved by the Board. Cancelled options may be re-issued after such cancellation has been approved, provided that re-issued options shall only be granted in compliance with the terms of the New Share Option Scheme and the requirements of the Listing Rules and provided further that new options may be issued to a grantee in place of his cancelled options only if there are available unissued options (excluding the cancelled options) within the Scheme Mandate Limit or the renewed Scheme Mandate Limit.

Any reference to the “Board” above shall include a duly authorised committee of the Board.

2. Present status of the New Share Option Scheme

The New Share Option Scheme is conditional on:

(a) the passing of necessary resolutions by Shareholders in a general meeting to terminate the Existing Share Option Scheme and to approve and adopt the New Share Option Scheme and to authorise the Board to grant options to subscribe for New Shares thereunder and to allot, issue and deal with the New Shares which fall to be issued by the Company pursuant to the exercise of the options under the New Share Option Scheme;
(b) the Listing Committee of the Stock Exchange granting approval of the listing of, and permission to deal in, the New Shares representing 10% of the issued share capital of the Company upon Completion which may fall to be issued pursuant to the exercise of the options; and
(c) Completion of the Restructuring Proposal.

As at the date of this circular, no option has been granted or agreed to be granted under the New Share Option Scheme.

Application will be made to the Listing Committee of the Stock Exchange for the approval of the listing of, and permission to deal in, the New Shares representing 10% of the issued share capital of the Company upon Completion which may fall to be issued pursuant to the exercise of the options granted under the New Share Option Scheme.

3. Disclosure in annual and interim reports

The Company will disclose details of the New Share Option Scheme in its annual and interim reports including the number of options, date of grant, exercise price, exercise period, vesting period and (if appropriate) a valuation of options granted during the financial year/period in the annual/interim reports in accordance with the Listing Rules in force from time to time.

4. Values of all options that can be granted under the New Share Option Scheme

It is considered not appropriate to state the value of all options that can be granted under the New Share Option Scheme as if they had been granted at the Latest Practicable Date. Any statement regarding the value of the options will not be helpful or meaningful to the Shareholders because the options to be granted must be personal to the grantee and shall not be sold, transferred, charged, mortgaged, encumbered or assigned by the grantee to or in favour of any third party over or in relation to the option.

Besides, the calculation of the value of the options that can be granted pursuant to the New Share Option Scheme is based on a number of variables such as the exercise price, the exercise period, interest rate, expected volatility, the expected price of the New Shares and other relevant variables. As trading in the Shares has been suspended since 28th December, 2001, data for calculating certain of the variables (on which the value of the options will be based) such as expected volatility and the expected price of the New Shares is not available. Therefore, it is not practically possible to calculate the values of the options. Furthermore, any calculation of the value of the options as at the Latest Practicable Date based on a great number of speculative assumptions would not be meaningful and would be misleading to the Shareholders.

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VALUATION REPORTS

APPENDIX III

Set out in this appendix is the text of the valuation reports prepared in relation to the properties interests held by the Group in the PRC and Australia.

1. PROPERTIES INVESTED BY THE GROUP IN THE PRC

The following is the text of a letter, summary of values and valuation certificate received from Chesterton Petty Limited, an independent valuer, prepared for the purpose of inclusion in this circular, in connection with its valuation of the properties invested by the Group as at 31st August, 2002

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International Property Consultants Chesterton Petty Ltd 16/F Citic Tower 1 Tim Mei Avenue Central Hong Kong

14th November, 2002

The Provisional Liquidators of Seapower Resources International Limited

Dear Sir

In accordance with your instructions to us to value the properties invested by Seapower Resources International Limited (Provisional Liquidators Appointed) and its subsidiaries (together “the Group”) in the People’s Republic of China (the “PRC”), we confirm that we have carried out inspection, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the open market value of the investment properties as at 31st August, 2002.

Our valuation is our opinion of the open market value which we would define as intended to mean “the best price at which the sale of an interest in a property would have been completed unconditionally for cash consideration on the date of valuation assuming:-

a) a willing seller;
b) that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of price and terms and for the completion of the sale;
c) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation;
d) that no account is taken of any additional bid by a prospective purchaser with a special interest; and
e) that both parties to the transaction had acted knowledgeably, prudently and without compulsion”.

Our valuation has been made on the assumption that the owner sells the properties on the open market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to increase the values of the properties. Furthermore, no account has been taken of any option or right of pre-emption concerning or affecting the sale of the properties and no forced sale situation in any manner is assumed in our valuation.

We have valued the properties by reference to sales evidence as available in the market on the assumption that vacant possession of the properties is immediately available.

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VALUATION REPORTS

APPENDIX III

Whenever possible, we have inspected the exterior and interior of the premises. However, no structural survey has been made, but in the course of our inspection, we did not note any serious defects. We are not, however, able to report that these properties are free from rot, infestation or any other structural defects. No tests were carried out on any of the services.

As advised, the Group is in the process of obtaining Certificate for Housing Ownership and land use right title in respect of the investment properties. However, for the purpose of our valuation, we have assumed that the properties have proper legal titles and are freely transferable/disposable to local or overseas purchasers without any associated payments or outstanding premium.

We have relied to a very considerable extent on the information given by you and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, lettings, floor areas and all other relevant matters. Dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us and are therefore only approximations.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the properties nor for any expenses which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature which could affect their values.

Unless otherwise stated, all money amounts stated are in Hong Kong Dollars. The exchange rate adopted in our valuation is HK$1=RMB1.05.

We enclose herewith our valuation certificate.

Yours faithfully For and on behalf of

Chesterton Petty Limited Charles C K Chan

MSc FRICS FHKIS MCIArb RPS(GP) Executive Director

Enc

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VALUATION REPORTS

APPENDIX III

VALUATION CERTIFICATE

			Open market value
			in existing state
Properties	Description and tenure	Particulars of occupancy	as at 31 August 2002
10 ‘Model C3’	Xinglong Lakeview Villas is a	The properties are	HK$121,400,000
Townhouses and	residential development within	currently vacant.
14 ‘Model C’	Xinglong Zhuang of Gaobeidian in
Townhouses	Chaoyang District, Beijing. It was
Xinglong Lakeview Villas	completed in 1995.
Xinglong Centre
Xinglong Zhuang	The property comprises ten 3-storey
Gaobeidian	‘Model C3’ townhouses and fourteen
Chaoyang District	3-storey ‘Model C’ townhouses in the
Beijing	development, with a total gross floor
The People’s Republic	areas of 9,472.10 sq m (101,958 sq ft)
of China	or thereabouts.
	The land use rights of the property
	have been granted for a term of 70
	years commencing from 26 March
	1993 and expiring on 25 March 2063.

Notes:

(1) The properties comprise House Nos. 27-34 and 36-51 of Xinglong Lakeview Villas development.

(2) According to the information provided by the client, the properties were the sole investment of Pentagon Profits Limited, a wholly-owned subsidiary of the Group.

(3) The provisional liquidators of Seapower Resources International Limited (the “Provisional Liquidators”) have advised, to the best of their knowledge, they are not aware of any potential tax liability, as at the lastest practicable date, which would arise if the properties were to be sold at the amount of their open market value as at 31 August 2002, that is HK$121,400,000 because there is approximately HK$13,810,000 in deficit when compared the said open market value of the properties to the book value of approximately HK$135,210,000 according to the Company’s last published annual report. There will not be any potential tax liability

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VALUATION REPORTS

APPENDIX III

Set out in this appendix is the text of the valuation reports prepared in relation to the properties interests held by the Group in the PRC and Australia.

2. PROPERTIES INTEREST HELD BY THE GROUP IN AUSTRALIA

The following is the text of a letter, summary of values and valuation certificate received from Chesterton International (NSW) PTY. Limited, an independent valuer, prepared for the purpose of inclusion in this circular, in connection with its valuation of the properties held by the Group as at 23rd October, 2002

14th November, 2002

The Provisional Liquidators of Seapower Resources International Limited

Dear Sirs

In accordance with your instructions to us to value the property interests held by Seapower Resources International Limited (Provisional Liquidators Appointed) (the “Company”) and its subsidiaries (the “Group”) in Australia, we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value for the existing use of such property interests as at 23 October 2002.

We have assessed our valuation on the basis of freehold title, with vacant possession on an “existing use basis”. This basis assumes the current entity, the owner-occupier will continue in operational existence for the foreseeable future, there is no intention to cease the “existing use” of the property in the foreseeable future, and is subject to adequate potential profitability of the enterprise.

Our valuation has been ascribed in accordance with the Australian Property Institute’s definition relating to market value for the existing use.

“The market value for the existing use is the value of an asset based on the continuation of its existing use, assuming the asset could be sold as part of a continuing business operation”.

Our valuation is determined on the basis that the property, the title thereto, and its use are not affected by any matter other than that mentioned in our full report. It has been assessed through utilisation of the depreciated replacement cost approach with secondary regard to a direct comparison approach.

Due to the specific purposes for which the building and structures of property interests have been constructed, there are no directly comparable market transactions. Therefore we have approached the valuation on a depreciated replacement cost basis which is based on the theoretical assumption that the capital value of the property is the costs of equivalent reinstatement as depreciated.

Depreciated Replacement Cost (DRC) is based on the estimated current cost of replacement of the asset with a similar asset which is not necessarily an exact reproduction but which has similar service potential and function, less an amount for depreciation in the form of accrued physical wear and tear and economic and functional obsolescence, plus the value of the land.

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VALUATION REPORTS

APPENDIX III

We have searched the property within the Local Government area of Gosford, Parish of Gosford and County of Northumberland of Australia. We have relied on information given by you and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, completion date of buildings, particulars of occupancy, tenancy agreements, floor areas and all other relevant matters. Dimensions, measurements and areas included in the valuation certificates are based on information contained in the documents provided to us and are therefore only approximations.

We have not been able to carry out detailed on-site measurements to verify the correctness of the floor areas of the properties and we have assumed that the floor areas shown on the documents provided to us are correct. We have no reason to doubt the truth and accuracy of the information provided to us by the Company which is material to the valuation. We were also advised by the Company that no material facts have been omitted from the information provided.

We have inspected the exterior of the properties valued and, where possible, the interior of the premises. No structural survey has been made however, in the course of our inspection, we did not note any serious defects. We are not, however, able to report that the properties are free from rot, infestation or any other structural defects. No tests were carried out on any of the services.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on any property interests nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property interests are free from encumbrances, restrictions and outgoings of an onerous nature which could affect their values.

Unless otherwise stated, all monetary amounts contained within our valuation report are in Australian Dollars (AUD).

Our valuation certificate is herewith attached.

Yours faithfully, For and on behalf of

CHESTERTON INTERNATIONAL (NSW) PTY. LIMITED

Narelle Coneybeare AAPI Troy Griffiths FAPI Registered Valuer No 6458 Registered Valuer No 5065 Valuer Director Corporate Property Advisors Corporate Property Advisors

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VALUATION REPORTS

APPENDIX III

VALUATION CERTIFICATE

Description and tenure

Property

Lots 11 and 120 The property comprises a purpose Racecourse Road built cold storage warehouse facility West Gosford with associated offices, loading docks NSW 2250 and amenities. Part of the structure Sydney was originally constructed 30 years Australia ago with extensions carried out in 1980.

Details of the floor areas of the property are set out as follows:

Use Freezer Rooms Ancillary Total:	Floor Area (sq m) 2,450.0 2,107.0	Volume (cu m) 21,914.1 N/A
	4,557.0	21,914.1

Market value For the existing use as at 23 October 2002

Particulars of occupancy

Currently the property is AUD $3,100,000 substantially owner(exclusive of GST if any) occupied as a cold storage warehouse.

The remaining premises comprising boning room, attached chiller, passageway and office situated in the front dock is subject to a licence agreement for a period of 4 years expiring on 20 March 2004, yielding an annual licence fee of AUD $52,000 exclusive of GST

The land comprises two lots with a total site area of 11,525 sq m (124,055 sq ft) held under the provisions of the Real Property Act, within the Local Government area of Gosford, Parish of Gosford and County of Northumberland.

The land as prescribed above is freehold in tenure and the registered proprietor is Seapower Resources Gosford Pty Ltd.

The land is rectangular in shape, and is generally level.

Notes:

(1) Leader Glory Holdings Limited and Mr. Pang Man Kin, Nixon (the “Investors”) have stated in their “Letter from the Investors” of this circular that they intend the Company to continue with the operation and warehousing and cold storage business in Australia, the property interests shall continue in their existing uses and operate in cold storage warehousing business and there is no intention to sell the Company’s cold storage warehouse in Australia. Accordingly, there will not be any potential tax liability issues which warrants consideration.

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GENERAL INFORMATION

APPENDIX IV

1. RESPONSIBILITY STATEMENTS

This circular includes particulars given in compliance with the Code and the Listing Rules for the purpose of giving information with regard to the Company and the Investors. The Provisional Liquidators jointly and severally accept full responsibility for the accuracy of the information contained in this circular (other than that relating to the Investors) and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, opinions expressed in this circular (other than those relating to the Investors) have been arrived at after due and careful consideration and there are no other facts not contained in this circular the omission of which would make any statement in this circular misleading.

The information contained in this circular relating to the Investors has been supplied by the Investors and the directors of Leader Glory. The Investors and directors of Leader Glory accept full responsibility for the accuracy of information contained in this circular (other than that relating to the Group) and confirms, having made all reasonable enquiries, that to the best of their knowledge and belief, the opinions expressed in this circular (other than those relating to the Group) have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

2. MARKET PRICES

The table below shows the closing prices of the Shares on the Stock Exchange on the last day on which trading in the Shares took place in each of the fourteen calendar months immediately preceding the date of the joint announcement made by the Company and the Investors on 19th August, 2002.

Date	Closing price per Share
	(HK$)
31st July, 2001	0.069
31st August, 2001	0.037
28th September, 2001	0.034
10th October, 2001	0.037
30th November, 2001	0.031
28th December, 2001	0.027
31st December, 2001	N/A*
30th January, 2002	N/A*
28th February, 2002	N/A*
31st March, 2002	N/A*
30th April, 2002	N/A*
31st May, 2002	N/A*
30th June, 2002	N/A*
31st July, 2002	N/A*

Trading in the Company’s Shares has been suspended since 2:30 p.m. on 28th December, 2001 and will remain suspended after Completion until sufficient public float has been restored. The closing price before suspension was HK$0.027 per Share which is therefore the closing price prior to the date of the joint announcement of the Company and the Investors in relation to the Restructuring Proposal and the Latest Practicable Date.

As the trading in the Company’s Shares has been suspended since 28th December, 2001, the highest and lowest closing prices of the Shares during the Relevant Period are not available.

The highest and lowest closing prices of the Shares during the period between the twelve months preceding the date of the joint announcement of the Company and the Investors dated 19th August, 2002 and the Latest Practicable Date were HK$0.038 each on 4th September, 2001, 7th September, 2001, 10th September, 2001 and 19th September, 2001 and HK$0.019 each on 21st December, 2001.

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GENERAL INFORMATION

APPENDIX IV

3. INTEREST IN SECURITIES OF THE COMPANY

(a) Directors

As at the Latest Practicable Date, the interest of the Directors in the securities of the Company and its associated corporations (within the meaning of the SDI Ordinance) which had been notified to the Company and the Stock Exchange pursuant to section 28 of the SDI Ordinance (including interests which they were deemed or taken to have under section 31 or Part I of the Schedule to the SDI Ordinance) or which were required, pursuant to section 29 of the SDI Ordinance, 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, to be notified to the Company and the Stock Exchange were as follows:

	Type of	Number of
Name	interest	Shares held
Ms. Shirley Choi Siu Lui	Personal interests	500,000
Mr. Choi Sai Leung_(Note 1)_	Personal interests	9,000,000

Note 1: Mr. Choi Sai Leung was declared bankrupt by the High Court of Hong Kong on 3 April 2002.

Note 2: The above information is extracted from the Company’s last published interim report.

Save as disclosed above, to the best of the knowledge of the Provisional Liquidators having made all reasonable enquiries, as at the Latest Practicable Date, none of the chief executive or Directors had any interest in the securities of the Company or any associated corporations (within the meaning of the SDI Ordinance) which were required to be notified to the Company and the Stock Exchange pursuant to section 28 of the SDI Ordinance (including interests which they were deemed or taken to have under section 31 or Part I of the Schedule to the SDI Ordinance) or which were required, pursuant to section 29 of the SDI Ordinance, 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.

(b) Substantial Shareholders

Save as disclosed below, to the best of the knowledge of the Provisional Liquidators, having made all reasonable enquiries, as at the Latest Practicable Date, there was no person who was, directly or indirectly, interested in 10% or more of the nominal value of any class of issued share capital carrying rights to vote in all circumstances at general meetings of the Company or any other member of the Group or had any options in respect of such issued capital.

	Number of % interest in the
Name	Shares held Company
I-China	Holdings Limited_(Note 1)_ 426,191,518 27.54
Note 1:	This represents the deemed interest in 426,191,518 shares of the Company held by Felcasa International
	Limited and Fordit Limited which are wholly-owned subsidiaries of I-China Holdings Limited.

(c) As at the Latest Practicable Date, to the best knowledge of the Provisional Liquidators having made all reasonable enquiries, none of the Directors and the substantial Shareholders had any interest in the securities of Leading Glory.

(d) The Investors

As at the Latest Practicable Date, none of the Investors, its director, and parties acting in concert with them had any interest in the securities of the Company, other than the agreement to subscribe for the New Shares and Warrants by the Investors pursuant to the Subscription Agreement.

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GENERAL INFORMATION

APPENDIX IV

(e) Others

As at the Latest Practicable Date, to the best of the knowledge of the Provisional Liquidators having made all reasonable enquiries indicate the following:

(i) none of the subsidiaries or associates of the Company, nor any pension funds of the Company or of any of its subsidiaries, nor the Provisional Liquidators, Asian Capital, ICEA, Somerley, AMS, CCIF, Chesterton Petty Limited, Chesterton International (NSW) PTY Limited or advisers (as defined under the code) to the Company and the Investors had any interest in the securities of the Company.
(ii) no person who had any arrangement of the kind referred to in Note 8 to Rule 22 of the Code with the Company, the Investors, or any party acting in concert with any of them had any interest in the securities of the Company.
(iii) no person who, prior to the posting of this circular, has irrevocably committed themselves to accept or reject the Restructuring Proposal had any interest in any securities of the Company.

4. DEALINGS IN SECURITIES OF THE COMPANY

(a) Directors

To the best of the knowledge of the Provisional Liquidators, having made all reasonable enquiries, none of the Directors nor parties acting in concert with them had dealt in any securities of the Company during the Relevant Period.

(b) The Investors

None of the Investors, its director, and any party acting in concert with them had dealt in any securities of the Company during the Relevant Period.

(c) Others

During the Relevant Period, to the best of the knowledge of the Provisional Liquidators, having made all reasonable enquiries,

(i) none of the subsidiaries or associates of the Company, nor any pension funds of the Company or of any of its subsidiaries, nor the Provisional Liquidators, Asian Capital, ICEA, Somerley, AMS, CCIF, Chesterton Petty Limited, Chesterton International (NSW) PTY Limited or advisers (as defined under the code) to the Company and the Investors had dealt in any interest in the securities of the Company.
(ii) no person who had any arrangement of the kind referred to in Note 8 to Rule 22 of the Code with the Company or the Investors or with any persons acting in concert with any of them had dealt in any securities of the Company; and
(iii) no person who, prior to the posting of this circular, has irrevocably committed themselves to accept or reject the Restructuring Proposal had dealt in any securities of the Company.
(iv) no fund managers connected with the Company or any of its subsidiaries had dealt in any securities of the Company

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GENERAL INFORMATION

APPENDIX IV

5. INTERESTS AND DEALINGS IN THE INVESTOR

To the best of the knowledge of the Provisional Liquidators, having made all reasonable enquiries, neither the Company and the Directors nor parties acting in concert with any of them had any interest in the securities of Leader Glory and none of them had dealt in any such securities during the Relevant Period.

6. ARRANGEMENTS AFFECTING DIRECTORS

To the best of the knowledge of the Provisional Liquidators, having made all reasonable enquiries,

(a) none of the Directors have any service contract with any member of the Group which (excluding contracts expiring or determinable by the employer) is not terminable within one year without payment of compensation (other than statutory compensation) and, save as disclosed below, no service contract has been entered into or amended within six months before the joint announcement of the Company and the Investors dated 19th August, 2002;
(b) since 31st March, 2001 (being the date to which the latest published audited accounts of the Company were made up), none of the Directors have any interest, direct or indirect, in any assets which have been acquired or disposed of or are proposed to be acquired or disposed of by or leased to any member of the Group;
(c) there is no agreement or arrangement between the Investors or any person acting in concert with them and any Directors or recent directors, shareholders or recent shareholders of the Company which is conditional on or dependent upon the Completion of the Restructuring Proposal or otherwise in connection therewith;
(d) there is no agreement or arrangement between any Directors and any other person which is conditional on or dependent upon the outcome of the Restructuring Proposal or otherwise in connection therewith:
(e) there is no material contract or arrangement entered into by any of the Directors and the Investors or parties acting in concert with them which any Director has a material personal interest; and
(f) no other benefits have been or will be given to the Directors as compensation for loss of office or otherwise in connection with the Restructuring Proposal.

7. EXPERTS

(a) The following are the qualifications of the experts who have given an opinion or advice which is contained or referred to in this circular:

Name Qualification

Provisional Liquidators Officers of the High Court of Hong Kong, SAR and the Grand Court of the Cayman Islands

Asian Capital an investment adviser and a securities dealer registered under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong)

Charles Chan, Ip & Fung Certified Public Accountants, Hong Kong CPA Ltd.

Somerley a registered dealer registered under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong)

ICEA

a registered dealer registered under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong)

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GENERAL INFORMATION

APPENDIX IV

AMS an investment adviser registered under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong) Chesterton Petty Limited Property valuers Chesterton International (NSW) PTY Limited Property valuers

(b) Each of the Provisional Liquidators, Asian Capital, CCIF, Somerley, ICEA Capital, AMS or Chesterton Petty Limited Chesterton International (NSW) PTY Limited (i) has no shareholding in any member of the Group nor any right to subscribe for or to nominate persons to subscribe for securities in any member of the Group; (ii) has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its respective letter and references to its name, as the case may be, in the form and context in which they respectively appear; and (iii) does not have any direct or indirect interest in any assets which have been since 31st March, 2001, the date to which the latest published audited accounts of the Group were made up, acquired or disposed of by, or leased to, or which are proposed to be acquired or disposed of by, or leased to, the Company or any of its subsidiaries.

8. MATERIAL LITIGATION

To the best knowledge of the Provisional Liquidators having made all reasonable enquiries, neither the Company nor any other members of the Group is engaged in any litigation or arbitration of material importance and no material litigation or claim of material importance is pending or threatened against any member of the Group as at the Latest Practicable Date.

9. MATERIAL CONTRACTS

Save for the Restructuring Agreement and the Subscription Agreement, to the best of the knowledge of the Provisional Liquidators, having made all reasonable enquiries, neither the Company nor any other members of the Group have entered into any material contracts (not being contracts entered into in the ordinary course of business carried out by the Group) within the two years preceding the Latest Practicable Date.

10. MATERIAL CHANGES IN THE FINANCIAL OR TRADING POSITION

Except for the disposals of the three properties in Hong Kong by the receivers between 28th January, 2002 and 11th March, 2002 (details of which have been disclosed in the Company’s announcements dated 1st February, 2002 and 5th February, 2002) which led to the disposals of the assets of the Operators by the Provisional Liquidators to the purchasers of the three properties between 8th February, 2002 and 4th March, 2002 (details of which have been announced by the Company on 11th March, 2002) and the Group discontinuing its cold storage warehousing operation in Hong Kong, to the best of the knowledge of the Provisional Liquidators having made all reasonable enquiries, as at the Latest Practicable Date, there is no material change in the financial or trading position or prospects of the Group subsequent to the last published audited accounts of the Company for the year ended 31st March, 2001.

The impact of the above mentioned disposals has been incorporated in the “Pro forma Unaudited Consolidated Balance Sheet of the Group” as included in section 6 of Appendix I to this circular.

11. POTENTIAL TAX LIABILITY OF REVALUED ASSETS

(1) The Provisional Liquidators have advised, to the best of their knowledge, they are not aware of any potential tax liability, as at the lastest practicable date, which would arise if Pentagon Profits’ investment in the 24 townhouses as in Beijing were to be sold at the amount of their open market value as at 31 August 2002, that is HK$121,400,000 because there is approximately HK$13,810,000 in deficit when compared the said open market value of the properties to the book value of approximately HK$135,210,000 according to the Company’s last published annual report. There will not be any potential tax liability.
(2) Leader Glory Holdings Limited and Mr. Pang Man Kin, Nixon (the “Investors”) have stated in their “Letter from the Investors” of this circular that they intend the Company to continue with the operation and warehousing and cold storage business in Australia, the property interests shall continue in their existing uses and operate in cold storage warehousing business and there is no intention to sell the Company’s cold storage warehouse in Australia. Accordingly, there will not be any potential tax liability issues which warrants consideration.

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GENERAL INFORMATION

APPENDIX IV

12. MISCELLANEOUS

(a) As at the Latest Practicable Date, there are no agreements, arrangements or understanding as to the transfer of any New Shares to be acquired by the Investors or parties acting in concert with them pursuant to the Restructuring Proposal to any other persons.
(b) The Company’s Hong Kong branch share registrar is Progressive Registration Limited at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong.
(c) The registered office of the Company is Caledonian House, George Town, Grand Cayman, Cayman Islands.
(d) The registered office of Leader Glory is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.
(e) The registered office of Asian Capital is Suite 3104, 31/F., Nine Queen’s Road Central, Hong Kong.
(f) The registered office of Somerley is Suite 3108, One Exchange Square, 8 Connaught Place, Central, Hong Kong.
(g) The registered office of ICEA Capital is 42nd Floor, Jardine House, 1 Connaught Place, Central, Hong Kong.
(h) The registered office of AMS is 20th Floor, Hong Kong Diamond Exchange Building, 8-10 Duddell Street, Central, Hong Kong.
(i) The registered office of CCIF is 37th Floor, Hennessy Centre 500 Hennessy Road Causeway Bay, Hong Kong.
(j) The English text of this circular and form of proxy shall prevail over the Chinese text in the case of any inconsistency.

13. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the office of the Provisional Liquidators at 7th Floor, Allied Kajima Building, 138 Gloucester Road, Wanchai, Hong Kong up to and including 5th December, 2002:

(a) the New Memorandum and New Articles of Association of the Company;
(b) the memorandum and articles of association of Leader Glory;
(c) the annual reports of the Company for the two financial years ended 31st March, 2000 and 2001;
(d) the interim report of the Company for the period ended 30th September, 2001.
(e) the material contracts referred to in the section headed “Material Contracts” in this appendix;
(f) the letter of advice from AMS the text of which is set out on pages 26 to 37 of this circular;
(g) the letter from the Provisional Liquidators, the text of which are set out on pages 6 to 20 of this circular;
(h) the letter from CCIF, the text of which are set out on pages 87, 88, 92 and 93 of this circular;
(i) the letter from Asian Capital, the text of which are set out on pages 89 and 94 of this circular;
(j) the letters, summaries of valuation and valuation certificates prepared by Chesterton Petty Limited and Chesterton International (NSW) PTY Limited relating to the property interests of the Group, the texts of which are set out in Appendix III to this circular;
(k) the rules of the New Share Option Scheme; and
(l) the written consents referred to in the paragraph 7(b) under the section headed “Experts” in this Appendix.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

==> picture [34 x 57] intentionally omitted <==

SEAPOWER RESOURCES INTERNATIONAL LIMITED 海暉國際實業有限公司

(Provisional Liquidators Appointed)

(Incorporated in the Cayman Islands with limited liability)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (“EGM”) of Seapower Resources International Limited (Provisional Liquidators Appointed) (the “Company”) will be held at Plaza V, Lower Lobby, Novotel Century Hong Kong, 238 Jaffe Road, Wanchai, Hong Kong, on 9th December, 2002 at 10:00 a.m. for the purpose of considering and, if thought fit, passing, with or without modification, the following resolutions, numbered 2, 9, 10 and 11 as special resolutions and numbered from 1 and 3 to 8 as ordinary resolutions, as set out below:

ORDINARY RESOLUTIONS

“ THAT , conditional upon approval of resolutions No. 2 and 5 set out in the notice dated 14th November, 2002 of which this resolution forms part (the “Notice”) convening the extraordinary general meeting (“EGM”) of Seapower Resources International Limited (Provisional Liquidators Appointed) (“Company”) and conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) granting their approval to the listing of, and permission to deal in, the new ordinary shares of the Company of HK$0.01 each (“New Shares”) resulting from the reorganisation of the share capital of the Company (“Capital Reorganisation”) to be effected pursuant to the restructuring agreement dated 22nd June, 2002 as amended by the supplemental agreement dated 3rd October, 2002 (“Restructuring Agreement”) and in compliance with the Companies Law (2002 Revision) of the Cayman Islands (“ Cayman Law ”),
(a) every 10 issued shares of HK$0.05 each will be consolidated into one share of HK$0.5 (“Consolidated Issued Share”);
(b) each of the 18,452,957,171 unissued shares of HK$0.05 each will be subdivided into five New Shares of HK$0.01 each such that the authorised unissued share capital of the Company will comprise 92,264,785,855 New Shares of HK$0.01 each;
(c) all of the New Shares of $0.01 each in the capital of the Company after completion of the Capital Reorganisation shall rank pari passu in all respects with each other and have the same rights and privileges and be subject to the restrictions contained in the existing New Memorandum and New Articles of Association of the Company as amended pursuant to resolution numbered 2 below (the “Amended Memorandum and Articles”);
(d) the credit which will arise as a result of the capital reduction of the Company to be effected pursuant to resolution No. 2(a) below shall be applied to eliminate the same amount of the Company’s accumulated loss on a dollar for dollar basis and the future directors of the Company be and are hereby authorised to apply such credit in such manner as may be permitted by the Amended Memorandum and Articles; and
(e) the provisional liquidators of the Company (the “Provisional Liquidators”) and future directors of the Company be and are hereby authorised generally to do all things appropriate to effect and implement any of the foregoing.”

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NOTICE OF EXTRAORDINARY GENERAL MEETING

SPECIAL RESOLUTIONS

“ THAT , conditional upon approval of resolutions No. 1 and 5 set out in the Notice and conditional upon the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the New Shares and in compliance with the Cayman Law,
(a) the nominal value of each Consolidated Issued Share will be reduced from HK$0.5 to HK$0.01 so that the Company’s issued share capital of HK$77,352,141.45 will be reduced by HK$75,805,098.63 to HK$1,547,042.82;
(b) conditional upon completion of the Capital Reorganisation, clause 8 of the Company’s existing New Memorandum of Association be amended by the deletion of its entirety and by its replacement with the following provision:
- “8. The authorised capital of the Company is HK$924,194,901.37 divided into 92,419,490,137 shares of a nominal or par value of HK$0.01 each provided always that subject to the provisions of The Companies Law Cap. 22 as amended and the Articles of Association the Company shall have power to redeem or purchase any or all of such shares and to sub-divide or consolidate the said shares or any of them and to issue all or any part of its capital whether original, redeemed, increased or reduced with or without any preference, priority or special privilege or subject to any postponement of rights or to any conditions or restrictions whatsoever and so that unless the conditions of issue shall otherwise expressly provide every issue of shares whether stated to be Ordinary, Preference or otherwise shall be subject to the powers on the part of the Company hereinbefore provided.”;
(c) conditional upon completion of the Capital Reorganisation, article 3 of the existing New Articles of Association of the Company be amended by the deletion of its entirety and by its replacement with the following provision:

“3. The authorised share capital of the Company shall be HK$924,194,901.37 divided into 92,419,490,137 shares of a par value of HK$0.01 each”; and

(d) the Provisional Liquidators and future directors of the Company be and are hereby authorised generally to do all things appropriate to effect and implement any of the foregoing.”

ORDINARY RESOLUTIONS

“ THAT , conditional upon approval of resolution No. 5 set out in the Notice,
(a) the entry by the Company into the restructuring agreement dated 22nd June, 2002 and the supplemental agreement thereto dated 3rd October, 2002 (collectively the “Restructuring Agreement”), copies of which together with a copy of the composite document sent to the Company’s shareholders dated 14th November, 2002 (the “ Composite Document ”) have been produced to the EGM marked “A” and “B” respectively and in each case signed by the chairman of the EGM for identification purposes, the transactions contemplated by the Restructuring Agreement and the performance thereof by the Company, be and are hereby confirmed, ratified and approved; and
(b) the Provisional Liquidators and future directors of the Company be and are hereby authorised to the extent of their authority so to act, to do all such things and take all such action as they may consider to be necessary or desirable to give effect to the terms of the Restructuring Agreement including, without limiting the foregoing, to complete the transactions contemplated by the Restructuring Agreement.”
“ THAT , conditional upon approval of resolution No. 5 set out in the Notice of which this Resolution forms part,
(a) the entry by the Company into the Subscription Agreement (as defined in the Composite Document ), a copy of which has been produced to the EGM marked “C” and signed by the chairman of the EGM for identification purposes, the transactions contemplated by the Subscription Agreement and the performance thereof by the Company, be and are hereby confirmed, ratified and approved;

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NOTICE OF EXTRAORDINARY GENERAL MEETING

(b) conditional upon the Capital Reorganisation (as defined in Resolution No. 1 of the Notice) being effected, the Provisional Liquidators and future directors of the Company be and are hereby authorised to allot and issue New Shares (as defined in Resolution No. 1 of the Notice) and Warrants (as defined in the Composite Document) pursuant to the terms of the Subscription Agreement and to execute and affix the common seal of the Company to the instrument constituting the Warrants (the “Warrant Instrument”); and
(c) the future directors of the Company be and are hereby authorised from time to time to issue New Shares upon exercise of the Warrants by the holders thereof subject to the terms of the Warrants and the Warrant Instrument and to take all such actions as they may consider to be necessary or desirable to give effect to the terms of the Warrants and the Warrant Instrument.”
“ THAT , the waiver (the “ Whitewash Waiver ”) granted or to be granted by the Executive Director of the Corporate Finance Division of the Securities and Futures Commission pursuant to Note 1 of the Notes on Dispensations from Rule 26 of the Hong Kong Code on Takeovers and Mergers waiving any obligation on the part of Leader Glory Holdings Limited and Mr. Pang Man Kin, Nixon (collectively the “Investors”) and parties acting in concert with them, to make a general offer for all the shares of the Company not already owned by them or agreed to be acquired upon completion of the Restructuring Agreement and the Subscription Agreement and the transactions contemplated therein, including without limitation, the exercise of the Warrants, Put Option (as defined in the Composite Document) and Call Option (as defined in the Composite Document), be and is hereby approved and the Provisional Liquidators and future directors of the Company be and are hereby authorised to do all such things and take all such action as they may consider to be necessary or desirable to give effect to any of the matters relating to, or incidental to, the Whitewash Waiver.”
“ THAT , subject to and conditional upon the Listing Committee of the Stock Exchange granting listing of, and permission to deal in, the New Shares to be issued pursuant to the exercise of options which may be granted under the new share option scheme, a copy of which is produced to the EGM marked “F” and signed by the chairman of the EGM for the purpose of identification (“New Share Option Scheme”), and if required, its approval of the New Share Option Scheme and the grant of options thereunder,
(a) the operation of the share option scheme (“Existing Share Option Scheme”) adopted by the Company by ordinary resolution of its shareholders on 30th September, 1999 be terminated and that no further options will be granted under the Existing Share Option Scheme but in all other respects the provisions of the Existing Share Option Scheme shall remain in force to the extent necessary to give effect to the exercise of any options granted prior thereto or otherwise as may be required in accordance with the provisions of the Existing Share Option Scheme and options granted prior to such termination shall continue to be valid and exercisable in accordance with the Existing Share Option Scheme; and
(b) the rules of the New Share Option Scheme be and are hereby approved and adopted and that the future directors of the Company be and are hereby authorised:
- (i) to administer the New Share Option Scheme including granting options to subscribe for New Shares to eligible participants under the New Share Option Scheme;
- (ii) to modify and/or amend the rules of the New Share Option Scheme from time to time subject to the provisions of such rules;
- (iii) to issue and allot from time to time such number of New Shares as may be required to be issued pursuant to the exercise of the options granted under the New Share Option Scheme; and
- (iv) to make application at the appropriate time to the Stock Exchange, and any other stock exchange upon which the New Shares may for the time being be listed, for listing of, and permission to deal in, the New Shares which may thereafter from time to time be issued and allotted pursuant to the exercise of the options granted under the New Share Option Scheme.”

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NOTICE OF EXTRAORDINARY GENERAL MEETING

“ THAT , conditional upon approval of the resolution numbered 5 as set out in the Notice,
(a) subject to paragraph (b) below, the future directors of the Company be and are hereby generally and unconditionally authorised to exercise during the Relevant Period (as defined below) all the powers of the Company to allot, issue and deal with additional New Shares and to make or grant offers, agreements and options (including warrants, bonds and debentures, notes and any securities which carry rights to subscribe for or are convertible into ordinary shares of the Company) which would or might require the exercise of any of such powers during or after the end of the Relevant Period;
(b) the aggregate nominal amount of the New Shares of the Company allotted, issued or otherwise dealt with or agreed conditionally or unconditionally to be allotted, issued or otherwise dealt with (whether pursuant to an option or otherwise) by the future directors of the Company pursuant to approval of paragraph (a) above, other than pursuant to (i) a Rights Issue (as defined below); or (ii) an issue of ordinary shares of the Company upon the exercise of rights of subscription or conversion under the terms of any warrants of the Company or any securities which are convertible into ordinary shares of the Company; or (iii) an issue of ordinary shares of the Company by way of scrip dividend pursuant to the Amended Memorandum and Articles of Association of the Company from time to time; or (iv) the exercise of any option granted under any option scheme or similar arrangement for the time being adopted for the grant or issue to eligible participants of the Company and/or its subsidiaries, of options to subscribe for, or rights to acquire, shares of the Company, shall not in total exceed 20% of the aggregate nominal amount of the share capital of the Company in issue immediately following completion of the Restructuring Agreement and the Subscription Agreement;
(c) for the purpose of this resolution numbered 7, “Relevant Period” means the period from the passing of this resolution until whichever is the earliest of:
- (i) the conclusion of the next annual general meeting of the Company;
- (ii) the revocation or variation of the authority given under this resolution by ordinary resolution of the shareholders in general meeting; or
- (iii) the expiration of the period within which the next annual general meeting of the Company is required by the Amended Memorandum and Articles, or any applicable laws, to be held; and

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

“ THAT , conditional upon and with effect from completion of the Restructuring Agreement:-
(a) each of Messrs. Pang Man Kin, Nixon, Wong Chak Wai and Sun Tak Yan Desmond be appointed as executive directors of the Company;
(b) Ms. Lau Ching Yin, Judy be appointed as independent non-executive director of the Company;

and that the Provisional Liquidators be and are hereby generally and unconditionally authorised to appoint such other new executive directors and new independent non-executive directors of the Company as may be nominated by the Investors upon completion of the Restructuring Agreement.”

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NOTICE OF EXTRAORDINARY GENERAL MEETING

SPECIAL RESOLUTIONS

“ THAT , conditional upon and with effect from completion of the Restructuring Agreement, each of Messrs Shirley Choi Siu Lui, Ou Yirong, Norman Choi Sung Fung, Choi Sai Leung, Judy Wong Tak Kwan and Ronald Lau Kin Hon be removed as directors of the Company and that the Provisional Liquidators be and are hereby generally and unconditionally authorised to remove all other current directors of the Company (if any) upon completion of the Restructuring Agreement.”
“ THAT , conditional upon completion of the Restructuring Agreement, the future directors of the Company appointed pursuant to resolution numbered 8 as set out in the Notice be and are hereby generally and unconditionally authorised to remove the current auditor of the Company.”
“ THAT , conditional upon completion of the Restructuring Agreement, the future directors of the Company appointed pursuant to resolution numbered 8 as set out in the Notice be and are hereby generally and unconditionally authorised to appoint new auditor of the Company to prepare and publish the Company’s annual results and audited results for the year ended 31st March, 2002.”

For and on behalf of

S EAPOWER RESOURCES INTERNATIONAL LIMITED (Provisional Liquidators Appointed) Cosimo Borrelli

W.K. Fan, Joseph

Joint and Several Provisional Liquidators

Hong Kong, 14th November, 2002

Notes:

A member entitled to attend and vote at the EGM by the above notice is entitled to appoint another person as his proxy to attend and vote on his behalf. A member may appoint more than one proxy to attend the EGM or any adjournment therof. A proxy needs not be a member of the Company.
In order to be valid, the form of proxy, together with the power of attorney or other authority (if any) under which it is signed, or a notorially certified copy of such power of attorney or authority, MUST to be deposited at the office of the Provisional Liquidators, at 7th Floor, Allied Kajima Building, 138 Gloucester Road, Wan Chai, Hong Kong, not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof. Under Article 95 of the New Memorandum and New Articles of Association of the Company, a vote given in accordance with the terms of the proxy shall be valid notwithstanding the revocation of the proxy or power of attorney or other authority under which the proxy was executed provided that no intimation in writing of such revocation shall have been received by the Company at 7th Floor, Allied Kajima Building, 138 Gloucester Road, Wah Chai, Hong Kong not less than two hours before the holding of the EGM or any adjourned EGM.
Where there are joint holders of any Share of the Company, any one of such persons may vote at the EGM either personally or by proxy in respect of such Share as if he were solely entitled thereto, but if more than one of such joint holders be present at the EGM personally or by proxy, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of such joint holding.
A form of proxy for use in connection with the EGM is enclosed.
Resolutions numbered 1 to 5, 8 and 9 shall be voted by way of a poll of the Independent Shareholders (as defined in the document in which the notice convening this meeting is contained).

— 119 —

AI assistant

Central Development Holdings Limited — Proxy Solicitation & Information Statement 2002

49236_rns_2002-11-14_fac87a16-a41b-4265-86b2-3879e88f5156.pdf

LEADER GLORY HOLDINGS LIMITED

SEAPOWER RESOURCES INTERNATIONAL LIMITED 海暉國際實業有限公司

SOMERLEY LIMITED

AMS Corporate Finance Limited

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

1. INTRODUCTION AND BACKGROUND

2. THE RESTRUCTURING PROPOSAL

(A) Capital Reorganisation

(B) Debt Restructuring

(ii) Other Terms

(b) Put Option

(c) Call Option

(C) Subscription

3. CONDITIONS PRECEDENT TO THE RESTRUCTURING PROPOSAL

4. EFFECTS OF THE RESTRUCTURING PROPOSAL

(a) Share Capital

(b) Shareholding Structure

(c) Dilution of Shareholders’ Interest

(d) Maintaining the Listing of the Company

(e) Working Capital

LETTER FROM THE PROVISIONAL LIQUIDATORS

(f) Indebtedness

(g) Net Assets

5. USE OF PROCEEDS FROM THE SUBSCRIPTION

6. DIRECTORS AND MANAGEMENT

7. REASONS FOR THE RESTRUCTURING OF THE GROUP

8. INTENTION OF THE INVESTORS

9. TERMINATION OF THE EXISTING SHARE OPTION SCHEME AND THE ADOPTION OF NEW SHARE OPTION SCHEME

(iii) Completion of the Restructuring Proposal.

10. GENERAL MANDATE TO ISSUE NEW SHARES

11. PUBLICATION AND DESPATCH OF AUDITED RESULTS

12. GENERAL

13. TRADING ARRANGEMENTS

(a) Documents of Title

(b)

Trading arrangements

(c) Facilities for odd lot holders

14. CREDITORS’ MEETING

15.

EXTRAORDINARY GENERAL MEETING

16. RECOMMENDATIONS

17.

ADDITIONAL INFORMATION

Leader Glory Holdings Limited

To the Shareholders and

BACKGROUND

COMPLETION OF THE RESTRUCTURING AGREEMENT

INVESTORS’ INTEREST IN THE COMPANY AFTER COMPLETION

TAKEOVERS CODE IMPLICATION

RESTORATION OF PUBLIC FLOAT

LETTER FROM THE INVESTORS

TRADING ARRANGEMENTS

INTENTION OF THE INVESTORS

LETTER FROM THE INVESTORS

APPOINTMENT OF NEW DIRECTORS

Executive Directors

Independent non-executive Directors

LETTER FROM THE INVESTORS

INFORMATION ON THE INVESTORS

OTHER INFORMATION

博資財務顧問有限公司 AMS Corporate Finance Limited

Seapower Resources International Limited

PROPOSED RESTRUCTURING PROPOSAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

A. The restructuring proposal

(i) Background

(ii) Current financial position of the Group

(a) Results of operations

(b) Net assets

(iii) The Restructuring Proposal

(a) Capital Reorganisation

(b) Debt Restructuring

(i) The Schemes

Central Development Holdings Limited Proxy Solicitation & Information Statement 2002