Eminence Enterprise Limited - Proxy Solicitation & Information Statement 2005

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares of Asia Alliance Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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

Asia Alliance Holdings Limited

(Incorporated in Bermuda with limited liability)

Stock Code: 616

VERY SUBSTANTIAL ACQUISITION

A notice convening a special general meeting of Asia Alliance Holdings Limited to be held at 7th Floor, Hong Kong Spinners Building, Phase 6, 481-483 Castle Peak Road, Cheung Sha Wan, Kowloon, Hong Kong on 11 March 2005 at 9:00 a.m. is set out on pages 98 to 99 of this circular. Whether or not they are able to attend the special general meeting, Shareholders are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event by not less than 48 hours before the time appointed for holding the special general meeting. Completion and return of the form of proxy will not preclude Shareholders from attending and voting in person at the special general meeting or any adjourned meeting should they so wish.

* For identification only

21 February 2005

CONTENTS

				Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		. . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	1
LETTER	FROM THE BOARD . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	4
1.	INTRODUCTION . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	4
2.	THE AGREEMENT AND SUPPLEMENTAL AGREEMENT .		. . . . . . . . . . . . . . . . .	5
3.	REASONS FOR AND BENEFITS OF THE	TRANSACTION	. . . . . . . . . . . . . . . . .	8
4.	INFORMATION ABOUT THE PROJECT .	. . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	9
5.	FINANCIAL EFFECTS OF THE TRANSACTION ON THE GROUP . . . . . . . . . . .			9
6.	FINANCIAL AND TRADING PROSPECTS	OF THE GROUP	. . . . . . . . . . . . . . . .	10
7.	SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	10
8.	PROCEDURE FOR DEMANDING A POLL	. . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	10
9.	RECOMMENDATION . . . . . . . . . . . . . . .	. . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	11
10.	ADDITIONAL INFORMATION . . . . . . . .	. . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	11
APPENDIX I — FINANCIAL INFORMATION		ON THE GROUP . . . . . . . . . . . . . . . .		12
APPENDIX II — UNAUDITED PRO FORMA FINANCIAL INFORMATION ON
	THE ENLARGED GROUP	. . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	82
APPENDIX III — PROPERTY VALUATION . . .		. . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	87
APPENDIX IV — GENERAL INFORMATION .		. . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	92
NOTICE	OF THE SGM . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	98

— i —

DEFINITIONS

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

“Acquisition”	the proposed acquisition of the Property pursuant to the
	Agreement and the Supplemental Agreement
“Agreement”	the agreement dated 24 December 2004 entered into between
	the Vendor and the Subsidiary in respect of the Transaction as
	amended by the Supplemental Agreement
“Board”	the board of Directors
“Company”	Asia Alliance Holdings Limited, an exempted company
	incorporated in Bermuda with limited liability, the shares of
	which are listed on the Main Board of the Stock Exchange
“Construction”	the construction of the Plant
“Deposit”	the deposit of HK$15,000,000 to be paid to the Vendor for the
	Construction
“Director(s)”	the director(s) of the Company
“Easyknit”	Easyknit International Holdings Limited, an exempted
	company incorporated in Bermuda with limited liability, the
	shares of which are listed on the Main Board of the Stock
	Exchange and on the Singapore Exchange Securities Trading
	Limited
“Group”	the Company and it subsidiaries
“HK$”	Hong Kong Dollars, the lawful currency of Hong Kong
“Hong Kong”	The Hong Kong Special Administrative Region of PRC
“Independent Third Party”	any person who and whose ultimate beneficial owner are
	independent of and not connected to the Company, any
	director, chief executive or substantial Shareholder of the
	Company or any of its subsidiaries or any of their respective
	associates (as defined in the Listing Rules) and is not a
	connected person of the Company (as defined in the Listing
	Rules)
“Latest Practicable Date”	1 February 2005, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information
	contained herein
“Listing Rules”	the Rules Governing the Listing of Securities on The Stock
	Exchange of Hong Kong Limited

— 1 —

DEFINITIONS

==> picture [457 x 600] intentionally omitted <==

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

|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|“Plant”|waste|water|treatment|plant|to|be|built|on|the|Property|
|“PRC”|or|“China”|The|People’s|Republic|of|China|(other|than,|for|the|purpose|of|
|this|circular|only,|Hong|Kong,|the|Macau|Special|
|Administrative|Region|of|PRC|and|Taiwan)|
|“PRC|Entities”|four|wholly|owned|foreign|enterprises|to|be|incorporated|in|
|PRC|and|to|be|held|by|the|Subsidiary|or|other|wholly|owned|
|subsidiaries|of|the|Company|for|the|purposes|of|holding|
|different|assets|in|connection|with|the|development|
|of|the|manufacturing|operations|under|the|Project,|and|
|the|aggregate|registered|capital|of|which|is|expected|
|to|be|HK$500,000,000.|As|at|the|Latest|Practicable|
|Date,|,|and|
|have|been|incorporated|
|“Project”|the|Acquisition,|the|proposed|development|of|manufacturing|
|operations|in|Huzhou|City,|Zhejiang|Province,|PRC|on|the|
|Property|to|be|held|through|the|PRC|Entities,|including|
|garment|manufacturing,|bleaching|and|dyeing|and|knitting|
|and|the|Construction|
|“Property”|the|land|of|about|670|mu|situate|at|the|West|of|Dongliang|
|Road,|Zhili|Town,|Wuxing|District,|Huzhou|City,|Zhejiang|
|Province,|PRC|and|the|South|of|Hengtang|Harbour,|PRC|
|“Property|Consideration”|the|consideration|of|RMB10,050,000|(equivalent|to|
|approximately|HK$9,472,196)|for|the|Acquisition|
|“RMB”|Renminbi,|the|lawful|currency|of|the|PRC|
|“Scheme”|the|share|option|scheme|of|the|Company|adopted|on|22|May|
|2001|
|“SFO”|Securities|and|Futures|Ordinance|(Chapter|571|of|the|laws|of|
|Hong|Kong)|
|“SGM”|a|special|general|meeting|of|the|Company|to|be|held|to|
|approve,|among|other|things,|the|Agreement,|the|
|Supplemental|Agreement|and|the|Transaction|
|“Share|Options”|share|options|granted|under|the|Scheme|
|“Shareholder(s)”|the|shareholder(s)|of|the|Company|
|“Stock|Exchange”|The|Stock|Exchange|of|Hong|Kong|Limited|

----- End of picture text -----

— 2 —

DEFINITIONS

“Subsidiary”		Easyknit (Mauritius) Limited, a company incorporated in the
		Republic of Mauritius and a wholly owned subsidiary of the
		Company
“Supplemental	Agreement”	the supplemental agreement dated 28 December 2004 entered
		into between the Vendor and the Subsidiary varying certain
		terms in the Agreement
“Transaction”		phase 1 of the Project in Huzhou City, Zhejiang Province,
		PRC which involves the Acquisition, the Construction and the
		setting up of manufacturing operations initially comprising
		garment manufacturing, bleaching and dyeing capabilities
“Vendor”		The People’s Government of Zhili Town, Wuxing District,
		Huzhou City, Zhejiang Province, PRC
“%”		per cent

— 3 —

LETTER FROM THE BOARD

Asia Alliance Holdings Limited

*

(Incorporated in Bermuda with limited liability)

Executive Directors: Koon Wing Yee Tsang Yiu Kai Lui Yuk Chu

Registered office: Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda

Independent Non-Executive Directors:

Kan Ka Hon Kwong Jimmy Cheung Tim Lau Sin Ming

Principal place of business in Hong Kong: 7th Floor Hong Kong Spinners Building Phase 6, 481-483 Castle Peak Road Cheung Sha Wan Kowloon Hong Kong 21 February 2005

To the Shareholders, and for information only, the holder of the Share Options

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION

1. INTRODUCTION

On 3 January 2005, the Board announced that on 24 December 2004 and 28 December 2004, the Agreement and the Supplemental Agreement were entered into respectively between the Vendor and the Subsidiary which set out the terms in respect of the Acquisition at the Property Consideration of RMB10,050,000 (equivalent to approximately HK$9,472,196), the Construction at a cost of not more than HK$30,000,000 and the proposed development of manufacturing operations in Huzhou City, Zhejiang Province, PRC to be held through the PRC Entities.

For identification only

— 4 —

LETTER FROM THE BOARD

The Transaction, being phase 1 of the Project, involves the setting up of manufacturing operations initially comprising garment manufacturing and bleaching and dyeing capabilities, the Acquisition and the Construction for treating waste water. The proposed development in phase 1 of the Project will involve building on the Property factories to house equipment and machinery for manufacturing operations, storage and maintenance facilities, packaging facilities and employee quarters and the Construction. The total investment under the Transaction, including the aggregate cost of HK$40,000,000 for the Acquisition and the Construction under the Agreement and the Supplemental Agreement and the intended investment of HK$160,000,000 for other parts of the Transaction, is expected to be up to HK$200,000,000.

The Transaction constitutes a very substantial acquisition of the Company under the Listing Rules and is therefore subject to the approval of the Shareholders at the SGM.

The purpose of this circular is to give you further information regarding the Transaction and to give you the notice of the SGM and other information required under the Listing Rules.

2. THE AGREEMENT AND SUPPLEMENTAL AGREEMENT

(1) Date

The Agreement and the Supplemental Agreement were entered into by the Vendor and the Subsidiary on 24 December 2004 and 28 December 2004 respectively.

(2) Parties

(a) The Subsidiary, as the purchaser. The principal business activity of the Subsidiary is that of investment holding.
(b) The People’s Government of Zhili Town, Wuxing District, Huzhou City, Zhejiang Province, PRC as the vendor. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, the Vendor is an Independent Third Party.

(3) The Transaction

The Transaction involves the Acquisition at the Property Consideration of RMB10,050,000 (equivalent to approximately HK$9,472,196), the Construction at a cost of not more than HK$30,000,000 and the development of manufacturing operations in Huzhou City, Zhejiang Province, PRC to be held through the PRC Entities. The Acquisition, the Construction and the development of the manufacturing operations which will initially comprise garment manufacturing and bleaching and dyeing capabilities will form phase 1 of the Project and is the subject of the Transaction, and the development of knitting capability will form phase 2 of the Project which will not be commenced until completion of the Transaction. Separate approvals for operation shall be applied for each part of the Project.

— 5 —

LETTER FROM THE BOARD

The Agreement and the Supplemental Agreement only provide for detailed capital commitment of HK$40,000,000 by the Subsidiary in respect of the Acquisition and the Construction. No commitment has been made in respect of other parts of the Transaction, the total amount of which is expected to be HK$160,000,000 upon completion, or phase 2 of the Project. References to other parts of the Project are stated as broad intended plans.

(4) The Property to be acquired

Pursuant to the Agreement and the Supplemental Agreement, the Subsidiary has agreed to acquire from the Vendor the Property, comprising the land use rights for 50 years for land of about 670 mu located at the West of Dongliang Road, Zhili Town, Wuxing District, Huzhou City, Zhejiang Province, PRC and the South of Hengtang Harbour, PRC. 70 mu of land comprised in the Property has been reserved but will only be delivered upon demand by the Subsidiary at no extra cost. It is intended that multifunctional manufacturing facilities will be built on the Property to expand the manufacturing capacity of the Group.

The Agreement and the Supplemental Agreement further provide that the Plant will be built on the Property for treating waste water and that the manufacturing operations comprising garment manufacturing and bleaching and dyeing capabilities be set up, which will be held through the PRC Entities.

(5) Condition precedent

The Agreement and the Supplemental Agreement will be binding on the Subsidiary upon the Company and the Subsidiary having obtained all necessary approvals, if any, in respect of the transactions contemplated under the Agreement and the Supplemental Agreement and pursuant to the Listing Rules, including without limitations, the obtaining of the approval of the Shareholders.

(6) Consideration and payment terms

The aggregate investment for the Transaction is expected to be HK$200,000,000. Under the Agreement and the Supplemental Agreement, the Property Consideration is RMB10,050,000 (equivalent to approximately HK$9,472,196), which has been determined at arm’s length negotiation with reference to (i) the value of the Property as approved by the People’s Government of Huzhou City, Zhejiang Province, PRC as an incentive for the Group to invest in Huzhou City, Zhejiang Province, PRC and to build its facilities in that city which will bring subsequential employment and growth and (ii) the expenses for the issue of the certificate of land use right and related tax to be borne by the Vendor (the tax for the Acquisition, at 3% of the Property Consideration, will be payable by the Subsidiary, and the Vendor will coordinate the refund to the Subsidiary of 80% of the tax so paid, which will involve approval(s) by Huzhou municipal government and/or the Vendor).

In addition, the Agreement and the Supplemental Agreement provide that the Plant shall be constructed at a cost of not more than HK$30,000,000, half of which is in the form of the Deposit of HK$15,000,000 that will be applied for the purpose of the Construction. The estimated costs of setting up the manufacturing operations consist of HK$100,000,000 for establishing the bleaching and dyeing capabilities, and HK$60,000,000 for establishing the garment manufacturing capabilities.

— 6 —

LETTER FROM THE BOARD

The Directors believe that the terms of the Agreement, the Supplemental Agreement and the Transaction are fair and reasonable and in the interests of the Shareholders as a whole.

No commitment has been made in respect of the costs of other parts of the Transaction, which is expected to be approximately HK$160,000,000.

(7) Funding

An aggregate sum of HK$25,000,000, which includes the Property Consideration of RMB10,050,000 (equivalent to approximately HK$9,472,196), related expenses of approximately HK$527,804 and the Deposit of HK$15,000,000, will be paid to the Vendor upon confirmation by the Vendor of the payment details. If the condition precedent, as set out in paragraph headed “Condition precedent” on page 6 of this circular, is not satisfied, the above sum of HK$25,000,000 will be refundable in full.

The Company will inject further funds through the PRC Entities as and when necessary for the purpose of development of the Project. The Agreement and the Supplemental Agreement do not provide for any further commitment of funds other than providing that the total registered capital of the PRC Entities shall be HK$500,000,000, which shall be injected only when such fund is required in order to consummate the Project.

The Group will finance the Acquisition and the Construction through bank borrowings of HK$30,000,000 which is guaranteed by a personal guarantee from Mr. Koon Wing Yee, who is a Director. The Company has not granted any security to Mr. Koon Wing Yee in connection with him providing the personal guarantee. The Group will also make use of an existing bank facility of HK$10,000,000 for the Construction if required.

The costs for setting up the manufacturing operations in the sum of HK$160,000,000 will be financed through bank borrowing or other forms of financing available. As at the date hereof, the Company has not entered into any financing arrangement in respect thereof.

(8) Completion

The Property shall be capable of being transferred to the Subsidiary or its subsidiaries within 15 business days of payment of the Property Consideration. The Vendor will also arrange for infrastructure connections including water, electricity, roads, gas and others within 45 business days of the Group obtaining approvals from Huzhou municipal government and/or the Vendor.

The Construction shall be completed before March 2006.

— 7 —

LETTER FROM THE BOARD

The Agreement and the Supplemental Agreement further provide for indicative timetable for the other parts of the manufacturing operations as follows:

(a) Construction must commence in early 2005;
(b) Strive to complete garment manufacturing and bleaching and dyeing capabilities by early 2006; and
(c) Strive to complete knitting operation by the end of 2006.

(9) Other terms of the Transaction

Other terms of the Transaction include, in summary, the following:

(a) The Subsidiary may nominate any of its subsidiaries or affiliates to hold assets (including the Property and the Plant) relating to the development of manufacturing operations in Huzhou City, Zhejiang Province, PRC.
(b) The Vendor has agreed to support the Group with infrastructure to ensure the Plant can be functional, including the construction of drainage linking the Plant to the canal nearby.

(10) Implications under the Listing Rules

The aggregate investment for the Transaction exceeds 100% of the relevant percentage ratios under Rule 14.07 of the Listing Rules and therefore the Transaction constitutes a very substantial acquisition of the Company under the Listing Rules and is subject to the approval by the Shareholders at the SGM pursuant to Rule 14.49 of the Listing Rules. To the best knowledge of the Directors, no Shareholder has a material interest in the Transaction, therefore no Shareholder and its associate will be required to abstain from voting at the SGM.

3. REASONS FOR AND BENEFITS OF THE TRANSACTION

The Company is primarily engaged in the business of bleaching, dyeing and knitting. The Company wishes to strengthen its manufacturing operations and the capability of its existing main business by developing a multi-functional base in Huzhou City, Zhejiang Province, PRC and as part of that development, to acquire the Property and to construct the Plant for the purpose of establishing a manufacturing base for its business. The Company chose the Property so as to benefit from the inexpensive land price and low cost base including low labour costs.

The Company further believes that the Project will consolidate and significantly increase its manufacturing capabilities and provide the Company with further economy of scale. It also enhances relationship with the Vendor which will assist in the smooth running of its operations, including the provision of infrastructure support as contemplated in the Agreement and the Supplemental Agreement.

— 8 —

LETTER FROM THE BOARD

4. INFORMATION ABOUT THE PROJECT

The Company intends to divide the Project into 2 phases. Phase 1 of the Project consists of the Acquisition, the Construction, and the development of the garment manufacturing and bleaching and dyeing operations as described above. The Plant is an integral part of the Project to develop the manufacturing facilities, and a clear plan as to how to deal with waste water treatment to the standard required under PRC laws is an important factor taken into account by the Group in choosing the Property to be the site of developing such facilities.

The Group will proceed with its investment in phase 1 of the Project as and when it has obtained further funding either through bank borrowings, or to the extent possible through internal resources depending on when such funding is needed.

Phase 2 of the Project consists of the development of the knitting operation. The Company has no present intention to move forward to phase 2 unless and until the Transaction is completed and it adds value to the business of the Group. The Group will make further announcement as and when necessary if it decides to pursue phase 2 of the Project.

5. FINANCIAL EFFECTS OF THE TRANSACTION ON THE GROUP

There will not be any impact on the net assets of the Group arising from the Transaction based on financial resources committed under the Agreement. The total assets of the Group will be increased by HK$25,000,000 representing the payment for acquisition of the Property and the deposit paid for the Construction which will be offset by an increase by the same amount of bank loans obtained for financing the Transaction as mentioned in the paragraph headed “Funding” on page 7 of this circular. Please also refer to the “Unaudited pro forma financial information on the Enlarged Group” in Appendix II to this circular as set out on pages 82 to 86.

Initially, the Transaction involves the acquisition of the Property and construction of the Plant as committed under the Agreement. As the Property is vacant land and the Plant is yet to be constructed, no revenues or expenses have been incurred and there was no profit and loss statement prepared on the Property or the Plant for the three preceding financial years, including the two years ended 31 December 2001 and 31 December 2002 and the 15 months ended 31 March 2004, as required under Rule 14.69(4)(b)(i) of the Listing Rules.

— 9 —

LETTER FROM THE BOARD

6. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

As stated in the interim report of the Company for the six months period ended 30 September 2004 (the “Period”), the Group recorded a turnover of approximately HK$22,000,000, representing more than tenfold increase from HK$1,900,000 for the previous corresponding period. The increase was mainly attributable to the significant increase in turnover arising from the acquisition of the bleaching and dyeing business during the Period. Profit attributable to the Shareholders was HK$6,200,000 as compared with a loss of HK$17,700,000 for the same period in 2003. The Group has had a major change in operations following the completion of the acquisition of Po Cheong International Enterprises Limited (the “Po Cheong Acquisition”) on 17 May 2004 which has introduced bleaching and dyeing business to the Group and has contributed positively to the Group’s profitability. There will be no variation to the aggregate remuneration payable to and benefits in kind receivable by the Directors in consequence of the Po Cheong Acquisition. The Transaction will not only further consolidate the Group’s bleaching and dyeing business by adding further and more centralized and modern manufacturing capabilities, but will also introduce garment manufacturing capabilities which are expected to contribute to the income base of the Group upon completion.

7. SGM

Set out on pages 98 to 99 is a notice convening the SGM to be held at 7th Floor, Hong Kong Spinners Building, Phase 6, 481-483 Castle Peak Road, Cheung Sha Wan, Kowloon, Hong Kong on 11 March 2005 at 9:00 a.m.

A form of proxy for use at the SGM is enclosed. Whether or not you are able to attend the meeting, you are requested to complete the form of proxy and return it to the Company’s office at 7th Floor, Hong Kong Spinners Building, Phase 6, 481-483 Castle Peak Road, Cheung Sha Wan, Kowloon, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjourned meeting should you so wish.

8. PROCEDURE FOR DEMANDING A POLL

Pursuant to bye-law 70 of the bye-laws of the Company, a poll may be demanded in relation to any resolution put to the vote of the SGM before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll:

(a) by the chairman of the meeting; or
(b) by at least three Shareholders present in person or by duly authorised corporate representative or by proxy for the time being entitled to vote at the meeting; or
(c) by any Shareholder or Shareholders present in person or by duly authorised corporate representative or by proxy and representing not less than one-tenth of the total voting rights of all Shareholders having the right to vote at the meeting; or

— 10 —

LETTER FROM THE BOARD

(d) by any Shareholder or Shareholders present in person or by duly authorised corporate representative or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

9. RECOMMENDATION

The Directors consider that the terms of the Agreement, the Supplemental Agreement and the Transaction are fair and reasonable and in the interests of the Shareholders as a whole. Accordingly, the Directors recommend that all the Shareholders should vote in favour of the ordinary resolution as set out in the notice of the SGM.

10. ADDITIONAL INFORMATION

Your attention is drawn to the information set out in the appendices to this circular.

Yours faithfully, For and on behalf of the Board

Koon Wing Yee

President and Chief Executive Officer

— 11 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. INTERIM RESULTS

Set out below are the extracts of the unaudited interim results for the six months ended 30 September 2004 of the Group with comparative figures for the six months ended 30 September 2003. These interim financial statements have been reviewed by the Company’s audit committee.

The financial effects of the acquisition of the entire issued share capital of Po Cheong International Enterprises Limited as set out below will be subject to adjustment which will only be finalised in the mid of 2005.

CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004

		Six months ended	Six months ended
		30 September
	NOTES	2004	2003
		HK$’000	HK$’000
		(Unaudited)	(Unaudited)
Turnover	3	21,981	1,922
Cost of sales and services		(18,504)	(1,705)
Gross profit		3,477	217
Other operating income	4	123	369
Distribution costs		(149)	(333)
Administrative expenses		(4,191)	(11,120)
Other operating expenses		(1,757)	(2,814)
Impairment loss recognised in respect of
long term investments		—	(3,900)
(Allowance) write-back of allowance
for a loan to Acme Landis Operations
Holdings Limited, a former subsidiary		(198)	95
Write-back of allowance for doubtful debts		17	931
Loss from operations	5	(2,678)	(16,555)
Gain on disposal of subsidiaries	20	9,042	—
Finance costs	6	(138)	(1,023)
Share of results of jointly controlled entities		—	(75)
Net profit (loss) for the period		6,226	(17,653)
Basic earnings (loss) per share	8	HK$0.02	HK$(0.59)

— 12 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED BALANCE SHEET AT 30 SEPTEMBER 2004

30 September 31 March NOTES 2004 2004 HK$’000 (Unaudited) HK$’000 (Audited) Non-current assets Property, plant and equipment 10 24,998 665 Goodwill 47,523 — Loan to Acme Landis Operations Holdings Limited 11 205 403 72,726 1,068 Current assets Inventories 3,469 — Trade and other receivables 12 26,476 1,935 Bank balances and cash 4,128 66,131 34,073 68,066 Current liabilities Trade and other payables 13 12,224 7,069 Bills payable 895 — Amount due to a related company 17 121 — Import loans 686 — Bank loans — amount due within one year 14 3,486 — Other loan, secured 15 — 4,000 Consideration payable on acquisition of subsidiaries 19 15,000 — 32,412 11,069 Net current assets 1,661 56,997 74,387 58,065 Capital and reserves Share capital 16 35,701 35,701 Reserves 28,397 22,155 64,098 57,856 Minority interests — 209 Non-current liabilities Bank loans — amount due after one year 14 10,289 — 74,387 58,065	30 September 31 March NOTES 2004 2004 HK$’000 (Unaudited) HK$’000 (Audited) Non-current assets Property, plant and equipment 10 24,998 665 Goodwill 47,523 — Loan to Acme Landis Operations Holdings Limited 11 205 403 72,726 1,068 Current assets Inventories 3,469 — Trade and other receivables 12 26,476 1,935 Bank balances and cash 4,128 66,131 34,073 68,066 Current liabilities Trade and other payables 13 12,224 7,069 Bills payable 895 — Amount due to a related company 17 121 — Import loans 686 — Bank loans — amount due within one year 14 3,486 — Other loan, secured 15 — 4,000 Consideration payable on acquisition of subsidiaries 19 15,000 — 32,412 11,069 Net current assets 1,661 56,997 74,387 58,065 Capital and reserves Share capital 16 35,701 35,701 Reserves 28,397 22,155 64,098 57,856 Minority interests — 209 Non-current liabilities Bank loans — amount due after one year 14 10,289 — 74,387 58,065	30 September 31 March NOTES 2004 2004 HK$’000 (Unaudited) HK$’000 (Audited) Non-current assets Property, plant and equipment 10 24,998 665 Goodwill 47,523 — Loan to Acme Landis Operations Holdings Limited 11 205 403 72,726 1,068 Current assets Inventories 3,469 — Trade and other receivables 12 26,476 1,935 Bank balances and cash 4,128 66,131 34,073 68,066 Current liabilities Trade and other payables 13 12,224 7,069 Bills payable 895 — Amount due to a related company 17 121 — Import loans 686 — Bank loans — amount due within one year 14 3,486 — Other loan, secured 15 — 4,000 Consideration payable on acquisition of subsidiaries 19 15,000 — 32,412 11,069 Net current assets 1,661 56,997 74,387 58,065 Capital and reserves Share capital 16 35,701 35,701 Reserves 28,397 22,155 64,098 57,856 Minority interests — 209 Non-current liabilities Bank loans — amount due after one year 14 10,289 — 74,387 58,065
	72,726 3,469 26,476 4,128 34,073 12,224 895 121 686 3,486 — 15,000 32,412 1,661	1,068
		— 1,935 66,131
		68,066
		7,069 — — — — 4,000 —
		11,069
		56,997
	74,387	58,065
	35,701 28,397 64,098 — 10,289	35,701 22,155
		57,856
		209
		—
	74,387	58,065

— 13 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004

At 1 January 2003 Rights issue of shares Issue of new shares by private placements Reduction of share capital and share premium upon capital reorganisations Elimination of accumulated losses Realised on disposal of subsidiaries Net loss for the period At 31 March 2004 and 1 April 2004 Realised on disposal of subsidiaries Net profit for the period At 30 September 2004 At 1 April 2003 Rights issue of shares Net loss for the period At 30 September 2003	Share capital HK$’000 110,187 35,260 7,272 (117,018) — — — 35,701 — — 35,701	Share premium HK$’000 255,030 52,890 8,454 (255,030) — — — 61,344 — — 61,344	Capital reserve Contributed surplus HK$’000 HK$’000 — — — — — — 17,850 354,198 — (353,484) — — — — 17,850 714 — — — — 17,850 714	Capital reserve Contributed surplus HK$’000 HK$’000 — — — — — — 17,850 354,198 — (353,484) — — — — 17,850 714 — — — — 17,850 714	Exchange reserve Accumulated losses HK$’000 HK$’000 (14) (353,484) — — — — — — — 353,484 (2) — — (57,737) (16) (57,737) 16 — — 6,226 — (51,511)	Exchange reserve Accumulated losses HK$’000 HK$’000 (14) (353,484) — — — — — — — 353,484 (2) — — (57,737) (16) (57,737) 16 — — 6,226 — (51,511)	Total HK$’000 11,719 88,150 15,726 — — (2) (57,737) 57,856 16 6,226 64,098 (3,039) 13,773 (17,653) (6,919)
	11,019 5,509 —	— 8,264 —	— — —	714 — —	(14) — —	(14,758) — (17,653)	(3,039 13,773 (17,653
	16,528	8,264	—	714	(14)	(32,411)

— 14 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004

	Six months ended	Six months ended
	30 September
	2004	2003
	HK$’000	HK$’000
	(Unaudited)	(Unaudited)
Net cash used in operating activities	(5,188)	(13,935)
Net cash used in investing activities	(61,815)	(12,023)
Net cash from financing activities	5,000	13,773
Net decrease in cash and cash equivalents	(62,003)	(12,185)
Cash and cash equivalents at beginning of the period	66,131	24,644
Cash and cash equivalents at end of the period,
represented by bank balances and cash	4,128	12,459

— 15 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004

1. GENERAL AND BASIS OF PREPARATION

The condensed financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and with Statement of Standard Accounting Practice (“SSAP”) No. 25 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

On 1 September 2003, the board of directors of the Company resolved to change the financial year-end date of the Company from 31 December to 31 March to align the financial year-end date with that of Easyknit International Holdings Limited. The condensed financial statements for the current period therefore cover the six month period from 1 April 2004 to 30 September 2004.

2. PRINCIPAL ACCOUNTING POLICIES

The condensed financial statements have been prepared under the historical cost convention.

The principal accounting policies adopted are consistent with those followed in the preparation of the Group’s annual financial statements for the fifteen months ended 31 March 2004.

3. SEGMENT INFORMATION

The Group’s primary format for reporting segment information is business segments. During the period, the Group acquired a new business of bleaching and dyeing upon the acquisition of subsidiaries (see note 19) and established a new business of knitting. An analysis of the Group’s turnover and result by business segments is as follows:

	Turnover	Segment result	Consolidated
	HK$’000	HK$’000	HK$’000
For the six months ended 30 September 2004
Bleaching and dyeing	20,892	1,176
Knitting	1,089	(2,169)
Wireless communication business	—	70
Communication solutions consultancy services	—	(11)
	21,981	(934)

Segment result	(934)
Interest income	3
Unallocated corporate expenses	(1,747)
Loss from operations	(2,678)

— 16 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

For the six months ended 30 September 2003 Wireless communication business Communication solutions consultancy services Internet operations Segment result Interest income Unallocated corporate expenses Loss from operations	Turnover Segment result Consolidated HK$’000 HK$’000 HK$’000 967 (7,622) 955 (1,545) — (153) 1,922 (9,320) (9,320) 48 (7,283) (16,555)	Turnover Segment result Consolidated HK$’000 HK$’000 HK$’000 967 (7,622) 955 (1,545) — (153) 1,922 (9,320) (9,320) 48 (7,283) (16,555)	Turnover Segment result Consolidated HK$’000 HK$’000 HK$’000 967 (7,622) 955 (1,545) — (153) 1,922 (9,320) (9,320) 48 (7,283) (16,555)
			(9,320) 48 (7,283)
			(16,555)

4. OTHER OPERATING INCOME Interest income Others 5. LOSS FROM OPERATIONS Loss from operations has been arrived at after charging: Amortisation of goodwill, included in other operating expenses Depreciation Impairment loss recognised in respect of goodwill of subsidiaries, included in other operating expenses Loss on disposal of property, plant and equipment	Six months ended 30 September 2004 2003 HK$’000 HK$’000 3 48 120 321 123 369 Six months ended 30 September 2004 2003 HK$’000 HK$’000 1,639 — 1,120 2,991 — 388 — 149

— 17 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

6. FINANCE COSTS

The amount represents interest on bank and other borrowings wholly repayable within five years.

7. TAXATION

No provision for Hong Kong Profits Tax has been made as the Company and its subsidiaries had no assessable profit for both periods.

8. BASIC EARNINGS (LOSS) PER SHARE

The calculation of the basic earnings (loss) per share is based on the net profit for the period of HK$6,226,000 (six months ended 30 September 2003: net loss of HK$17,653,000) and on 357,006,840 shares (six months ended 30 September 2003: weighted average number of 29,700,520 shares) in issue during the period.

The denominator for the purposes of calculating basic loss per share for the six months ended 30 September 2003 has been adjusted to reflect the consolidation of shares on the basis that forty shares were consolidated into one share and the rights issue of shares in September 2003.

No diluted earnings per share has been presented for the six months ended 30 September 2004 as the exercise prices of the Company’s outstanding share options were higher than the average market price for the period.

No diluted loss per share has been presented for the six months ended 30 September 2003 as the exercise of the Company’s outstanding share options would reduce the loss per share for that period.

9. DIVIDENDS

No dividend was paid by the Company during the period. The directors do not recommend the payment of an interim dividend for both periods.

10. PROPERTY, PLANT AND EQUIPMENT

During the period, the Group spent approximately HK$26,022,000 (six months ended 30 September 2003: HK$12,076,000) on acquisition of property, plant and equipment, of which approximately HK$14,529,000 (six months ended 30 September 2003: nil) was related to acquisition of subsidiaries.

11. LOAN TO ACME LANDIS OPERATIONS HOLDINGS LIMITED (“ALOH”)

30 September 2004 HK$’000 Loan to ALOH 45,815 Less: Allowance (45,610) 205	31 March 2004 HK$’000 45,815 (45,412) 403

— 18 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The loan to ALOH is secured by a pledge given by the purchaser of ALOH in respect of 1,900,000 shares of the Company of HK$0.10 each. The loan is interest-free and has no fixed repayment terms. In the opinion of the directors, repayment of the loan due from ALOH is not probable. Accordingly, an allowance was made to reduce the carrying amount of the loan to the approximate prevailing market value of the secured shares at 30 September 2004.

12. TRADE AND OTHER RECEIVABLES

The Group allows an average credit period of up to 90 days to its customers. The aged analysis of trade receivables at the reporting date, based on invoice date, is as follows:

30 September 2004 HK$’000 0 - 60 days 16,590 61 - 90 days 2,626 Over 90 days 6,018 Trade receivables 25,234 Other receivables 1,242 26,476	30 September 2004 HK$’000 0 - 60 days 16,590 61 - 90 days 2,626 Over 90 days 6,018 Trade receivables 25,234 Other receivables 1,242 26,476	31 March 2004 HK$’000 — — —
	25,234 1,242	— 1,935
	26,476	1,935

13. TRADE AND OTHER PAYABLES

The aged analysis of trade payables at the reporting date is as follows:

30 September 2004 HK$’000 0 - 60 days 7,868 61 - 90 days 2,199 Over 90 days 472 Trade payables 10,539 Other payables 1,685 12,224	30 September 2004 HK$’000 0 - 60 days 7,868 61 - 90 days 2,199 Over 90 days 472 Trade payables 10,539 Other payables 1,685 12,224	31 March 2004 HK$’000 — — 101
	10,539 1,685	101 6,968
	12,224	7,069

14. BANK LOANS

During the period, the Group obtained a new bank loan in the amount of HK$5,000,000 for general working capital purposes and acquired bank loans in the amount of HK$8,775,000 upon acquisition of subsidiaries. The loans are unsecured, bear interest at prevailing market rates and are repayable in instalments over a period of four years. At 30 September 2004, the Group had bank loans amounting to HK$13,775,000 (31.3.2004: nil).

— 19 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

15. OTHER LOAN, SECURED

On 25 June 2004, the Group entered into a settlement agreement with the lender for the full settlement of the loan of HK$4,000,000 and accrued interest of HK$511,000 (up to the date of the agreement) by way of transferring all the issued shares of i100 Wireless Corporation, a wholly-owned subsidiary of the Company, to the lender. i100 Wireless Corporation and its subsidiaries are principally engaged in the wireless communication business.

16. SHARE CAPITAL

There was no movement in the authorised and issued and fully paid share capital of the Company during the interim period under review.

17. RELATED PARTY TRANSACTIONS/CONNECTED TRANSACTIONS

(a) During the period, the Group had the following transactions carried out at prices determined by reference to market prices for similar transactions with related parties/persons deemed to be “connected persons” by the Stock Exchange, being entities controlled by certain relatives of Koon Wing Yee and his spouse Lui Yuk Chu, both of whom are directors of the Company:

	Six months ended	Six months ended
	30 September
	2004	2003
	HK$’000	HK$’000
Sales of bleached and dyed fabric	13,047	—
Bleaching and dyeing charges received	166	—

At the reporting date, amounts due from the above entities comprise:

		September	31 March
		2004	2004
		HK$’000	HK$’000
Trade	receivables	13,295	—

(b) During the period, the Group received administrative services from Easyknit International Trading Company Limited, a company in which Koon Wing Yee, Tsang Yiu Kai and Lui Yuk Chu, all of whom are directors of the Company, have beneficial interests and paid services fee of approximately HK$121,000 (six months ended 30 September 2003: nil). The services fee is determined based on mutually agreed terms. At 30 September 2004, the amount was not yet settled (31.3.2004: nil) and was disclosed as amount due to a related company in the condensed consolidated balance sheet.

— 20 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

18. CAPITAL COMMITMENTS

30 September 2004 HK$’000 Capital expenditure contracted for but not provided in the condensed financial statements in respect of: Acquisition of property, plant and equipment 10 Acquisition of the entire issued share capital of Po Cheong International Enterprises Limited (“Po Cheong”) — Capital injection for interests in jointly controlled entities and non wholly-owned subsidiaries 20,904 20,914	31 March 2004 HK$’000 9,923 65,000 20,904
	95,827

30 September
2004
HK$’000
Capital expenditure contracted for but not provided in the condensed financial
statements in respect of:
Acquisition of property, plant and equipment
10
Acquisition of the entire issued share capital of Po Cheong International
Enterprises Limited (“Po Cheong”)
—
Capital injection for interests in jointly controlled entities and
non wholly-owned subsidiaries
20,904
20,914

31 March
2004
HK$’000
9,923
65,000
20,904

95,827

19. ACQUISITION OF SUBSIDIARIES

On 17 May 2004, the Group acquired the entire issued share capital of Po Cheong at a consideration of HK$65,000,000, subject to adjustment, as described in the circular of the Company dated 23 April 2004. Po Cheong, together with its subsidiary, is principally engaged in the business of bleaching and dyeing. Acquisition of the subsidiaries was accounted for by the acquisition method of accounting. The consideration shall be satisfied in cash, of which HK$50,000,000 was paid on 13 May 2004. Details of the arrangement of the consideration should be referred to the circular and the adjustment will be finalised in the mid of 2005.

Net assets acquired Goodwill on acquisition (note) Satisfied by: Consideration - Cash paid - Consideration payable Expenses incurred in connection with acquisition Net cash outflow arising on acquisition: Cash consideration paid Expenses incurred in connection with acquisition Bank balances and cash acquired	HK$’000 16,572 49,162
	65,734
	50,000 15,000 734
	65,734
	(50,000 (734 423
	(50,311

The turnover and result of the subsidiaries acquired during the period are set out in note 3.

Note: Goodwill is amortised over ten years. The amount of goodwill and related amortisation shall be subject to adjustment, if any, after the finalisation of the adjustment in the mid of 2005.

— 21 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

20. DISPOSAL OF SUBSIDIARIES

As referred to in note 15, the Group disposed of i100 Wireless Corporation to the lender of the other loan on 25 June 2004. The effect of the disposal is summarised as follows:

Net liabilities disposed of Exchange reserve realised on disposal of subsidiaries Gain on disposal of subsidiaries Total consideration Satisfied by: Loan principal waived Accrued interest thereof waived Net cash outflow arising on disposal: Bank balances and cash disposed of	HK$’000 (4,547) 16 9,042 4,511 4,000 511 4,511 (15)

The subsidiaries disposed of during the period did not have any significant impact on the Group’s turnover and loss from operations.

— 22 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

2. REPRODUCED REPORT OF ERNST & YOUNG (THE FORMER AUDITORS OF THE COMPANY) FOR THE YEAR ENDED 31 DECEMBER, 2002

The following is the full text of the reproduced report of Ernst & Young (the former auditors of the Company) for the year ended 31 December, 2002 extracted from pages 20 to 21 of the annual report 2002 of the Company (“Annual Report”). The page references in this reproduced report are the same as the Annual Report.

To the members

i100 Limited

(Incorporated in Bermuda with limited liability)

We have audited the financial statements on pages 22 to 79 which have been prepared in accordance with accounting principles generally accepted in Hong Kong.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

The Company’s directors are responsible for the preparation of financial statements which give a true and fair view. In preparing financial statements which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently. It is our responsibility to form an independent opinion, based on our audit, on those statements and to report our opinion to you.

BASIS OF OPINION

We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants. An audit includes an 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 judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company’s and the Group’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion.

— 23 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

FUNDAMENTAL UNCERTAINTY IN RESPECT OF GOING CONCERN

In forming our opinion, we have considered the adequacy of the disclosures made in note 2 to the financial statements concerning the adoption of the going concern basis, being the basis on which the financial statements have been prepared. As explained in note 2 to the financial statements, the Group’s operations generated a net loss during the year and negative cash flows. The Group also had net current liabilities of HK$3,521,000 at the balance sheet date. Subsequent to the balance sheet date, the Group obtained a loan of approximately HK$30,270,000 from a new holding company. The financial statements have been prepared on a going concern basis, the validity of which depends upon the Group attaining profitable and cash positive operations in the longer term and, in the meantime, the continuing financial support from the new holding company as detailed in note 2 to the financial statements. We consider that appropriate estimates and disclosures regarding the above fundamental uncertainties have been made and our opinion is not qualified in this respect.

OPINION

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 31 December 2002 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.

Ernst & Young

Certified Public Accountants

Hong Kong 24 April 2003

— 24 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

3. AUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of the audited consolidated income statement of the Group for the two years ended 31 December 2001 and 31 December 2002 and the 15 months ended 31 March 2004, the audited consolidated balance sheet of the Group as at 31 December 2001, 31 December 2002 and 31 March 2004, the balance sheet of the Company as at 31 December 2002 and 31 March 2004, the consolidated statement of changes in equity and the consolidated cash flow statement for the year ended 31 December 2002 and the 15 months ended 31 March 2004. The information upon which the summary is based has been fully extracted from the annual reports of the Company for the relevant years.

CONSOLIDATED INCOME STATEMENT

		1.1.2003 to	1.1.2002 to	1.1.2001 to
	NOTES	31.3.2004	31.12.2002	31.12.2001
		HK$’000	HK$’000	HK$’000
Turnover	5	5,083	70,354	198,134
Cost of sales and services		(3,352)	(52,216)	(170,172)
Gross profit		1,731	18,138	27,962
Other operating income	7	709	2,398	6,817
Distribution costs		(6,948)	(19,942)	(23,521)
Administrative expenses		(26,597)	(55,775)	(78,522)
Other operating expenses		(5,417)	(5,399)	(55,576)
Impairment loss recognised in respect
of property, plant and equipment		(9,971)	(785)	—
Impairment loss recognised in respect
of long term investments		(3,900)	—	—
Allowance for a loan to Acme Landis Operations
Holdings Limited, a former subsidiary		(3,297)	(42,115)	—
Allowance for doubtful debts		(1,155)	(6,082)	—
Allowance for amounts due from associates		(317)	—	—
Loss from operations	9	(55,162)	(109,562)	(122,840)
Loss on disposal of subsidiaries/discontinued
operations	31	(539)	(4,615)	—
Finance costs	10	(1,960)	(37)	(458)
Share of results of an associate		(4)	(13,991)	4,014
Impairment loss recognised in respect of
goodwill of an associate		—	(48,807)	—
Allowance for loans to an associate		—	(14,216)	—
Share of results of jointly controlled entities		(72)	(65)	(15)
Loss before taxation		(57,737)	(191,293)	(119,299)
Taxation	12	—	309	570
Loss before minority interests		(57,737)	(190,984)	(118,729)
Minority interests		—	(440)	269
Net loss for the period/year		(57,737)	(191,424)	(118,460)
Basic loss per share	13	HK$(0.97)	HK$(4.98)	HK$(3.26)*

The basic loss per share as stated above has been adjusted for the effect of the consolidation of shares in September 2003 and rights issue of shares in September 2003 and March 2004, details of which are set out in the respective circulars.

— 25 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

NOTES 31.3.2004 31.12.2002 31.12.2001 HK$’000 HK$’000 HK$’000 Non-current assets Property, plant and equipment 15 665 5,999 30,028 Goodwill 16 — 388 — Investment properties — — 3,980 Interests in associates 18 — — 13,584 Interests in jointly controlled entities 19 — 1,253 1,318 Long term investments 20 — 3,900 5,699 Loan to Acme Landis Operations Holdings Limited 21 403 3,700 — 1,068 15,240 54,609 Current assets Construction contracts — — 13,825 Loans to an associate — — 9,823 Tax recoverable — — 277 Inventories, at cost — 137 23,231 Trade and other receivables 22 1,935 2,669 32,597 Bank balances and cash 66,131 1,822 32,762 68,066 4,628 112,515 Current liabilities Trade and other payables 23 7,069 6,915 35,116 Amounts due to jointly controlled entities 24 — 1,234 — Other loan, secured 25 4,000 — — Interest-bearing bank loans — — 4,326 11,069 8,149 39,442 Net current assets (liabilities) 56,997 (3,521) 73,073 58,065 11,719 127,682 Capital and reserves Share capital 26 35,701 110,187 100,187 Reserves 22,155 (98,468) 26,666 57,856 11,719 126,853 Minority interests 209 — 829 58,065 11,719 127,682	NOTES 31.3.2004 31.12.2002 31.12.2001 HK$’000 HK$’000 HK$’000 Non-current assets Property, plant and equipment 15 665 5,999 30,028 Goodwill 16 — 388 — Investment properties — — 3,980 Interests in associates 18 — — 13,584 Interests in jointly controlled entities 19 — 1,253 1,318 Long term investments 20 — 3,900 5,699 Loan to Acme Landis Operations Holdings Limited 21 403 3,700 — 1,068 15,240 54,609 Current assets Construction contracts — — 13,825 Loans to an associate — — 9,823 Tax recoverable — — 277 Inventories, at cost — 137 23,231 Trade and other receivables 22 1,935 2,669 32,597 Bank balances and cash 66,131 1,822 32,762 68,066 4,628 112,515 Current liabilities Trade and other payables 23 7,069 6,915 35,116 Amounts due to jointly controlled entities 24 — 1,234 — Other loan, secured 25 4,000 — — Interest-bearing bank loans — — 4,326 11,069 8,149 39,442 Net current assets (liabilities) 56,997 (3,521) 73,073 58,065 11,719 127,682 Capital and reserves Share capital 26 35,701 110,187 100,187 Reserves 22,155 (98,468) 26,666 57,856 11,719 126,853 Minority interests 209 — 829 58,065 11,719 127,682	NOTES 31.3.2004 31.12.2002 31.12.2001 HK$’000 HK$’000 HK$’000 Non-current assets Property, plant and equipment 15 665 5,999 30,028 Goodwill 16 — 388 — Investment properties — — 3,980 Interests in associates 18 — — 13,584 Interests in jointly controlled entities 19 — 1,253 1,318 Long term investments 20 — 3,900 5,699 Loan to Acme Landis Operations Holdings Limited 21 403 3,700 — 1,068 15,240 54,609 Current assets Construction contracts — — 13,825 Loans to an associate — — 9,823 Tax recoverable — — 277 Inventories, at cost — 137 23,231 Trade and other receivables 22 1,935 2,669 32,597 Bank balances and cash 66,131 1,822 32,762 68,066 4,628 112,515 Current liabilities Trade and other payables 23 7,069 6,915 35,116 Amounts due to jointly controlled entities 24 — 1,234 — Other loan, secured 25 4,000 — — Interest-bearing bank loans — — 4,326 11,069 8,149 39,442 Net current assets (liabilities) 56,997 (3,521) 73,073 58,065 11,719 127,682 Capital and reserves Share capital 26 35,701 110,187 100,187 Reserves 22,155 (98,468) 26,666 57,856 11,719 126,853 Minority interests 209 — 829 58,065 11,719 127,682
1,068 — — — — 1,935 66,131 68,066 7,069 — 4,000 — 11,069 56,997	15,240 — — — 137 2,669 1,822 4,628 6,915 1,234 — — 8,149 (3,521)	54,609
		13,825 9,823 277 23,231 32,597 32,762
		112,515
		35,116 — — 4,326
		39,442
		73,073
58,065	11,719	127,682
35,701 22,155 57,856 209	110,187 (98,468) 11,719 —	100,187 26,666
		126,853 829
58,065	11,719	127,682

— 26 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

BALANCE SHEET

	NOTES	31.3.2004	31.12.2002
		HK$’000	HK$’000
Non-current assets
Interests in subsidiaries	17	2,116	2,136
Interests in associates	18	—	—
Loan to Acme Landis Operations Holdings Limited	21	—	3,700
		2,116	5,836
Current assets
Other receivables		109	73
Bank balances and cash		65,856	698
		65,965	771
Current liabilities
Other payables		1,322	1,235
Net current assets (liabilities)		64,643	(464)
		66,759	5,372
Capital and reserves
Share capital	26	35,701	110,187
Reserves	28	27,942	(106,165)
		63,643	4,022
Non-current liabilities
Amounts due to subsidiaries	29	3,116	1,350
		66,759	5,372

— 27 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Share capital HK$’000 100,187	Share premium Capital reserve HK$’000 HK$’000 (note 28) 237,549 —	Share premium Capital reserve HK$’000 HK$’000 (note 28) 237,549 —	Contributed surplus HK$’000 (note 28) —	Leasehold land and buildings revaluation reserve HK$’000 2,634	Investment property revaluation reserve Goodwill reserve Exchange reserve Accumulated losses HK$’000 HK$’000 HK$’000 HK$’000 7,324 (48,780) (80) (171,981)	Investment property revaluation reserve Goodwill reserve Exchange reserve Accumulated losses HK$’000 HK$’000 HK$’000 HK$’000 7,324 (48,780) (80) (171,981)	Investment property revaluation reserve Goodwill reserve Exchange reserve Accumulated losses HK$’000 HK$’000 HK$’000 HK$’000 7,324 (48,780) (80) (171,981)
— — —	— — — — 237,549 20,000 (2,519) — — 255,030 52,890 8,454 (255,030) — — —	— — —	— — —		— 66 — — (27) — (27) 66 (48,807) (14) — — — — 48,807 — — — — (14) — — — — — — — — — (2) — —	— — 9,921	66 (37 (27
—		—	—			9,921	2
100,187 10,000 — — —		— — — — —	— — — — —	— — — — —		(162,060) — — — (191,424)	126,855 30,000 (2,519 48,807 (191,424
110,187 35,260 7,272 (117,018) — — —		— — — 17,850 — — —				(353,484) — — — 353,484 — (57,737)	11,719 88,150 15,726 — — (2 (57,737

— 28 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

	1.1.2003 to	1.1.2002 to
	31.3.2004	31.12.2002
	HK$’000	HK$’000
Cash flows from operating activities
Loss before taxation	(57,737)	(191,293)
Adjustments for:
Share of results of an associate	4	13,991
Share of results of jointly controlled entities	72	65
Interest income	(70)	(1,624)
Interest expense	1,960	37
Depreciation	6,495	9,165
Amortisation of goodwill	—	97
Loss on disposal of subsidiaries/discontinued operations	539	4,615
Allowance for a loan to Acme Landis Operations
Holdings Limited, a former subsidiary	3,297	42,115
Allowance for doubtful debts	1,155	6,082
Allowance for amounts due from associates	317	—
Allowance for loans to an associate	—	14,216
Deficit arising on revaluation of investment properties	—	350
Deficit arising on revaluation of leasehold land and buildings	—	158
Loss on disposal of property, plant and equipment	379	410
Loss on waiver of amount due from a minority
shareholder of a subsidiary	117	—
Loss on waiver of loan to a jointly controlled entity	7	—
Impairment loss recognised in respect of property,
plant and equipment	9,971	785
Impairment loss recognised in respect of long term investments	3,900	—
Impairment loss recognised in respect of goodwill of
subsidiaries	492	—
Impairment loss recognised in respect of goodwill of an
associate	—	48,807
Operating cash outflows before movements in working capital	(29,102)	(52,024)
Decrease in inventories	137	2,410
Increase in trade and other receivables	(864)	(3,702)
Increase in trade and other payables	132	2,187
Cash used in operations	(29,697)	(51,129)
Interest paid	(1,534)	(37)
Hong Kong Profits Tax refunded	—	(77)
Net cash used in operating activities	(31,231)	(51,243)

— 29 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

		1.1.2003 to	1.1.2002 to
	NOTES	31.3.2004	31.12.2002
		HK$’000	HK$’000
Cash flows from investing activities
Interest received		70	1,624
Proceeds from disposal of property, plant and equipment		227	7
Purchase of property, plant and equipment		(12,125)	(4,476)
Advances from jointly controlled entities		—	1,234
Investment in an associate		(4)	—
Advances to associates		(317)	(4,394)
Acquisition of a subsidiary/subsidiaries, net of cash and
cash equivalents acquired	30	(72)	(103)
Disposal of subsidiaries/discontinued operations net of
cash and cash equivalents disposal of	31	(115)	(4,894)
Net cash used in investing activities		(12,336)	(11,002)
Cash flows from financing activities
Proceeds from issue of new shares		103,876	27,481
Bank loans raised		—	4,424
Other borrowings raised		34,270	—
Repayment of bank loans		—	(600)
Repayment of other borrowings		(30,270)	—
Net cash from financing activities		107,876	31,305
Net increase (decrease) in cash and cash equivalents		64,309	(30,940)
Cash and cash equivalents at beginning of the period/year		1,822	32,762
Cash and cash equivalents at end of the period/year,
represented by bank balances and cash		66,131	1,822

— 30 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

NOTES TO THE FINANCIAL STATEMENTS

For the fifteen months ended 31 March 2004

1. GENERAL

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

The Company is an investment holding company. Its subsidiaries are principally engaged in wireless communication business, communication solutions consultancy services and Internet operations.

On 24 January 2003, a sale and purchase agreement was entered into between Asia Pacific Growth Fund III, L.P., i100 Capital Corporation, i100 Holdings Corporation, Landmark Profits Limited (a wholly-owned subsidiary of Easyknit International Holdings Limited (“Easyknit”)) and Easyknit, pursuant to which Landmark Profits Limited agreed to purchase 609,000,000 shares of the Company of HK$0.10 each. The completion of the above agreement took place on 28 January 2003 and the Company became a subsidiary of Easyknit. Easyknit is a company incorporated in Bermuda, whose shares are listed on the Stock Exchange and the Singapore Exchange Securities Trading Limited. Details of the above are set out, inter alia, in the announcement of the Company dated 6 February 2003.

As a result of two private placements of shares of the Company on 17 November 2003 and 22 December 2003, Easyknit’s shareholding in the Company was reduced to approximately 35.9%.

2. CHANGE OF FINANCIAL YEAR-END DATE

On 1 September 2003, the board of directors of the Company resolved to change the financial year-end date of the Company from 31 December to 31 March to align the financial year-end date with that of Easyknit. The financial statements therefore cover a fifteen month period from 1 January 2003 to 31 March 2004. The corresponding amounts shown for the consolidated income statement, consolidated statement of changes in equity, consolidated cash flow statement and related notes cover a twelve month period from 1 January 2002 to 31 December 2002 and therefore may not be comparable with amounts shown for the current period.

3. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS

In the current period, the Group has adopted, for the first time, the Hong Kong Financial Reporting Standards (“HKFRS”) - Statement of Standard Accounting Practice (“SSAP”) 12 (Revised) issued by the Hong Kong Society of Accountants (“HKSA”). The term of HKFRS is inclusive of SSAPs and Interpretations approved by the HKSA.

The principal effect of the implementation of SSAP 12 (Revised) is in relation to deferred tax. SSAP 12 (Revised) requires the adoption of a balance sheet liability method, whereby deferred tax is recognised in respect of all temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, with limited exceptions. The adoption of SSAP 12 (Revised) has no material effect on the results for the current or prior accounting periods. Accordingly, no prior period adjustment has been required.

— 31 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

4. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared under the historical cost convention and have been prepared in accordance with accounting principles generally accepted in Hong Kong. The principal accounting policies adopted are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to the balance sheet date.

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

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

Goodwill

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

Goodwill arising on acquisitions prior to 1 January 2001 continues to be held in reserves, and will be charged to the income statement at the time of disposal of the relevant subsidiary, associate or jointly controlled entity, or at such time as the goodwill is determined to be impaired.

Goodwill arising on acquisitions since 1 January 2001 is capitalised and amortised on a straight line basis over its useful economic life. Goodwill arising on the acquisition of an associate or jointly controlled entity is included within the carrying amount of the associate or jointly controlled entity. Goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet as a separate intangible asset.

Negative goodwill

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

Negative goodwill arising on acquisitions prior to 1 January 2001 continues to be held in reserves, and will be credited to income at the time of disposal of the relevant subsidiary, associate or jointly controlled entity.

Negative goodwill arising on acquisitions since 1 January 2001 is presented as deduction from assets. To the extent that such negative goodwill is attributable to losses or expenses anticipated at the date of acquisition, it is released to income in the period in which those losses or expenses arise. The remaining negative goodwill is recognised as income on a straight line basis over the remaining average useful life of the identifiable acquired depreciable assets. To the extent that such negative goodwill exceeds the aggregate fair value of the acquired identifiable non-monetary assets, it is recognised as income immediately.

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

— 32 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Investments in subsidiaries

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

Interests in associates

The consolidated income statement includes the Group’s share of the post-acquisition results of its associates for the period/year. In the consolidated balance sheet, interests in associates are stated at the Group’s share of the net assets of the associates plus the goodwill in so far as it has not already been amortised, less any identified impairment loss.

The results of associates are accounted for by the Company on the basis of dividends received and receivable during the period/year. In the Company’s balance sheet, investments in associates are stated at cost, as reduced by any identified impairment loss.

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 plus the goodwill in so far as it has not already been amortised, less any identified impairment loss. The Group’s share of the post-acquisition results of its jointly controlled entities is included in the consolidated income statement.

Revenue recognition

Telecommunications revenue for services provided for fixed periods is recognised on a straight line basis over the respective periods. Other telecommunications revenue is recognised when products are delivered or services are rendered.

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

Revenue from fixed price construction contracts is recognised on the percentage of completion method, measured by reference to the proportion of costs incurred to date to the estimated total cost of the relevant contract. Revenue from cost plus construction contracts is recognised on the percentage of completion method, by reference to the recoverable costs incurred during the period plus the related fee earned, measured by the proportion of costs incurred to date to the estimated total cost of the relevant contract.

Commission income is recognised when services are provided.

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

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

Rental income is recognised on a straight line basis over the lease terms.

— 33 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Impairment

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

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

Property, plant and equipment

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

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

Furniture, fixtures and equipment 20% - 33[1] ⁄3% Motor vehicles 20%

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

Investments in securities

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

At subsequent reporting dates, debt securities that the Group intends to hold to maturity, which are held-to-maturity debt securities, are measured at amortised cost less any identified impairment losses. Any discount or premium on the acquisition of a held-to-maturity debt security is aggregated with other investment income receivable over the term of the instrument so that the revenue recognised in each period represents a constant yield on the investment.

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

Investment securities, which are securities held for an identified long-term strategic purpose, are measured at subsequent reporting dates at cost less any identified impairment losses.

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

Construction contracts

When the outcome of a construction contract can be estimated reliably, contract costs are charged to the income statement by reference to the stage of completion of the contract activity at the balance sheet date, as measured by the proportion that costs incurred to date bear to estimated total costs for the contract.

When the outcome of a construction contract cannot be estimated reliably, contract costs are recognised as an expense in the period in which they are incurred.

— 34 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out method.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period/year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes income statement items that are never taxable or deductible.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Foreign currencies

Transactions in foreign currencies are translated at the rates ruling on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are re-translated at the rates ruling on the balance sheet date. Gains and losses arising on exchange are included in the income statement.

On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are classified as equity and transferred to the Group’s exchange reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of.

Operating leases

Rentals payable under operating leases are charged to the income statement on a straight line basis over the relevant lease term.

— 35 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Retirement benefits costs

The amount of the Group’s contributions payable under the Group’s retirement benefits schemes is charged to the income statement as and when incurred.

5. TURNOVER

Turnover represents the aggregate of the amounts received and receivable for goods sold, net of returns, and services rendered by the Group during the period/year. An analysis of the Group’s turnover is as follows:

1.1.2003 to 31.3.2004 1.1.2002 to 31.12.2002 HK$’000 HK$’000 Continuing operations: Wireless communication services 3,982 953 Communication solutions consultancy services 1,101 1,131 5,083 2,084 Discontinued operations: Sales of sanitary fixtures and fittings — 38,860 Sales of hardware, industrial and consumer products — 20,258 Drainage, plumbing and engineering contracting services — 9,152 — 68,270 5,083 70,354	1.1.2003 to 31.3.2004 1.1.2002 to 31.12.2002 HK$’000 HK$’000 Continuing operations: Wireless communication services 3,982 953 Communication solutions consultancy services 1,101 1,131 5,083 2,084 Discontinued operations: Sales of sanitary fixtures and fittings — 38,860 Sales of hardware, industrial and consumer products — 20,258 Drainage, plumbing and engineering contracting services — 9,152 — 68,270 5,083 70,354	1.1.2003 to 31.3.2004 1.1.2002 to 31.12.2002 HK$’000 HK$’000 Continuing operations: Wireless communication services 3,982 953 Communication solutions consultancy services 1,101 1,131 5,083 2,084 Discontinued operations: Sales of sanitary fixtures and fittings — 38,860 Sales of hardware, industrial and consumer products — 20,258 Drainage, plumbing and engineering contracting services — 9,152 — 68,270 5,083 70,354
	5,083 — — — —	2,084
		38,860 20,258 9,152
		68,270
	5,083	70,354

— 36 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

6. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

For management purposes, the Group is currently organised into three main operating divisions - wireless communication business, communication solutions consultancy services and Internet operations. These divisions are the bases on which the Group reports its primary segment information.

Segment information about these businesses is presented below:

For the fifteen months ended 31 March 2004

(i) Income statement

Continuing operations:
Wireless communication business
Communication solutions consultancy services
Internet operations
Segment result
Interest income
Allowance for amounts due from associates (note)
Unallocated corporate expenses
Loss from operations
Loss on disposal of subsidiaries
Finance costs
Share of results of an associate
Share of results of jointly controlled entities
Net loss for the period

Turnover
Segment result
Consolidated
HK$’000
HK$’000
HK$’000
3,982
(31,873)
1,101
(2,856)
—
(304)
5,083
(35,033)
(35,033)
70
(317)
(19,882)
(55,162)
(539)
(1,960)
(4)
(72)
(57,737)

Note: The amount is related to the segment of wireless communication business.

— 37 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(ii) Balance sheet

		Communication
	Wireless	solutions
	communication	consultancy	Internet
	business	services	operations	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000
ASSETS
Segment assets	76	59	2	137
Unallocated corporate assets				68,997
Consolidated total assets				69,134
LIABILITIES
Segment liabilities	3,189	558	80	3,827
Unallocated corporate liabilities				7,242
Consolidated total liabilities				11,069

(iii) Other information

		Communication
	Wireless	solutions
	communication	consultancy	Internet
	business	services	operations	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000
Capital additions	12,125	—	—	12,125
Depreciation	5,863	434	198	6,495
Impairment loss in respect of property, plant
and equipment	9,971	—	—	9,971
Impairment loss in respect of long term
investments	3,900	—	—	3,900
Allowance for doubtful debts	1,045	110	—	1,155
Allowance for amounts due from associates	317	—	—	317
Impairment loss in respect of goodwill of
subsidiaries	104	388	—	492
Loss (gain) on disposal of property, plant and
equipment	323	58	(2)	379

In addition, allowance for a loan to Acme Landis Operations Holdings Limited, a former subsidiary of the Company, amounting to HK$3,297,000 charged to the consolidated income statement is related to the segments of sanitary fixtures and fittings, hardware, industrial and consumer products, and drainage, plumbing and engineering contracting services.

— 38 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

For the year ended 31 December 2002

(i) Income statement

Continuing operations: Wireless communication business Communication solutions consultancy services Internet operations Discontinued operations: Sanitary fixtures and fittings Hardware, industrial and consumer products Drainage, plumbing and engineering contracting services Eliminations Segment result Interest income Allowance for a loan to Acme Landis Operations Holdings Limited, a former subsidiary (note a) Unallocated corporate expenses Loss from operations Loss on disposal of discontinued operations Finance costs Share of results of an associate Impairment loss recognised in respect of goodwill of an associate Allowance for loans to an associate Share of results of jointly controlled entities (note b) Loss before taxation Taxation Loss before minority interests Minority interests Net loss for the year	External HK$’000 953 1,131 — 38,860 20,258 9,152 70,354 — 70,354	Turnover Inter- segment HK$’000 — 480 — 26 — — 506 (506) —	Total HK$’000 953 1,611 — 38,886 20,258 9,152 70,860 (506) 70,354	Segment result Consolidated HK$’000 HK$’000 (29,704) (4,122) (598) 443 (926) (1,907) (36,814) (180) (36,994) (36,994) 1,624 (42,115) (32,077) (109,562) (4,615) (37) (13,991) (48,807) (14,216) (65) (191,293) 309 (190,984) (440) (191,424)	Segment result Consolidated HK$’000 HK$’000 (29,704) (4,122) (598) 443 (926) (1,907) (36,814) (180) (36,994) (36,994) 1,624 (42,115) (32,077) (109,562) (4,615) (37) (13,991) (48,807) (14,216) (65) (191,293) 309 (190,984) (440) (191,424)
					(36,994 1,624 (42,115 (32,077
					(109,562 (4,615 (37 (13,991 (48,807 (14,216 (65
					(191,293 309
					(190,984 (440

— 39 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Inter-segment sales are charged at prevailing market prices.

Notes:

(a) The amount is related to the segments of sanitary fixtures and fittings, hardware, industrial and consumer products, and drainage, plumbing and engineering contracting services.
(b) The amount is related to the segment of wireless communication business.
(ii) Balance sheet

		Communication
	Wireless	solutions
	communication	consultancy	Internet
	business	services	operations	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000
ASSETS
Segment assets	4,696	1,980	342	7,018
Interests in jointly controlled entities	1,253	—	—	1,253
Unallocated corporate assets				11,597
Consolidated total assets				19,868
LIABILITIES
Segment liabilities	3,207	2,035	88	5,330
Unallocated corporate liabilities				2,819
Consolidated total liabilities				8,149

— 40 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(iii) Other information

		Continuing operations	Continuing operations	Discontinued operations	Discontinued operations	Discontinued operations
						Drainage,
	Communication				Hardware,	plumbing and
	Wireless	solutions		Sanitary	industrial and	engineering
	communication	consultancy	Internet	fixtures and	consumer	contracting
	business	services	operations	fittings	products	services	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Amortisation of
goodwill	—	97	—	—	—	—	97
Capital additions	3,550	107	20	809	95	—	4,581
Depreciation	6,973	613	512	819	244	4	9,165
Impairment loss in
respect of property,
plant and
equipment	785	—	—	—	—	—	785
Allowance (write back
of allowance) for
doubtful debts	7,224	747	—	(2,032)	143	—	6,082
Deficit arising on
revaluation of
investment
properties	—	—	—	—	350	—	350
Deficit arising on
revaluation of
leasehold land and
buildings	—	—	—	158	—	—	158
Deficit on revaluation
recognised directly
in equity	—	—	—	—	37	—	37
Loss on disposal of
property, plant and
equipment	—	340	—	70	—	—	410

In addition, allowance for a loan to Acme Landis Operations Holdings Limited, a former subsidiary of the Company, amounting to HK$42,115,000 charged to the consolidated income statement is related to the segments of sanitary fixtures and fittings, hardware, industrial and consumer products, and drainage, plumbing and engineering contracting services.

— 41 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Geographical segments

An analysis of the Group’s turnover by geographical market for the period/year is as follows:

	1.1.2003 to	1.1.2002 to
	31.3.2004	31.12.2002
	HK$’000	HK$’000
Hong Kong	5,083	64,797
The People’s Republic of China, excluding Hong Kong (the “PRC”)	—	5,557
	5,083	70,354

An analysis of the carrying amount of segment assets and additions to property, plant and equipment, analysed by the geographical area in which the assets are located is as follows:

Hong Kong PRC	Carrying amount of segment assets Additions to property, plant and equipment 31.3.2004 31.12.2002 1.1.2003 to 31.3.2004 1.1.2002 to 31.12.2002 HK$’000 HK$’000 HK$’000 HK$’000 67,425 13,973 12,125 4,475 1,709 5,895 — 106 69,134 19,868 12,125 4,581	Carrying amount of segment assets Additions to property, plant and equipment 31.3.2004 31.12.2002 1.1.2003 to 31.3.2004 1.1.2002 to 31.12.2002 HK$’000 HK$’000 HK$’000 HK$’000 67,425 13,973 12,125 4,475 1,709 5,895 — 106 69,134 19,868 12,125 4,581
		4,581

7. OTHER OPERATING INCOME

An analysis of the Group’s other operating income is as follows:

	1.1.2003 to	1.1.2002 to
	31.3.2004	31.12.2002
	HK$’000	HK$’000
Commission income	471	—
Interest income	70	1,624
Rental income	—	251
Others	168	523
	709	2,398

— 42 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

8. DISCONTINUED OPERATIONS

(a) On 4 May 2002, Acme Sanitary Ware Company, Limited (“ASW”), a former indirectly wholly-owned subsidiary of the Company, entered into a sale and purchase agreement with an independent third party for the disposal of ASW’s entire equity interest in Acme Sanitary Engineering Limited (“ASE”) at a consideration of HK$2. This transaction was completed in year 2002, upon which the Group’s business of the provision of drainage, plumbing and engineering contracting services was discontinued.
(b) On 29 May 2002, the Company entered into a share acquisition agreement with an independent third party for the disposal of the Group’s entire equity interest in Acme Landis Operations Holdings Limited (“ALOH”) at a consideration of HK$1. This transaction was completed in year 2002 upon which ALOH ceased to be a subsidiary of the Company and the Group’s businesses relating to the distribution of sanitary fixtures and fittings, and a range of hardware, industrial and consumer products were discontinued.

The results of the discontinued operations for year 2002 were as follows:

Sanitary fixtures and fittings Hardware, industrial and consumer products Drainage, plumbing and engineering contracting services Eliminations HK$’000 HK$’000 HK$’000 HK$’000 Turnover 38,886 20,258 9,152 (26) Cost of sales and services (26,612) (14,308) (9,380) 26 Gross profit 12,274 5,950 (228) Other operating income 1,326 513 — (355) Distribution costs (4,353) (1,622) — 71 Administrative expenses (9,623) (5,117) (1,679) 13 Other operating expenses 1,659 (506) — — Profit (loss) from operations 1,283 (782) (1,907) Loss on disposal of subsidiaries (6,355) — — — Finance costs (171) (9) (127) 271 Loss before taxation (5,243) (791) (2,034) Taxation (29) (1) — — Loss before minority interests (5,272) (792) (2,034) Minority interests (443) — — — Net loss for the year (5,715) (792) (2,034)	Sanitary fixtures and fittings Hardware, industrial and consumer products Drainage, plumbing and engineering contracting services Eliminations HK$’000 HK$’000 HK$’000 HK$’000 Turnover 38,886 20,258 9,152 (26) Cost of sales and services (26,612) (14,308) (9,380) 26 Gross profit 12,274 5,950 (228) Other operating income 1,326 513 — (355) Distribution costs (4,353) (1,622) — 71 Administrative expenses (9,623) (5,117) (1,679) 13 Other operating expenses 1,659 (506) — — Profit (loss) from operations 1,283 (782) (1,907) Loss on disposal of subsidiaries (6,355) — — — Finance costs (171) (9) (127) 271 Loss before taxation (5,243) (791) (2,034) Taxation (29) (1) — — Loss before minority interests (5,272) (792) (2,034) Minority interests (443) — — — Net loss for the year (5,715) (792) (2,034)	Sanitary fixtures and fittings Hardware, industrial and consumer products Drainage, plumbing and engineering contracting services Eliminations HK$’000 HK$’000 HK$’000 HK$’000 Turnover 38,886 20,258 9,152 (26) Cost of sales and services (26,612) (14,308) (9,380) 26 Gross profit 12,274 5,950 (228) Other operating income 1,326 513 — (355) Distribution costs (4,353) (1,622) — 71 Administrative expenses (9,623) (5,117) (1,679) 13 Other operating expenses 1,659 (506) — — Profit (loss) from operations 1,283 (782) (1,907) Loss on disposal of subsidiaries (6,355) — — — Finance costs (171) (9) (127) 271 Loss before taxation (5,243) (791) (2,034) Taxation (29) (1) — — Loss before minority interests (5,272) (792) (2,034) Minority interests (443) — — — Net loss for the year (5,715) (792) (2,034)	Total HK$’000 68,270 (50,274) 17,996 1,484 (5,904) (16,406) 1,153 (1,677) (6,355) (36) (8,068) (30) (8,098) (443) (8,541)
12,274 1,326 (4,353) (9,623) 1,659 1,283 (6,355) (171) (5,243) (29) (5,272) (443)	5,950 513 (1,622) (5,117) (506) (782) — (9) (791) (1) (792) —	(228) — (355) — 71 (1,679) 13 — — (1,907) — — (127) 271 (2,034) — — (2,034) — —	17,996 1,484 (5,904 (16,406 1,153
			(1,677 (6,355 (36
			(8,068 (30
			(8,098 (443
(5,715)	(792)	(2,034)

Note: The results covered a period from 1 January 2002 to the date of disposal of the discontinued operations.

The carrying amounts of the assets and liabilities of the discontinued operations at the date of disposal in year 2002 are set out in note 31.

— 43 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The net cash flows of the discontinued operations attributable to the Group in year 2002 were as follows:

			Hardware,	Drainage,
			industrial	plumbing and
		Sanitary	and	engineering
	fixtures and		consumer	contracting
		fittings	products	services		Eliminations	Total
		HK$’000	HK$’000	HK$’000		HK$’000	HK$’000
Net cash used in operating activities		(1,414)	(871)	(3,049)		271	(5,063)
Net cash from investing activities		988	49	—		—	1,037
Net cash from financing activities		2,176	445	—		(271)	2,350
Net cash inflow (outflow)		1,750	(377)	(3,049)		—	1,676
LOSS FROM OPERATIONS
					1.1.2003 to		1.1.2002 to
						31.3.2004	31.12.2002
						HK$’000	HK$’000
Loss from operations has been arrived	at after charging:
Directors’ remuneration (note 11(a))						868	6,657
Other staff costs, including retirement	benefits costs					11,869	32,922
Total staff costs						12,737	39,579
Amortisation of goodwill (note)						—	97
Auditors’ remuneration						350	1,000
Cost of inventories recognised as an expense						378	40,765
Deficit arising on revaluation of investment properties						—	350
Deficit arising on revaluation of leasehold land and buildings						—	158
Depreciation						6,495	9,165
Impairment loss recognised in respect of goodwill of
subsidiaries (note)						492	—
Loss on disposal of property, plant and equipment						379	410
Loss on waiver of amount due from a	minority shareholder of
a subsidiary (note)						117	—
Loss on waiver of loan to a jointly controlled entity (note)						7	—

9. LOSS FROM OPERATIONS

Note: The amounts are included in other operating expenses.

— 44 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

10. FINANCE COSTS

			1.1.2003 to	1.1.2002	to
			31.3.2004	31.12.2002
			HK$’000	HK$’000
	Interest on borrowings wholly repayable within five years:
		— Easyknit Loan (see note 14(a))	1,515		—
		— bank borrowings	—		37
		— other borrowings	445		—
			1,960		37
11.	DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS
	(a)	Information regarding directors’ emoluments
			1.1.2003 to	1.1.2002	to
			31.3.2004	31.12.2002
			HK$’000	HK$’000
		Directors’ fees:
		Executive	—		—
		Independent non-executive	200		—
			200		—
		Other emoluments paid to executive directors:
		Salaries and other benefits	664	6,593
		Retirement benefits costs	4		64
			668	6,657
		Total directors’ emoluments	868	6,657
		The emoluments of the directors fall within the following bands:
			Number of directors
			1.1.2003 to	1.1.2002	to
			31.3.2004	31.12.2002
		Nil to HK$1,000,000	15		8
		HK$2,000,001 to HK$2,500,000	—		2
			15		10

— 45 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(b) Information regarding employees’ emoluments

The five highest paid individuals of the Group included one director (1.1.2002 to 31.12.2002: two directors). The emoluments of the remaining four (1.1.2002 to 31.12.2002: three) highest paid individuals, not being directors, are as follows:

	1.1.2003 to	1.1.2002 to
	31.3.2004	31.12.2002
	HK$’000	HK$’000
Salaries and other benefits	4,028	4,773
Retirement benefits costs	62	35
Severance payments	37	—
Total employees’ emoluments	4,127	4,808

Their emoluments were within the following bands:

	Number of employees	Number of employees
	1.1.2003 to	1.1.2002	to
	31.3.2004	31.12.2002
Nil to HK$1,000,000	3		1
HK$1,000,001 to HK$1,500,000	1		1
HK$2,000,001 to HK$3,000,000	—		1
	4		3

During the period/year, 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 in office.

No director waived any emoluments in the fifteen months ended 31 March 2004. For the year ended 31 December 2002, two directors waived portion of their emoluments totalling HK$450,000.

— 46 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

12. TAXATION

	1.1.2003 to	1.1.2002 to
	31.3.2004	31.12.2002
	HK$’000	HK$’000
The amount comprises:
Taxation (credit) charge attributable to the Company and its subsidiaries
Hong Kong Profits Tax	—	189
Overprovision in prior years	—	(159)
	—	30
Share of taxation of an associate	—	(339)
	—	(309)

No provision for Hong Kong Profits Tax has been made as the Company and its subsidiaries had no assessable profit for the fifteen months ended 31 March 2004.

Hong Kong Profits Tax for the year ended 31 December 2002 was calculated at 16% of the estimated assessable profit for that year.

The tax credit for the period/year can be reconciled to the results per the consolidated income statement as follows:

	1.1.2003 to	1.1.2002 to
	31.3.2004	31.12.2002
	HK$’000	HK$’000
Loss before taxation	(57,737)	(191,293)
Tax credit of Hong Kong Profits Tax at 17.5% (1.1.2002 to 31.12.2002: 16%)	(10,104)	(30,607)
Tax effect of share of results of associates	1	1,899
Tax effect of share of results of jointly controlled entities	13	11
Tax effect of income not taxable for tax purpose	(22)	(45)
Tax effect of expenses not deductible for tax purpose	3,575	20,553
Tax effect of tax losses not recognised	5,929	7,999
Overprovision in prior years	—	(159)
Others	608	40
Tax credit for the period/year	—	(309)

— 47 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

13. LOSS PER SHARE

The calculation of the basic loss per share is based on the following data:

	1.1.2003 to	1.1.2002 to
	31.3.2004	31.12.2002
	HK$’000	HK$’000
Loss for the purposes of basic loss per share	(57,737)	(191,424)
	1.1.2003 to	1.1.2002 to
	31.3.2004	31.12.2002
Number of shares
Weighted average number of shares for the purposes of basic loss per share	59,376,993	38,433,085

The denominator for the purposes of calculating basic loss per share of year 2002 has been adjusted to reflect the consolidation of shares in September 2003 on the basis that forty shares were consolidated into one share and the rights issue of shares in September 2003 and March 2004.

The calculation of diluted loss per share has not been disclosed as the exercise of the Company’s outstanding share options would reduce the loss per share for both accounting periods.

14. RELATED PARTY TRANSACTIONS/CONNECTED TRANSACTIONS

(a) During the period, the Group obtained a loan of HK$30,270,000 from Planetic International Limited (the “Easyknit Loan”), a wholly-owned subsidiary of Easyknit, for working capital purposes. The loan was unsecured, bore interest at prevailing market rates and was repaid in full during the period. Interest paid by the Group during the period amounted to HK$1,514,500.
(b) The Group also had the following transactions with related parties in which certain former directors of the Company have beneficial interests:

		1.1.2003 to	1.1.2002 to
	Notes	31.3.2004	31.12.2002
		HK$’000	HK$’000
Office rental expenses paid to Avon Limited	(i)	—	1,282
Warehouse rental expenses paid to:	(ii)
Come Trend Limited		—	200
Chung Yuen Electrical Company Limited		—	200
Warehouse rental income received from Chung Yuen
Electrical Company Limited	(ii)	—	100

— 48 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes:

(i) The office expenses were calculated by the then directors by reference to open market rentals prevailing at the times when the tenancy agreements were entered into, as confirmed to the Group by a firm of independent professional valuers.
(ii) The warehouse rental income and expenses were determined by the then directors by reference to open market rentals prevailing at the times when the tenancy agreements were entered into.

15. PROPERTY, PLANT AND EQUIPMENT

Furniture, fixtures and equipment HK$’000 THE GROUP COST At 1 January 2003 19,005 Additions 12,125 On disposal of subsidiaries (1,202) Disposals (2,120) At 31 March 2004 27,808 DEPRECIATION AND IMPAIRMENT LOSS At 1 January 2003 13,589 Provided for the period 6,360 Impairment loss recognised in the period 9,971 On disposal of subsidiaries (815) Eliminated on disposals (1,729) At 31 March 2004 27,376 NET BOOK VALUE At 31 March 2004 432 At 31 December 2002 5,416	Motor vehicles HK$’000 968 — — (429)	Total HK$’000 19,973 12,125 (1,202) (2,549) 28,347 13,974 6,495 9,971 (815) (1,943) 27,682 665 5,999
27,808 13,589 6,360 9,971 (815) (1,729) 27,376	539 385 135 — — (214) 306	28,347
		13,974 6,495 9,971 (815 (1,943
		27,682
432 5,416	233 583

During the period, the directors conducted a review of the Group’s operating assets and determined that a number of those assets were impaired, due to the decrease in spending in the mobile communications market in Hong Kong which was contributed by the unfavourable overall economic conditions. Accordingly, an impairment loss of HK$9,971,000 has been recognised in respect of furniture, fixtures and equipment. The impairment loss was recognised based on the recoverable amounts of furniture, fixtures and equipment which were determined by the estimated discounted net future cash flows from these assets. The carrying amounts of the furniture, fixtures and equipment were reduced to the respective recoverable amounts which were estimated using market borrowing rates.

— 49 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

16. GOODWILL

	THE GROUP
	HK$’000
COST
At 1 January 2003	485
Arising on acquisition of a subsidiary	104
At 31 March 2004	589
AMORTISATION AND IMPAIRMENT LOSS
At 1 January 2003	97
Impairment loss recognised in the period	492
At 31 March 2004	589
CARRYING AMOUNT
At 31 March 2004	—
At 31 December 2002	388

Goodwill is amortised over five years.

Impairment loss was recognised based on the recoverable amounts of the subsidiaries acquired which were determined by the estimated discounted net future cash flows from these subsidiaries using market borrowing rates. The carrying amount of the goodwill was fully impaired in the fifteen months ended 31 March 2004.

17. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Less: Impairment loss recognised Amounts due from subsidiaries	THE COMPANY 31.3.2004 31.12.2002 HK$’000 HK$’000 334,470 304,200 (334,470) (304,200	THE COMPANY 31.3.2004 31.12.2002 HK$’000 HK$’000 334,470 304,200 (334,470) (304,200
	— 2,116	— 2,136
	2,116	2,136

— 50 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The amounts due from subsidiaries are unsecured, non-interest bearing and have no fixed repayment terms. In the opinion of the directors, repayment of the amounts will not be demanded by the Company within the twelve months from the balance sheet date. Accordingly, the amounts are shown as non-current assets in the balance sheet.

Impairment loss was recognised based on the recoverable amounts of subsidiaries which were determined by the estimated discounted net future cash flows from these subsidiaries using market borrowing rates. The carrying amount of the investments in subsidiaries was fully impaired during the fifteen months ended 31 March 2004.

Particulars of the Company’s principal subsidiaries at 31 March 2004 are as follows:

			Proportion of	Proportion of
	Place of	Nominal	nominal value of
	incorporation	value of	issued share capital
Name of subsidiary	and operation	issued share	held by the	Company	Principal activities
			Directly	Indirectly
Copplestone Limited	Cayman Islands/	Ordinary	100%	—	Investment holding
	Hong Kong	US$42,880,770
Castlebright Limited	Hong Kong	Ordinary	—	100%	Provision of
		HK$2			management services
Digital Empires	Hong Kong	Ordinary	—	100%	Provision of computer
Company Limited		HK$100			system consultancy
					services
Good Fine Technology	Hong Kong	Ordinary	—	100%	Wireless communication
Limited		HK$2			business,
					communication
					solutions consultancy
					services and Internet
					operations
i100 Wireless	Hong Kong	Ordinary	—	100%	Wireless data service
(Hong Kong)		HK$2			provider
Limited

The above table lists the subsidiaries of the Company, which, in the opinion of the directors of the Company, principally affected the results of the period or constituted a substantial portion of the assets of the Group. To give details of other subsidiaries would in the opinion of the directors, result in particulars of excessive length.

None of the subsidiaries had issued any debt securities at 31 March 2004.

— 51 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

18. INTERESTS IN ASSOCIATES

Share of net assets Loan to an associate Less: Allowance Loan to an associate Less: Allowance	THE GROUP 31.3.2004 31.12.2002 HK$’000 HK$’000 — — — 14,216 — (14,216) — — THE COMPANY 31.3.2004 31.12.2002 HK$’000 HK$’000 — 12,429 — (12,429) — —	THE GROUP 31.3.2004 31.12.2002 HK$’000 HK$’000 — — — 14,216 — (14,216) — — THE COMPANY 31.3.2004 31.12.2002 HK$’000 HK$’000 — 12,429 — (12,429) — —
		—

The loan to an associate was written off during the fifteen months ended 31 March 2004.

19. INTERESTS IN JOINTLY CONTROLLED ENTITIES

Share of net assets Loan to a jointly controlled entity	THE GROUP 31.3.2004 31.12.2002 HK$’000 HK$’000 — 1,231 — 22 — 1,253	THE GROUP 31.3.2004 31.12.2002 HK$’000 HK$’000 — 1,231 — 22 — 1,253
		1,253

During the period, a jointly controlled entity became a subsidiary of the Company (see note 30) and the remaining one was struck off.

— 52 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

20. LONG TERM INVESTMENTS

Investment securities: Unlisted equity investments, at cost Less: Impairment loss recognised	THE GROUP 31.3.2004 31.12.2002 HK$’000 HK$’000 3,900 3,900 (3,900) — — 3,900	THE GROUP 31.3.2004 31.12.2002 HK$’000 HK$’000 3,900 3,900 (3,900) — — 3,900
		3,900

Impairment loss was recognised based on the recoverable amounts of the long term investments.

21. LOAN TO ACME LANDIS OPERATIONS HOLDINGS LIMITED (“ALOH”)

Loan to ALOH Less: Allowance	THE GROUP 31.3.2004 31.12.2002 HK$’000 HK$’000 45,815 45,815 (45,412) (42,115) 403 3,700	THE COMPANY 31.3.2004 31.12.2002 HK$’000 HK$’000 — 45,815 — (42,115) — 3,700	THE COMPANY 31.3.2004 31.12.2002 HK$’000 HK$’000 — 45,815 — (42,115) — 3,700
			3,700

The loan to ALOH is secured by a pledge given by the purchaser of ALOH in respect of 1,900,000 shares of the Company of HK$0.10 each. The loan is interest-free and the principal of the loan will be reduced upon receipt of repayment from ALOH, or by the amount of the net proceeds of disposal of the secured shares at the prevailing market value, or upon the disposal of the last remaining shares, any principal outstanding will be reduced to zero.

During the fifteen months ended 31 March 2004, the loan to ALOH was assigned by the Company to a subsidiary at the carrying amount of the loan.

— 53 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

22. TRADE AND OTHER RECEIVABLES

The Group allows an average credit period of up to 90 days to its customers. The aged analysis of trade receivables at the balance sheet date, based on invoice date, is as follows:

0 - 30 days 31 - 90 days Over 90 days	THE GROUP 31.3.2004 31.12.2002 HK$’000 HK$’000 — 85 — 133 — 1 — 219	THE GROUP 31.3.2004 31.12.2002 HK$’000 HK$’000 — 85 — 133 — 1 — 219
		219

23. TRADE AND OTHER PAYABLES

The aged analysis of trade payables at the balance sheet date is as follows:

0 - 30 days Over 90 days	THE GROUP 31.3.2004 31.12.2002 HK$’000 HK$’000 — 4 101 689 101 693	THE GROUP 31.3.2004 31.12.2002 HK$’000 HK$’000 — 4 101 689 101 693
		693

24. AMOUNTS DUE TO JOINTLY CONTROLLED ENTITIES

The amounts were unsecured and non-interest bearing.

25. OTHER LOAN, SECURED

During the period, the Group obtained a loan of HK$4,000,000 from an outside party. The loan bears interest at market rates and is repayable on demand. The loan is secured by charges over all issued shares of i100 Wireless Corporation, a wholly-owned subsidiary of the Company.

— 54 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

26. SHARE CAPITAL

		Nominal value	Number
	Notes	per share	of shares	Amount
		HK$		HK$’000
Authorised:
At 1 January 2002 and 31 December 2002		0.10	3,000,000,000	300,000
Effect of the First Reorganisation referred to below	(b)(i)		27,000,000,000	—
		0.01	30,000,000,000	300,000
Effect of the Share Consolidation referred to below	(c)		(29,250,000,000)	—
		0.40	750,000,000	300,000
Effect of the Second Reorganisation referred to below	(g)(i)		2,250,000,000	—
		0.10	3,000,000,000	300,000
Increase of authorised share capital	(g)(iii)		3,500,000,000	350,000
At 31 March 2004		0.10	6,500,000,000	650,000
Issued and fully paid:
At 1 January 2002		0.10	1,001,873,000	100,187
Issue of new shares at a price of HK$0.30 per share	(a)	0.10	100,000,000	10,000
At 31 December 2002		0.10	1,101,873,000	110,187
Reduction of share capital	(b)(ii)		—	(99,168)
		0.01	1,101,873,000	11,019
Effect of the Share Consolidation referred to below	(c)		(1,074,326,175)	—
		0.40	27,546,825	11,019
Rights issue of shares at a price of HK$1.00
per rights share	(d)	0.40	13,773,412	5,509
Issue of new shares by private placements	(e) & (f)	0.40	18,180,903	7,272
		0.40	59,501,140	23,800
Reduction of share capital	(g)(ii)		—	(17,850)
		0.10	59,501,140	5,950
Rights issue of shares at a price of HK$0.25
per rights share	(h)	0.10	297,505,700	29,751
At 31 March 2004		0.10	357,006,840	35,701

— 55 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes:

(a) As announced by the Company on 4 June 2002, i100 Capital Corporation, a then substantial shareholder of the Company, conditionally agreed to place through its placing agents 124,000,000 then existing shares of HK$0.10 each of the Company (the “2002 Placing Shares”) and to subscribe for 100,000,000 new shares of HK$0.10 each in the capital of the Company at a price equal to the price per each 2002 Placing Share (the “2002 Placing Price”) net of all expenses incurred by i100 Capital Corporation. The 2002 Placing Price of HK$0.30 per share represents a discount of approximately 24.1% to the closing price of HK$0.395 per share quoted on the Stock Exchange on 3 June 2002, being the last full trading day of the Company’s shares prior to the date of the announcement.

The placing agents were Sun Hung Kai International Limited, Luen Fat Securities Company Limited and Ever-Long Securities Company Limited. The 2002 Placing Shares were placed to not less than six placees. The placees and the placing agents are independent of, not connected with and not acting in concert with i100 Capital Corporation or its associates (as defined in the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”) ) or its concert parties. They are also independent of, not connected with and not acting in concert with the Company’s then directors, chief executives or substantial shareholders, subsidiaries or any associates (as defined in the Listing Rules) or any of them. The 2002 Placing Shares represented approximately 12.4% of the then existing issued capital of the Company and approximately 11.3% of the Company’s then enlarged capital. The net proceeds from the subscription of approximately HK$27.5 million were used in the development of the wireless data service business and as general working capital.

The placement and the subscription were completed in June 2002. The interest of i100 Capital Corporation, together with parties acting in concert with it and their associates (as defined in the Listing Rules), in the then issued capital of the Company decreased from approximately 60.8% prior to the placement and the subscription to approximately 53.1% immediately after the placement and the subscription.

(b) In February 2003, the Company underwent a capital reorganisation (the “First Reorganisation”). Details of the First Reorganisation are set out in the circular dated 16 January 2003 issued by the Company.

At the special general meeting of the Company held on 7 February 2003, a special resolution approving the First Reorganisation was passed and the following capital reorganisation took effect on 10 February 2003:

(i) unissued shares of HK$0.10 each in the authorised share capital of the Company were subdivided into ten shares of HK$0.01 each;
(ii) nominal value of issued shares in the share capital of the Company was reduced from HK$0.10 each to HK$0.01 each (the “First Capital Reduction”);
(iii) the entire amount of HK$255,030,000 standing to the credit of the share premium account of the Company was cancelled (the “Share Premium Cancellation”); and
(iv) the credit amounts arising from the First Capital Reduction and the Share Premium Cancellation were credited to the contributed surplus account of the Company where such amounts were utilised to eliminate the accumulated losses of the Company as at 31 December 2002 to the extent of HK$353,484,000.
(c) As announced by the Company on 1 August 2003, the Company proposed to effect a share consolidation pursuant to which every forty issued and unissued then existing shares of HK$0.01 each were consolidated into one consolidated share of HK$0.40 each (“Share Consolidation”). Details of the Share Consolidation are set out in the circular dated 20 August 2003 issued by the Company. The ordinary resolution approving the Share Consolidation was passed at the special general meeting of the Company held on 8 September 2003.

— 56 —

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

(d) Rights issue of 13,773,412 shares of HK$0.40 each at a subscription price of HK$1.00 per rights share were allotted on 25 September 2003 to the shareholders of the Company in the proportion of one rights share for every two existing shares then held. The net proceeds of the rights issue were used for general working capital purposes.
(e) As announced by the Company on 14 October 2003, the Company conditionally agreed to place through its placing agent, Get Nice Investment Limited, 8,264,047 new shares of HK$0.40 each in the capital of the Company (the “2003 First Placing Shares”) at a price of HK$0.865 per share which represents a discount of approximately 19.9% to the closing price of HK$1.08 per share quoted on the Stock Exchange on 13 October 2003, being the last full trading day of the Company’s shares prior to the date of the announcement.

The 2003 First Placing Shares were placed to not less than six placees. The placees and their respective ultimate beneficial owners are independent individuals, corporate and/or institutional investors who are not connected persons (as defined in the Listing Rules) of the Company. The placing agent is not a connected person (as defined in the Listing Rules) and does not own any shares of the Company. The 2003 First Placing Shares represented approximately 20.0% of the then existing issued capital of the Company and approximately 16.7% of the Company’s then enlarged capital. The net proceeds from the placement amounted to approximately HK$6.9 million of which HK$5.0 million was used for the partial repayment of the Easyknit Loan and the balance as general working capital.

The placement was completed in November 2003.

(f) As announced by the Company on 27 November 2003, the Company conditionally agreed to place through its placing agent, Kingston Securities Limited, 9,916,856 new shares of HK$0.40 each in the capital of the Company (the “2003 Second Placing Shares”) at a price of HK$0.865 per share which represents a discount of approximately 2.8% to the closing price of HK$0.89 per share quoted on the Stock Exchange on 21 November 2003, being the last full trading day of the Company’s shares prior to the date of the announcement.

The 2003 Second Placing Shares were placed to not less than six placees. The placees and their respective ultimate beneficial owners are independent individuals, corporate and/or institutional investors who are not connected persons (as defined in the Listing Rules) of the Company. The placing agent is not a connected person (as defined in the Listing Rules) and does not own any shares of the Company. The 2003 Second Placing Shares represented approximately 20.0% of the then existing issued capital of the Company and approximately 16.7% of the Company’s then enlarged capital. The net proceeds from the placement amounted to approximately HK$8.4 million of which HK$4.0 million was used for the further repayment of the Easyknit Loan and the balance as general working capital.

The placement was completed in December 2003.

(g) In March 2004, the Company underwent another capital reorganisation (the “Second Reorganisation”). Details of the Second Reorganisation are set out in the circular dated 10 February 2004 issued by the Company.

At the special general meeting of the Company held on 4 March 2004, resolutions approving the Second Reorganisation were passed and the following capital reorganisation took effect on 4 March 2004:

(i) unissued shares of HK$0.40 each in the authorised share capital of the Company were subdivided into four shares of HK$0.10 each;
(ii) nominal value of issued shares in the share capital of the Company was reduced from HK$0.40 each to HK$0.10 each (the “Second Capital Reduction”);
(iii) authorised share capital of the Company was increased from HK$300,000,000 to HK$650,000,000 by the creation of an additional 3,500,000,000 shares of HK$0.10 each; and

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(iv) the credit amount arising from the Second Capital Reduction was transferred to a capital reserve account of the Company where such amount may be applied in the future for distribution to the shareholders.
(h) Rights issue of 297,505,700 shares of HK$0.10 each at a subscription price of HK$0.25 per rights share were allotted on 24 March 2004 to the shareholders of the Company in the proportion of five rights shares for every share then held. The net proceeds of the rights issue amounted to approximately HK$73.2 million of which HK$21,270,000 was used for repayment of the balance of the Easyknit Loan, HK$50,000,000 for partial payment for the acquisition of the entire issued share capital of Po Cheong International Enterprises Limited (“Po Cheong”) from a wholly-owned subsidiary of Easyknit (see note 38(a)), and for general working capital purposes.

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

27. SHARE OPTION SCHEMES

(a) Share option schemes of the Company:

On 21 August 1991, the Company approved a share option scheme (the “1991 Share Option Scheme”) which was terminated by an ordinary resolution of its shareholders at the annual general meeting held on 22 May 2001 but the subsisting options granted thereunder prior to its termination remain valid and exercisable in accordance with the terms of the 1991 Share Option Scheme.

On 22 May 2001, the Company approved a share option scheme (the “2001 Share Option Scheme”) which was terminated by an ordinary resolution of its shareholders at the annual general meeting held on 6 June 2002 but the subsisting options granted thereunder prior to the termination remain valid and exercisable in accordance with the terms of the 2001 Share Option Scheme.

On 6 June 2002, a new share option scheme (the “2002 Share Option Scheme”) was approved by the shareholders of the Company. Under the terms of the 2002 Share Option Scheme, the board of directors of the Company may, at their discretion, grant options to any employee (full-time and part-time), director, supplier, consultant or advisor of any member of the Group to subscribe for shares in the Company subject to the terms and conditions stipulated therein. No share options have been granted under the 2002 Share Option Scheme since its adoption.

The 2002 Share Option Scheme is for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations.

The maximum number of shares which may be issued under the 2002 Share Option Scheme must not (when aggregate with any shares subject to any other share option scheme of the Company) exceed 10% of the shares in issue at the date of adoption of the 2002 Share Option Scheme.

The maximum number of shares issuable under share options to each eligible participant in the 2002 Share Option Scheme within any 12-month period, is limited to 1% of the shares of the Company in issue at any time. Any further grant to share options in excess of this limit is subject to shareholders’ approval in a general meeting of the Company.

The exercise period of the share options granted is determined by the board of directors of the Company, and commences after a certain vesting period and ends on a date which is not later than 10 years from the date of the grant of the option. The offer of a grant of share options may be accepted within 14 days from the date of the offer, upon payment of a nominal consideration of HK$1 in total by the grantee.

The exercise price in respect of any particular option of the 2002 Share Option Scheme may be determined by the board of directors of the Company in their absolute discretion and notified to each offeree but may not be less than the highest of (i) the closing price of the Company’s shares on the date of offer, which must be a business day; (ii) the average closing price of the Company’s shares for the five business days immediately preceding the date of offer; and (iii) the nominal value of the Company’s shares on the date of offer.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The 2002 Share Option Scheme is valid during the period of 10 years commencing 6 June 2002, unless otherwise cancelled or amended.

A summary of the movements of share options granted during the fifteen months ended 31 March 2004 is as follows:

Grantee Share option scheme Date of grant Exercise period Exercise price HK$ (note iii) Director 2001 31 August 2001 (note ii) 31 August 2001 to 30 August 2011 0.4032 Employees 1991 2 August 2000 (note i) 2 August 2001 to 1 August 2010 0.75 20.00 3.333 1991 6 October 2000 (note i) 6 October 2001 to 5 October 2010 0.47 1991 26 March 2001 (note i) 26 March 2002 to 25 March 2011 0.385 10.267 1.711 2001 31 August 2001 (note i) 31 August 2002 to 30 August 2011 0.4032 10.752 1.792 2001 31 August 2001 (note ii) 31 August 2001 to 30 August 2011 0.4032 10.752 1.792	At 1 January 2003 Number of share options (adjusted as appropriate) Reclassification Adjustments Lapsed during the period* 25,000,000 (25,000,000) — — 2,075,000 — (245,000) (1,830,000) — — 9,187 (1,687) — — (7,500) — — — 45,000 — 290,000 — — (290,000) 3,775,000 — (275,000) (3,500,000) — — 10,312 (937) — — (9,375) — — — 56,250 — 7,068,000 — (1,128,000) (5,940,000) — — 42,300 (2,625) — (39,675) — — — 238,050 — — 25,000,000 (25,000,000) — — — 937,500 — — — (937,500) — — — 5,625,000 — 38,208,000 — (20,678,451) (11,565,249)	Share price at grant date of options At 31 March 2004 HK$ (note iv) — 0.50 — 0.80 — — — — 45,000 — — 0.56 — 0.39 — — — — 56,250 — — 0.50 — — — — 238,050 — — 0.50 — — — — 5,625,000 — 5,964,300

The number of share options and the corresponding exercise price have been adjusted as a result of share consolidation and rights issue of shares of the Company during the fifteen months ended 31 March 2004.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

A summary of movements of share options granted during the year ended 31 December 2002 is as follows:

					Number of share	Number of share	options	Share price
	Share					Lapsed	At	at grant
	option				At 1 January	during	31 December	date of
Grantee	scheme	Date of grant	Exercise period	Exercise price	2002	the year	2002	options
				HK$				HK$
				(note iii)				(note iv)
Director	2001	31 August 2001	31 August 2001 to	0.4032	25,000,000	—	25,000,000	0.50
		(note ii)	30 August 2011
Employees	1991	2 August 2000	2 August 2001 to	0.75	3,475,000	(1,400,000)	2,075,000	0.80
		(note i)	1 August 2010
	1991	6 October 2000	6 October 2001 to	0.47	1,540,000	(1,250,000)	290,000	0.56
		(note i)	5 October 2010
	1991	26 March 2001	26 March 2002 to	0.385	6,875,000	(3,100,000)	3,775,000	0.39
		(note i)	25 March 2011
	2001	31 August 2001	31 August 2002 to	0.4032	13,736,000	(6,668,000)	7,068,000	0.50
		(note i)	30 August 2011
					50,626,000	(12,418,000)	38,208,000

Notes:

(i) The vesting period is the period of three years after the date of grant. One-third of the share options become exercisable after 12 months from the date of grant, and after the subsequent 18 months, 24 months, 30 months and 36 months from the date of grant, further one-sixth of the options become exercisable.
(ii) The vesting period is the period from the date of grant to six months after the date of grant. Half of the share options are exercisable from the date of grant and the remaining half becomes exercisable after 6 months from the date of grant.
(iii) The exercise price of the share options is subject to adjustment in the case of rights or bonus issues, or other similar changes in the share capital of the Company.
(iv) The share price at grant date of options represents the closing price of the Company’s shares as stated on the daily quotations sheets issued by the Stock Exchange on the trading day immediately preceding the date of grant of the options.

No share options have been granted or exercised during both accounting periods.

(b) Share option schemes of subsidiaries:
(i) solution100 Corporation

On 22 May 2001, solution100 Corporation, a wholly-owned subsidiary of the Company, adopted a share option scheme under which options to subscribe for shares in the share capital of solution100 Corporation may be granted to the qualifying persons from time to time subject to the terms and conditions stipulated therein. No share options have been granted under the share option scheme of solution100 Corporation since its adoption.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(ii) i100 Wireless Corporation

On 6 June 2002, i100 Wireless Corporation, a wholly-owned subsidiary of the Company, adopted a share option scheme pursuant to the then requirements of Chapter 17 of the Listing Rules and under which options to subscribe for shares in the share capital of i100 Wireless Corporation may be granted to the qualifying persons from time to time subject to the terms and conditions stipulated therein. No share options have been granted under the share option scheme of i100 Wireless Corporation since its adoption.

The financial impact of share options granted is not recorded in the Company’s or the Group’s balance sheet until such time as the options are exercised, and no charge is recognised in the income statement in respect of the value of options in the period/year. Upon the exercise of the share options, the resulting shares issued are recorded by the Company as additional share capital at the nominal value of the shares and the excess of the exercise price per share over the nominal value of the shares is recorded by the Company as share premium. Options which lapse or are cancelled prior to their exercise date are deleted from the register of outstanding options.

28. RESERVES

THE GROUP

The capital reserve of the Group represents the credit arising from the reduction of share capital of the Company in March 2004 and can be applied in the future for distribution to the shareholders.

The contributed surplus of the Group represents the credit arising from the reduction of share capital of the Company in February 2003 which may then be utilised by the directors in accordance with the Company’s Bye-laws and all applicable laws, including to fully eliminate the accumulated losses of the Company.

THE COMPANY

At 1 January 2002 Premium arising from issue of new shares Net loss for the year At 31 December 2002 Premium arising from issue of new shares Reduction of share capital and share premium upon capital reorganisations (see note 26) Elimination of accumulated losses Net loss for the period At 31 March 2004	Share premium HK$’000 237,549 17,481 —	Capital reserve Contributed surplus Accumulated losses HK$’000 HK$’000 HK$’000 — 46,962 (248,926) — — — — — (159,231)	Capital reserve Contributed surplus Accumulated losses HK$’000 HK$’000 HK$’000 — 46,962 (248,926) — — — — — (159,231)	Capital reserve Contributed surplus Accumulated losses HK$’000 HK$’000 HK$’000 — 46,962 (248,926) — — — — — (159,231)	Total HK$’000 35,585 17,481 (159,231) (106,165) 61,344 117,018 — (44,255) 27,942
	255,030 61,344 (255,030) — —	— — 17,850 — —	46,962 — 354,198 (353,484) —	(408,157) — — 353,484 (44,255)	(106,165 61,344 117,018 — (44,255
	61,344	17,850	47,676	(98,928)

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The capital reserve of the Company represents the credit arising from the reduction of share capital of the Company in March 2004 and can be applied in the future for distribution to the shareholders.

The contributed surplus of the Company represents the difference between the nominal value of the share capital issued by the Company and the fair value of the subsidiaries’ shares acquired under the group reorganisation in August 1991 and the credit arising from the reduction of share capital of the Company in February 2003 which may then be utilised by the directors in accordance with the Company’s Bye-laws and all applicable laws, including to fully eliminate the accumulated losses of the Company.

Under the laws in Bermuda, the contributed surplus account of a company is also available for distribution. However, the company cannot declare or pay a dividend, or make a distribution out of contributed surplus if:

(a) it is, or would after the payment be, unable to pay its liabilities as they become due; or
(b) the realisable value of its assets would thereby be less than the aggregate of its liabilities and its issued share capital and share premium accounts.

The Company has no reserves available for distribution at 31 March 2004 and 31 December 2002.

29. AMOUNTS DUE TO SUBSIDIARIES

THE COMPANY

The amounts due to subsidiaries are unsecured, non-interest bearing and have no fixed repayment terms. Repayment of the amounts will not be made by the Company within the twelve months from the balance sheet date. Accordingly, the amounts are shown as non-current liabilities in the balance sheet.

30. ACQUISITION OF A SUBSIDIARY/SUBSIDIARIES

In December 2003, the Group acquired an additional interest of 45% of the issued share capital of Vector Entertainment Corporation (“Vector”) for a cash consideration of approximately HK$1.0 million. Vector was previously a jointly controlled entity of the Group in which the Group had a 45% equity interest amounting to HK$954,000. Acquisition of the subsidiary was accounted for by the acquisition method of accounting.

	1.1.2003 to	1.1.2002 to
	31.3.2004	31.12.2002
	HK$’000	HK$’000
Net assets acquired:
Property, plant and equipment	—	105
Inventories	—	52
Amounts due from shareholders	1,131	—
Trade and other receivables	—	436
Bank balances and cash	971	97
Trade and other payables	—	(672)
Minority interests	(209)	—
	1,893	18
Goodwill on acquisition	104	485
Total consideration	1,997	503

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

	1.1.2003 to	1.1.2002 to
	31.3.2004	31.12.2002
	HK$’000	HK$’000
Satisfied by:
Cash	1,043	500
Reclassification of interest in a jointly controlled entity	954	—
Shares allotted	—	3
	1,997	503
Net cash outflow arising on acquisition:
Cash consideration paid	(1,043)	(200)
Bank balances and cash acquired	971	97
Net cash outflow of cash and cash equivalents in respect of the purchase of a
subsidiary/subsidiaries	(72)	(103)

In August 2002, the consideration of HK$502,500 for the acquisition of subsidiaries was satisfied by cash of HK$500,000 and the issuance of 2,500 ordinary shares at par value of HK$1 each of solution100 Limited, a subsidiary of the Company. Cash consideration of HK$200,000 was paid upon completion of the acquisition in year 2002 and the remaining balance of HK$300,000 was paid in the fifteen months ended 31 March 2004.

The subsidiary acquired during the period did not have any significant impact on the results and cash flows of the Group.

31. DISPOSAL OF SUBSIDIARIES/DISCONTINUED OPERATIONS

In January 2003, the Group disposed of the entire issued shares in i100OnAir Limited, a then wholly-owned subsidiary of the Company, for a cash consideration of US$1. In February 2004, the Group also disposed of the entire issued shares of Golden Throne Holdings Limited and Rainer Capital Limited which were then wholly-owned subsidiaries of the Company for a cash consideration of HK$10.

	1.1.2003 to	1.1.2002 to
	31.3.2004	31.12.2002
	HK$’000	HK$’000
Net assets disposed of:
Property, plant and equipment	387	18,048
Investment properties	—	3,630
Long term investments	—	1,799
Inventories	—	20,736
Construction contracts	—	13,919
Trade and other receivables	443	35,153
Tax recoverable	—	323
Bank balances and cash	115	4,894
Loan from the Company	—	(53,000)
Trade and other payables	(404)	(31,360)
Bank borrowings other than bank overdrafts	—	(8,150)
Minority interests	—	(1,350)
	541	4,642

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

	1.1.2003 to	1.1.2002 to
	31.3.2004	31.12.2002
	HK$’000	HK$’000
Exchange reserve realised on disposal of subsidiaries	(2)	—
Loss on disposal of subsidiaries/discontinued operations	(539)	(4,615)
Negative goodwill released from goodwill reserve	—	(27)
Total consideration	—	—
Net cash outflow arising on disposal:
Bank balances and cash disposed of	(115)	(4,894)

The subsidiaries disposed of during the period did not contribute to the Group’s turnover but incurred loss from operations of approximately HK$982,000.

Details of the subsidiaries disposed of in year 2002 are disclosed in notes 8(a) and 8(b).

32. DEFERRED TAXATION

The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting periods:

THE GROUP Accelerated tax depreciation Tax losses HK$’000 HK$’000 At 1 January 2002 — as previously reported — — — adjustment on adoption of SSAP 12 (Revised) 791 (791) — as restated 791 (791) (Credit) charge to income statement for the year (432) 432 At 31 December 2002 359 (359) (Credit) charge to income statement for the period (389) 389 Effect of change in tax rate 34 (34) At 31 March 2004 4 (4)	THE GROUP Accelerated tax depreciation Tax losses HK$’000 HK$’000 At 1 January 2002 — as previously reported — — — adjustment on adoption of SSAP 12 (Revised) 791 (791) — as restated 791 (791) (Credit) charge to income statement for the year (432) 432 At 31 December 2002 359 (359) (Credit) charge to income statement for the period (389) 389 Effect of change in tax rate 34 (34) At 31 March 2004 4 (4)	Total HK$’000 — —
791 (432) 359 (389) 34	(791) 432 (359) 389 (34)	— —
		— — —
4	(4)	—

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

For the purposes of balance sheet presentation, the above deferred tax liabilities and assets have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes:

Deferred tax liabilities Deferred tax assets	THE GROUP 31.3.2004 31.12.2002 HK$’000 HK$’000 4 359 (4) (359) — —	THE GROUP 31.3.2004 31.12.2002 HK$’000 HK$’000 4 359 (4) (359) — —
		—

At the balance sheet date, deductible temporary differences not recognised in the financial statements were analysed into:

Tax losses Others	THE GROUP 31.3.2004 31.12.2002 HK$’000 HK$’000 189,674 166,531 2,179 2,155 191,853 168,686	THE GROUP 31.3.2004 31.12.2002 HK$’000 HK$’000 189,674 166,531 2,179 2,155 191,853 168,686
		168,686

No deferred tax asset has been recognised in respect of such deductible temporary differences due to the unpredictability of future profit streams. The tax losses at 31 March 2004 and 31 December 2002, which amounted to approximately HK$4,105,000 and HK$15,371,000 respectively, can only be carried forward for a maximum period of five years, other losses may be carried forward indefinitely.

The Company has unrecognised tax losses at 31 March 2004 and 31 December 2002. No deferred tax asset has been recognised due to the unpredictability of future profit streams.

33. PLEDGE OF ASSETS

THE GROUP

At 31 March 2004, the entire issued share capital of i100 Wireless Corporation has been pledged to an outside party to secure the other loan of HK$4,000,000 (see also notes 25 and 38(b)). There was no similar arrangement at 31 December 2002.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

34. CONTINGENT LIABILITIES

		THE GROUP AND THE COMPANY	THE GROUP AND THE COMPANY	THE GROUP AND THE COMPANY
		31.3.2004	31.12.2002
		HK$’000	HK$’000
	Corporate guarantees given to banks in respect of credit facilities
	granted to ALOH and its subsidiaries	—		87,100
35.	CAPITAL COMMITMENTS
		THE GROUP
		31.3.2004	31.12.2002
		HK$’000	HK$’000
	Capital expenditure contracted for but not provided in the financial
	statements in respect of:
	— acquisition of property, plant and equipment	9,923		—
	— acquisition of the entire issued share capital of Po Cheong
	(see note 38(a))	65,000		—
	— capital injection for interests in jointly controlled entities and non
	wholly-owned subsidiaries	20,904		24,238
		95,827		24,328

The Company had no significant capital commitments at the balance sheet date.

36. OPERATING LEASE ARRANGEMENTS

		THE	GROUP
		1.1.2003 to	1.1.2002 to
		31.3.2004	31.12.2002
		HK$’000	HK$’000
Minimum	lease payments recognised in the consolidated income statement
during	the period/year	1,855	6,831

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

Within one year In the second to fifth year inclusive Over five years	THE GROUP 31.3.2004 31.12.2002 HK$’000 HK$’000 654 911 1,695 — 2,870 — 5,219 911	THE GROUP 31.3.2004 31.12.2002 HK$’000 HK$’000 654 911 1,695 — 2,870 — 5,219 911
		911

Operating lease payments represent rentals payable by the Group for certain of its office and factory premises. Leases are negotiated for lease terms ranging from two to ten years.

Under the leases entered into by the Group, the lease payments are fixed and no arrangements have been entered into for contingent rental payments.

The Company had no significant lease commitments at the balance sheet date.

37. RETIREMENT BENEFITS SCHEMES

The Group operates defined contribution Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance. Under the MPF Scheme, the employees are required to contribute 5% of their monthly salaries or up to a maximum of HK$1,000 and they can choose to make additional contributions. The employer’s monthly contributions are calculated at 5% of the employee’s monthly salaries or up to a maximum of HK$1,000 (the “mandatory contributions”). The employees are entitled to 100% of the employer’s mandatory contributions upon their retirement at the age of 65, death or total incapacity.

Prior to the MPF Scheme becoming effective, the Group operates a defined contribution retirement benefits scheme (the “ORSO Scheme”) under the Occupational Retirement Schemes Ordinance, for those employees who were eligible to participate. The ORSO Scheme operates in a similar way to the MPF Scheme, except that when an employee leaves the ORSO Scheme before his/her interest in the Group’s employer contributions vesting fully, the ongoing contributions payable by the Group are reduced by the relevant amount of the forfeited contributions. With effect from 1 December 2000, the Group operates both schemes and those employees who are not eligible to participate in the ORSO Scheme are eligible to participate in the MPF Scheme.

The assets of both schemes are held separately from those of the Group in independently administered funds.

Employees of the subsidiaries in the PRC are members of the state-sponsored pension scheme operated by the PRC government. The subsidiaries are required to contribute a certain percentage of their payroll to the pension scheme to fund the benefits. The only obligation of the Group with respect to the pension scheme is to make the required contributions.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

There were no forfeited contributions utilised to offset employers’ contributions for the period/year. The employers’ contributions which have been dealt with in the income statement of the Group were as follows:

								THE	GROUP
								1.1.2003 to	1.1.2002 to
								31.3.2004	31.12.2002
								HK$’000	HK$’000
Employers’	contributions	charged	to	the	consolidated	income	statement	410	1,034

At the balance sheet date, there was no forfeited contributions available to reduce the contributions payable in the future years.

38. POST BALANCE SHEET EVENTS

The following significant events took place subsequent to 31 March 2004:

(a) As announced by the Company on 5 March 2004, the Group conditionally agreed to purchase the entire issued shares of Po Cheong from a wholly-owned subsidiary of Easyknit at a consideration of HK$65,000,000. Po Cheong, together with its subsidiary, is principally engaged in the business of bleaching and dyeing. The consideration shall be satisfied in cash, of which HK$50,000,000 was paid on 13 May 2004 and the remaining balance of HK$15,000,000 shall be payable after finalisation of the adjustment (as described in the circular of the Company dated 23 April 2004) in the mid of 2005. Details of the above are set out, inter alia, in the circular of the Company dated 23 April 2004.

At the special general meeting of the Company held on 10 May 2004, resolutions approving the acquisition of Po Cheong were passed.

(b) On 25 June 2004, the Group entered into a settlement agreement with the lender of the other loan (see note 25) for the full settlement of the loan of HK$4,000,000 and accrued interest of HK$511,000 (up to the date of the agreement) by way of transferring all the issued shares of i100 Wireless Corporation to the lender. i100 Wireless Corporation and its subsidiaries are principally engaged in the wireless communication business. Details of the above are set out in the announcement dated 14 July 2004 issued by the Company.

— 68 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Financial Summary

RESULTS

		Year ended	31 December	31 December	1.1.2003 to
	1999	2000	2001	2002	31.3.2004
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Turnover	449,123	247,003	198,134	70,354	5,083
Profit (loss) before taxation	5,945	(130,111)	(119,299)	(191,293)	(57,737)
Taxation (charge) credit	(1,661)	(3,056)	570	309	—
Profit (loss) before minority
interests	4,284	(133,167)	(118,729)	(190,984)	(57,737)
Minority interests	(8)	587	269	(440)	—
Net profit (loss) for the year/period	4,276	(132,580)	(118,460)	(191,424)	(57,737)
ASSETS AND LIABILITIES
		At 31 December			At 31
					March
	1999	2000	2001	2002	2004
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Total assets	193,981	306,387	167,124	19,868	69,134
Total liabilities	(57,416)	(59,783)	(39,442)	(8,149)	(11,069)
Minority interests	(8)	(1,437)	(829)	—	(209)
Shareholders’ funds	136,557	245,167	126,853	11,719	57,856

4. INDEBTEDNESS

At the close of business on 31 December 2004, being the latest practicable date for ascertaining this indebtedness prior to the printing of this circular, the Group had in aggregate outstanding bank loans of approximately HK$47.90 million of which HK$25 million were guaranteed personally by a Director. In addition, the Group had outstanding at that date interest payable in respect of the above bank loans of approximately HK$0.08 million.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities, the Group did not have at the close of business on 31 December 2004 any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, finance leases, hire purchase commitments, guarantees or other material contingent liabilities.

5. WORKING CAPITAL

Taking into account the financial and trading prospects for the Group discussed in the section headed “Financial and trading prospects of the Group” set out on page 10 of this circular, the Directors are of the opinion that, with the internal resources and existing banking facilities available, the Group has sufficient working capital for its day to day operations for a period of at least 12 months commencing from the date of this circular.

6. MATERIAL ADVERSE CHANGE

Apart from the acquisition of the entire issued share capital of Po Cheong International Enterprises Limited as disclosed in the unaudited interim results for the six months ended 30 September 2004 of the Group, as set out on page 21, as at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial and trading position of the Group since 31 March 2004, the date to which the latest published audited consolidated financial statements were made up.

7. BUSINESS REVIEW OF THE GROUP

Set out below are the reproduction of the “management discussion and analysis” section of the Group for the two years ended 31 December 2001 and 31 December 2002 and the 15 months ended 31 March 2004 contained in the Company’s annual reports for the corresponding years/period.

For the year ended 31 December 2001

Financial review

Revenue

Turnover of the Group was HK$198 million, a 20% decrease from the previous year. The decrease in revenue was due to a continuing lethargic real estate market and the resulting reduction in sanitary engineering.

Gross Margin

Gross margins decreased to 14%, compared to 22.5% in the previous year, primarily due to an overall drop in sales prices and changes in revenue mix. Prices for our sanitary products and engineering services were under great pressure due to tough competition in the market.

— 70 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Operating Expenses

Operating expenses were HK$157.6 million for fiscal 2001, compared to HK$156.7 million for fiscal 2000. During the year, significant expenses were incurred in all facets of development work for our wireless data service. The total operating expenses for the Acme Landis Division and the non-Acme Landis Division were HK$73.1 million and HK$84.5 million respectively, for fiscal 2001.

During the year, a director of the Acme Landis Division, who is also a director of the Company, received remuneration of HK$5.3 million, HK$3.5 million of which was related to his current and prior years’ services.

Liquidity, Financial Resources and Capital Structure

As at 31 December 2001, the total shareholders’ equity of the Group was approximately HK$126.9 million, a decrease of 48.3% over that as at 31 December 2000. At the balance sheet date, the cash and cash equivalents stood at HK$32.7 million. The Group’s cash is primarily in Hong Kong and US dollars, and placed in leading commercial banks as time deposits with various maturities. Bank borrowings amounted to HK$4.3 million, a decrease of 72.2% over that of the previous year. The borrowings are all short-term bank loans. The gearing ratio of the Group, calculated by total interest bearing debts divided by shareholders’ equity at the balance sheet date, was 3.4%. During the year, the Group acquired the business of Shanghai Cyberway CompuComm Limited for a consideration of HK$454,000 which was satisfied by the issurance of 873,000 ordinary shares of the Company. The net assets acquired were approximately RMB1.2 million.

Charges on Group Assets

As at balance sheet date, certain leasehold land and buildings of the Group with an aggregate carrying value of HK$13,900,000 were pledged to certain banks to secure banking facilities granted to the Group.

Contingent Liabilities

The Company’s contingent liabilities amounted to HK$87.1 million at the balance sheet date, compared to HK$107.1 million in 2000. These contingent liabilities are corporate guarantees given to secure general banking facilities granted to subsidiaries.

Employees and Remuneration Policies

As at 31 December 2001, the Group employed approximately 215 full time management, technical and administrative staff in Hong Kong and in elsewhere in the People’s Republic of China (the “PRC”). Among the total, 166 were in the Acme Landis Division. The Group remunerates its employees based on their performance, experience and prevailing industry standards. The Group has a share option scheme to motivate valued employees.

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APPENDIX I

Review of operations

solution100

solution100 has continued to build alliances with leading companies from around the world in order to distribute their products and services, with added value, in the Greater China market. These include digital video recording solutions from Canada and innovative wireless security products from the United States. This business brings an immediate income to the company and continues to be part of a dual-pronged strategy in 2002.

However, solution100’s current main business focus is in the provision of multimedia platforms. The company will build on existing software application design, implementation and service expertise to build an integrated multimedia platform that incorporates voice portal applications, next generation video streaming and a full messaging and data product portfolio. This strategy will provide solution100 with a solid revenue stream in the longer term. The company believes that by delivering a complete and cutting-edge foundation platform for businesses in this rapidly growing sector, solution100 can become a leading applications provider in the region.

Given the world market situation and the company’s expertise and experience, solution100 continues to focus primarily on Hong Kong and China, whilst also sourcing partnerships to leverage expansion into other lucrative markets.

Joint Venture with The Leadcorp (formerly known as “Dong Teuk”)

In June 2001, the Group announced Korean wireless leader The Leadcorp’s 8% strategic equity investment in the Company and that the Group and The Leadcorp were to incorporate and unify their respective wireless entertainment businesses.

By pooling together the expertise of both companies, the Group and The Leadcorp are now strategically positioned to lead in wireless entertainment. The Group contributes its experience in wireless technology and telecommunications solutions, whereas The Leadcorp leverages its expansive network in Korea to identify and source game publishers, supported by its unique wireless entertainment expertise, and Korea’s leading position in the worldwide wireless industry. This is a perfect partnership for meeting the expectations of the rapidly growing global market for wireless entertainment connectivity.

Together, the Group and The Leadcorp have already formed alliances with two major Korean wireless entertainment companies, Toysoft and Nazca. We are now working to aggregate and distribute games from these Korean companies, in addition to globally sourced games, throughout the China market.

Wireless Data Service

Throughout the year, the Group has worked to build a GPRS-driven and entertainment focused wireless data service for launch in 2002. The key principle of the service is that it fits perfectly with

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APPENDIX I

our target audience’s mobile lifestyle, and as such, building partnerships with a variety of international content providers has played a central role in this year’s efforts. So far, a large plethora of content partnerships have been secured. The partnerships offer content breadth and depth, but above all, are immediately attractive to people “on the move”.

We have also formed partnerships with leading wireless games companies from Europe, Korea and Taiwan, and are now able to incorporate their proven games into our wireless service as well as working with major telecommunication carriers towards exclusive deployment in China. In addition, we have developed unique wireless applications, including instant messaging, that provide a platform to generate interactive mobile communities, and we are now looking to develop advanced multimedia messaging services.

The partnerships we have formed, as well as marketing and technical expertise, guarantee a perfect fit with our target audience’s mobile needs and we look forward to a successful launch.

Legacy Businesses

Although daily operations of Ask100 and OnAir100 have already been scaled down significantly, the Group has fully utilised their resources by redirecting them into the new wireless data venture. The subscriber databases, community base, content links and technical expertise of the team have been put to full use in the company’s wireless data and entertainment initiatives.

Acme Landis

The Acme Landis business suffered negative growth in turnover and consequently higher losses were recorded. 2002 is the first synchronized global profits recession in over a decade. As a result, all divisions in the business reported lower sales, with sanitary ware and engineering departments being more markedly affected. The Hong Kong economy, in which a large percentage of the business depends, continued to deflate and the lack of pricing power is reflected in lowering margins both in the domestic wholesale business as well as in the engineering business.

Looking to 2002, the domestic deflationary pressures appear to be abating slowly, and with this, the likelihood of an increase in local demand, both in residential flats, as well as in the wholesale market of sanitary ware, is improved. However, as the Hong Kong economy has suffered a number of “false dawns” in the past, the directors remain extremely cautious regarding a sustainable rebound in demand for this coming year.

For the year ended 31 December 2002

Financial review

Revenue

Turnover of the Group was HK$70 million, a 64% decrease from the previous year. The decrease in revenue was due to the disposal of the Group’s entire shareholding in (i) Acme Sanitary Engineering Company Limited, which is engaged in the business of the provision of drainage, plumbing and

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APPENDIX I

engineering contracting services, on 4 May 2002 and (ii) Acme Landis Operations Holdings Limited, which is engaged in the business of trading of sanitary fixtures and fittings and a range of hardware, industrial and consumer products, on 29 May 2002. Save for the disposal of Acme Landis business disclosed above, there is no change in market segment. It is the Group’s strategy to concentrate on its wireless communication business. There are no material changes in other industry segment nor material developments within the segment other than wireless communication business.

Gross Margin

Gross margin increased to 26%, compared to 14% in the previous year, primary due to an overall increase in gross margin from Acme Sanitary Engineering Company Limited and Acme Landis Operations Holdings Limited before the disposals in May 2002.

Operating expenses

The Group’s loss was HK$191.4 million which included provision of HK$42.1 million for a loan to Acme Landis Operations Holdings Limited (“Acme Landis”), provision of HK$14.2 million for loans to an associate, impaired goodwill of an associate of HK$48.8 million, loss on discontinued operations of HK$4.6 million, impairment loss of fixed assets of HK$0.8 million, provision for bad debts of HK$6.1 million (net) and share of loss of an associate of HK$14.0 million. The outstanding loan balance due from Acme Landis as at 31 December 2002 was HK$45.8 million which is secured by a pledge in respect of 76 million shares of the Company. On prudence basis, provision of HK$42.1 million is made to reflect the market value of the pledged shares as at 31 December 2002. The provision of HK$14.2 million for loans to an associate is made because the proposed listing exercise of that associate is delayed. Loans were advanced to that associate mainly for its working capital requirements. Full provision is made because that associate has limited tangible assets and is unlikely to have sufficient funding to repay the outstanding amount in the near future. An impairment of goodwill on acquisition of an associate which was previously eliminated against consolidated reserves was recognized amounting to HK$48.8 million in the fiscal 2002. The Group has the opinion that the associate is unlikely to generate sufficient profit and cashflow in the near future to match with the related goodwill because the proposed listing exercise of one of the subsidiary of that associate was delayed. The loss on discontinued operations of HK$4.6 million arose from the disposal of Acme Landis Division in May 2002. Impairment loss of fixed assets of HK$0.8 million was for furniture, fixtures, and equipment. The net provision of bad debt of HK$6.1 million included a provision for bad debt of HK$7.2 million which was made for other receivables because the debtor requested a change of selling price after the transaction was completed and the Group refused. Full provision is made on prudence basis. The share of loss of an associate of HK$14.0 million was related to an associate which the Group owns 49%.

The Group has capital commitments of HK$24.2 million related to the Group’s interests in jointly-controlled entities and non-wholly-owned subsidiaries. Save as disclosed above, the Group has no other plans for material investments or capital assets, except for the Group’s development of the wireless business.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Liquidity, Financial Resources and Capital Structure

As at 31 December 2002, the total shareholders’ equity of the Group was approximately HK$11.7 million, a decrease of 90.8% over that as at 31 December 2001. At the balance sheet date, the cash and cash equivalents stood at HK$1.8 million. The Group’s cash is primarily in Hong Kong and US Dollars, and placed in leading commercial banks as time deposits with various maturities. There was no bank borrowing as at the balance sheet date, compared with that of HK$4.3 million last year. The Group has no material exposure to fluctuations in exchange rates and any related hedges.

During the year, the group acquired the business of Digital Empires Company Limited for a consideration of HK$502,500 which was satisfied by the issuance of 2,500 ordinary shares of solution100 Limited of HK$1 each, a wholly-owned subsidiary of the Company, and cash of HK$500,000. The consolidated net assets acquired were approximately HK$18,000.

Charges on Group Assets

There was no charge on the Group’s assets as at 31 December 2002.

Contingent Liabilities

As at 31 December 2002, the Group had contingent liabilities of approximately HK$87.1 million in respect of bank guarantees given to secure banking facilities granted to certain subsidiaries which were disposed of by the Group in May 2002. Such guarantees were released by the relevant banks subsequent to the close of business on 31 December 2002. There are no other contingent liabilities of the Group.

Employees and Remuneration Policies

As at 31 December 2002, the Group employed approximately 80 full time management, technical and administrative staff in Hong Kong and elsewhere in the People’s Republic of China (the “PRC”). The Group remunerates its employees based on their performance, experience and prevailing industry standards. The Group has a share option scheme to motivate valued employees.

Placing of New Shares

On 4 June 2002, the Group announced that i100 Capital Corporation, a substantial shareholder of the Company, placed 124 million shares of the Company to more than six independent professional and/or institutional investors at a price of HK$0.3 per share (“Placing Price”). The Placing Price represented a discount of approximately 24.1% to the closing price of HK$0.395 per share on 3 June 2002.

On the same date, i100 Capital Corporation agreed to subscribe for 100 million new shares issued by the Company at the price equal to the Placing Price less all expenses incurred in connection with the private placement. The new shares issued represented approximately 10% of the Group’s issued

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

share capital immediately before the private placement and approximately 9.1% of the enlarged issued share capital. The net proceeds of the subscription of approximately HK$29 million were used for development in wireless data service and as general working capital of the Group. All shares issued rank pari passu with the existing shares in issue in all respects.

Review of operations

solution100

The Group has redirected the extensive technological and market expertise of its wireless solutions arm, solution100, to support the wireless data service. This is a contingency tactic for solution100, as its traditional business environment remains subdued from reduced corporate IT spending.

Wireless Data Service

The Group’s wholly-owned subsidiary, i100 Wireless (Hong Kong) Limited, is principally engaged in the provision of a branded wireless data services as a full service mobile operator using MVNO (Mobile Virtual Network Operator) business structure in Hong Kong. The key principle of the service is a GPRS-driven and entertainment focus wireless data service supported by international content providers, leading wireless games companies and major telecommunication carriers that fits with our target audience’s mobile lifestyle. We believe the future of the mobile data business remains promising and we will continue to strive to become a leader in this market.

Legacy Businesses

Resources from legacy business Ask100 and OnAir100 continue to be adapted and utilized to develop the wireless data business. The subscriber data base, community base, content links and technical expertise of the team have been put to full use in Wireless data services.

Acme Landis

The Acme Landis business, which is engaged in the business of the provision of drainage, plumbing and engineering contracting services, trading of sanitary fixtures and fittings and a range of hardware, industrial and consumer products, suffered negative growth in turnover and consequently higher losses were recorded. The Group sold its entire shareholding in Acme Landis in May 2002.

For the 15 months ended 31 March 2004

Financial results

The Group’s turnover and net loss for the fifteen months ended 31 March 2004 were approximately HK$5,083,000 (for the year ended 31 December 2002: approximately HK$70,354,000) and approximately HK$57,737,000 (for the year ended 31 December 2002: approximately HK$191,424,000), respectively, representing a decrease of approximately 92.8% and approximately 69.8% respectively when compared to the year ended 31 December 2002.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The decrease in turnover was mainly due to the disposal of the Group’s entire shareholding in (i) Acme Sanitary Engineering Company Limited (“Acme Sanitary”), formerly a wholly-owned subsidiary of the Company which was engaged in the business of the provision of drainage, plumbing and engineering contracting services, on 4 May 2002 and (ii) Acme Landis Operations Holdings Limited (“Acme Landis”), formerly a wholly-owned subsidiary of the Company which was engaged in the business of trading of sanitary fixtures and fittings and a range of hardware, industrial and consumer products, on 29 May 2002.

The Group’s net loss for the fifteen months ended 31 March 2004 amounted to approximately HK$57,737,000 which includes impairment loss recognised in respect of long term investments of approximately HK$3,900,000 and impairment loss recognised in respect of property, plant and equipment of approximately HK$9,971,000. The Group’s operating expenses for the period under review were approximately HK$38,962,000 compared to approximately HK$81,116,000 for the year ended 31 December 2002 and the decrease was mainly due to the disposal of Acme Sanitary and Acme Landis.

Business review

During the fifteen months ended 31 March 2004, the Group was principally engaged in wireless communication business, provision of communication solutions consultancy services and internet operations.

During the period under review, the Company’s former wholly-owned subsidiary, i100 Wireless (Hong Kong) Limited, was engaged in the provision of a branded wireless data services in Hong Kong. The key principal service was a GPRS (general packet radio service)-driven and entertainment focused wireless data service supported by international content providers, leading wireless games companies and major telecommunication carriers that accommodated the lifestyle of the Group’s target users.

The Group launched its 2.5G MVNO (mobile virtual network operator) business in October 2002, under the trade name Noodle. Noodle’s technical platform was based on GPRS, the most popular 2.5G data technology used in Hong Kong. It offered its customers a wide array of mobile content such as games, up-to-date news, horoscopes, sports and other entertainment topics. Noodle mainly targeted the younger market for its services.

In June 2003, Noodle transferred all the active customer accounts of its 2.5G MVNO business to SUNDAY. Hence, i100 Wireless (Hong Kong) Limited became a content provider to SUNDAY. However, the wireless communication business still suffered from huge losses.

Prospects

The general economic climate affected the mobile communication business of the Group in Hong Kong. The Group will continue to streamline its operation in this business segment.

After the completion of the Po Cheong Acquisition (as defined in the section headed “Significant Corporate Events” below) on 17 May 2004, the bleaching and dyeing business of Po Cheong and its subsidiary is expected to contribute positively to the Group’s profitability.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The Group will continue to explore potential investment projects or businesses with a view to diversify and expand its source of income.

Significant corporate events

On 28 January 2003, Easyknit, through its wholly-owned subsidiary, Landmark Profits Limited, acquired approximately 55.27% equity interest of the Company and subsequently made a mandatory general offer for the shares that it did not own. The general offer resulted in Easyknit holding approximately 55.30% equity interest of the Company as at 14 April 2003. A series of disposal of the Company’s shares in June 2003 brought Easyknit’s interest in the Company down to approximately 51.73% as at 30 June 2003.

As a result of the capital reorganisation which came into effect on 10 February 2003, the then issued share capital of the Company was reduced from HK$110,187,300 to HK$11,018,730 comprising 1,101,873,000 shares of HK$0.01 each.

On 8 September 2003, every 40 issued and unissued shares of the Company of HK$0.01 each were consolidated into one consolidated share of HK$0.40 each. Immediately following the share consolidation, the share capital of the Company comprised 27,546,825 issued shares of HK$0.40 each and 722,453,175 unissued shares of HK$0.40 each.

On 25 September 2003, the Company issued 13,773,412 rights shares at a price of HK$1.00 per rights share (the “First Rights Issue”) and raised net proceeds of approximately HK$13,300,000 for general working capital purposes.

On 17 November 2003, 8,264,047 shares of HK$0.40 each were issued and allotted by the Company at a price of HK$0.865 per placing share by way of placing (the “First Placing”). The net proceeds of the First Placing were approximately HK$6,900,000 of which HK$5,000,000 has been used for partial repayment of an unsecured interest-bearing loan of HK$30,270,000 (“Easyknit Loan”) extended by Planetic International Limited (a wholly owned subsidiary of Easyknit) to the Group in February 2003 and approximately HK$1,900,000 are used as general working capital.

On 22 December 2003, the Company issued and allotted 9,916,856 shares of HK$0.40 each at a price of HK$0.865 per placing share by way of placing (the “Second Placing”). Out of the net proceeds of the Second Placing of approximately HK$8,400,000, HK$4,000,000 has been used for partial repayment of Easyknit Loan. The remaining net proceeds of approximately HK$4,400,000 are for general working capital purposes.

As a result of the First Rights Issue, the First Placing and the Second Placing, the then issued share capital of the Company were increased to HK$23,800,456 comprising 59,501,140 shares of HK$0.40 each. Subsequent to the completion of the First Placing and the Second Placing, Easyknit’s interest in the Company has been diluted to approximately 35.93% of the then issued share capital of the Company.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

With effect from 19 November 2003, the name of the Company has been changed from “i100 Limited” to “Asia Alliance Holdings Limited” and the Chinese name “ ” has been adopted by the Company for identification purposes.

On 4 March 2004, the then issued share capital of the Company was reduced to HK$5,950,114 consisting of 59,501,140 shares of HK$0.10 each and the authorised share capital of the Company was increased to HK$650,000,000 comprising 6,500,000,000 shares of HK$0.10 each.

On 24 March 2004, the Company raised approximately HK$73,200,000 (net of expenses) by way of the rights issue of 297,505,700 rights shares at a price of HK$0.25 per rights share on the basis of five rights shares for every share held (the “Second Rights Issue”). Out of such proceeds, approximately HK$22,000,000 has been used to repay the Easyknit Loan and the remaining balance of approximately HK$51,000,000 has been applied for partial payment in respect of the Po Cheong Acquisition (as defined below). As a result of the Second Rights Issue, the issued share capital of the Company has been increased to HK$35,700,684 comprising 357,006,840 shares of HK$0.10 each.

On 17 May 2004, the acquisition of the entire issued share capital of Po Cheong International Enterprises Limited (“Po Cheong”) at a total consideration of HK$65,000,000 (subject to adjustment) (the “Po Cheong Acquisition”) by Best Ability Limited, a wholly-owned subsidiary of the Company, from Easyknit International Trading Company Limited, a wholly-owned subsidiary of Easyknit, was completed and Po Cheong has become a wholly-owned subsidiary of the Company. Po Cheong and its subsidiary are principally engaged in the business of bleaching and dyeing.

On 15 June 2004, the Company entered into an agreement (the “Agreement”) with each of Mr. Louie Tsz Chung and Ms. Koon Po Fun, pursuant to which, amongst other things, the Group has agreed to sell fabrics and provide bleaching and dyeing services to the companies controlled by Mr. Louie Tsz Chung/companies controlled by Ms. Koon Po Fun respectively for the period from 17 May 2004 to 31 March 2007 subject to respective caps. The respective transactions (the “Ongoing Connected Transactions”) contemplated under the Agreement with each of Mr. Louie Tsz Chung and Ms. Koon Po Fun constitute non-exempt continuing connected transactions of the Company under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and are subject to reporting and independent shareholders’ approval at the special general meeting of the Company to be held on 25 August 2004. Details of the Ongoing Connected Transactions are set out in the circular of the Company dated 26 July 2004.

On 25 June 2004, Copplestone Limited (“Copplestone”), a wholly owned subsidiary of the Company, and Arco Consulting Inc. (“Arco”), a third party independent of the Company, entered into a settlement agreement (the “Settlement Agreement”). Pursuant to the Settlement Agreement, inter alia, the facility agreement entered into on 6 January 2003 between Copplestone as borrower and Arco as lender relating to a term loan facility of up to HK$4,000,000 (the “Facility Loan”) secured by all the shares in the share capital of i100 Wireless Corporation held by Copplestone was terminated and Copplestone transferred the entire issued share capital of i100 Wireless Corporation to Arco. The disposal of i100 Wireless Corporation constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules. Details of the Settlement Agreement and the disposal of i100 Wireless Corporation are set out in the announcement of the Company dated 14 July 2004.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Liquidity and financial resources

During the period under review, the Group obtained the Easyknit Loan of HK$30,270,000 which has been fully repaid in March 2004 and the Facility Loan of HK$4,000,000. Both loans bore interest at market rate and were repayable on demand. The Group’s total borrowings at 31 March 2004 were HK$4,000,000. During the period under review, the Group raised aggregate net proceeds of approximately HK$101,800,000 from the First Rights Issue, the First Placing, the Second Placing and the Second Rights Issue. As at 31 March 2004, the remaining balance of the net proceeds was approximately HK$65,856,000. During the fifteen months ended 31 March 2004, the Group’s operation was mainly financed by the Easyknit Loan, the Facility Loan and the net proceeds of the aforesaid fund raising exercises.

As at 31 March 2004, the Group had net current assets of approximately HK$56,997,000 (net current liabilities as at 31 December 2002: approximately HK$3,521,000) and cash and cash equivalents of approximately HK$66,131,000 (31 December 2002: approximately HK$1,822,000). The Group’s cash is primarily in Hong Kong and US dollars and placed in leading commercial banks as time deposits with various maturities.

As at 31 March 2004, the Group had a gearing ratio of 6.9%. The gearing ratio is calculated on the basis of the Group’s total borrowings of HK$4,000,000 over the shareholders’ fund of HK$57,856,000. As the Group had no borrowings as at 31 December 2002, no gearing ratio of the Group is presented at 31 December 2002.

The directors believe that the Group has sufficient working capital for its operations.

Exposure to fluctuations in exchange rates and related hedges

As at 31 March 2004, the Group had no significant exposure to fluctuations in exchange rates and any related hedges.

Capital structure

The Group had no debt securities or other capital instruments as at 31 March 2004 and up to the date of this report.

Material acquisitions and disposals

Save as the Po Cheong Acquisition as set out in “Significant Corporate Events” above, the Group had no material acquisitions and disposals of subsidiaries or associates during the fifteen months ended 31 March 2004.

Charges on Group assets

As at 31 March, 2004, the Facility Loan of HK$4,000,000 from an independent third party was secured by all the issued shares of i100 Wireless Corporation, a former wholly-owned subsidiary of the Company.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Capital expenditure

During the fifteen months ended 31 March 2004, the Group spent approximately HK$12,125,000 on acquisition of property, plant and equipment.

Contingent liabilities

As at 31 March 2004, the Group did not have any contingent liabilities.

Significant investment

As at 31 March 2004, the Group did not have any significant investment held or any significant investment plans.

Employees and remuneration policies

As at 31 March 2004, the Group employed approximately 29 full time management, technical and administrative staff in Hong Kong and elsewhere in the People’s Republic of China. Employees’ cost (including directors’ emoluments) amounted to approximately HK$12,737,000 for the period under review. The Group remunerates its employees based on their performance, experience and prevailing industry practice. The Group has share option schemes to motivate valued employees.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX II

UNAUDITED PRO FORMA NET ASSETS STATEMENT OF THE GROUP

The Unaudited Pro Forma Net Assets Statement of the Group has been prepared in accordance with paragraph 29 of Chapter 4 of the Listing Rules for the purpose of illustrating the effect of the Acquisition and the payment of deposit for the Construction on the assets and liabilities of the Group on the assumption that the Acquisition and the payment of deposit for the Construction had taken place on 30 September 2004.

The Unaudited Pro Forma Net Assets Statement of the Group is based on the unaudited consolidated balance sheet of the Group as at 30 September 2004, which has been extracted from the Interim Report of the Company for the six months ended 30 September 2004, adjusted for the transaction resulting from the Acquisition and the payment of deposit for the Construction. A narrative description of the unaudited pro forma adjustments of the Acquisition and the payment of deposit for the Construction that are (i) directly attributable to the Acquisition and the payment of deposit for the Construction; (ii) expected to have a continuing impact on the Group; and (iii) factually supportable, are summarised in the accompanying notes.

The Unaudited Pro Forma Net Assets Statement of the Group is based on a number of assumptions, estimates and uncertainties. The accompanying Unaudited Pro Forma Net Assets Statement of the Group does not purport to describe the actual financial position of the Group that would have been attained had the Acquisition and the payment of deposit for the Construction been completed. The Unaudited Pro Forma Net Assets Statement of the Group does not purport to predict the future financial position of the Group.

The Unaudited Pro Forma Net Assets Statement of the Group should be read in conjunction with the historical financial information of the Group as set out in the Interim Report of the Company for the six months ended 30 September 2004 and other financial information included elsewhere in this circular.

The Group as at 30 September 2004 Pro forma adjustments Notes Pro forma balance HK$’000 HK$’000 HK$’000 Non-current assets Property, plant and equipment 24,998 10,000 a 34,998 Deposit for the Construction — 15,000 b 15,000 Goodwill 47,523 — 47,523 Loan to Acme Landis Operations Holdings Limited 205 — 205 72,726 25,000 97,726	The Group as at 30 September 2004 Pro forma adjustments Notes Pro forma balance HK$’000 HK$’000 HK$’000 Non-current assets Property, plant and equipment 24,998 10,000 a 34,998 Deposit for the Construction — 15,000 b 15,000 Goodwill 47,523 — 47,523 Loan to Acme Landis Operations Holdings Limited 205 — 205 72,726 25,000 97,726	The Group as at 30 September 2004 Pro forma adjustments Notes Pro forma balance HK$’000 HK$’000 HK$’000 Non-current assets Property, plant and equipment 24,998 10,000 a 34,998 Deposit for the Construction — 15,000 b 15,000 Goodwill 47,523 — 47,523 Loan to Acme Landis Operations Holdings Limited 205 — 205 72,726 25,000 97,726	The Group as at 30 September 2004 Pro forma adjustments Notes Pro forma balance HK$’000 HK$’000 HK$’000 Non-current assets Property, plant and equipment 24,998 10,000 a 34,998 Deposit for the Construction — 15,000 b 15,000 Goodwill 47,523 — 47,523 Loan to Acme Landis Operations Holdings Limited 205 — 205 72,726 25,000 97,726
	72,726	25,000	97,726

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX II

	The Group
	as at
	30 September	Pro forma		Pro forma
	2004	adjustments	Notes	balance
	HK$’000	HK$’000		HK$’000
Current assets
Inventories	3,469	—		3,469
Trade and other receivables	26,476	—		26,476
Bank balances and cash	4,128	—	a, b & c	4,128
	34,073	—		34,073
Current liabilities
Trade and other payables	12,224	—		12,224
Bills payable	895	—		895
Amount due to a related company	121	—		121
Import loans	686	—		686
Bank loans — amount due within
one year	3,486	25,000	c	28,486
Consideration payable on
acquisition of subsidiaries	15,000	—		15,000
	32,412	25,000		57,412
Net current assets (liabilities)	1,661	(25,000)		(23,339)
	74,387	—		74,387

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX II

The Group as at 30 September 2004 Pro forma adjustments Notes Pro forma balance HK$’000 HK$’000 HK$’000 Capital and reserves Share capital 35,701 — 35,701 Reserves 28,397 — 28,397 64,098 — 64,098 Non-current liabilities Bank loans — amount due after one year 10,289 — 10,289 74,387 — 74,387	The Group as at 30 September 2004 Pro forma adjustments Notes Pro forma balance HK$’000 HK$’000 HK$’000 Capital and reserves Share capital 35,701 — 35,701 Reserves 28,397 — 28,397 64,098 — 64,098 Non-current liabilities Bank loans — amount due after one year 10,289 — 10,289 74,387 — 74,387	The Group as at 30 September 2004 Pro forma adjustments Notes Pro forma balance HK$’000 HK$’000 HK$’000 Capital and reserves Share capital 35,701 — 35,701 Reserves 28,397 — 28,397 64,098 — 64,098 Non-current liabilities Bank loans — amount due after one year 10,289 — 10,289 74,387 — 74,387	The Group as at 30 September 2004 Pro forma adjustments Notes Pro forma balance HK$’000 HK$’000 HK$’000 Capital and reserves Share capital 35,701 — 35,701 Reserves 28,397 — 28,397 64,098 — 64,098 Non-current liabilities Bank loans — amount due after one year 10,289 — 10,289 74,387 — 74,387
	64,098 10,289	— —	64,098 10,289
	74,387	—	74,387

This statement has been prepared for illustrative purpose only and because of its nature, it may not give a true picture of the financial position of the Group.

Notes:

a. The adjustment reflects the Acquisition at a total consideration of approximately HK$10,000,000 (inclusion of estimated related expenses of approximately HK$527,804).
b. The adjustment reflects a deposit of HK$15,000,000 contracted for the Construction for treating waste water.
c. The adjustment reflects a bank loan of HK$25,000,000 raised to finance the Acquisition and the payment of deposit for the Construction. The loan is guaranteed personally by a Director, it bears interest at the prevailing market rate and is repayable within one year.

— 84 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX II

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21 February 2005

The Directors

Asia Alliance Holdings Limited

Dear Sirs,

We report on the unaudited pro forma net assets statement (the “Unaudited Pro Forma Net Assets Statement”) of Asia Alliance Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) set out in Appendix II to the circular of the Company dated 21 February 2005 (the “Circular”) issued by the Company in connection with the very substantial acquisition, which has been prepared by the Directors of the Company (the “Directors”), for illustrative purpose only, to provide information about how the Acquisition and the payment of deposit for the Construction might have affected the relevant assets and liabilities of the Group.

Responsibilities

It is solely the responsibility of the Directors to prepare the Unaudited Pro Forma Net Assets Statement of the Group in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

It is our responsibility to form an opinion, as required by the Listing Rules, on the Unaudited Pro Forma Net Assets Statement of the Group and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Net Assets Statement of the Group beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of opinion

We conducted our work with reference to the Statements of Investment Circular Reporting Standards and Bulletin 1998/8 “Reporting pro forma financial information pursuant to the Listing Rules” issued by the Auditing Practices Board in the United Kingdom. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Net Assets Statement of the Group with the Directors.

— 85 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX II

Our work does not constitute an audit or a review in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants and, accordingly, we do not express such assurance on the Unaudited Pro Forma Net Assets Statement of the Group.

The Unaudited Pro Forma Net Assets Statement of the Group has been prepared on the basis set out in Appendix II to the Circular for illustrative purpose only and, because of its nature, it may not be indicative of the financial position as at 30 September 2004 or at any future date.

Opinion

In our opinion:

(a) the Unaudited Pro Forma Net Assets Statement of the Group has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Net Assets Statement of the Group as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Yours faithfully,

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong

— 86 —

PROPERTY VALUATION

APPENDIX III

The following is the text of a letter, a summary of valuation and valuation certificate, prepared for the purpose of inclusion in the circular to shareholders issued by the Company, received from Merryshine Surveyors Limited, an independent property valuer, in connection with its valuation on the property interests as at 31 December 2004.

MERRYSHINE SURVEYORS LIMITED

Valuation � Investment Agency � Development Consultancy

Rm 1403, Kwai Hung Holdings Centre, 89 King’s Road, North Point, Hong Kong

17 February 2005

The Directors

Asia Alliance Holdings Limited 7/F., Hong Kong Spinners Building, Phase 6, 481-483 Castle Peak Road, Cheung Sha Wan, Kowloon, Hong Kong

Dear Sirs,

In accordance with your instructions for us to value the property interests in the People’s Republic of China (referred hereinafter as the “PRC”) for the purpose of future development. We confirm that we have carried out inspection, 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 of such property interests as at 31 December 2004 (the “date of valuation”).

Our valuation of the interests in property is our opinion of the market value which we would define as intended to mean — “The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

In valuing the property interests which are for future development in the PRC, we have valued the property on the basis that the property will be developed and completed in accordance with the Company’s latest development proposals provided to us. We have assumed that approvals for the proposal have been obtained. We have also taken into account the construction costs that will be expended to complete the development to reflect the quality of the completed development.

— 87 —

PROPERTY VALUATION

APPENDIX III

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

Direct comparison approach is adopted with reference to comparable transactions in the market and on the basis of vacant possession. Reference has been made to the information on past comparable sales as available to us and standard land price in the locality. Comparison based on prices realized on actual sales or offerings of comparable properties is made. Factors of sizes, character and locations are analyzed, and carefully weighted against all respective advantages and disadvantages of each property in order to arrive at a fair comparison of value.

We have been provided with extracts from title documents relating such property interests. We have not, however, searched the original documents to verify ownership or existence of any amendment which does not appear on the copies handed to us. All documents and leases have been used for reference only. All dimensions, measurements and areas are approximations.

In undertaking our valuation for property, we have relied on the legal opinion provided by the Company’s legal adviser (the “PRC Legal Opinion”).

We understand the current status of titles, grant of major approvals, licenses and documents of the property is as follows:

	Property
State-owned Land Use Rights Grant Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	No
State-owned Land Use Rights Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	No
Building Ownership Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	No

We have inspected the exterior of the property and, where possible, the interior of the premises. However, we have not carried out a structural survey nor have we inspected woodwork or other parts of the structures which are covered, unexposed or inaccessible and we are therefore unable to report that any such parts of the properties are free from defect.

We have relied to a considerable extent on information provided by the Company and have accepted advice given to us by the Company on such matters as planning approvals, statutory notices, easements, tenure, occupation, lettings, site and floor areas.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the properties 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.

— 88 —

PROPERTY VALUATION

APPENDIX III

In valuating the property interests, we have complied with all the requirements contained in the Practice Note 12, and Chapter 5 of the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited and “The HKIS Valuation Standards on Properties” published by the Hong Kong Institute of Surveyors. The valuation has been undertaken by valuers, acting as external valuers, qualified for the purpose of the valuation.

Unless otherwise stated, all money amounts stated are in Hong Kong Dollar. The exchange rate used in valuing the property interests in the PRC on 31 December 2004 was HK$1 = RMB1.06. There has been no significant fluctuation in exchange rate between that date and the date of this letter.

We enclose herewith a summary of our valuation and valuation certificate.

Yours faithfully, For and on behalf of Merryshine Surveyors Limited Li Chi Ho BLE, MRICS, MHKIS, RPS(GP) Director

Note: Li Chi Ho, Chartered Surveyor, has over 10 years’ experience in undertaking valuation of properties in Hong Kong and the PRC.

— 89 —

PROPERTY VALUATION

APPENDIX III

SUMMARY OF VALUATION

Property interests for future development in the PRC

Property

Market value in existing state as at 31 December 2004

An industrial site located at the West of Dongliang Road, Zhili Town, Wuxing District, Huzhou City, Zhejiang Province, PRC and the South of Hengtang Harbour, PRC

No commercial value

Note:

In the absence of a State-owned Land Use Rights Certificate, the property cannot be freely transferred, let or mortgaged in the market. As a result of this, we have assigned it with no commercial value.

— 90 —

PROPERTY VALUATION

APPENDIX III

VALUATION CERTIFICATE

Property

Description

Market value in Particulars of existing state as at 31 Occupancy December 2004

An industrial site located The property comprises an industrial site with a at the West of total site area of approximately 421,631.1sq.m. Dongliang Road, located at the West of Dongliang Road, Zhili Zhili Town, Town, Wuxing District, Huzhou City, Zhejiang Wuxing District, Province, PRC and the South of Hengtang Huzhou City, Harbour, PRC. Zhejiang Province, PRC and the South of The property is planned to be developed in three Hengtang Harbour, plots, the site areas are listed as follows: PRC

The property is No commercial value at present a flat land for agricultural use with several buildings scattered around.

Plot Plot I Plot II Plot III Total:	Site Area (sq.m.) 156,996.1 79,643.4 184,991.6
	421,631.1

Notes:

We understand that the current status of the titles, grant of major approvals, licenses and documents of the property are as follows:
(a) Contract for Land Compensation and Obtaining of Land Use Rights No (b) State-owned Land Use Rights Certificate No (c) Construction Land Planning Permit No (d) Construction Work Planning Permits No (e) Construction Commencement Permits No
According to the information given, the Company planned to hold and develop the property through four subsidiaries of the Company which will be incorporated as wholly owned foreign enterprises in the PRC. As at 1 February 2005, , and have been incorporated.
We have been provided the following information, as at the date of valuation, the Company or its subsidiary company has not obtained a State-owned Land Use Rights Certificate over the property. Thus due to the absence of this title document, at our valuation date, the property can not be freely transferred, let or mortgaged in the market. As a result of this, we have assigned it with no commercial value.
For indicative purposes, we have valued the property assuming that the property will be developed and completed in accordance with the Company’s latest development proposals where (a) construction of certain waste water treatment plant on the property must commence in early 2005; (b) strive to complete garment manufacturing and bleaching and dyeing capabilities by early 2006; and (c) strive to complete knitting operation by the end of 2006. The total intended gross floor area is of not more than 421,631.1 sq.m. approximately. As at the date of valuation, under the assumption that if the State-owned Land Use Rights Certificate has been obtained with the land use right for a term of 50 years for industrial uses and the property can be freely transferred, leased and mortgaged in the market, the market value of the property is approximately RMB50,595,000 (equivalent to HK$47,731,000).

— 91 —

GENERAL INFORMATION

APPENDIX IV

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS OF DIRECTORS

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company and their respective associates in the shares, underlying shares and debentures (as the case may be) of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which are taken or deemed to have under such provisions of the SFO), or recorded in the register maintained by the Company pursuant to Section 352 of the SFO or which were notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of the Listed Issuers in Appendix 10 of the Listing Rules are as follows:

		Number of
		ordinary	Approximate
		shares held	percentage
Name of Director	Nature of interest	(long position)	of interest
Mr. Koon Wing Yee (Note)	Interest of spouse	128,259,324	35.93%
Ms. Lui Yuk Chu (Note)	Beneficiary of a trust	128,259,324	35.93%

Note: The 128,259,324 shares relate to the same block of shares in the Company. These shares were registered in the name of and were beneficially owned by Landmark Profits Limited which was a wholly-owned subsidiary of Easyknit. Magical Profits Limited was interested in approximately 36.74% of the issued share capital of Easyknit. Magical Profits Limited was wholly-owned by Accumulate More Profits Limited which in turn was wholly-owned by Trustcorp Limited as trustee of The Magical 2000 Trust (the beneficiaries of which include Ms. Lui Yuk Chu and her family members other than spouse). Mr. Koon Wing Yee, being the spouse of Ms. Lui Yuk Chu, was deemed to be interested in the 128,259,324 shares by virtue of the SFO.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or the chief executive of the Company and their respective associates had any interests or short positions in the shares, underlying shares and/or debentures (as the case may be) of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which he is taken or deemed to have under such provisions of the SFO), or recorded in the register maintained by the Company pursuant to Section 352 of the SFO or which were notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of the Listed Issuers.

— 92 —

GENERAL INFORMATION

APPENDIX IV

Save as disclosed in the section headed “Material Contracts” in this appendix, none of the Directors is materially interested in any contract or arrangement subsisting at the Latest Practicable Date which is significant in relation to the business of the Group.

As at the Latest Practicable Date, save for the acquisition of Po Cheong International Enterprises Limited as disclosed in the section headed “Material Contracts” below, none of the Directors had any direct or indirect interest in any assets which had been, since 31 March 2004 (the date to which the latest published audited accounts of the Company were made up), (i) acquired or disposed of by; or (ii) leased to; or (iii) proposed to be acquired or disposed of by; or (iv) proposed to be leased to any member of the Group.

3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company, the persons (other than the Directors or the chief executive of the Company) who had an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or who were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any other members of the Group, or had any options in respect of such capital are set out below:

		Number of
		ordinary	Approximate
Name of		shares held	percentage
Substantial Shareholder	Nature of interest	(long position)	of interest
Landmark Profits Limited	Beneficial owner	128,259,324	35.93%
(Notes 1 & 2)
Easyknit (Notes 1 & 2)	Interest of controlled	128,259,324	35.93%
	corporation
Magical Profits Limited	Interest of controlled	128,259,324	35.93%
(Notes 1 & 3)	corporation
Accumulate More Profits Limited	Interest of controlled	128,259,324	35.93%
(Notes 1 & 4)	corporation
Trustcorp Limited (Note 1)	Trustee	128,259,324	35.93%
Au Yeung Man Yin	Beneficial owner	47,624,136	13.34%
Chan So Chun	Beneficial owner	37,191,000	10.42%

Notes:

The 128,259,324 shares relate to the same block of shares in the Company. These shares were registered in the name of and were beneficially owned by Landmark Profits Limited which was a wholly-owned subsidiary of Easyknit. Magical Profits Limited was interested in approximately 36.74% of the issued share capital of Easyknit. Magical Profits Limited was wholly-owned by Accumulate More Profits Limited which in turn was wholly-owned by Trustcorp Limited as trustee of The Magical 2000 Trust (the beneficiaries of which include Ms. Lui Yuk Chu, a Director, and her family members other than spouse).

— 93 —

GENERAL INFORMATION

APPENDIX IV

Mr. Koon Wing Yee, Mr. Tsang Yiu Kai and Ms. Lui Yuk Chu, being the Directors, are also the directors of Landmark Profits Limited and Easyknit.
Ms. Lui Yuk Chu, being a Director, is also a director of Magical Profits Limited.
Mr. Koon Wing Yee, being a Director, is also a director of Accumulate More Profits Limited.

Save as disclosed above, as at the Latest Practicable Date, the Directors and chief executive of the Company are not aware of any other persons who had an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who were, directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or had any options in respect of such capital.

4. MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business) have been entered into by the Company and its subsidiaries within the two years immediately preceding the date of this circular and are or may be material:

(a) an underwriting agreement dated 30 July 2003 entered into between the Company and Get Nice Investment Limited in relation to the underwriting of a rights issue of not less than 13,773,412 rights shares at a price of HK$1.00 per rights share;
(b) a placing agreement dated 13 October 2003 entered into between the Company and Get Nice Investment Limited in relation to the placing of 8,264,047 new shares at a price of HK$0.865 per placing share and the underwriting arrangements;
(c) a placing agreement dated 21 November 2003 entered into between the Company and Kingston Securities Limited in relation to the placing of 9,916,856 new shares at a price of HK$0.865 per placing share and the underwriting arrangements;
(d) an underwriting agreement dated 2 January 2004 entered into among the Company, Get Nice Investment Limited, Kingston Securities Limited and Cheer Union Securities Limited in relation to the underwriting of a rights issue of not less than 297,505,700 rights shares at a price of HK$0.25 per rights share;
(e) a sale and purchase agreement dated 5 March 2004 between Best Ability Limited, a wholly owned subsidiary of the Company, as purchaser and Easyknit International Trading Company Limited, a wholly owned subsidiary of Easyknit, as vendor in relation to the acquisition of entire issued share capital of Po Cheong International Enterprises Limited at a consideration of HK$65,000,000, subject to adjustment (for details, please refer to the announcements dated 5 March 2004, 26 March 2004, 2 April 2004, 8 April 2004, 21 April 2004 and 10 May 2004, and the circular dated 23 April 2004 of the Company);

— 94 —

GENERAL INFORMATION

APPENDIX IV

(f) a settlement agreement dated 25 June 2004 between Copplestone Limited (“Copplestone”), a wholly owned subsidiary of the Company and Arco Consulting Inc. (“Arco”) in relation to the full settlement of a loan of HK$4,000,000 provided by Arco to Copplestone and the accrued interest of HK$511,000 (up to the date of the agreement) by way of transferring all the issued shares of i100 Wireless Corporation, a then wholly owned subsidiary of Copplestone, to Arco (for details, please refer to the announcement dated 14 July 2004 and the circular dated 4 August 2004 of the Company);
(g) the Agreement; and
(h) the Supplemental Agreement.

5. LITIGATION

As at the Latest Practicable Date, there was no litigation or claims of material importance pending or threatened against any member of the Group.

6. DIRECTORS’ INTERESTS IN COMPETING BUSINESSES

As at the Latest Practicable Date, none of the Directors or their respective associates had any interest in businesses which are considered to compete or are likely to compete, either directly or indirectly, with the businesses of the Group as required to be disclosed pursuant to the Listing Rules.

7. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with the Company or any member of the Group which is not expiring or terminable by the Group within one year without payment of compensation (other than statutory compensation).

8. QUALIFICATIONS OF EXPERTS AND CONSENTS

The following are the qualifications of the professional advisers who have given opinions or advice contained in this circular:

Name	Qualification
Deloitte Touche Tohmatsu	Certified Public Accountants
Ernst & Young	Certified Public Accountants
Merryshine Surveyors Limited	Professional Surveyors and Property Valuers

Each of Deloitte Touche Tohmatsu, Ernst & Young and Merryshine Surveyors Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its report and letter (if any), as the case may be, or references to its name in the form and context in which they respectively appear.

— 95 —

GENERAL INFORMATION

APPENDIX IV

9. EXPERT’S INTERESTS IN ASSETS

As at the Latest Practicable Date, each of Deloitte Touche Tohmatsu, Ernst & Young and Merryshine Surveyors Limited:

(a) was not interested, directly or indirectly in any assets which have been, since 31 March 2004 (being the date to which the latest published audited accounts of the Company were made up), (i) acquired or disposed of by; or (ii) leased to; or (iii) proposed to be acquired or disposed of by; or (iv) proposed to be leased to, any member of the Group; and
(b) did not have any shareholding interest in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

10. MISCELLANEOUS

(a) The secretary of the Company is Tsang Yiu Kai, FHKICPA, FCCA, AHKIT, CGA and CPA.
(b) The qualified accountant of the Company is Chan Chung Keung, AHKICPA.
(c) The registered office of the Company is at Canon’s Court, 22 Victoria Street, Hamilton, HM12, Bermuda and the principal place of business of the Company in Hong Kong is at 7th Floor, Hong Kong Spinners Building, Phase 6, 481-483 Castle Peak Road, Cheung Sha Wan, Kowloon, Hong Kong.
(d) The Hong Kong branch share registrar and transfer office of the Company is Secretaries Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.
(e) The English text of this circular and form of proxy shall prevail over the Chinese text in the case of inconsistency.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the principal place of business of the Company in Hong Kong up to and including 11 March 2005:

(a) the memorandum of association and bye-laws of the Company;
(b) the Agreement and the Supplemental Agreement;
(c) the material contracts referred to in the section headed “Material Contracts” in this appendix;
(d) the annual reports of the Company for the year ended 31 December 2002 and for the fifteen months ended 31 March 2004;

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GENERAL INFORMATION

APPENDIX IV

(e) the interim report of the Company for the six months ended 30 September 2004;
(f) the circular of the Company dated 23 April 2004 regarding a major and connected transaction;
(g) the circular of the Company dated 26 July 2004 regarding the ongoing connected transactions and adoption of new bye-laws of the Company;
(h) the circular of the Company dated 4 August 2004 regarding a discloseable transaction;
(i) the letters of consent referred to in the section headed “Qualifications of Experts and Consents” in this appendix;
(j) the report from Deloitte Touche Tohmatsu on the unaudited pro forma financial information of the enlarged Group dated 21 February 2005, the text of which is set out in Appendix II to this circular; and
(k) the property valuation report from Merryshine Surveyors Limited dated 17 February 2005, the text of which is set out in Appendix III to this circular.

— 97 —

NOTICE OF THE SGM

Asia Alliance Holdings Limited

(Incorporated in Bermuda with limited liability)

Stock Code: 616

NOTICE IS HEREBY GIVEN that a special general meeting of the shareholders of Asia Alliance Holdings Limited (the “Company”) will be held at 7th Floor, Hong Kong Spinners Building, Phase 6, 481-483 Castle Peak Road, Cheung Sha Wan, Kowloon, Hong Kong on 11 March 2005 at 9:00 a.m. for the purpose of considering and, if thought fit, passing the following resolution with or without amendment as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“THAT

(1) the agreement dated 24 December 2004 (the “Agreement”) and the supplemental agreement dated 28 December 2004 (the “Supplemental Agreement”), copies of which have been produced to this meeting marked “A” and “B” respectively and signed by the Chairman of this meeting for the purpose of identification, made between the People’s Government of Zhili Town, Wuxing District, Huzhou City, Zhejiang Province, the People’s Republic of China as vendor and Easyknit (Mauritius) Limited, a wholly owned subsidiary of the Company, as purchaser and the transactions contemplated thereunder including the acquisition of land and construction of waste water treatment plant and the investment in the setting up of manufacturing operations comprising garment manufacturing and bleaching and dyeing capabilities, upon the terms and subject to the conditions therein contained, be and are hereby approved, confirmed and ratified; and
(2) the directors of the Company be and are hereby authorised to do all acts or execute all documents which in their opinion are necessary, desirable or expedient to carry out or to give effect to the terms of the Agreement and the Supplemental Agreement.”

By order of the board of Asia Alliance Holdings Limited

Koon Wing Yee President and Chief Executive Officer

Hong Kong, 21 February 2005

For identification only

— 98 —

NOTICE OF THE SGM

Notes:

Any shareholder entitled to attend and vote at the meeting of the Company is entitled to appoint another person as his proxy to attend and vote instead of him. A shareholder who is the holder of two or more shares may appoint more than one proxy to attend on the same occasion. A proxy need not be a shareholder of the Company.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or if the appointor is a corporation, either under its seal or under the hand of an officer or attorney duly authorised.
The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be delivered to the Company’s principal place of business in Hong Kong at 7th Floor, Hong Kong Spinners Building, Phase 6, 481-483 Castle Peak Road, Cheung Sha Wan, Kowloon, Hong Kong not less than forty-eight (48) hours before the time appointed for holding the meeting or adjourned meeting (as the case may be) at which the person named in the instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid.
Completion and return of the instrument appointing a proxy will not preclude shareholders from attending and voting in person at the meeting convened by the above notice or at any adjourned meeting thereof (as the case may be) should they so wish, and in such event, the instrument appointing the proxy shall be deemed to be revoked.
In the case of joint holders of a share, if more than one of such joint holders be present at any meeting 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 in respect of the joint holding.

As of the date hereof, the executive directors of the Company are Mr. Koon Wing Yee, Mr. Tsang Yiu Kai and Ms. Lui Yuk Chu and the independent non-executive directors are Mr. Kan Ka Hon, Mr. Kwong Jimmy Cheung Tim and Mr. Lau Sin Ming.

— 99 —

Asia Alliance Holdings Limited

(Incorporated in Bermuda with limited liability)

Stock Code: 616

FORM OF PROXY FOR USE AT THE SPECIAL GENERAL MEETING (OR AT ANY ADJOURNMENT THEREOF)

I/We (Note 1) ,

of

ordinary share(s) of HK$0.10 each in the

being the registered holder(s) of (Note 2) ordinary share(s) of HK$0.10 each in the capital of ASIA ALLIANCE HOLDINGS LIMITED (the “Company”) hereby appoint the Chairman of the special general meeting

of the Company, or (Note 3)

of

as my/our proxy to attend and vote for me/us and on my/our behalf at the special general meeting of the Company (the “Meeting”) to be held at 7th Floor, Hong Kong Spinners Building, Phase 6, 481-483 Castle Peak Road, Cheung Sha Wan, Kowloon, Hong Kong on 11 March 2005 at 9:00 a.m. and at any adjournment thereof for the purpose of considering and, if thought fit, passing the resolution as set out in the notice convening the Meeting as ordinary resolution, as indicated below or if no such indication is given, as my/our proxy thinks fit and in respect of any other business that may properly come before the Meeting and/or at any adjournment thereof:

Ordinary Resolution For (Note 4) Against (Note 4)
(1) to approve, confirm and ratify the agreement dated 24 December 2004 (the “Agreement”) and the supplemental agreement dated 28 December 2004 (the “Supplemental Agreement”) between the People’s Government of Zhili Town, Wuxing District, Huzhou City, Zhejiang Province, the People’s Republic of China as vendor and Easyknit (Mauritius) Limited, a wholly owned subsidiary of the Company, as purchaser and the transactions contemplated thereunder including the acquisition of land, the construction of waste water treatment plant and the investment in the setting up of manufacturing operations comprising garment manufacturing and bleaching and dyeing capabilities, upon the terms and subject to the conditions therein contained; and
(2) to authorise the directors of the Company to do all acts or execute all documents which in their opinion are necessary, desirable or expedient to carry out or to give effect to the terms of the Agreement and the Supplemental Agreement.

Dated this day of , 2005 Signature:

Notes:

Full name(s) and address(es) must be inserted in BLOCK CAPITAL .
Please insert the number of shares registered in your name(s) to which the proxy relates. If no number is inserted, this form of proxy will be deemed to relate to all the shares of the Company registered in your name(s).
If any proxy other than the Chairman is preferred, please strike out “the Chairman of the special general meeting of the Company, or” and insert the name and address of the proxy desired in the space provided. ANY ALTERATION MADE TO THIS FORM OF PROXY MUST BE INITIALLED BY THE PERSON(S) WHO SIGN(S) IT .
IMPORTANT: IF YOU WISH TO VOTE FOR THE RESOLUTION, TICK THE BOX MARKED “FOR”. IF YOU WISH TO VOTE AGAINST THE RESOLUTION, TICK THE BOX MARKED “AGAINST” . Failure to tick either box will entitle your proxy to cast your vote or abstain at his discretion. Your proxy will also be entitled to vote at his discretion on any resolution properly put to the Meeting and/or at any adjournment thereof other than those referred to in the notice convening the Meeting.
Any shareholder entitled to attend and vote at the Meeting is entitled to appoint another person as his proxy to attend and vote instead of him. A shareholder who is the holder of two or more shares may appoint more than one proxy to attend the Meeting. A proxy need not be a shareholder of the Company.
This form of proxy must be signed by you or your attorney duly authorised in writing or, in the case of a corporation, must either be executed under its common seal or under the hand of an officer or attorney duly authorised.
This form of proxy and the power of attorney or other authority, if any, under which it is signed or a certified copy of such power or authority, shall be delivered to the Company’s principal place of business in Hong Kong at 7th Floor, Hong Kong Spinners Building, Phase 6, 481-483 Castle Peak Road, Cheung Sha Wan, Kowloon, Hong Kong not less than forty-eight (48) hours before the time appointed for holding the Meeting or adjourned meeting at which the person named in this form of proxy proposes to vote, and in default this form of proxy shall not be treated as valid.
In the case of joint holders of a share, if more than one of such joint holders be present at any meeting 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 in respect of the joint holding.
Completion and return of this form of proxy will not preclude you from attending and voting in person at the Meeting and, in such event, the form of proxy shall be deemed to be revoked.

* For identification only

AI assistant

Eminence Enterprise Limited — Proxy Solicitation & Information Statement 2005

49340_rns_2005-02-21_ad9075dd-c888-4116-be1e-db2c17ba06e4.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Asia Alliance Holdings Limited

VERY SUBSTANTIAL ACQUISITION

DEFINITIONS

DEFINITIONS

Asia Alliance Holdings Limited

*

VERY SUBSTANTIAL ACQUISITION

1. INTRODUCTION

LETTER FROM THE BOARD

2. THE AGREEMENT AND SUPPLEMENTAL AGREEMENT

(1) Date

(2) Parties

(3) The Transaction

(4) The Property to be acquired

(5) Condition precedent

(6) Consideration and payment terms

(7) Funding

(8) Completion

(9) Other terms of the Transaction

(10) Implications under the Listing Rules

3. REASONS FOR AND BENEFITS OF THE TRANSACTION

4. INFORMATION ABOUT THE PROJECT

5. FINANCIAL EFFECTS OF THE TRANSACTION ON THE GROUP

6. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

7. SGM

8. PROCEDURE FOR DEMANDING A POLL

9. RECOMMENDATION

10. ADDITIONAL INFORMATION

1. INTERIM RESULTS

CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004

CONDENSED CONSOLIDATED BALANCE SHEET AT 30 SEPTEMBER 2004

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004

CONDENSED CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004

NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004

1. GENERAL AND BASIS OF PREPARATION

2. PRINCIPAL ACCOUNTING POLICIES

3. SEGMENT INFORMATION

6. FINANCE COSTS

7. TAXATION

8. BASIC EARNINGS (LOSS) PER SHARE

9. DIVIDENDS

10. PROPERTY, PLANT AND EQUIPMENT

11. LOAN TO ACME LANDIS OPERATIONS HOLDINGS LIMITED (“ALOH”)

12. TRADE AND OTHER RECEIVABLES

13. TRADE AND OTHER PAYABLES

14. BANK LOANS

15. OTHER LOAN, SECURED

16. SHARE CAPITAL

17. RELATED PARTY TRANSACTIONS/CONNECTED TRANSACTIONS

18. CAPITAL COMMITMENTS

19. ACQUISITION OF SUBSIDIARIES

20. DISPOSAL OF SUBSIDIARIES

2. REPRODUCED REPORT OF ERNST & YOUNG (THE FORMER AUDITORS OF THE COMPANY) FOR THE YEAR ENDED 31 DECEMBER, 2002

To the members

i100 Limited

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

BASIS OF OPINION

FUNDAMENTAL UNCERTAINTY IN RESPECT OF GOING CONCERN

OPINION

Ernst & Young

3. AUDITED CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED BALANCE SHEET

BALANCE SHEET

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE FINANCIAL STATEMENTS

1. GENERAL

2. CHANGE OF FINANCIAL YEAR-END DATE

3. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS

4. SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

Goodwill

Negative goodwill

Investments in subsidiaries

Interests in associates

Eminence Enterprise Limited Proxy Solicitation & Information Statement 2005