IMPORTANT

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

If you have sold or transferred all your shares in renren Holdings Limited, you should at once hand this circular and the accompanying form of proxy 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 transferee.

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

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**renren Holdings Limited 人人控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

PROPOSED RIGHTS ISSUE

OF NOT LESS THAN 620,000,000 RIGHTS SHARES AND NOT MORE THAN 674,929,113 RIGHTS SHARES AT HK$0.018 PER RIGHTS SHARE PAYABLE IN FULL ON ACCEPTANCE (ON THE BASIS OF ONE RIGHTS SHARE FOR EVERY ONE SHARE HELD)

Manager

Ever-Long Securities Company Limited

Underwriters

Ever-Long Securities Company Limited Taiwan Concord Capital Securities (Hong Kong) Limited

Independent Financial Adviser to the Independent Board Committee

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Menlo Capital Limited

It should be noted that the Underwriting Agreement (as defined herein) contains provisions granting Ever-Long (as defined herein), on behalf of the Underwriters (as defined herein) the right to terminate the Underwriting Agreement, which may be exercised at any time prior to 4:00 p.m. on the second Business Day (as defined herein) immediately after the last day for acceptance of the Rights Issue (as defined herein), if in the reasonable opinion of Ever-Long on behalf of the Underwriters: (a) the success of the Rights Issue would be affected by: (i) the introduction of any new regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may, in the opinion of Ever-Long, materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole; or (ii) the occurrence of any local, national or international event or change, whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date hereof, of a political, military, financial, economic or other nature (whether or not ejusdem generis with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the opinion of Ever-Long, materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole; or (iii) any material adverse change in the business or in the financial or trading position of the Group as a whole; or (b) any material adverse change in market conditions (including, without limitation, a change in fiscal or monetary policy or foreign exchange or currency markets, suspension or restriction of trading in securities) occurs which in the reasonable opinion of Ever-Long makes it inexpedient or inadvisable to proceed with the Rights Issue; or (c) the circular or the prospectus of the Rights Issue when published contain information (either as to business prospects or the condition of the Group or as to its compliance with any laws or the Listing Rules or any applicable regulations) which has not prior to the date hereof been publicly announced or published by the Company and which may in the opinion of Ever-Long is material to the Group as a whole and is likely to affect the success of the Rights Issue or might cause a prudent investor not to accept the Rights Shares provisionally allotted to it; Ever-Long, on behalf of the Underwriters, may terminate the Underwriting Agreement and the Rights Issue will not proceed.

Shares will be dealt with on an ex-rights basis from 1st April, 2003. Rights Shares will be dealt with in their nil-paid form from 9th April, 2003 to 16th April, 2003 (both dates inclusive). If Ever-Long, on behalf of the Underwriters, terminates the Underwriting Agreement or the conditions of the Rights Issue are not fulfilled or otherwise waived by Ever-Long on behalf of the Underwriters, the Rights Issue will not proceed.

Any dealing in Shares or Rights Shares in their nil-paid form between 9th April, 2003 to 16th April, 2003 (both dates inclusive) is accordingly at the investors’ own risk.

If in any doubt, investors should consider obtaining professional advice on this.

Notice of a special general meeting of renren Holdings Limited to be held at 27/F., Park Lane Room 3, Park Lane Hotel, 310 Gloucester Road, Causeway Bay, Hong Kong on Monday, 7th April, 2003 at 9:30 a.m. is set out on pages 86 to 89 of this circular.

If you are not able to attend the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same at the office of Abacus Share Registrars Limited, at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjourned meeting should you so wish.

A letter of advice from Menlo (as defined herein) to the Independent Board Committee is set out on pages 22 to 30 of this circular.

21st March, 2003

* For identification purpose only

EXPECTED TIMETABLE

2003 Last day of dealings in Shares on a cum-rights basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31st March, Commencement of dealings in Shares on an ex-rights basis . . . . . . . . . . . . . . . . . . . . . . . . 1st April, Latest time for lodging transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on 2nd April, Closure of register of members to determine the eligibility of the Rights Issue (both dates inclusive) . . . . . . . . . . . . . . . 3rd April to 7th April, Latest time for lodging proxy forms for the SGM . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on 5th April, Expected date of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on 7th April, Record Date for the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7th April, Despatch of Rights Issue prospectus, provisional allotment letters and forms of application for excess Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7th April, Register of members re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8th April, First day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9th April, Latest time for splitting nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on 11th April, Last day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16th April, Latest time for payment and acceptance of Rights Shares . . . . . . . . . . . . . 4:00 p.m. on 23rd April, Latest time for the Rights Issue to become unconditional . . . . . . . . . . . . . 4:00 p.m. on 25th April, Announcement of results of the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28th April, Despatch of refund cheques in respect of wholly unsuccessful or partially unsuccessful applications for excess Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28th April, Despatch of share certificates for Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28th April, Dealings in fully paid Rights Shares commence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30th April,

– i –

CONTENTS

		Pages
Responsibility Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Termination	of the Underwriting Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Letter from	the Board
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		7
PROPOSED RIGHTS ISSUE
	Issue statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
	Qualifying Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
	Basis of the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
	Subscription Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
	Warning of the risks in trading of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
	Status of the Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
	Certificates of the Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
	Rights of Overseas Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
	Application for excess Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
	Listing and dealings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
PERMISSION OF THE BMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		12
THE UNDERWRITING AGREEMENT
	Undertaking from Mr. Mak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
	Termination of the Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
	Conditions of the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
	Use of proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
	Reasons for the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
	Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
BUSINESS REVIEW AND PROSPECTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		16
INFORMATION ON THE USE OF PROCEEDS FROM
PAST PLACEMENTS AND SUBSCRIPTIONS
SINCE FEBRUARY 2001
	June Placement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
	July Bond Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
	March Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
	December Placement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
GENERAL MANDATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		19
THE SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		20
RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		20
FURTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		20
Letter from	the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Letter from	Menlo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Appendix 1	– Financial information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	31
Appendix 2	– Explanatory statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	76
Appendix 3	– General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	79
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		86

– ii –

RESPONSIBILITY STATEMENT

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

– 1 –

TERMINATION OF THE UNDERWRITING AGREEMENT

It should be noted that the Underwriting Agreement contains provisions granting the Underwriters the right to terminate the Underwriting Agreement, which may be exercised at any time prior to 4:00 p.m. on the second Business Day immediately after the last day for acceptance of the Rights Issue, if in the reasonable opinion of Ever-Long on behalf of the Underwriters:

(a) the success of the Rights Issue would be affected by:
(i) the introduction of any new regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may, in the opinion of Ever-Long, materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole; or
(ii) the occurrence of any local, national or international event or change, whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date hereof, of a political, military, financial, economic or other nature (whether or not ejusdem generis with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the opinion of Ever-Long, materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole; or
(iii) any material adverse change in the business or in the financial or trading position of the Group as a whole; or
(b) any material adverse change in market conditions (including, without limitation, a change in fiscal or monetary policy or foreign exchange or currency markets, suspension or restriction of trading in securities) occurs which, in the reasonable opinion of Ever-Long, makes it inexpedient or inadvisable to proceed with the Rights Issue; or
(c) the circular or the prospectus of the Rights Issue when published contain information (either as to business prospects or the condition of the Group or as to its compliance with any laws or the Listing Rules or any applicable regulations) which has not prior to the date hereof been publicly announced or published by the Company and which may, in the opinion of Ever-Long, is material to the Group as a whole and is likely to affect the success of the Rights Issue or might cause a prudent investor not to accept the Rights Shares provisionally allotted to it;

Ever-Long, on behalf of the Underwriters, may terminate the Underwriting Agreement and the Rights Issue will not proceed.

– 2 –

DEFINITIONS

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

“Action”	a civil action brought by GE Capital against renren Limited,
	a wholly owned subsidiary of the Company, and the
	Company in the Court on 17th January, 2003
“Announcement”	the announcement of the Company dated 3rd March, 2003
	in relation to the Rights Issue
“BMA”	Bermuda Monetary Authority
“Board”	the board of Directors
“Business Day”	any day (other than a Saturday) on which licensed banks in
	Hong Kong are generally open for business throughout their
	normal business hours
“CCASS”	the Central Clearing and Settlement System established and
	operated by HKSCC
“Company”	renren Holdings Limited, an exempted company
	incorporated in Bermuda with limited liability, the issued
	Shares of which are listed on the Stock Exchange
“Companies Act”	the Companies Act 1981 of Bermuda
“Companies Ordinance”	the Companies Ordinance, Chapter 32 of the Laws of Hong
	Kong
“Court”	the Court of First Instance of the High Court of Hong Kong
“December Placement”	the placement by the Company of 150,000,000 new Shares
	and subscription of 157,586,193 new Shares at the price of
	HK$0.031 per new Share by Rich Delta which were
	completed on 22nd December, 2002
“Directors”	directors of the Company
“Ever-Long”	Ever-Long Securities Company Limited, a dealer registered
	under the Securities Ordinance (Chapter 333 of the Laws
	of Hong Kong), being one of the Underwriters
“GE Capital”	GE Capital (Hong Kong) Limited, a limited company
	incorporated in Hong Kong
“General Mandates”	the New Issue Mandate and the Repurchase Mandate
“Group”	the Company and its subsidiaries

– 3 –

DEFINITIONS

“HKSCC”	Hong Kong Securities Clearing Company Limited
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Independent Board Committee”	the independent committee of the board of Directors
	comprising the independent non-executive Directors, Mr.
	Lo Chi Man, Joseph and Mr. Wong Kwong Lung, Terence
“Independent Shareholders”	Shareholders other than Rich Delta, Sky Concord, Mr. Mak
	and their respective associates (as defined in the Listing
	Rules)
“June Placement”	the placement of 1,300,000,000 existing Shares at HK$0.036
	per Share and subscription of 1,300,000,000 new Shares at
	HK$0.036 per new Share by Rich Delta which was
	completed on 27th June, 2001
“July Bond Issue”	the issue of convertible bonds by the Company in aggregate
	principal amount of HK$12,000,000 in July, 2001
“Latest Practicable Date”	19th March, 2003, being the latest practicable date prior to
	the printing of this circular for the purpose of ascertaining
	certain information contained in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Magna Steels”	Magna Steels Co. Ltd., a company incorporated on
	9th August, 2001 in the British Virgins Islands with limited
	liability and is an indirect wholly-owned subsidiary of the
	Company
“March Rights Issue”	the issue of 6,820,502,663 rights shares by the Company at
	a price of HK$0.016 per rights share of the Company on
	the basis of 17 rights shares for every 2 shares of the
	Company with bonus warrants, which had become
	unconditional on 5th March, 2002
“Menlo”	Menlo Capital Limited, an investment adviser registered
	under the Securities Ordinance (Chapter 333 of the Laws
	of Hong Kong), the independent financial adviser to the
	Independent Board Committee in relation to the Rights Issue
“Mr. Mak”	Mr. Mak Chi Yeung, a Director and the beneficial owner of
	the entire issued share capital of Sky Concord which in
	turn is the beneficial owner of the entire issued share capital
	of Rich Delta

– 4 –

DEFINITIONS

“New Issue Mandate”	a general and unconditional mandate to the Directors to
	exercise all the powers of the Company to allot, issue and
	otherwise deal with Shares and other securities of the
	Company with an aggregate nominal amount not exceeding
	20% of the aggregate nominal amount of the Shares in
	issue as enlarged by the issue of the Rights Shares
“Options”	options to subscribe for Shares granted by the Company on
	23rd July, 2001 under a share option scheme adopted by
	the Company on 26th June, 2000
“Overseas Shareholders”	Shareholders whose names appear on the register of
	members of the Company as at the close of the business on
	the Record Date and whose addresses as shown on such
	register are outside Hong Kong
“PRC”	the People’s Republic of China which for the purpose of
	this circular, excludes Hong Kong
“Prospectus Documents”	the Rights Issue prospectus, the provisional allotment letter
	and the form of application for excess Rights Shares
“Qualifying Shareholders”	Shareholders other than the Overseas Shareholders
“Record Date”	7th April, 2003, the record date by reference to which
	entitlements to the Rights Issue will be determined
“Repurchase Mandate”	a general and unconditional mandate to the Directors to
	exercise all the powers of the Company to repurchase Shares
	with an aggregate nominal amount not exceeding 10% of
	the aggregate nominal amount of the Shares in issue as
	enlarged by the issue of the Rights Shares
“Rich Delta”	Rich Delta Development Limited, a company incorporated
	in the British Virgin Islands with limited liability and the
	beneficial owner of 316,092,279 Shares which represented
	approximately 50.98% of the entire issued share capital of
	the Company and a wholly-owned subsidiary of Sky
	Concord
“Rights Issue”	the proposed issue by way of rights of Rights Shares at a
	price of HK$0.018 per Rights Share on the basis of one
	Rights Share for every one Share then held on the Record
	Date
“Rights Shares”	Shares to be issued pursuant to the Rights Issue
“SDI Ordinance”	the Securities (Disclosure of Interests) Ordinance (Chapter
	396 of the Laws of Hong Kong)

– 5 –

DEFINITIONS

“Share(s)”	ordinary share(s) of HK$0.01 each in the share capital of
	the Company
“Shareholder(s)”	holder(s) of the Share(s)
“SGM”	the special general meeting of the Company to be held on
	7th April, 2003
“Sky Concord”	Sky Concord Development Limited, a company incorporated
	in the British Virgin Islands, which is wholly owned by
	Mr. Mak and is the beneficial owner of the entire issued
	share capital of Rich Delta
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscription Price”	subscription price of HK$0.018 per Rights Share
“Takeovers Code”	the Hong Kong Code on Takeovers and Mergers
“Taiwan Concord”	Taiwan Concord Capital Securities (Hong Kong) Limited,
	one of the Underwriters
“Underwriters”	Ever-Long and Taiwan Concord
“Underwriting Agreement”	the underwriting agreement dated 26th February, 2003 in
	relation to the Rights Issue and entered into between the
	Company, Mr. Mak and the Underwriters
“Warrants	warrants of the Company with subscription rights being
	transferable in amounts and multiples of HK$0.25 per Share
	entitling the holders thereof to subscribe for an aggregate
	of 54,151,513 Shares. The Warrants have expired on 11th
	March, 2003
“HK$”	Hong Kong dollars, the lawful currency for the time being
	of Hong Kong
“%”	per cent.

– 6 –

LETTER FROM THE BOARD

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**renren Holdings Limited 人人控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

Executive Directors: Mak Chi Yeung (Chairman) Mak Shuk Yin

Independent non-executive Directors: Lo Chi Man, Joseph Wong Kwong Lung, Terence

Registered office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Head office and principal place of business in Hong Kong: Room 601 Pacific House 20 Queen’s Road Central Hong Kong

21st March, 2003

To the Shareholders

PROPOSED RIGHTS ISSUE OF NOT LESS THAN 620,000,000 RIGHTS SHARES AND NOT MORE THAN 674,929,113 RIGHTS SHARES AT HK$0.018 PER RIGHTS SHARE PAYABLE IN FULL ON ACCEPTANCE (ON THE BASIS OF ONE RIGHTS SHARE FOR EVERY ONE SHARE HELD)

Dear Sir or Madam,

INTRODUCTION

The Directors announced on 3rd March, 2003 that the Company proposed to effect the Rights Issue. The purpose of this circular is to give you further information on the Rights Issue and to set out the advice of Menlo to the Independent Board Committee and the recommendation of the Independent Board Committee in respect of the Rights Issue and to give you notice of the SGM at which the necessary resolutions will be proposed to consider and, if thought fit, approve the Rights Issue, the Repurchase Mandate, the New Issue Mandate and the mandate to allot and issue securities with an aggregate nominal amount equal to those Shares which are repurchased by the Company pursuant to the Repurchase Mandate.

* For identification purpose only

– 7 –

LETTER FROM THE BOARD

PROPOSED RIGHTS ISSUE

Issue statistics

Basis of the Rights Issue: one Rights Share for every one Share held on the Record Date Number of Shares in issue: 620,000,000 Shares (as at the date of Announcement) Number of Shares in issue: 620,000,554 Shares (Note 1) (as at the Latest Practicable Date) Number of Rights Shares: not less than 620,000,554 Rights Shares and not more than 620,778,154 Rights Shares (Note 2) Outstanding Options granted: 777,600 Options entitling the holders thereof to subscribe for an aggregate of 777,600 Shares (Note 3) Number of Warrants: as at the date of the Announcement, there were outstanding Warrants entitling the holders thereof to subscribe for an aggregate of 54,151,513 Shares. The Warrants have expired on 11th March, 2003 (Note 1) Underwriters: Ever-Long and Taiwan Concord

Notes:

Between the date of the Announcement and the Latest Practicable Date, 554 Warrants have been exercised and 554 Shares were allotted to the relevant holders of the Warrants. The total number of issued Shares increased from 620,000,000 Shares (as at the date of Announcement) to 620,000,554 Shares (as at the Latest Practicable Date).
Excluding the 54,150,959 Warrants which entitled the holders thereof to subscribe for an aggregate of 54,150,959 Shares and which remained unexercised upon their expiry on 11th March, 2003, the number of Rights Shares proposed to be issued by the Company will now be not less than 620,000,554 Rights Shares and not more than 620,778,154 Rights Shares instead of not less than 620,000,000 Rights Shares and not more than 674,929,113 as announced in the Announcement.
Amongst the 777,600 Options, 576,000 Options were granted to Mr. Mak and the remaining 201,600 Options were granted to be employees of the Group.

Assuming that no further Shares will be issued or that the outstanding Options will not be exercised during the period commencing from the Latest Practicable Date up to and including the Record Date and all the 620,000,554 Rights Shares have been fully subscribed for or underwritten, save and except for Mr. Mak who will procure the acceptance of 316,092,279 Rights Shares which will be provisionally allotted to Rich Delta as per his undertaking under the Underwriting Agreement, the shareholding structure of the Company before and after the Rights Issue is as follows:

	Before the Rights Issue	Before the Rights Issue	After the Rights	Issue
	No. of Shares	%	No. of Shares	%
Rich Delta	316,092,279	50.98	632,184,558	50.98
Sky Concord_(Note)_	316,092,279	50.98	632,184,558	50.98
Mr. Mak_(Note)_	316,092,279	50.98	632,184,558	50.98
Public	303,908,275	49.02	607,816,550	49.02
Total issued Shares	620,000,554	100	1,240,001,108	100

Note: These 316,092,279 Shares are beneficially owned by Rich Delta. Rich Delta is a wholly-owned subsidiary of Sky Concord which in turn is wholly-owned by Mr. Mak.

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LETTER FROM THE BOARD

Qualifying Shareholders

The Company will send provisional allotment letters and forms of application for excess Rights Shares to Qualifying Shareholders only.

A Qualifying Shareholder must:

be registered as a member of the Company on the Record Date; and
have an address in Hong Kong which appears on the register of members of the Company on the Record Date.

In order to be registered as members of the Company on the Record Date and to qualify for the Rights Issue, Shareholders must lodge any transfer of Shares (together with the relevant share certificates) with the Company’s branch share registrars in Hong Kong by 4:00 p.m. on 2nd April, 2003.

The branch share registrars of the Company in Hong Kong is:

Abacus Share Registrars Limited G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong

The register of members of the Company will be closed from 3rd April to 7th April 2003 (both dates inclusive). No transfer of Shares will be registered during this period.

Basis of the Rights Issue

The Company will provisionally allot one Rights Share, in nil-paid form, for every one Share held by the Qualifying Shareholders on the Record Date payable in full on acceptance. Based on the 620,000,554 Shares in issue as at the Latest Practicable Date, 620,000,554 Rights Shares will be issued under the Rights Issue. Assuming the outstanding Options are exercised in full on or before the Record Date, a maximum number of 620,778,154 Rights Shares will be issued under the Rights Issue. The terms and conditions of the Rights Issue have been agreed after arm’s length negotiation between the Company, Mr. Mak and the Underwriters.

Subscription Price

HK$0.018 per Rights Share, payable in full upon acceptance.

The Subscription Price represents:

a discount of about 43.75% to the closing price of HK$0.032 per Share as quoted on the Stock Exchange on 21st February, 2003, being the last trading day prior to the suspension of trading of the Shares on 24th February, 2003;
a discount of about 40% to the average closing price of approximately HK$0.030 per Share for the last 10 trading days up to and including 21st February, 2003;

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LETTER FROM THE BOARD

a discount of about 28% to the theoretical ex-rights price of HK$0.025 per Share based on the closing price as quoted on the Stock Exchange on 21st February, 2003;
a discount of about 52.63% to the net tangible assets of the Group of approximately HK$0.038 per Share (on a pro forma basis assuming the Rights Issue has been completed) as at 30th June, 2002; and
a discount of about 28% to the closing price of approximately HK$0.025 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

The Subscription Price was agreed after arm’s length negotiation among the Company, Mr. Mak and the Underwriters with reference to the prevailing market conditions and after considering the substantial discounts for the subscription prices of recent rights issue of other listed issuers. In view of the current sluggish economic environment and the uncertain international market condition, the Directors consider that the Subscription Price and the discounts for the Subscription Price are fair and reasonable.

Warning of the risks in trading of Shares

Shares will be dealt with on an ex-rights basis from 1st April, 2003. Rights Shares will be dealt with in their nil-paid form from 9th April, 2003 to 16th April, 2003 (both dates inclusive). If Ever-Long, on behalf of the Underwriters, terminates the Underwriting Agreement (see paragraph headed “Termination of the Underwriting Agreement” below) or the conditions of the Rights Issue (see paragraph headed “Conditions of the Rights Issue” below) are not fulfilled or otherwise waived by Ever-Long on behalf of the Underwriters, the Rights Issue will not proceed.

Any dealing in Shares or Rights Shares in their nil-paid form between 9th April, 2003 and 16th April, 2003 (both dates inclusive) is accordingly at the investors’ own risk.

If in any doubt, investors should consider obtaining professional advice on this.

Status of the Rights Shares

The Rights Shares (when allotted, issued and fully paid) will rank pari passu in all respects with the Shares in issue on the date of allotment and issue of the Rights Shares. Holders of the Rights Shares (when allotted, issued and fully paid) will be entitled to receive all future dividends and distributions which are declared, made or paid on or after the date of allotment and issue of the Rights Shares. Dealings in the nil-paid and fully paid Rights Shares will be subject to payment of stamp duty in Hong Kong.

Certificates of the Rights Shares

Subject to the conditions of the Rights Issue being fulfilled or otherwise waived by EverLong on behalf of the Underwriters, as appropriate, certificates for all fully paid Rights Shares are expected to be posted by 28th April, 2003 to those Shareholders who have accepted the provisional allotment of the Rights Shares or applied for and been allotted the excess Rights Shares, and paid for the Rights Shares. The dealings of the fully paid Rights Shares are expected to commence on or about 30th April, 2003.

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LETTER FROM THE BOARD

Rights of Overseas Shareholders

The Prospectus Documents will not be registered or filed under the applicable securities legislation of any jurisdictions other than Hong Kong and Bermuda. Having reviewed the register of members of the Company, the Directors have exercised the discretion given to them under the bye-laws of the Company, among other things, not to offer the Rights Shares to persons in territories where in their opinion the Rights Issue would or might, in the absence of compliance with registration or other special formalities in such territories, be unlawful or impracticable. Accordingly, no provisional allotment of Rights Shares will be made to Overseas Shareholders. The Company will send a Rights Issue prospectus to each of the Overseas Shareholders for their information only. The Company will not send provisional allotment letters or forms of application for excess Rights Shares to Overseas Shareholders.

If a premium (net of expenses) can be obtained, the Company will sell the Rights Shares which would otherwise have been provisionally allotted to the Overseas Shareholder once dealings in the nil-paid Rights Shares commence. The proceeds of each sale, less expenses, which amount to HK$100 or more will be paid by cheque to the relevant Overseas Shareholder in Hong Kong dollars as soon as practicable. The Company will retain individual amount of less than HK$100 for its own benefit.

Application for excess Rights Shares

Qualifying Shareholders may apply (using forms for application of excess Rights Shares) for any unsold entitlement of the Overseas Shareholders and any Rights Shares provisionally allotted but not accepted.

The Company will allocate excess Rights Shares at its sole discretion, on a fair and equitable basis.

Listing and dealings

The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Rights Shares in both nil-paid and fully-paid forms.

Subject to the granting of the listing of, and permission to deal in, the Rights Shares in their nil-paid and fully-paid forms on the Stock Exchange, the Rights Shares in their nil-paid and fullypaid forms will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the respective commencement dates of dealings in the Rights Shares in their nil-paid and fully-paid forms on the Stock Exchange or such other dates as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Provisional allotments of the Rights Shares made to Qualifying Shareholders will be transferable and the existing Shares will be dealt with on an ex-rights basis with effect from 1st April, 2003, and that the Rights Shares will be dealt with in their nil-paid form from 9th April, 2003 to 16th April, 2003 (both dates inclusive). Such dealings will take place whilst the conditions to which the Rights Issue is subject remain unfulfilled. Any persons dealing in the Shares from 1st April, 2003 to the date on which all conditions to which the Rights Issue is subject are fulfilled

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LETTER FROM THE BOARD

(which is expected to be at 4:00 p.m. on 25th April, 2003) and any person dealings in nil-paid Rights Shares from 9th April, 2003 to 16th April, 2003 (being the first and last dates of dealings in the nil-paid Rights Shares, respectively), will accordingly bear the risk that the Rights Issue may not become unconditional. Any investor who is in any doubt about his position is advised to consult his own professional adviser.

Dealing in the Rights Shares (in both nil-paid and fully-paid forms) will be in board lots of 8,000 shares and be subject to the payment of stamp duty in Hong Kong.

PERMISSION OF THE BMA

Permission under the Exchange Control Act 1972 of Bermuda (and regulations made thereunder) has been received from the BMA in respect of the issue of the Rights Shares to persons regarded as non-residents of Bermuda for exchange control purposes subject to the requirement that the Rights Shares are listed on the Stock Exchange. In granting such permission and in accepting the Prospectus Documents for filing, neither the BMA nor the Registrar of Companies of Bermuda accepts any responsibility for the financial soundness of the Group or for the correctness of any statements made or opinions expressed in the Prospectus Documents.

THE UNDERWRITING AGREEMENT

Underwriters: Ever-Long and Taiwan Concord

The Underwriters are independent of, and not connected with the directors, chief executives and substantial shareholders of the Company, any of its subsidiaries or any of their respective associates (as defined in the Listing Rules).

Number of Shares underwritten as not less than 303,907,721 and not more than 358,836,834 per the Underwriting Agreement: Rights Shares (Note) Commission: 2.5% of the Subscription Price of the Rights Shares underwritten by the Underwriters.

Note: Excluding the 316,092,279 Rights Shares which will be provisionally allotted to Rich Delta pursuant to Mr. Mak’s irrevocable undertaking to the Company and the Underwriters.

The Underwriters will not become the substantial shareholders of the Company after the completion of the Rights Issue, as the Underwriters will procure sub-underwriters to take up the Rights Shares underwritten by them pursuant to the Underwriting Agreement.

As at the Latest Practicable Date, there were 620,000,554 Shares in issue and 777,600 Options outstanding. The Warrants have expired on 11th March, 2003. 554 Warrants had been exercised and 554 Shares were allotted to the relevant holders thereof between the date of the Underwriting Agreement and the Latest Practicable Date. Excluding the 54,150,959 Warrants which entitled the holders thereof to subscribe for an aggregate of 54,150,959 Shares and which remained unexercised upon their expiry on 11th March, 2003, the number of Right Shares to be issued by the Company will be not less than 620,000,554 Rights Shares and not more than 620,778,154 Rights Shares. As a result, the Underwriters will now only be obligated to underwrite not less than 303,908,275 and not more than 304,685,875 Rights Shares instead of not less than 303,907,721 and not more than 358,836,834 as announced in the Announcement.

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LETTER FROM THE BOARD

Undertaking from Mr. Mak

As at the date hereof, Rich Delta is the beneficial owner of 316,092,279 Shares which represents approximately 50.98% of the existing issued share capital of the Company. Rich Delta is a wholly-owned subsidiary of Sky Concord, which entire issued share capital is in turn wholly owned by Mr. Mak. Mr. Mak has given an irrevocable undertaking under the Underwriting Agreement in favour of both the Company and the Underwriters to accept or procure acceptance in full of the 316,092,279 Rights Shares which will be provisionally allotted to Rich Delta pursuant to the Rights Issue. Neither Mr. Mak, Rich Delta nor Sky Concord has decided to apply for any excess Rights Shares or not as at the date hereof. The remaining balance of not less than 303,908,275 Rights Shares and not more than 304,685,875 Rights Shares (after deducting 54,150,959 Shares which were to be issued under the Warrants which remained unexercised upon their expiry on 11th March, 2003) will be fully underwritten by the Underwriters.

Termination of the Underwriting Agreement

(a) the success of the Rights Issue would be affected by:
(i) the introduction of any new regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may, in the opinion of Ever-Long, materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole; or
(ii) the occurrence of any local, national or international event or change, whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date hereof, of a political, military, financial, economic or other nature (whether or not ejusdem generis with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the opinion of Ever-Long, materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole; or
(iii) any material adverse change in the business or in the financial or trading position of the Group as a whole; or
(b) any material adverse change in market conditions (including, without limitation, a change in fiscal or monetary policy or foreign exchange or currency markets, suspension or restriction of trading in securities) occurs which, in the reasonable opinion of Ever-Long, makes it inexpedient or inadvisable to proceed with the Rights Issue; or

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LETTER FROM THE BOARD

(c) the circular or the prospectus of the Rights Issue when published contain information (either as to business prospects or the condition of the Group or as to its compliance with any laws or the Listing Rules or any applicable regulations) which has not prior to the date hereof been publicly announced or published by the Company and which may, in the opinion of Ever-Long, is material to the Group as a whole and is likely to affect the success of the Rights Issue or might cause a prudent investor not to accept the Rights Shares provisionally allotted to it;

Ever-Long, on behalf of the Underwriters, may terminate the Underwriting Agreement and the Rights Issue will not proceed.

Conditions of the Rights Issue

The Rights Issue is conditional upon, among other things, the following conditions being fulfilled, and as the case may be, condition numbered 5 below being waived by Ever-Long on behalf of the Underwriters:

the approval of the Rights Issue by the Independent Shareholders at the SGM;
the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Rights Shares in their nil-paid and fully-paid forms;
the delivery to the Stock Exchange and registration with the Registrar of Companies in Hong Kong of one copy of the Prospectus Documents in compliance with the Listing Rules and the Companies Ordinance;
the filing of the Prospectus Documents with the Registrar of Companies in Bermuda in accordance with the Companies Act; and
the execution of a consent order between GE Capital, renren Limited (a wholly owned subsidiary of the Company) and the Company as full and final settlement of the Action, on terms acceptable to Ever-Long on behalf of the Underwriters.

on or before the last day for termination of the Rights Issue.

On 17th March, 2003, the parties to the Action have executed a consent order for full and final settlement of the Action and the Court has on 18th March, 2003 granted an order in terms of the executed consent order. As a result, condition numbered 5 above has been fulfilled. Ever-Long, on behalf of the Underwriters, has made a written confirmation dated 17th March, 2003 to the Company that it will not, on behalf of the Underwriters, terminate the Underwriting Agreement based on the condition numbered 5 above.

Use of proceeds

The estimated net proceeds of the Rights Issue will be not less than about HK$10 million and not more than about HK$11 million of which approximately HK$2 million will be applied as payment to GE Capital in relation to the settlement of the Action. Under the Action, GE Capital claimed against the Company and renren Limited for an aggregate sum of approximately HK$5.7 million, being unpaid rental and overdue interests pursuant to various lease agreements for products supplied to the Group by GE Capital. Settlement in relation to the Action has been reached

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LETTER FROM THE BOARD

between GE Capital, the Company and renren Limited and a consent order has been executed on 17th March, 2003 and the Court has on 18th March, 2003 granted an order in terms of the executed consent order. The terms of the consent order are as follows:

In full and final settlement of the Action, the Company and renren Limited are required to pay GE Capital an aggregate sum of approximately HK$5.7 million (inclusive of costs incurred in relation to the Action) by the following five instalments:

(a) the first and second instalments of approximately HK$1 million each will be made before the mid of May, 2003;
(b) the third and fourth instalments of approximately HK$0.5 million each will be paid by no later than the end of June and the end of August, 2003 respectively;
(c) the fifth instalment, being the remaining balance of approximately HK$2.7 million will be paid by the end of December, 2003.

Ever-Long, on behalf of the Underwriters, has indicated by a letter dated 17th March, 2003 to the Company that such settlement terms are acceptable to the Underwriters. As a result, condition numbered 5 as stated herein under heading “Conditions of the Rights Issue” has been fulfilled, Ever-Long, on behalf of the Underwriters, also confirmed in the letter dated 17th March, 2003, that the Underwriters will not terminate the Underwriting Agreement based on condition numbered 5.

Out of the net proceeds of the Rights Issue, HK$2 million will be used for the first and second instalments of the settlement of the Action. The Directors envisage that the Group will finance the third to fifth instalment payments by internal resources and if the circumstances may require, by the proceeds of the Rights Issue which has been intended for payment of the Group’s borrowing or debts.

The balance of not more than approximately HK$9 million will be used as general working capital of the Group to support the day-to-day operation of the Group’s business. Assuming no adverse changes to the market environment of the Group’s existing business or the general economic condition, the Directors estimate that amongst the HK$9 million, approximately HK$3 million will be used as salary and rental payments, approximately HK$3 million will be used as capital for the continuation or development of the Group’s business, and the remaining balance of HK$3 million will be used to pay off the Group’s borrowing, payables or debts due as from time to time arising from its daily operation of the Group’s business, such as professional fees, printing charges, third parties loans, and the third to fifth instalment payments for the settlement of the Action. Depending on the then financial situation of the Group by the end of 2003, the Directors may consider using the proceeds of HK$3 million which are intended for payment of the Group’s debts to pay off the third to fifth instalment payments for the settlement of the Action.

Reasons for the Rights Issue

The Directors believe that it is in the best interests of the Company and the Shareholders to enlarge the capital base of the Company through the Rights Issue, as the enlarged capital base will support the continuing development and daily operation of the Group’s existing business activities and reduce the liability or debt of the Company. The Rights Issue will allow all Shareholders (other than the Overseas Shareholders) to participate in the growth of the Group as the Company will utilise the raised capital for maintaining the operation of the business of the Group and if market conditions are suitable, for financing any prospective development of the Group’s business in the future.

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LETTER FROM THE BOARD

The Group has adopted a policy that would tighten control on cost for its business. However, in view of the current difficult business environment of the telecommunication industry, the Directors foresee that the costs and expenses of the Group’s business will not be able to cut down substantially and immediately so as to allow substantial profits in the coming year. Therefore, the Directors believe that in order to maintain the competitiveness of the Group, it is preferable for the Group to maintain a sufficient cash flow and capital base for the continuation of its existing business and to reduce debt at the same time so as to minimise the costs incurred by interests payment.

Expenses

The expenses in connection with the Rights Issue, including documentation fees, underwriting commission, printing, translation, legal and accountancy charges and other professional fees are estimated to be approximately HK$1.2 million and are payable out of the Rights Issue proceeds by the Company.

BUSINESS REVIEW AND PROSPECTS

The Company is an investment holding company and its subsidiaries are principally engaged in the media and telecommunication businesses, in the operation of “renren.com”, the provision of Internet products and services and information technology business in Hong Kong and the PRC.

In March 2002, the Group acquired the entire issued share capital of Magna Steels for a cash consideration of HK$54,000,000 from an independent third party. The principal assets of Magna Steels is its holding of a 35% equity interest in Seven Perfect Investment Co., Ltd. which in turn, beneficially owns the entire interest in Twin Faces Co. Ltd., a company incorporated in the British Virgin Islands. Twin Faces Co., Ltd. is principally engaged in management and consultancy services in an intelligent transport system in Shanghai, the PRC. The transaction was completed on 5th March, 2002 and resulted in goodwill of approximately HK$53,992,000, which will be capitalised and thereafter amortised over a period of five years on straight-line basis.

The Group’s turnover from the continuing operation of its business, including the provision of telecommunication products and services, for the six months period ended June, 2002 was approximately HK$15.3 million compared to the same period in 2001 of only HK$277,000. The substantial increase in turnover over the same period in 2001 was due to the increase in the sale of telecommunication products and services extended by the Group as a result of the Group’s active marketing strategy.

However, for the six months period ended June, 2002, the Group reported a net loss attributable to the Shareholders of approximately HK$53 million which is slightly reduced as compared to the same period in 2001. The loss was mainly due to the loss on disposal of and the reduction in value of the marketable listed securities and unlisted securities invested by the Group, the amortisation of goodwill which arose from previous acquisitions of subsidiaries and depreciation of fixed asset such as computer equipment and software, furniture and fixtures, long term leasehold land and buildings and leasehold improvements.

The results of the Group for the six months ended 30th June, 2002 have reflected the post acquisition effect of the acquisition of Magna Steels by the Group in March, 2002. The effect of the acquisition on the Group’s assets was shown in the unaudited consolidated balance sheet of the Company as at 30th June, 2002 as produced in the Company’s interim report 2002.

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LETTER FROM THE BOARD

In view of the gloomy market environment due to worldwide political uncertainties caused by the threat of war and intense competition of the telecommunication industry, the business of the Group is currently operating under minimal profit margin. The Directors is currently seeking investment opportunity in media and other business which can diversify its existing telecommunication business so as to broaden the earning base of the Group and diversify the risk involved in the telecommunication business. The Company presently does not have any specific plans for investment but the Company may require cash flow when any prospective investment opportunity arises in the future. The Directors consider that the Rights Issue is in the interests of the Company and the Shareholders as the Rights Issue will improve the cash position of the Group and will facilitate its daily operation and future investment should there arise any good investment opportunity. Save as the proposed Rights Issue, the Company has no present plans to raise funds in the forthcoming year. However, should any prospective investment plans or business opportunities arise in the future which require capital, the Company may consider to fund such investments by equity financing instead of debt financing. As mentioned by the Directors in the 2002 interim report, in view of the prolonged weak performance of the telecommunication business in Hong Kong, the Directors planned to diversify its existing business into media and infotainment businesses which the Directors believe that such businesses may have synergetic effect on the Group’s existing business. The Directors were looking for business opportunity that would provide added value to its existing business and for future business expansion and diversification. The Directors believe that such strategy is essential to the Group’s development in the long-term and additional working capital from equity financing will facilitate such business development when opportunities arises. At present, in view of the gloomy market condition, the Company is not under negotiation of any investment plans for its business and there are no concrete plans for any business investment.

INFORMATION ON THE USE OF PROCEEDS FROM PAST PLACEMENTS AND SUBSCRIPTIONS SINCE FEBRUARY 2001

June Placement

The net proceeds from the June Placement were approximately HK$44 million and the actual use of the proceeds was in line with the intended use as stated in the announcement of the Company dated 14th June, 2001. The actual use of the proceeds is detailed as follows:

approximately HK$27 million had been applied in acquisitions of subsidiaries, investment in listed and non-listed securities in Hong Kong, so as to expand the Group’s business in technology business, and
the balance of approximately HK$17 million had been applied as general working capital of the Group, of which approximately HK$7.6 million was for salary and rental payment, HK$4 million was for hire and purchase of products supplied by GE Capital and HK$5.4 million was for other expenses such as utilities payment, travelling expenses, entertainment expenses, professional fees, printing costs and all such necessary expenses for the daily operation of the Group’s business.

July Bond Issue

The Company issued convertible bonds in the aggregate principal amount of HK$12 million, bearing interests at the rate of 2.5% per annum, in July, 2001. The net proceeds from the issue of the convertible bonds were approximately HK$17.7 million, of which approximately HK$11.5 million was received from the subscribers at the completion of the subscription of the convertible

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LETTER FROM THE BOARD

bonds in July 2001 and HK$6.2 million was received from the bondholders at the conversion of the bonds in August 2002. As stated in the announcement of the Company dated 23rd July, 2001 in relation to the July Bond Issue, the Company had no specific plan for utilising the capital. The actual use of the proceeds is as follows:

approximately HK$11.5 million had been used in the acquisitions of subsidiaries, investments in listed and non-listed securities in Hong Kong, and
approximately HK$6.2 million was used as the working capital of the Group for the period from January 2002 to April 2002 of which approximately HK$2 million was used for salary and rental payment, HK$2.3 million was used for payment of hire and purchase of products from GE Capital and HK$1.9 million was used for investment in securities of non-listed companies in Hong Kong.

Amongst the total proceeds of approximately HK$41 million from the June Placement and the July Bond Issue which were used in acquisitions of subsidiaries, investment in listed and nonlisted securities in Hong Kong, approximately HK$10 million was used to invest into West Marton Group Limited which develops and operates electronic commerce portals in Hong Kong and the PRC, approximately HK$19 million was used to invest into Comstar Hong Kong Limited in August, 2001 and Info Century Inc. in November, 2001, approximately HK$2 million was used as part of the proceeds for investment in a non-listed company in Hong Kong in 2002, and the remaining balance of approximately HK$10 million was used in investment in listed securities of Hong Kong listed companies in 2001.

Shareholders and investors can refer to the annual report 2001 of the Company for further details in relation to the above-mentioned investment in securities and subsidiaries.

March Rights Issue

The net proceeds from the March Rights Issue was approximately HK$103 million and the actual use of the proceeds is as follows:

HK$36 million had been applied to finance the entire consideration of HK$36 million payable by Offshore Trinity Limited, a wholly-owned subsidiary of the Company to the vendor under a sale and purchase agreement dated 18th December, 2001 in relation to the acquisition of the entire issued share capital of Grandmax International Limited by the Group;
HK$54 million had been applied to finance the entire consideration of HK$54 million payable by Winning Luck International Limited, a wholly-owned subsidiary of the Company to the vendor under a sale and purchase agreement dated 18th December, 2001 in relation to the acquisition of the entire issued share capital of Magna Steels by the Group, and
the remaining balance of HK$13 million had been applied as the general working capital of the Group and has been fully utilised as at the date of the Announcement. Amongst the HK$13 million working capital, approximately HK$4.5 million was used as salary and rental payment, HK$1.8 million was used for payment of hire and purchase of products from GE Capital, HK$1.6 million was used for licence fee payment for the Group’s internet business and the balance of HK$5.1 million was used for other expenses such as utilities payment, travelling expenses, entertainment expenses, professional fees, printing costs and all such necessary expenses for the daily operation of the Group’s business.

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LETTER FROM THE BOARD

The actual use of the proceeds from the March Rights Issue is in line with the intended use of the proceeds as disclosed in the announcement of the Company dated 21st December, 2001. Shareholders can also refer to the circular of the Company dated 10th January, 2002 for details.

December Placement

The net proceeds from the December Placement was approximately HK$9 million and the actual use of the proceeds is as follows:

HK$7.8 million had been applied to settle part of the promissory notes issued by the Company pursuant to a sale and purchase agreement dated 5th November, 2002 made between Polywise Limited, a wholly-owned subsidiary of the Company as purchaser and Scopwick Resources Limited as vendor in relation to the acquisition of the entire issued share capital of Union Key Limited by the Group;
HK$0.5 million had been applied to repay a loan due from the Group to a financial institution; and
the remaining balance of HK$0.7 million had been applied as the general working capital of the Group and has been fully utilised as at the date of the Announcement.

The intended use of the proceeds from the December Placement as disclosed in the announcement of the Company dated 6th November, 2002 and the circular of the Company dated 5th December, 2002 was that HK$4.5 million was intended for the settlement of the abovementioned promissory notes and the remaining balance was intended to be used as the general working capital of the Group. However, the actual use of the proceeds from the December Placement has a slight divergence from the intended use as disclosed mainly for the reason that the Group was demanded payment of some of its debts immediately and in order to avoid potential claim and further interests being incurred, the proceeds were used to reduce the liabilities of the Group by repayment of loans.

GENERAL MANDATES

In connection with the enlarged issued share capital as a result of the Rights Issue, the Directors will also seek the approval of Shareholders for the grant of the New Issue Mandate, the Repurchase Mandate and the mandate to allot and issue securities with an aggregate nominal amount equal to those Shares which are repurchased by the Company pursuant to the Repurchase Mandate.

THE SGM

There is set out on pages 86 to 89 in this circular a notice convening the SGM to be held on Monday, 7th April, 2003 at 9:30 a.m. at 27/F., Park Lane Room 3, Park Lane Hotel, 310 Gloucester Road, Causeway Bay, Hong Kong, at which an ordinary resolution will be proposed to the Independent Shareholders only to consider and, if thought fit, to approve the Rights Issue and ordinary resolutions will be proposed to the Shareholders to consider and, if thought fit, to approve the grant of the New Issue Mandate, the Repurchase Mandate and the mandate to allot and issue Shares with an aggregate nominal amount equal to those Shares which are repurchased by the Company pursuant to the Repurchase Mandate.

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LETTER FROM THE BOARD

In accordance with the Listing Rules, Rich Delta, Sky Concord and Mr. Mak and their respective associates (as defined in the Listing Rules) will abstain from voting on the resolution to approve the Rights Issue at the SGM.

You will find enclosed a form of proxy for use at the SGM. If you are not able to attend the SGM in person, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon to the office of Abacus Share Registrars Limited, at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the SGM. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM should you so desire.

RECOMMENDATION

Menlo has been appointed to advise the Independent Board Committee with regard to the terms and conditions of the Rights Issue. Menlo considers that the terms and conditions of the Rights Issue are fair and reasonable so far as the interests of the Independent Shareholders are concerned. The text of the letter of advice from Menlo containing its recommendation and the principal factors it has taken into account in arriving at its recommendation are set out on pages 22 to 30 of this circular.

The Independent Board Committee, having taken into account the advice of Menlo, considers the terms, conditions and the reasons for the Rights Issue are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the Rights Issue. The full text of the letter from the Independent Board Committee is set out on page 21 of this circular.

The Directors consider that the terms, conditions and the reasons for the Rights Issue are fair and reasonable and the Directors consider that the Rights Issue is in the interests of the Company and the Shareholders as a whole. The Directors are also of the opinion that the granting of the General Mandates is in the best interests of the Company and the Shareholders. Accordingly, the Directors recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the SGM to approve the Rights Issue. The Directors also recommend to the Shareholders to vote in favour of the resolutions to be proposed at the SGM to approve the grant of the General Mandates.

FURTHER INFORMATION

Subject to the necessary resolution approving the Rights Issue being passed at the SGM, it is expected that the Prospectus Documents will be despatched to the Qualifying Shareholders on or about 7th April, 2003.

Your attention is also drawn to the letter of advice from Menlo, which contains its advice and recommendation to the Independent Board Committee in connection with the Rights Issue, the letter from the Independent Board Committee which sets out its recommendation to the Independent Shareholders in relation to the Rights Issue and to the additional information set out in the Appendices to this circular.

By Order of the Board renren Holdings Limited Mak Chi Yeung Chairman

– 20 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [68 x 43] intentionally omitted <==

**renren Holdings Limited 人人控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

21st March, 2003

To the Independent Shareholders

Dear Sir or Madam,

Pursuant to Rule 7.19(6) of the Listing Rules, the proposed Rights Issue is required to be approved by the Independent Shareholders at a general meeting of the Company as the Rights Issue involves an increase in the issued share capital of the Company by more than 50%.

We have been appointed by the Directors to consider the terms, conditions and the reasons for the Rights Issue and to advise the Independent Shareholders in relation to them. Details of the Rights Issue are set out on pages 13 to 16 of this circular (the “Circular”), of which this letter forms a part. Terms defined in the Circular shall have the same meanings in this letter.

We wish to draw your attention to the letter from the Board set out on pages 7 to 20 of the Circular, and the letter of advice from Menlo set out on pages 22 to 30 of the Circular. Having considered (i) the terms and conditions of the Rights Issue, (ii) the reasons regarding the Rights Issue, (iii) a letter dated 17th March, 2003 (“the Letter”) from Ever-Long to the Company indicating its acceptance, on behalf of the Underwriters, to the settlement terms of the Action as per the consent order granted by the Court on 18th March, 2003, details of which are set out on page 15 of the Circular, and (iv) the confirmation from Ever-Long as stated in the Letter, on behalf of the Underwriters, that the Underwriting Agreement will not be terminated based on the condition numbered 5 as set out in the paragraph “Conditions of the Rights Issue” in the letter from the Board and taken into account the advice and recommendation of Menlo, we consider the terms and conditions of the Rights Issue and the reasons for the Rights Issue to be fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution numbered 1 as set out in the notice convening the SGM to approve the Rights Issue at the SGM.

Yours faithfully,

Independent Board Committee

Lo Chi Man, Joseph Wong Kwong Lung, Terence Independent non-executive Directors

* For identification purpose only

– 21 –

LETTER FROM MENLO

The following is the text of a letter from Menlo in connection with the Rights Issue which has been prepared for the purpose of inclusion in this circular:

==> picture [48 x 42] intentionally omitted <==

Menlo Capital Limited

Room 505, Nan Fung Tower 173 Des Voeux Road Central Hong Kong

21st March, 2003

To the Independent Board Committee of renren Holdings Limited

Dear Sirs,

PROPOSED RIGHTS ISSUE

We refer to our appointment to advise the Independent Board Committee in respect of the Rights Issue, details of which are set out in the letter from the Board (the “Board Letter”) contained in the circular of the Company dated 21st March 2003 (the “Circular”) of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context of this letter otherwise requires.

Given that the Rights Issue will increase the issued share capital of the Company by more than 50%, pursuant to rule 7.19(6) of the Listing Rules, the Rights Issue is therefore subject to the approval of the Independent Shareholders at the SGM at which Rich Delta, Sky Concord and Mr. Mak and their respective associates (as defined in the Listing Rules) shall abstain from voting in respect of the Rights Issue.

In formulating our opinion, we have relied on the statements, information, opinions and representations contained in the Circular and the information and representations provided to us by the Directors and management of the Company. We have assumed that all information, representations and opinions contained or referred to in the Circular and all information, representations and opinions which have been provided by the Directors or management of the Company for which they are solely responsible, are true and accurate at the time they were made and will continue to be accurate at the date of the despatch of the Circular.

We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any fact or circumstance which would render the information provided and representations and opinions made to us untrue, inaccurate or misleading. Having made all reasonable enquiries, the Directors have further confirmed that, to the best of their knowledge, they believe there are no other facts or representations the omission of which would

– 22 –

LETTER FROM MENLO

make any statement in the Circular, including this letter, misleading. We have not, however, carried out any independent verification of the information provided by the Directors and management of the Company, nor have we conducted an independent investigation into the business and affairs of the Company.

In formulating our opinion, we have not considered the taxation implications on Shareholders in relation to the subscription for, holding or disposal of the Rights Shares, since these are particular to their individual circumstances. It is emphasised that we will not accept responsibility for any tax effects on, or liabilities of any person resulting from the subscription for, holding or disposal of the Rights Shares. In particular, Shareholders subject to overseas taxation or Hong Kong taxation on securities dealings should consider their own tax position and, if in any doubt, should consult their own professional advisers.

PRINCIPAL FACTORS TAKEN INTO ACCOUNT

As stated in the Board Letter, the Company proposes to raise not less than approximately HK$11.2 million and not more than approximately HK$12.1 million before expenses by issuing not less than 620,000,554 Rights Shares and not more than 620,778,154 Rights Shares at a price of HK$0.018 per Rights Share on the basis of one Rights Share for every one Share held by the Qualifying Shareholders on the Record Date.

In arriving at our advice to the Independent Board Committee in respect of the Rights Issue, we have taken the following principal factors and reasons into consideration:

I. Background and Reasons for the Rights Issue

The Company is an investment holding company and its subsidiaries are principally engaged in the media and telecommunication business, in the operation of “renren.com”, the provision of Internet products and services and information technology business in Hong Kong and the PRC.

For the year ended 31st December, 2001, the Group reported a net loss attributable to the Shareholders of approximately HK$84.8 million (2000: net loss attributable to the Shareholders of approximately HK$190.4 million). The Group’s turnover from the continuing operation business, including the provision of telecommunication products and services, for the year ended 31st December, 2001 was approximately HK$17.6 million (2000: approximately HK$1.4 million), an increase of over 1,157% compared to the preceding year. However, the Group had an unsatisfactory result for the year due to the global financial recession affecting the investment and consumption environment and also the collapse of Internet bubble.

According to the 2002 interim report of the Company, for the 6 months ended 30th June, 2002, the Group reported an unaudited net loss attributable to the Shareholders of approximately HK$53.7 million (2001: unaudited net loss attributable to the Shareholders of approximately HK$56.8 million). The Group’s turnover for the 6 months ended 30th June, 2002 was approximately HK$15.3 million (2001: approximately HK$0.28 million), an increase of over 5,364% compared to the preceding year. The substantial increase in turnover

– 23 –

LETTER FROM MENLO

over the same period last year was due to the increase in the sale of telecommunication products and services extended by the Group as a result of the Group’s active marketing strategy. However, as mentioned by the Directors in the interim report, the telecommunication industry and its related services and products were still facing difficulties that profit margin may not be maintained at level that used to be. In light of the weak market condition of the telecommunication business, the Directors planned to diversify its existing business into media and infotainment businesses and were looking for business opportunity that could provide added value for its existing business and for future business expansion and diversification. The Directors believe that such strategy is essential to the Group’s development in the long-term and additional working capital from equity financing will facilitate such business development when opportunities arises. At present, in view of the gloomy market condition, the Company is not under negotiation of any investment plans and there are no concrete plans for any business investment.

The Directors believe that it is in the best interests of the Company and the Shareholders to enlarge the capital base of the Company through the Rights Issue, as the enlarged capital base will support the continuing development and daily operation of the Group’s existing business activities and reduced the liability or debt of the Group. The Rights Issue will allow all Shareholders (excluding the Overseas Shareholders) the opportunity to participate in the growth of the Group. The Directors consider that the Rights Issue is in the best interests of the Company and the Shareholders as a whole.

Based on the recent financial performance of the Group, the prevailing gloomy market condition and the existence of the Action, we are of the opinion that it is prudent for the Company to finance by way of equity. We also consider that the Rights Issue offers all the Qualifying Shareholders an equal opportunity to participate in the equity interest of the Company rather than a private placement, which would result in dilution of existing Shareholders’ interests in the Company. We also consider the enlarged capital base will enhance the financial capability of the Group.

II. Terms of the Rights Issue

The Rights Issue is on the basis of one Rights Share for every one Share at a Subscription Price of HK$0.018. The Subscription Price represents:

a discount of 43.75% to the closing price of approximately HK$0.032 per Share as quoted on the Stock Exchange on 21st February, 2003, being the last trading day prior to the suspension of the Shares on 24th February, 2003;
a discount of 40% to the average closing price of approximately HK$0.030 per Share for the last 10 trading days up to and including 21st February, 2003;

– 24 –

LETTER FROM MENLO

a discount of 28% to the theoretical ex-rights price of HK$0.025 per Share based on the closing price as quoted on the Stock Exchange on 21st February, 2003;
a discount of 28% to the closing price of approximately HK$0.025 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
a discount of about 25% to the average closing price of approximately HK$0.0239 per Share for the 10 trading days up to and including the Latest Practicable Date;
a discount of about 16.28% to the theoretical ex-rights price of approximately HK$0.0215 per Share based on the closing price as quoted on the Latest Practicable Date.

The Subscription Price was agreed after arm’s length negotiation among the Company, Mr. Mak and the Underwriters with reference to the prevailing market condition and after considering the substantial discounts for the subscription prices of recent rights issue of other listed issuers. In view of the current sluggish economic environment and uncertain international market condition, the Directors consider that the Subscription Price and the discounts for the Subscription Price are fair and reasonable.

We have reviewed the terms of a total of 10 rights issue (the “Recent Rights Issues”) carried out by listed issuers on the Stock Exchange in the last 12 months and which involved heavy calls (on the basis of one or more rights shares for every share held) on shareholders which are summarized as follows:

			Discount to	Discount to
	Date of	Subscription	closing price on	the theoretical
Company name	Announcement	Price	last trading day	ex-rights price
Peace Mark (Holdings) Limited	06-06-2002	$0.180	66.67%	40.00%
Easyknit International Holdings
Limited	17-07-2002	$0.120	73.30%	40.70%
China Star Entertainment Limited	13-08-2002	$1.250	43.20%	20.20%
e-Kong Group Limited	07-10-2002	$0.120	40.00%	25.00%
China Strategic Holdings Limited	15-07-2002	$0.160	25.70%	18.50%
iAsia Technology Limited	12-10-2002	$0.100	36.80%	14.30%
Enerchina Holdings Limited	19-12-2002	$0.020	60.00%	37.50%
Harmony Asset Limited	11-11-2002	$0.020	62.96%	40.48%
Styland Holdings Limited	26-11-2002	$0.100	79.20%	55.90%
Hon Kwok Land Inv. Co., Limited	03-03-2003	$1.000	32.40%	16.10%
		Mean	52.02%	30.87%
		Median	51.60%	31.25%
The Company	03-03-2003	$0.018	43.75%	28.00%

– 25 –

LETTER FROM MENLO

The discounts to the closing prices on the last trading days prior to the dates of the announcements in relation to the Recent Rights Issues ranged from approximately 25.7% to 79.2% with the mean and median of approximately 51.69% and 51.6% respectively. The discounts to the theoretical ex-rights prices per share based on the last trading days prior to the dates of the announcements in relation to the Recent Rights Issues ranged from approximately 14.3% to 55.9% with the mean and median of approximately 30.23% and 31.25% respectively. The discount rate of the Subscription Price to the closing price (based on the closing price of the Shares on 21st February, 2003) of 43.75% is lower than the mean and median but fall within the above range of the Recent Rights Issues and the theoretical ex-rights price per Share of 28% (based on the closing price of the Shares on 21st February, 2003) is slightly lower than the mean and median but fall within the above range of the Recent Rights Issues. Taking in consideration the comparison between the Rights Issue and the Recent Rights Issues, we consider that the terms of the Rights Issue are in line with the market and are fair and reasonable so far as the Shareholders are concerned.

The Rights Shares will, when allotted, issued and fully paid, rank pari passu in all respects with the Shares then in issue and holders of such Rights Shares will receive all future dividends and distribution which are declared, made or paid after the date of allotment of the Rights Shares. Independent Shareholders are thus not disadvantaged by subscribing to the Rights Shares.

III. Dilution of percentage shareholding

For those Independent Shareholders who do not take up in full their entitlements under the Rights Issue, depending on the extent to which they take up the Rights Shares, their attributable interests in the Company will be diluted after completion of the Rights Issue. The maximum dilution in shareholding for those Independent Shareholders who do not take up any of their entitlements under the Rights Issue is 50% after the issue of the Rights Shares. We consider that the dilution is not prejudicial on the grounds that all Qualifying Shareholders are entitled to subscribe for their entitlements under the terms of the Rights Issue. As the nil-paid Rights Shares will be traded on the Stock Exchange, Qualifying Shareholders who do not take up their entitlements in full will have the opportunity to realise their nil-paid Rights Shares on the market, subject to market conditions.

Other means of fund raising where a given amount of funding is required, includes private placement of securities or debt financing. However, a placement of shares or warrants would have required an issue of new shares at significant discounts to the market price of the Shares, and at the same time, would result in significant dilution of existing Shareholders’ interests. Alternatively, debt financing through the issue of convertible bonds will increase the finance costs and dampen indebtedness of the Group which may not in the interest of the Group.

Taking into consideration the foregoing, we consider that the Rights Issue is an equitable method for all Shareholders as a whole to raise new equity capital for the Company as Shareholders can choose to participate in the Rights Issue or, if they are unwilling or

– 26 –

LETTER FROM MENLO

unable to do so, to dispose of their entitlements nil-paid in the market at a premium if one can be obtained.

IV. Financial effects of the Rights Issue

(a) Net tangible assets

The following is a statement of pro forma consolidated net tangible assets of the Group based on the unaudited net tangible asset value of the Group as at 30th June, 2002, of which was produced in the interim report of the Company dated 20th September, 2002:

ber, 2002:
Unaudited consolidated net tangible assets of the Group as at 30th June, 2002 Net proceeds from the conversion of the convertible notes under July Bond Issue on 27th August, 2002 and the conversion of the convertible notes on 15th October, 2002 which were issued in relation to the acquisition by the Company as announced on 11th September, 2001 Proceeds from December Placement Pro forma adjusted consolidated net tangible assets of the Group before the Rights Issue Estimated net proceeds of the Rights Issue (based on 620,000,554 Rights Shares to be issued) Pro forma adjusted consolidated net tangible assets after the Rights Issue Pro forma consolidated net tangible assets per Share: – before the Rights Issue (based on 620,000,554 Shares in issue) – after the Rights Issue (based on 620,000,554 Rights Shares to be issued) – after the Rights Issue (assuming the full exercise of Options based on 620,778,154 Rights Shares to be issued)	HK$’000 18,909 9,114 9,535
	37,558 10,000
	47,558

	HK$0.061

	HK$0.038

	HK$0.038

Based on the above table, the consolidated net tangible assets of the Group will be increased from approximately HK$37.56 million before the Rights Issue to approximately HK$47.56 million after the Rights Issue. The consolidated net tangible asset value per Share will be decreased by approximately HK$0.023 from approximately HK$0.061 before the Rights Issue to approximately HK$0.038 after the Rights Issue, representing a decrease of approximately 37.7%. We consider that the decrease in consolidated net tangible asset value per Share after the Rights Issue

– 27 –

LETTER FROM MENLO

is not prejudicial to the Qualifying Shareholders due to the fact that the Qualifying Shareholders can take up their entitlements to the Rights Shares at the Subscription Price which is at a discount of 52.63% to the adjusted consolidated net tangible asset value per Share after Rights Issue. We are of the view that the financial position of the Group will be improved after the Rights Issue.

(b) Gearing ratio

As set out in the 2002 interim report of the Company, the outstanding debts for the Group as at 30th June, 2002 was approximately HK$24.78 million. Based on pro forma consolidated net tangible assets of the Group as stated above, the gearing ratio of the Group would be improved from approximately 65.97% (calculated by about HK$24.78 million of debts divided by the pro forma consolidated net tangible assets before the Rights Issue of approximately HK$37.56 million) before the Rights Issue to approximately 52.1% (calculated by about HK$24.78 million of debts divided by the pro forma consolidated net assets after the Rights Issue of approximately HK$47.56 million) after the Rights Issue.

V. Use of proceeds

The estimated net proceeds of the Rights Issue will be approximately not less than HK$10 million and not more than HK$11 million of which approximately HK$2 million will be applied as the first and second instalment payments to GE Capital for the settlement of the Action. The balance of not more than HK$9 million will be used for general working capital of the Group. The Directors estimate that amongst the HK$9 million, approximately HK$3 million will be used as salary and rental payments, approximately HK$3 million will be used as capital for the continuation or development of the Group’s business, and the remaining balance of HK$3 million will be used to pay off the Group’s borrowing, payables and debts due as from time to time arising from its daily operation of the Group’s business, such as professional fees, printing charges, third parties loans, and the instalment payments for the settlement of the Action other than the first and second payments.

As the Action affects the creditability of the Company and imposes pressure to the management of the Company, the settlement of the Action using certain amount of the proceeds from the Rights Issue will be the priority and is critical to the future development of the Company. On this basis, we consider that the use of the proceeds for the settlement of the Action is in the interests of the Company and the Shareholders as a whole.

Settlement in relation to the Action has been reached between GE Capital, the Company and renren Limited and a consent order has been executed on 17th March, 2003 and the Court has on 18th March, 2003 granted an order in terms of the executed consent order. The terms of the consent order are as follows:

– 28 –

LETTER FROM MENLO

(a) the first and second instalments of approximately HK$1 million each will be made before the mid of May, 2003;
(b) the third and fourth instalments of approximately HK$0.5 million each will be paid by no later than end of June and end of August, 2003 respectively;
(c) the fifth instalment, being the remaining balance of approximately HK$2.7 million will be paid by the end of December, 2003.

The Underwriters, by a letter dated 17th March, 2003 from Ever-Long on behalf of the Underwriters, to the Company, confirmed to the Company that the settlement terms of the consent order entered into between GE Capital, renren Limited and the Company on 17th March, 2003 and subsequently approved by the Court on 18th March, 2003 are acceptable to them and Ever-Long, on behalf of the Underwriters shall not exercise their rights of terminating the Underwriting Agreement based on the condition numbered 5 as set out in “Condition of Right Issue” in the Board Letter.

On the other hand, as mentioned in the 2002 interim report of the Company, in view of the weak market condition of the telecommunication business, the Directors planned to diversify its existing business into media and infotainment businesses and were looking for business opportunity that could provide added value for its existing business and for future business expansion and diversification. The Directors believe that such strategy is essential to the Group’s development in the long-term and additional working capital from equity financing will facilitate such business development when opportunities arise. At present, in view of the gloomy market condition, the Company is not under negotiation of any investment plans and there are no concrete plans for any business investment. In light of this, we consider that the use of proceeds, partially for salary and rental payments, partially for pay off the Group’s borrowing payables and debts, as well as partially as capital for the continuation or development of the Group’s business, is in line with the Group’s business strategies and that the general working capital can provide flexibility to the Group’s operations.

VI. Underwriting arrangements

As at the Latest Practicable Date, Rich Delta is the beneficial owner of 316,092,279 Shares which represents approximately 50.98% of the existing issued share capital of the Company. Rich Delta is a wholly owned subsidiary of Sky Concord, which entire issued share capital is in turn owned by Mr. Mak. Mr. Mak has given an irrevocable undertaking in favour of the Company and the Underwriters to accept or procure acceptance in full of the 316,092,279 Rights Shares which will be provisionally allotted to Rich Delta pursuant to the Rights Issue. Neither Mr. Mak, Rich Delta nor Sky Concord has decided to whether to apply for excess Rights Shares or not as the Latest Practicable Date. Based on the total number of issued Shares of 620,000,554 as at the Latest Practicable Date and after deducting the 54,150,959 Shares which were to be issued under the Warrants which remained unexercised upon their expiry on 11th March, 2003, the remaining balance of not less than 303,908,275 Rights Shares and not more than 304,685,875 Rights Shares will be fully

– 29 –

LETTER FROM MENLO

underwritten by the Underwriters. Shareholders should note that Rich Delta, Sky Concord and Mr. Mak and their respective associates will abstain from voting at the SGM.

Subject to the fulfillment of the conditions contained in the Underwriting Agreement, not less than 303,908,275 Rights Shares and not more than 304,685,875 Rights Shares (the Rights Shares other than those agreed to be taken up by the Rich Delta) will be underwritten by the Underwriters. It also should be noted that the Rights Issue will not proceed if the Underwriters exercise their termination rights. Details of the provisions granting the Underwriters such termination rights are included in the Board Letter. However, the Underwriters have confirmed to the Company by a letter dated 17th March, 2003 that the settlement terms of the consent order entered into between GE Capital, renren Limited and the Company on 17th March, 2003 and subsequently approved by the Court on 18th March, 2003 are acceptable to them and Ever-Long, on behalf of the Underwriters shall not exercise their rights of terminating the Underwriting Agreement based on the condition numbered 5 as set out in “Condition of Rights Issue” in the Board Letter. The Underwriters may terminate the Underwriting Agreement due to the outbreak of war and in the reasonable opinion of Ever-Long, on behalf of the Underwriters, that the impact of the war will materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole. In case the Underwriters terminate the Underwriting Agreement, the Rights Issue will lapse. We consider the provisions granting the Underwriters the right to terminate the Underwriting Agreement and the conditions of the Rights Issue, including the acceptance by the Underwriters of the consent order granted by the Court on 18th March, 2003 in relation to the Action, are fair and reasonable.

RECOMMENDATION

Taking into consideration of the above principal factors of consideration, we are of the view that the terms, conditions and the reasons for the Rights Issue, including the acceptance by the Underwriters of the terms of the consent order granted by the Court on 18th March, 2003 in relation to the Action, are fair and reasonable so far as the interests of the Independent Shareholders are concerned. The Rights Issue will allow all Qualifying Shareholders to participate in the growth of the Group. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Rights Issue.

Yours faithfully, For and on behalf of

Menlo Capital Limited Michael Leung Director

– 30 –

FINANCIAL INFORMATION

APPENDIX 1

Set out below is a summary of the audited consolidated profit and loss accounts for each of the three years ended 31st December, 2001, the consolidated balance sheets as at 31st December, 2001 and 2000 of the Group, the consolidated cash flow statement for the two years ended 31st December, 2001 and the balance sheet of the Company as at 31st December, 2001 and 2000 together with the relevant notes to the financial statements as extracted from the audited financial accounts of the Company for the year ended 31st December, 2001.

CONSOLIDATED PROFIT AND LOSS ACCOUNT

Notes
TURNOVER
6
Continuing operations
Discontinued operations
5
Cost of sales
Gross profit/(loss)
Other income
6
Administrative expenses
Other operating expenses
Gain on disposal of discontinued operations
5
LOSS FROM OPERATING ACTIVITIES
7
Continuing operations
Discontinued operations
5
Finance costs
10
Share of profits and losses of associates
LOSS BEFORE TAX
Tax
11
LOSS BEFORE MINORITY INTERESTS
Minority interests
NET LOSS ATTRIBUTABLE TO
SHAREHOLDERS
12, 28
LOSS PER SHARE – Basic
13

Year ended 31st December,
2001
2000
1999
HK$’000
HK$’000
HK$’000
17,612
1,395
–
–
80,921
138,813
17,612
82,316
138,813
(30,499)
(65,531)
(108,031)
(12,887)
16,785
30,782
5,366
5,585
1,001
(57,183)
(98,035)
(58,850)
(28,720)
(114,186)
(61,649)
10,405
–
–
(83,019)
(188,518)
–
–
(1,333)
(88,716)
(83,019)
(189,851)
(88,716)
(1,811)
(573)
(6,342)
–
–
1,267
(84,830)
(190,424)
(93,791)
–
–
1,100
(84,830)
(190,424)
(92,691)
5
–
–
(84,825)
(190,424)
(92,691)
HK5.36 cents
HK20.70 cents
HK64.92 cents

Other than the net loss attributable to shareholders for the year, the Group had no recognised gains or losses. Accordingly, a consolidated statement of recognised gains and losses is not presented in the financial statements.

– 31 –

FINANCIAL INFORMATION

APPENDIX 1

CONSOLIDATED BALANCE SHEET

Notes
NON-CURRENT ASSETS
Fixed assets
14
Goodwill
15
Interests in associates
16
Investments in securities
17
CURRENT ASSETS
Inventories
19
Accounts receivable
20
Deposits, prepayments and other receivables
Investments in securities
17
Pledged time deposits
21
Cash and cash equivalents
21
CURRENT LIABILITIES
Accounts payables
22
Accrued liabilities and other payables
Provision for extended warranty and free service
23
Convertible bonds and notes payable
24, 25
Current portion of finance lease payables
26
NET CURRENT ASSETS
TOTAL ASSETS LESS CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Provision for extended warranty and free service
23
Finance lease payables
26
MINORITY INTERESTS
CAPITAL AND DEFICIT
Issued capital
27
Deficit
28

31st December,
2001
2000
HK$’000
HK$’000
13,630
9,850
18,287
–
–
–
10,000
–
41,917
9,850
–
2,846
1,315
1,586
1,931
6,476
36,233
–
774
–
6,168
84,925
46,421
95,833
412
3,273
9,659
16,446
–
7,835
12,150
–
9,361
2,703
31,582
30,257
14,839
65,576
56,756
75,426
–
2,412
1,005
4,141
1,005
6,553
–
–
55,751
68,873
100,302
76,004
(44,551)
(7,131)
55,751
68,873

– 32 –

FINANCIAL INFORMATION

APPENDIX 1

CONSOLIDATED CASH FLOW STATEMENT

Notes
NET CASH OUTFLOW FROM
OPERATING ACTIVITIES
29(a)
RETURNS ON INVESTMENTS AND SERVICING
OF FINANCE
Interest received
Interest paid
Interest element on finance lease rental payments
Net cash inflow/(outflow) from returns on investments
and servicing of finance
TAX PAID
INVESTING ACTIVITIES
Purchases of fixed assets
Proceeds from disposal of fixed assets
Increase in pledged time deposits
Purchase of a long term investment
Purchase of other investments
Acquisition of subsidiaries
29(c)
Disposal of subsidiaries
29(d)
Net cash outflow from investing activities
NET CASH OUTFLOW BEFORE
FINANCING ACTIVITIES
FINANCING ACTIVITIES
29(b)
Proceeds from issue of shares
Share issue expenses
Proceeds from issue of convertible bonds
Additional cash proceeds from conversion of
convertible bonds
29(e)(iv)
Capital element of finance lease rental payments
Cash contribution from minority shareholder
Net cash inflow from financing activities
INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash and cash equivalents at beginning of the year
CASH AND CASH EQUIVALENTS
AT END OF YEAR
ANALYSIS OF BALANCES OF CASH AND
CASH EQUIVALENTS
Cash and bank balances
Non-pledged time deposits with original maturity of
less than three months when acquired

Year ended
31st December,
2001
2000
HK$’000
HK$’000
(56,531)
(129,452)
1,386
5,248
(115)
(177)
(1,696)
(396)
(425)
4,675
–
–
(1,187)
(13,355)
1,760
1,365
(774)
–
(10,000)
–
(36,233)
–
(29,000)
–
(3,145)
–
(78,579)
(11,990)
(135,535)
(136,767)
46,800
257,837
(3,162)
(18,627)
12,000
–
6,200
–
(5,065)
(2,854)
5
–
56,778
236,356
(78,757)
99,589
84,925
(14,664)
6,168
84,925
5,502
13,897
666
71,028
6,168
84,925

– 33 –

FINANCIAL INFORMATION

APPENDIX 1

BALANCE SHEET

Notes NON-CURRENT ASSETS Interests in subsidiaries 18 CURRENT ASSETS Deposits, prepayments and other receivables Cash and cash equivalents 21 CURRENT LIABILITIES Accrued liabilities and other payables Convertible bonds and notes payable 24, 25 NET CURRENT ASSETS/(LIABILITIES) CAPITAL AND DEFICIT Issued capital 27 Deficit 28	31st December, 2001 2000 HK$’000 HK$’000 50,000 – – 739 943 71,041 943 71,780 561 438 12,150 – 12,711 438 (11,768) 71,342 38,232 71,342 100,302 76,004 (62,070) (4,662) 38,232 71,342

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FINANCIAL INFORMATION

APPENDIX 1

NOTES TO FINANCIAL STATEMENTS

31st December, 2001

1. CORPORATE INFORMATION

The principal activity of the Company is investment holding. During the year, the Group disposed of and discontinued its business involved in the distribution and sale of motor vehicles and the provision of after sale service, including repair and maintenance services and the sale of spare parts in Hong Kong and the People’s Republic of China (the “PRC”). Further details are included in note 5 to the financial statements.

During the year, the Group invested in certain strategic companies for provision of online financial services and made strategic investments in certain hi-technology projects.

The principal activities of the Company’s subsidiaries comprise the provision of Internet products and services, the provision of telecommunication products and services and investment holding.

As at 31st December, 2001, the directors considered that the ultimate holding company of the Company is Sky Concord Development Limited, a company incorporated in the British Virgin Islands (“BVI”).

2. IMPACT OF NEW AND REVISED HONG KONG STATEMENTS OF STANDARD ACCOUNTING PRACTICE

The following recently-issued and revised Hong Kong Statements of Standard Accounting Practice (“SSAPs”) are effective for the first time for the current year’s financial statements:

–	SSAP 9 (Revised)	Events after the balance sheet date
–	SSAP 14 (Revised)	Leases
–	SSAP 18 (Revised)	Revenue
–	SSAP 26	Segment reporting
–	SSAP 28	Provisions, contingent liabilities and contingent assets
–	SSAP 29	Intangible assets
–	SSAP 30	Business combinations
–	SSAP 31	Impairment of assets
–	SSAP 32	Consolidated financial statements and accounting for investments in
		subsidiaries
–	Interpretation 12	Business combinations – subsequent adjustment of fair values and goodwill
		initially reported
–	Interpretation 13	Goodwill – continuing requirements for goodwill and negative goodwill
		previously eliminated against/credited to reserves

These SSAPs prescribe new accounting measurement and disclosure practices. A summary of the major effects on the Group’s accounting policies and on the amounts disclosed in these financial statements of adopting these SSAPs follows.

SSAP 9 (Revised) prescribes which type of events occurring after the balance sheet date require adjustments to the financial statements and which require disclosure but no adjustment, and has had no major impact on these financial statements.

SSAP 14 (Revised) prescribes the basis for lessor and lessee accounting for finance and operating leases, and the required disclosures in respect thereof. The revised SSAP 14 has made certain amendments to the previous accounting measurement treatments, however these amendments have not had a material effect on the amounts previously recorded in the profit and loss account and balance sheet, and therefore no prior year adjustments have been required. The disclosure changes under SSAP 14 (Revised) have resulted in total future commitments being disclosed for commitments under operating leases, rather than only the forthcoming year’s commitments as was previously the case, as detailed in note 31 to the financial statements.

SSAP 18 (Revised) prescribes the recognition of revenue and was revised as a consequence of the revision to SSAP 9 described above. Proposed final dividends from subsidiaries that are declared and approved by the subsidiaries after the balance sheet date are no longer recognised in the Company’s own financial statements for the year. The revised SSAP 18 has had no impacts on these financial statements.

SSAP 26 prescribes the principles to be applied for reporting financial information by segment. It requires that management assesses whether the Group’s predominant risks or returns are based on business segments or geographical segments and determines one of these bases to be the primary segment reporting format, with the other as the secondary segment reporting format. The impact of SSAP 26 is the inclusion of additional segment reporting disclosures which are set out in note 4 to the financial statements.

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FINANCIAL INFORMATION

APPENDIX 1

SSAP 28 prescribes the recognition criteria and measurement bases to apply to provisions, contingent liabilities and contingent assets, together with the required disclosure in respect thereof. The principal impact of SSAP 28 on these financial statements is the requirement to discount the amounts of provision to their present value at the balance sheet date where the effect of discount is material. The new SSAP 28 has had no major impact on these financial statements.

SSAP 29 prescribes the recognition and measurement criteria for intangible assets, together with the disclosure requirements. The adoption of SSAP 29 has resulted in no change to the previously adopted accounting treatment for intangible assets and the additional disclosures that it requires have had no significant impact on these financial statements.

SSAP 30 prescribes the accounting treatment for business combinations, including the determination of the date of acquisition, the method for determining the fair values of the assets and liabilities acquired, and the treatment of goodwill or negative goodwill arising on acquisition. The SSAP 30 requires the disclosure of goodwill in the non-current assets section of the consolidated balance sheet. It requires that goodwill is amortised to the consolidated profit and loss account over its estimated useful life. The adoption of the SSAP has not resulted in a prior year adjustment, as there were no goodwill arising from acquisitions in previous years. The required new additional disclosures are included in notes 15 and 16 to the financial statements.

SSAP 31 prescribes the recognition and measurement criteria for impairments of assets. The SSAP 31 is required to be applied prospectively and therefore has had no effect on amounts previously reported in prior year financial statements.

SSAP 32 prescribes the accounting treatment and disclosures in the preparation and presentation of consolidated financial statements, and has had no significant impact on the preparation of these financial statements.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

These financial statements have been prepared in accordance with Hong Kong Statements of Standard Accounting Practice, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They are prepared under the historical cost convention, except for the periodic remeasurement of investments in securities, as further explained below.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries for the year ended 31st December, 2001. The results of subsidiaries acquired or disposed of during the year are consolidated from or to their effective dates of acquisition or disposal, respectively. All significant intercompany transactions and balances within the Group are eliminated on consolidation.

Subsidiaries

A subsidiary is a company whose financial and operating policies the Company controls, directly or indirectly, so as to obtain benefits from its activities.

The Company’s interests in subsidiaries are stated at cost less any impairment losses.

Associates

An associate is a company, not being a subsidiary, in which the Group has a long term interest of generally not less than 20% of the equity voting rights and over which it is in a position to exercise significant influence.

The Group’s share of the post-acquisition results and reserves of associates is included in the consolidated profit and loss account and consolidated reserves, respectively. The Group’s interests in associates are stated in the consolidated balance sheet at the Group’s share of net assets under the equity method of accounting, less any impairment losses. Goodwill or negative goodwill arising from the acquisition of associates is included as part of the Group’s interests in associates.

The results of associates are included in the Company’s profit and loss account to the extent of dividends received and receivable. The Company’s interests in associates are treated as long term assets and are stated at cost less any impairment losses.

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FINANCIAL INFORMATION

APPENDIX 1

Goodwill

Goodwill arising on the acquisition of subsidiaries and associates represents the excess of the cost of the acquisition over the Group’s share of the fair values of the identifiable assets and liabilities acquired as at the date of acquisition.

Goodwill arising on acquisition is recognised in the consolidated balance sheet as an asset and amortised on the straight-line basis over its estimated useful life of three years. In the case of associates, any unamortised goodwill is included in the carrying amount thereof, rather than as a separately identified asset on the consolidated balance sheet.

On disposal of subsidiaries or associates, the gain or loss on disposal is calculated by reference to the net assets at the date of disposal, including the attributable amount of goodwill which remains unamortised.

The carrying amount of goodwill is reviewed annually and written down for impairment when it is considered necessary. A previously recognised impairment loss for goodwill is not reversed unless the impairment loss was caused by a specific external event of an exceptional nature that was not expected to recur, and subsequent external events have occurred which have reversed the effect of that event.

Impairment of assets

An assessment is made at each balance sheet date of whether there is any indication of impairment of any asset, or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s value in use or its net selling price.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to the profit and loss account in the period in which it arises, unless the asset is carried at a revalued amount, when the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of an asset, however not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation), had no impairment loss been recognised for the asset in prior years.

A reversal of an impairment loss is credited to the profit and loss account in the period in which it arises, unless the asset is carried at a revalued amount, when the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

Fixed assets and depreciation

Fixed assets are stated at cost less accumulated depreciation and any impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after fixed assets have been put into operation, such as repairs and maintenance, is normally charged to the profit and loss account in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the fixed asset, the expenditure is capitalised as an additional cost of that asset.

Depreciation is calculated on the straight-line basis to write off the cost of each asset over its estimated useful life. The principal annual rates used for this purpose are as follows:

Leasehold land and buildings	5% or over the lease terms, whichever is shorter
Leasehold improvements	20% or over the lease terms, whichever is shorter
Computer equipment and software	50%
Furniture and fixtures	20%
Machinery, tools and equipment	20%
Motor vehicles and vessels	25%

The gain or loss on disposal or retirement of a fixed asset recognised in the profit and loss account, is the difference between the net sales proceeds and the carrying amount of the relevant asset.

– 37 –

FINANCIAL INFORMATION

APPENDIX 1

Leased assets

Leases that transfer substantially all the rewards and risks of ownership of assets to the Group, other than legal title, are accounted for as finance leases. At the inception of a finance lease, the cost of the leased asset is capitalised at the present value of the minimum lease payments and recorded together with the obligation, excluding the interest element, to reflect the purchase and financing. Assets held under capitalised finance leases are included in fixed assets and depreciated over the shorter of the lease terms and the estimated useful lives of the assets. The finance costs of such leases are charged to the profit and loss account so as to provide a constant periodic rate of charge over the lease terms.

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Rentals payable under the operating leases are charged to the profit and loss account on the straight-line basis over the lease terms.

Investment in securities

Long term investments in unlisted equity securities, intended to be held for a continuing strategic or long term purpose, are classified as investment securities and stated at cost less any impairment losses, on an individual investment basis.

When impairments in values have occurred, the carrying amounts of the investment securities are reduced to their fair values, as estimated by the directors, and the amounts of the impairments are charged to the profit and loss account for the period in which they arise. When the circumstances and events which led to an impairment cease to exist and there is persuasive evidence that the new circumstances and events will persist for the foreseeable future, the amounts of the impairment previously charged are credited to the profit and loss account to the extent of the amount previously charged.

Other investments are listed equity securities and are stated at their fair values at the balance sheet date, on an individual investment basis. The fair values of such listed securities are their quoted market prices at the balance sheet date. The gains or losses arising from changes in the fair values of such securities are credited or charged to the profit and loss account in the period in which they arise.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the first-in, firstout basis. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal.

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the balance sheet date of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the profit and loss account.

A provision for extended warranty and free services granted by the Group on new vehicles sold is recognised based on sales volume and past experience of the level of repairs and returns, discounted to their present value as appropriate.

The adoption of SSAP 28 has had no significant effect to the provision made in the prior year.

Deferred tax

Deferred tax is provided, using the liability method, on all significant timing differences in the recognition of revenue and expenses for tax and for financial reporting purposes, to the extent it is probable that the liability will crystallise in the foreseeable future. A deferred tax asset is not recognised until its realisation is assured beyond reasonable doubt.

– 38 –

FINANCIAL INFORMATION

APPENDIX 1

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following bases:

(a) from the sale of goods, when the significant risks and rewards of ownership have been transferred to the buyer, provided that the Group maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold;
(b) from the rendering of telecommunication services, when the relevant services are provided;
(c) from the rendering of after sales services, when the services are provided;
(d) Internet advertising revenue, on a pro rata basis over the period in which the advertisements are displayed on the website operated by the Group, provided that no significant obligations remain and collection of the resulting receivable is reasonably assured;
(e) commission income, when the relevant services are rendered; and
(f) interest income, on a time proportion basis taking into account the principal outstanding and the effective interest rate applicable.

Dividends

Final dividends proposed by the directors are classified as a separate allocation of retained profits within capital and reserves in the balance sheet, until they have been approved by the shareholders in a general meeting. When these dividends have been approved by the shareholders and declared, they are recognised as a liability.

Interim dividends are simultaneously proposed and declared, because the Company’s bye-laws grant the directors the authority to declare interim dividends. Consequently, interim dividends are recognised immediately as a liability when they are proposed and declared.

Retirement benefits scheme

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for all of its employees. The MPF Scheme has operated since 1st December, 2000. Contributions are made based on a percentage of the employees’ basic salaries and are charged to the profit and loss account as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme.

Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities.

Foreign currencies

Foreign currency transactions are recorded at the applicable rates of exchange ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange ruling at that date. Exchange differences are dealt with in the profit and loss account.

On consolidation, the financial statements of overseas subsidiaries and associates are translated into Hong Kong dollars at the applicable rates of exchange ruling at the balance sheet date. The resulting translation differences are included in the exchange fluctuation reserve.

Cash equivalents

For the purpose of the consolidated cash flow statement, cash equivalents represent short term highly liquid investments which are readily convertible into known amounts of cash and which were within three months of maturity when acquired, less advances from banks repayable within three months from the date of the advance. For the purpose of balance sheet classification, cash equivalents represent assets similar in nature to cash, which are not restricted as to use.

– 39 –

FINANCIAL INFORMATION

APPENDIX 1

4. SEGMENT INFORMATION

SSAP 26 was adopted during the year, as detailed in note 2 to the financial statements. Segment information is presented by way of two segment formats: (i) on a primary segment reporting basis, by business segment; and (ii) on a secondary segment reporting basis by, geographical segment.

The Group’s operating businesses are structured and managed separately, according to the nature of their operations and the products and services they provide. Each of the Group’s business segments represents a strategic business unit that offers products and services which are subject to risks and returns that are different from those of other business segments. Summary details of the business segments are as follows:

(a) Online operations segment refers to the provision of Internet services. This segment includes the results, assets and liabilities of two companies which were acquired during the year. These companies are at a relatively early stage of their development. Further details of the acquisitions are set out in note 29(c) to the financial statements;
(b) Offline operations segment refers to the provision of telecommunication services and products. This segment was established during the year and commenced operations in September 2001. It is at a relatively early stage of operations. Subsequent to the year end the Group’s equity interest in this segment was increased to 100%, see note 32(c) for further details thereof;
(c) Investment holding segment refers to the investment in securities; and
(d) Discontinued operations represent the Group’s discontinued motor vehicle related business (note 5).

In determining the Group’s geographical segments, revenue and results are attributable to the segments based on the location of the customers, and assets are attributed to the segments based on the location of the assets.

Intersegment sales and transfers are transacted with reference to the selling prices used for sales made to third parties at the then prevailing market prices.

(a) Business segments

The following table presents revenue, profit and certain asset, liability and expenditure information for the Group’s business segments.

Online operations 2001 2000 HK$’000 HK$’000 Segment revenue: Sales to external customers 277 1,395 Segment results (94,922) (193,554) Interest and unallocated gains Unallocated expenses Loss from operating activities Finance costs: Included in segment results (1,696) (396) Unallocated amounts Share of profits less losses of associates – – Loss before tax Tax Loss before minority interests Minority interests Net loss attributable to shareholders	Offline operations 2001 2000 HK$’000 HK$’000 17,335 – (780) – – – – –	Investment holding 2001 2000 HK$’000 HK$’000 – – 1,619 – – – – –	Discontinued operations 2001 2000 HK$’000 HK$’000 – 80,921 – (1,333) – – – –	Consolidated 2001 2000 HK$’000 HK$’000 17,612 82,316 (94,083) (194,887) 11,791 5,036 (727) – (83,019) (189,851) (1,696) (396) (115) (177) (1,811) (573) – – (84,830) (190,424) – – (84,830) (190,424) 5 – (84,825) (190,424)

– 40 –

FINANCIAL INFORMATION

APPENDIX 1

Segment assets Bank balances included in segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information: Impairment losses of interests in associates Depreciation and amortisation Website development costs Other non-cash expenses Capital expenditure	Online operations 2001 2000 HK$’000 HK$’000 44,510 19,291 – – (16,583 ) (14,549) 15,303 – 14,640 9,785 6,835 72,462 – – 49,413 21,507	Offline operations 2001 2000 HK$’000 HK$’000 3,365 – 154 – (3,294) – – – 76 – – – – – 689 –	Investment holding 2001 2000 HK$’000 HK$’000 34,946 – – – – – – – – – – – 4,541 – – –	Discontinued operations 2001 2000 HK$’000 HK$’000 – 14,612 – – – (21,823) – – – 1,264 – – – 3,000 – 1,737	Consolidated 2001 2000 HK$’000 HK$’000 82,821 33,903 154 – 5,363 71,780 88,338 105,683 (19,877 ) (36,372 ) (12,710 ) (438 ) (32,587 ) (36,810 ) 15,303 – 14,716 11,049 6,835 72,462 4,541 3,000 50,102 23,244

(b) Geographical segments

The following table presents revenue, profit and certain asset, liability and expenditure information for the Group’s geographical segments.

					Elsewhere	Elsewhere	Elsewhere
	Hong Kong				in the PRC				United States			Consolidated
	2001		2000		2001		2000		2001	2000		2001		2000
	HK$’000	HK$’000		HK$’000		HK$’000		HK$’000		HK$’000	HK$’000		HK$’000
Segment revenue:
Sales to external
customers	17,612		59,661		–		22,389		–	266		17,612		82,316

Segment results*	(88,694)		(79,981)		(7,085) (113,820)				–	(1,482)		(95,779) (195,283)

					Elsewhere
	Hong Kong				in the PRC				United States			Consolidated
	2001		2000		2001		2000		2001	2000		2001		2000
	HK$’000	HK$’000		HK$’000		HK$’000		HK$’000		HK$’000	HK$’000		HK$’000
Other segment information:
Segment assets	78,588		97,410		9,750		8,273		–	–		88,338		105,683

Capital expenditure	30,102		21,507		20,000		1,737		–	–		50,102		23,244

Disclosed pursuant to the requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

– 41 –

FINANCIAL INFORMATION

APPENDIX 1

5. DISCONTINUED OPERATIONS

On 2nd January, 2001, the Group discontinued its business of the servicing of motor vehicles following the disposal of its entire 100% equity interest in a subsidiary, Ankor Service Limited (“ASL”), to an independent third party for a consideration of HK$20. Further details of the agreement in respect of the sales of ASL are set out in an announcement of the Company dated 29th December, 2000. The effective date of discontinuance of the Group’s business of the servicing of motor vehicles for accounting purposes was 2nd January, 2001.

With the termination of all the car distribution agreements of the Group on 31st December, 2000 and the disposal of ASL, Ankor Investments Limited (“AIL”) and its subsidiaries (together the “AIL Group”), which operated the Group’s motor vehicles business, became dormant. On 23rd January, 2001, the Group disposed of its entire 100% equity interest in AIL to another independent third party for a consideration of HK$10,000.

ASL and AIL were consolidated by the Group until the date of their disposals, at which time the assets and liabilities of ASL and AIL were transferred to the gain on disposal of the discontinued operations, which was as follows:

Proceeds received from the disposals of ASL and AIL Less: Net liabilities of ASL and AIL disposed of Waived amounts due to ASL and AIL Gain on disposal of subsidiaries	2001 HK$’000 10 7,211 3,184 10,405	2000 HK$’000 – –
		–

Due to the disposals of ASL and AIL, the turnover and the loss from operating activities in respect of the Group’s motor vehicles related business for the year, together with the corresponding amounts for the prior period, are classified and disclosed under discontinued operations in accordance with SSAP 2.

6. TURNOVER AND INCOME

Turnover represents the net invoiced value of goods sold during the year, after allowances for returns and trade discounts, the value of services rendered and advertising income.

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

Turnover Continuing operations: Sale of telecommunication products Rendering of telecommunication services Internet advertising income Discontinued operations: Sale of motor vehicles Rendering of after sales service Other income/gains Gain on disposal of investments Gain on disposal of fixed assets Interest income Commission income Exchange gains, net Others Total income	2001 HK$’000 16,917 418 277 17,612 – – – 3,186 768 1,386 – 26 – 5,366 22,978	2000 HK$’000 – – 1,395
		1,395
		40,932 39,989
		80,921
		– – 5,248 322 – 15
		5,585
		87,901

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FINANCIAL INFORMATION

APPENDIX 1

7. LOSS FROM OPERATING ACTIVITIES

The Group’s loss from operating activities is arrived at after charging/(crediting):

Notes Cost of inventories sold and services provided (i) Depreciation Amortisation of goodwill Provision for impairment of interest in associates_(note 16) Loss/(gain) on disposal of fixed assets Write off of fixed assets Website development costs (ii) Unrealised holding loss on investment in securities Minimum lease payments under operating lease in respect of land and buildings Auditors’ remuneration Staff costs, including directors’ emoluments(note 8): Wages and salaries Pension contributions (iii)_ Provision for extended warranty and free services: Additional provisions Reversals of unutilised provisions Exchange losses/(gains), net Reversal of overprovision of minority interests	2001 HK$’000 30,499 12,675 2,041 15,303 (768) – 6,835 4,541 2,040 850 22,145 340 22,485 – – – (25) –	2000 HK$’000 65,531 11,049 – – 35 3,604 72,462 – 8,364 583 62,120 850 62,970 1,690 (8,905) (7,215) 92 (3,000)

The amortisation of goodwill for the year, the provision for impairment of interest in associates, the website development costs and the unrealised holding loss on investment securities are included in “Other operating expenses” on the face of the consolidated profit and loss account.

Notes:

(i) The cost of inventories sold and services provided for the year ended 31st December, 2001 includes HK$12,212,000 relating to depreciation, which are also included in the amounts of depreciation disclosed separately above.
(ii) During the year, 164,754,524 ordinary shares of HK$0.01 each in aggregate were allotted and issued by the Company for the acquisition and enhancement of certain PRC-based websites at a total share premium of HK$5,187,000 (note 27) (the “Service Agreements”).

Subsequently, the Group terminated all the Services Agreements and all the website development costs were expensed to the profit and loss account for the year. Further details of the termination agreement are set out in an announcement of the Company dated 20th February, 2001.

(iii) At 31st December, 2001, the Group had no forfeited contributions available to reduce its contributions to the pension scheme in future years (2000: HK$202,000).

– 43 –

FINANCIAL INFORMATION

APPENDIX 1

8. DIRECTORS’ REMUNERATION

Directors’ remuneration disclosed pursuant to the Listing Rules and Section 161 of the Hong Kong Companies Ordinance is as follows:

Executive directors: Fees Other emoluments: Salaries, allowances and benefit in kind Pension scheme contributions Compensation for loss of office	Group 2001 2000 HK$’000 HK$’000 – – 5,250 5,684 26 – 550 – 5,826 5,684	Group 2001 2000 HK$’000 HK$’000 – – 5,250 5,684 26 – 550 – 5,826 5,684
		5,684

There were no emoluments paid or payable to the non-executive directors and the independent non-executive directors of the Company during the year (2000: Nil).

The number of directors whose remuneration fell within the following bands is as follows:

Nil to HK$1,000,000 HK$1,000,001 to HK$1,500,000 HK$1,500,001 to HK$2,000,000 HK$2,500,001 to HK$3,000,000	Number of directors 2001 2000 12 11 3 – – 1 – 1 15 13	Number of directors 2001 2000 12 11 3 – – 1 – 1 15 13
		13

There was no arrangement under which a director has waived or agreed to waive any emoluments during the current and prior years.

Save as disclosed above, during the current and prior years, no other emoluments were paid by the Group to any of the directors as an inducement to join the Group or upon joining the Group or as compensation for loss of office.

During the year, 680,000,000 share options were granted to certain directors in respect of their services rendered to the Group, further details of which are set out under the heading “Share option scheme” in the Report of the Directors.

In the absence of a readily available market value for share options on the ordinary shares of the Company, the directors were unable to arrive at an accurate assessment of the value of these share options. Accordingly, no estimate value of such options has been charged to the profit and loss account as at the date of the grant.

9. FIVE HIGHEST PAID EMPLOYEES

The five highest paid employees during the year included three (2000: four) directors, details of whose remuneration are set out in note 8 above. Details of the remuneration of the remaining two (2000: one) non-director, highest paid employees are as follows:

Salaries, allowances and benefits in kind Performance related bonus Pension scheme contributions Compensation for loss of office	Group 2001 2000 HK$’000 HK$’000 2,081 1,426 – 80 10 64 378 – 2,469 1,570	Group 2001 2000 HK$’000 HK$’000 2,081 1,426 – 80 10 64 378 – 2,469 1,570
		1,570

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FINANCIAL INFORMATION

APPENDIX 1

The number of employees whose remuneration fell within the following bands is as follows:

HK$1,000,001 to HK$1,500,000 HK$1,500,001 to HK$2,000,000	Number of employees 2001 2000 2 – – 1 2 1	Number of employees 2001 2000 2 – – 1 2 1
		1

Save as disclosed above, during the current and prior years, no other emoluments were paid by the Group to any of the non-director, highest paid employees abovementioned as an inducement to join the Group or upon joining the Group or as compensation for loss of office.

10. FINANCE COSTS

Interest expense on: Bank loans and overdrafts wholly repayable within five years Convertible notes Convertible bonds Finance leases	Group 2001 2000 HK$’000 HK$’000 – 177 58 – 57 – 1,696 396 1,811 573	Group 2001 2000 HK$’000 HK$’000 – 177 58 – 57 – 1,696 396 1,811 573
		573

11. TAX

No Hong Kong profits tax has been provided as the Group did not generate any assessable profits in Hong Kong during the year. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates, based on existing legislation, interpretations and practices in respect thereof.

The principal components of the Group’s deferred tax liabilities/(assets) provided for and not provided for/ (recognised) at the balance sheet date are as follows:

		Provided	Not	provided
	2001	2000	2001	2000
	HK$’000	HK$’000	HK$’000	HK$’000
Tax losses carried forward	–	–	(128)	(56,816)

12. NET LOSS ATTRIBUTABLE TO SHAREHOLDERS

The net loss attributable to shareholders for the year ended 31st December, 2001 dealt with in the financial statements of the Company was HK$104,813,000 (2000: HK$240,667,000).

13. LOSS PER SHARE

The calculation of basic loss per share is based on the net loss attributable to shareholders for the year of HK$84,825,000 (2000: HK$190,424,000 and 1999: HK$92,691,000), and the weighted average of 1,582,097,774 (2000: 919,896,333 and 1999: HK$142,768,176) ordinary shares in issue during the year, as adjusted to reflect the share consolidation and the rights issue effected after the balance sheet date (note 32).

Diluted loss per share for the years ended 31st December, 2001 and 2000 have not been disclosed as the share options and the convertible bonds and notes outstanding during these years and the bonus warrants effected after the balance sheet date (note 32) had an anti-dilutive effect on the basic loss per share for these years.

– 45 –

FINANCIAL INFORMATION

APPENDIX 1

14. FIXED ASSETS

Group

Long term leasehold land and Computer buildings Leasehold equipment Furniture Machinery, outside improve- and and tools and Hong Kong ments software fixtures equipment HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Cost: At 1st January, 2001 – 7,797 14,280 1,146 1,256 Additions – – 9,191 85 – Acquisition of subsidiaries 10,000 – – – – Disposals – – (1,740) (24) – Disposal of subsidiaries – (7,468) – (873) (1,256) At 31st December, 2001 10,000 329 21,731 334 – Accumulated depreciation: At 1st January, 2001 – 7,002 7,140 636 782 Charge for the year 250 146 12,212 48 – Disposals – – (770) (2) – Disposal of subsidiaries – (6,819) – (600) (782) At 31st December, 2001 250 329 18,582 82 – Net book value: At 31st December, 2001 9,750 – 3,149 252 – At 31st December, 2000 – 795 7,140 510 474	Motor vehicles and vessels HK$’000 5,303 498 – – (5,303) 498 4,372 19 – (4,372) 19 479 931	Total HK$’000 29,782 9,774 10,000 (1,764 (14,900
		32,892
		19,932 12,675 (772 (12,573
		19,262
		13,630

		9,850

The Group acquired the leasehold land and buildings, through acquisition of certain subsidiaries during the year. Further details of the acquisition is set out in note 29(c) to the financial statements.

The Group’s leasehold land and buildings were valued by Castores Magi Surveyors Limited (“Castores”), a firm of independent professional valuers, on the open market value existing state basis, at an aggregate value of approximately HK$10 million as at 31st May, 2001, the effective date of acquisition of the subsidiaries.

The net book value of the Group’s fixed assets held under finance leases included in the total amount of computer equipment and software at 31st December, 2001, amounted to HK$2,975,000 (2000: HK$4,849,000).

15. GOODWILL

SSAP 30 was adopted during the year, as detailed in note 2 to the financial statements. The amounts of the Group’s goodwill capitalised as an asset or recognised in the consolidated balance sheet, arising from the acquisition of subsidiaries, are as follows:

Cost: Acquisition of subsidiaries as at 31st December, 2001 Accumulated amortisation: Amortisation provided during the year as at 31st December, 2001 Net book value: At 31st December, 2001 At 31st December, 2000	HK$’000 20,328
	2,041
	18,287

	–

– 46 –

FINANCIAL INFORMATION

APPENDIX 1

During the year, the Group acquired certain subsidiaries of which the principal activities are investment holding and the provision of wireless application technology services. Further details of the acquisitions are set out in note 29(c) to the financial statements.

16. INTERESTS IN ASSOCIATES

Share of net assets Goodwill on acquisition Less: Provision for impairment_(note 7)_	Group 2001 2000 HK$’000 HK$’000 – – 15,303 – 15,303 – (15,303) – – –	Group 2001 2000 HK$’000 HK$’000 – – 15,303 – 15,303 – (15,303) – – –
		–

During the year, the Group acquired a 40% equity interests in Internet Marketing & Services Limited (“IMS”), for a total consideration of HK$15.18 million. The consideration was satisfied by:

HK$7.59 million by issue of 345 million ordinary shares of the Company at an issue price of HK$0.022 per share; and
HK$7.59 million by issue of two convertible notes of the Company with the principal amounts of HK$3.795 million each which bears interest rate at 2.5% per annum. The convertible notes could be converted into 345 million shares at an initial conversion price of HK$0.022 per share at any time from 8th October, 2001 to 7th October, 2002.

The principal asset of IMS is its holding of all the issued share capital in Marketing Online Limited (“MOL”), a company incorporated in Hong Kong and principally engaged in the provision of news and financial data, publication and Internet marketing services. The consideration paid by the Group was determined by reference to an independent professional valuation of the underlying business of the IMS Group as at 31st August, 2001, on the fair market value basis.

The impairment losses are estimated by the directors based on the recoverable amounts of the goodwill. In the opinion of the directors, such impairment losses arose from the prevailing unfavourable economic environment which has led to a significant scale down of the business operations of the IMS group subsequent to the balance sheet date in February 2002.

Particulars of the associates disclosed pursuant to Section 129 of the Hong Kong Companies Ordinance are as follows:

			Percentage
	Place of		of equity
	incorporation	Issued	attributable	Principal
Name	and operations	share capital	to the Group	activities
Internet Marketing &	BVI	US$100	40%	Investment
Services Limited*				holding
Marketing Online	Hong Kong	HK$2,000,000	40%	Provision of news
Limited*				and financial data,
				publication
				and Internet
				marketing services

Not audited by Ernst & Young Hong Kong or other Ernst & Young International member firms.

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FINANCIAL INFORMATION

APPENDIX 1

17. INVESTMENTS IN SECURITIES

Investment securities: Unlisted in Hong Kong, at cost Other investments: Listed in Hong Kong, at market value Listed outside Hong Kong, at market value At 31st December Carrying amount analysed for reporting purposes as: Non-current Current	Group 2001 2000 HK$’000 HK$’000 10,000 – 36,031 – 202 – 36,233 – 46,233 – 10,000 – 36,233 – 46,233 –	Group 2001 2000 HK$’000 HK$’000 10,000 – 36,031 – 202 – 36,233 – 46,233 – 10,000 – 36,233 – 46,233 –
		–
		–

		– –
		–

Subsequent to the balance sheet date, the Group disposed of certain listed investments and received cash proceeds of approximately HK$3,580,000. The market values of the remaining listed investments as at the date of approval of these financial statements are approximately HK$15,992,000.

Particulars of the investment in securities disclosed pursuant to section 129 of the Hong Kong Companies Ordinance are as follows:

			Percentage
			of equity
	Place of	Issued	attributable	Principal
Name	incorporation	share capital	to the Group	activities
West Marton Group	BVI	US$850	10%	Investment
Limited				holding
(“West Marton”)

The subsidiaries of West Marton are principally engaged in the provision of portal services in the PRC.

18. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Due from subsidiaries Provision for impairment in value Provision against amounts due from subsidiaries	Company 2001 2000 HK$’000 HK$’000 4 101,510 153,977 415,167 153,981 516,677 – (101,510 (103,981) (415,167 50,000 –	Company 2001 2000 HK$’000 HK$’000 4 101,510 153,977 415,167 153,981 516,677 – (101,510 (103,981) (415,167 50,000 –
		516,677 (101,510 (415,167
		–

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

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FINANCIAL INFORMATION

APPENDIX 1

19. INVENTORIES

Finished goods held for sale: Cars Spare parts and accessories Workshop supplies	Group 2001 2000 HK$’000 HK$’000 – 271 – 2,385 – 190 – 2,846	Group 2001 2000 HK$’000 HK$’000 – 271 – 2,385 – 190 – 2,846
		2,846

As at 31st December, 2000, the carrying amount of inventories carried at net realisable value was HK$2,331,000.

20. ACCOUNTS RECEIVABLE

The Group has a policy of allowing an average credit period of 60 days to its trade customers.

An aged analysis of the accounts receivable as at the balance sheet date, based on invoice date and net of provisions, was as follows:

Within 30 days 31 – 60 days 61 – 90 days Over 90 days	Group 2001 2000 HK$’000 HK$’000 1,090 909 225 188 – 282 – 207 1,315 1,586	Group 2001 2000 HK$’000 HK$’000 1,090 909 225 188 – 282 – 207 1,315 1,586
		1,586

21. CASH AND CASH EQUIVALENTS AND PLEDGED DEPOSITS

Cash and bank balances Time deposits Less: Pledged time deposits Cash and cash equivalents	Group 2001 2000 HK$’000 HK$’000 5,502 13,897 1,440 71,028 6,942 84,925 (774) – 6,168 84,925	Company 2001 2000 HK$’000 HK$’000 277 13 666 71,028 943 71,041 – – 943 71,041	Company 2001 2000 HK$’000 HK$’000 277 13 666 71,028 943 71,041 – – 943 71,041
			71,041 –
			71,041

22. ACCOUNTS PAYABLE

An aged analysis of the accounts payable as at the balance sheet date, based on invoice date, was as follows:

Within 30 days 31 – 60 days 61 – 90 days Over 90 days	Group 2001 2000 HK$’000 HK$’000 372 619 31 1,064 9 364 – 1,226 412 3,273	Group 2001 2000 HK$’000 HK$’000 372 619 31 1,064 9 364 – 1,226 412 3,273
		3,273

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FINANCIAL INFORMATION

APPENDIX 1

23. PROVISION FOR EXTENDED WARRANTY AND FREE SERVICE

At beginning of year Additional provision for the year Reversal of utilised amounts Disposal of subsidiaries At 31st December Portion classified as current liabilities Long term portion	Group 2001 2000 HK$’000 HK$’000 10,247 17,462 – 1,690 – (8,905) (10,247) – – 10,247 – (7,835) – 2,412

SSAP 28 was implemented during the year, as detailed in note 2 to the financial statements. There are no significant effects on the discounted amounts of provision to the present value at the balance sheet date for the prior year. Accordingly, no prior year adjustment is included in the financial statements.

As further detailed in note 5 to the financial statements, the Group disposed of certain subsidiaries during the year, the principal activities of which was motor vehicles related business. The motor vehicle related business was accounted for until the date of disposal, at which time the assets and liabilities of the motor vehicle related business were transferred to the gain on disposal of discontinued operations.

In prior years, in addition to the normal manufacturers’ warranty, the Group provided a package comprising free after sales service and an extension of the manufacturers’ warranty up to a period of three years from the date of sale of a new motor vehicle. Provision was made, in the year the new vehicle was sold, for the expected future revenue associated with providing the package and actual internal service costs were matched against the provision as incurred. The level of provision required was assessed by the directors annually and adjustment made if necessary.

24. CONVERTIBLE BONDS PAYABLE

Convertible bonds (the “Bonds”) in the principal amount of HK$12,000,000 were issued by the Company in July 2001 in favour of more than six independent third parties pursuant to a bond placement agreement dated 23rd July, 2001. The Bonds are repayable on 22nd July, 2002 and bears interest at 2.5% per annum.

Pursuant to the conversion terms and conditions of the Bonds, the Bonds holder may at its election at any time prior to the payment in full of the Bonds, convert any outstanding amount of the Bonds in units of HK$240,000 into 20,000,000 conversion shares at the conversion price of HK$0.022 per share by a payment of cash in the amount of HK$200,000 and tender the fair value of HK$240,000 outstanding Bonds.

No early redemption by cash is allowed prior to the maturity date of the Bonds. Any unredeemed and unconverted Bonds will be redeemed in cash or by the issue of the conversion shares upon maturity of the Bonds at the option of the Company.

During the year, an amount of HK$7,440,000 of the Bonds had been converted into conversion shares.

25. CONVERTIBLE NOTES PAYABLE

Convertible notes (the “Notes”) in the principal amount of HK$7,590,000 were issued by the Company in September 2001 in favour of two independent third parties as partial consideration for the acquisition of a 40% equity interest in associates (note 16). The Notes are repayable on 8th October, 2002 and bears interest at 2.5% per annum.

Pursuant to the conversion terms and conditions of the Notes, the Notes holder may at its election at any time prior to the payment in full of the Notes, convert any outstanding amount of the Notes and its accrued interest in units of HK$379,500 into 17,250,000 conversion shares at the conversion price of HK$0.022 per share.

No early redemption by cash is allowed prior to the maturity date of the Notes. Any unredeemed and unconverted Bonds will be redeemed in cash or by the issue of the conversion shares upon maturity of the Notes, at the option of the Company.

No Notes were converted into conversion shares during the year.

– 50 –

FINANCIAL INFORMATION

APPENDIX 1

26. FINANCE LEASE PAYABLES

The Group leases certain of its computer equipment for its Internet and telecommunication services business. These leases are classified as finance leases and have remaining lease terms ranging from one to two years. Pursuant to the leases, the Group has been granted purchase options to purchase all the leased assets at HK$400 at the end of the leases term.

At 31st December, 2001, the total future minimum lease payments under finance leases and their present values, were as follows:

Group Amounts payable: Within one year In the second year In the third to fifth years, inclusive Total minimum finance lease payments Future finance charges Total net finance lease payables Portion classified as current liabilities Long term portion	Minimum lease payments 2001 HK$’000 10,473 1,053 – 11,526 (1,160) 10,366 (9,361) 1,005	Minimum lease payments 2000 HK$’000 3,546 3,546 1,052 8,144 (1,300) 6,844 (2,703) 4,141	Present value of minimum lease payments 2001 HK$’000 9,361 1,005 – 10,366	Present value of minimum lease payments 2000 HK$’000 2,703 3,136 1,005
				6,844

SSAP 14 was revised and implemented during the year, as detailed in note 2 to the financial statements. Certain new disclosures are required and have been included above. The prior year comparative amounts for the new disclosures have also been included where appropriate.

27. SHARE CAPITAL

The following is a summary of movements in the authorised and issued share capital of the Company:

Notes Authorised: At 31st December, 2000 and 2001 Issued and fully paid: At 1st January, 2001 Issued for payment of websites development costs (i) New issue of shares by way of placing (ii) Issue of consideration shares (iii) Conversion of convertible bonds (iv) At 31st December, 2001	Number of ordinary shares of HK$0.01 each 30,000,000,000 7,600,396,465 164,754,524 1,300,000,000 345,000,000 620,000,000 10,030,150,989	Nominal value of ordinary shares HK$’000 300,000 76,004 1,648 13,000 3,450 6,200
		100,302

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FINANCIAL INFORMATION

APPENDIX 1

The following changes in the Company’s issued share capital took place during the year:

(i) On 20th February 2001 and 5th March, 2001, the Company issued 161,244,524 and 3,510,000 ordinary shares credited as fully paid to certain independent third parties at HK$0.042 and HK$0.018 per share, respectively, as considerations for acquisition and enhancement of certain PRC-based websites (note 7).
(ii) Pursuant to an agreement to place existing shares and subscribe for new shares dated 13th June, 2001, Rich Delta Development Limited, the controlling shareholder of the Company, placed 1,300,000,000 existing shares to more than six independent investors at a price of HK$0.036 per share and subscribe for 1,300,000,000 new shares of the Company at the price of HK$0.036 per share.
(iii) Pursuant to an acquisition agreement dated 11th September, 2001, the Company issued 345,000,000 consideration shares credited as fully paid at HK$0.022 per share to two independent third parties as partial consideration for the acquisition of a 40% equity interest in associates (note 16).
(iv) As further detailed in note 24, the Company issued Bonds in the aggregate principal amount of HK$12,000,000. During the year, an aggregate amount of HK$7,440,000 of the Bonds were converted into 620,000,000 conversion shares pursuant to the conversion terms and conditions of the Bonds.
Shares issued during the year rank pari passu in all respects with shares in issue at that time.

Share options

The Company operates a share option scheme (the “Scheme”), further details of which are set out under the heading “Share option scheme” in the Report of the Directors.

On 26th June, 2000, the Scheme was approved pursuant to a written resolution of the Company. The purpose of the Scheme is to enable the Group to grant options to employees as incentives or rewards for their contribution to the Group. The board of directors may, at their discretion, grant options to any full-time employee of the Company or its subsidiaries, to subscribe for shares of the Company. The total number of shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Scheme and other schemes by the Company must not exceed 10% of the shares in issue from time to time. A non-refundable nominal consideration of HK$1 is payable by the grantee upon acceptance of an option.

The subscription price for shares under the Scheme may be determined by the board of directors at its absolute discretion but in any event will be the greater of: (i) the nominal value of the share and (ii) an amount not less than 80 per cent of the average closing price of the shares as stated in the daily quotations immediately preceding the date on which the offer to grant an option is made to an employee.

The maximum number of share in respect of which an option may be granted under the Scheme will not, when aggregated with any shares subject to any other share option schemes of the Company, exceed 10 per cent of the issued share capital of the Company from time to time.

At the beginning of the year, there were 402,737,750 share options outstanding under the Scheme, which entitled the holders to subscribe for shares of the Company at any time during periods ranging from 1st September, 2000 to 17th December, 2001. The subscription prices per share payable upon the exercise of these options range from HK$0.063 to HK$0.130.

During the year, the Company granted a total of 754,625,000 new share options under the Scheme. The share options granted entitle the holders to subscribe for shares of the Company at any time during the period ranging from 2nd March, 2001 to 25th June, 2010. The subscription prices per share payable upon the exercise of these options range from HK$0.016 to HK$0.063.

No share options were exercised during the year and 411,362,750 share options with an exercise price range from HK$0.063 to HK$0.130 were cancelled during the year.

At the balance sheet date, the Company had 746,000,000 share options outstanding under the Scheme, with an exercise period from 23rd July, 2001 to 25th June, 2010 and an exercise price of HK$0.016. The exercise in full of the remaining share options would, under the capital structure of the Company as at 31st December, 2001, result in the issue of 746,000,000 additional shares of HK$0.01 each and proceeds of approximately HK$11,936,000.

The Scheme remains in force for a period of 10 years with effect from 26th June, 2000.

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FINANCIAL INFORMATION

APPENDIX 1

28. DEFICIT

Group

At 1st January, 2000 Issue of shares Issue expenses Cancelled paid-up ordinary share capital Loss for the year At 31st December, 2000 and 1st January, 2001 Issue of shares Issue expenses Loss for the year At 31st December, 2001 Deficits retained by: Company and subsidiaries Associates At 31st December, 2001 At 31st December, 2000 – Company and subsidiaries Company At 1st January, 2000 Issue of shares Issue expenses Cancelled paid-up ordinary share capital Loss for the year At 31st December, 2000 and 1st January, 2001 Issue of shares Issue expenses Loss for the year At 31st December, 2001	Share premium Accumulated account losses HK$’000 HK$’000 186,191 (316,957) 262,306 – (18,627) – – 70,380 – (190,424) 429,870 (437,001) 50,567 – (3,162) – – (84,825) 477,275 (521,826) 477,275 (521,826) – – 477,275 (521,826) 429,870 (437,001) Share premium Accumulated account losses HK$’000 HK$’000 186,191 (264,245) 262,306 – (18,627) – – 70,380 – (240,667) 429,870 (434,532) 50,567 – (3,162) – – (104,813) 477,275 (539,345)	Total HK$’000 (130,766) 262,306 (18,627) 70,380 (190,424) (7,131) 50,567 (3,162) (84,825) (44,551) (44,551) – (44,551) (7,131) Total HK$’000 (78,054) 262,306 (18,627) 70,380 (240,667) (4,662) 50,567 (3,162) (104,813) (62,070)

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FINANCIAL INFORMATION

APPENDIX 1

29. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

(a) Reconciliation of loss from operating activities to net cash outflow from operating activities

Loss from operating activities Interest income Websites development costs Write off of fixed assets Amortisation of goodwill Provision for impairment of interest in associates Depreciation of fixed assets Loss/(gain) on disposal of fixed assets Gain on disposal of subsidiaries Decrease in inventories Decrease/(increase) in accounts receivables Decrease/(increase) in deposits, prepayments and other receivables Increase/(decrease) in accounts payables Decrease in accrued liabilities and other payables Decrease in provision for extended warranty and free services Overprovision for minority interests Net cash outflow from operating activities	2001 HK$’000 (83,019) (1,386) 6,835 – 2,041 15,303 12,675 (768) (10,405) – (6,013) 7,606 7,387 (6,787) – – (56,531)	2000 HK$’000 (189,851) (5,248) 72,462 3,604 – – 11,049 35 – 2,855 2,830 (2,960) (5,864) (8,149) (7,215) (3,000) (129,452)

(b) Analysis of changes in financing during the year

At 1st January, 2000 Net cash inflow from financing activities Cancelled paid-up ordinary share capital Ordinary shares paid up other than cash Obligations under finance leases At 31st December, 2000 and 1st January, 2001 Net cash inflow from financing activities Acquisition of associates (note 29(e)(i)) Assignment of finance lease contracts by a related company (note 29(e)(ii)) Issue of shares for payment of websites development costs (note 29(e)(iii)) Conversion of convertible bonds (note 29(e)(iv)) Share of loss of a subsidiary At 31st December, 2001	Issued capital (including share premium account) HK$’000 264,391 239,210 (70,380) 72,653 – 505,874 49,838 7,590 – 6,835 7,440 – 577,577	Convertible notes payable HK$’000 – – – – – – – 7,590 – – – – 7,590	Convertible bonds payable HK$’000 – – – – – – 12,000 – – – (7,440) – 4,560	Finance lease payable HK$’000 – (2,854) – – 9,698 6,844 (5,065) – 8,587 – – – 10,366	Minority interests HK$’000 – – – – – – 5 – – – – (5) –

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FINANCIAL INFORMATION

APPENDIX 1

(c) Acquisition of subsidiaries

Net assets acquired: Leasehold land and buildings Accrued liabilities and other payables Loan from the former shareholder Goodwill arising from acquisition Satisfied by: Cash Assignment of a loan from the former shareholder	2001 HK$’000 10,000 (1,328) (6,976) 1,696 20,328 22,024 29,000 (6,976) 22,024	2000 HK$’000 – – –
		– –
		–

		– –
		–

An analysis of the net outflow of cash and cash equivalents in respect of the acquisition of subsidiaries is as follows:

Cash consideration and net outflow of cash and cash equivalents in respect of the acquisitions of subsidiaries During the year, the following significant acquisitions took place:	2001 HK$’000 29,000	2000 HK$’000 –

			Percentages
			of voting		Effective
	Place of	Principal	shares	Cost of	date of
Acquire	incorporation	activities	acquired	acquisition	acquisition
				HK$’000
Luckco Assets	BVI	Property holding	100	5,000	31st May,
Limited					2001
Cofidelen Profits	BVI	Property holding	100	5,000	31st May,
Limited					2001
Comstar Hong Kong	Hong Kong	Provision of	100	15,000	23rd August,
Limited		wireless services			2001
(“Comstar”)		application
Info Century Inc.	BVI	Internet content	100	4,000	22nd November
(“ICI”)		provider			2001

The subsidiaries acquired during the year ended 31st December, 2001 had no contribution to the Group’s net operation cash inflow, did not pay any net returns on investments and servicing of finance and contributed neither to investing activities nor financing activities.

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FINANCIAL INFORMATION

APPENDIX 1

(d) Disposal of subsidiaries

Net assets disposed of: Fixed assets Inventories Accounts receivable, deposit, prepayment and other receivables Cash and bank balances Accounts payable, accrued liabilities and other payables Provision for extended warranty and free services Gain on disposal of subsidiaries Satisfied by: Cash Waived amounts due to the disposed subsidiaries	2001 HK$’000 2,327 2,846 6,284 3,155 (11,576) (10,247) (7,211) 10,405 3,194 10 3,184 3,194	2000 HK$’000 – – – – – –
		– –
		–

		– –
		–

An analysis of the net outflow of cash and cash equivalents in respect of the disposal of subsidiaries are as follows:

Cash consideration Cash and bank balances disposed of Net outflow of cash and cash equivalents in respect of the disposal of subsidiaries	2001 HK$’000 10 (3,155) (3,145)	2000 HK$’000 – –
		–

The subsidiaries disposed of during the year ended 31st December, 2001 had no contributions to the Group’s net operating cash inflow, did not pay any net returns on investments and servicing of finance and contributed neither to investing activities nor financing activities.

(e) Major non-cash transactions

(i) During the year, the Group acquired a 40% equity interest in associates at a consideration of HK$15,180,000. The consideration is to be settled by (i) the issue of Notes of HK$7,590,000 and (ii) the issue of 345,000,000 consideration shares credited as fully paid at HK$0.022 per share.
(ii) During the year, the Group acquired certain computer equipment and software of HK$8,587,000 from a former related company by assignment of and transferring the obligations and liabilities under finance leases of HK$8,587,000 to the Group.
(iii) As further detailed in note 27 (i), during the year, the Company allotted 161,244,524 and 3,510,000 shares issued at HK$0.042 and HK$0.018 per share, respectively, credited as fully paid to certain independent third parties, as consideration for acquisition and enhancement of certain PRC-based websites.
(iv) As further detailed in note 24 to the financial statements, an amount of HK$7,440,000 of the Bonds had been converted into conversion shares of the Company during the year with cash proceeds of HK$6.2 million.

– 56 –

FINANCIAL INFORMATION

APPENDIX 1

30. CONTINGENT LIABILITIES

As at 31st December, 2001, contingent liabilities not provided for in the financial statements were as follows:

Guarantees of hire purchase financing facilities granted by a finance company to a subsidiary’s customers Guarantees given to securities dealers in connection with financing facilities granted to subsidiaries	Company 2001 2000 HK$’000 HK$’000 2,680 2,680 10,000 – 12,680 2,680	Company 2001 2000 HK$’000 HK$’000 2,680 2,680 10,000 – 12,680 2,680
		2,680

None of the above facilities was utilised as at 31st December, 2001.

At 31st December, 2001, the Group had no significant contingent liabilities (2000: Nil).

31. OPERATING LEASE COMMITMENTS

The Group leases certain of its office properties under operating lease arrangements for terms ranging from two to three years.

At 31st December, 2001, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

Within one year In the second to fifth years, inclusive	Group 2001 2000 HK$’000 HK$’000 (Restated) 918 393 721 1,619 1,639 2,012	Group 2001 2000 HK$’000 HK$’000 (Restated) 918 393 721 1,619 1,639 2,012
		2,012

SSAP 14 (Revised) requires lessees under operating leases to disclose the total minimum operating lease payments, rather than only the payments to be made during the next year as was previously required. Accordingly, the prior year comparative amounts for operating leases above, have been restated to accord with the current year’s presentation.

At 31st December, 2001, the Company had no significant commitments (2000: Nil).

32. POST BALANCE SHEET EVENTS

(a) Pursuant to ordinary resolutions passed on 4th February 2002, the Company effected a capital reorganisation comprising a capital reduction (the “Capital Reduction”) and a share consolidation (the “Share Consolidation”). Under the Capital Reduction, the paid up capital of the issued shares will be reduced from HK$0.01 to HK$0.0008 each by the cancellation of HK$0.0092 paid up capital on each issued share. As a result of the Capital Reduction, based on the present number of 10,030,150,989 issued shares, an amount of approximately HK$92,277,389 from the share capital account of the Company will be cancelled and credited to a contributed surplus account of the Company and applied in eliminating part of the Company’s accumulated losses. Immediately after the Capital Reduction, the Company then effect the Share Consolidation, whereby every twenty five issued shares of HK$0.0008 each were consolidated into two new shares. Following the Capital Reduction and the Share Consolidation, the issued share capital of the Company would comprise 802,412,078 new shares.
(b) Pursuant to ordinary resolutions passed on 4th February 2002, a rights issue of 6,820,502,663 rights shares at an issue price of HK$0.016 per rights share on the basis of seventeen rights shares for every two existing shares held by members on the register of members on 8th February 2002 was made by the Company, with bonus warrants on the basis of one bonus warrant for every five rights shares taken up. The transaction was completed on 5th March, 2002 and the proceeds of HK$109,128,043, before expenses, were received by the Company. 1,364,100,532 bonus warrants at an initial subscription price of HK$0.01 per share were issued.

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FINANCIAL INFORMATION

APPENDIX 1

Further details of the rights issue with bonus warrants are set out in the prospectus of the Company dated 11th February 2002.

(c) Pursuant to ordinary resolutions passed on 4th February 2002, the Group entered into an acquisition agreement (the “Grandmax Agreement”) with a director of the Company to acquire the entire issued share capital of Grandmax International Limited (“Grandmax”), a company incorporated in the British Virgin Islands with limited liability, for a cash consideration of HK$36,000,000. As a consequence of which the Group acquired the remaining outstanding 49% minority interest in Wiseford Ltd. and whereby Wiseford Ltd. became a wholly-owned subsidiary. The business of Wiseford Ltd. and its subsidiaries which was recently established in September 2001, includes the provision of callings cards in Hong Kong, retail sale of telecommunication products in Hong Kong and the PRC, wholesale of handsets in the PRC, the provision of virtual office services through online business solutions, provision of long distance call services in Hong Kong and the PRC and the installation of callings and broadband services in the PRC. The transaction constituted a connected and discloseable transaction and was approved by independent shareholders of the Company on 4th February 2002. The transaction, which was completed on 5th March, 2002, has resulted in goodwill of approximately HK$35,960,000, which will be capitalised and amortised over a period of five years on the straight-line basis. (note)
(d) Pursuant to ordinary resolutions passed on 4th February 2002, the Group entered into another acquisition agreement (the “Magna Steels Agreement”) with an independent third party to acquire the entire issued share capital of Magna Steels Co., Ltd., (“Magna”), a company incorporated in the British Virgin Islands with limited liability, for a cash consideration of HK$54,000,000. The principal assets of Magna Steel is its holding of a 35% equity interest in Seven Perfect Investment Co., Ltd. which in turn, beneficially owns the entire interest in Twin Faces Co. Ltd. (“Twin Faces”), a company incorporated in the British Virgin Islands. Twin Faces is principally engaged in management and consultancy services in an intelligent transport system in Shanghai, the PRC. The recovery of the Group’s investment in Magna is expected to come from profits to be generated from these foregoing services which are to be provided by Twin Faces to Shanghai Ke Zhen Investment and Consultant Company Limited (“Shanghai Ke Zhen”) which, in turn, is to provide such to parties in Shanghai, the PRC. Formal cooperation agreements between Shanghai Ke Zhen and its customer were signed in 2000 and 2001. However, the related services are not currently anticipated to begin operations until towards the end of 2002. The transaction was completed on 5th March, 2002 and resulted in goodwill of approximately HK$53,992,000, which will be capitalised and thereafter amortised over a period of five years on the straight-line basis. (note)

Further details of the above post balance sheet events are set out in the circular of the Company dated 10th January, 2002.

33. RELATED PARTY TRANSACTIONS

The Group had the following transactions with related parties during the year:

(i) A co-operation agreement was entered into between the Company and renren.com Holdings Limited, a related company in which certain directors of the Company have beneficial interests, under which renren. com Holdings Limited agreed to license its tradename of “renren.com” to the Group in return for a licence fee equal to the higher of US$100,000 (which had been reduced to US$15,000 with effect from 1st May, 2001) or 5% of the gross receipts arising from the use of the tradename for each calendar month; and to provide technical consultation services and second employees to the Group in return for consideration based on cost plus 5 per cent..

Payments to renren.com Holdings Limited: Licence fee Technical consultation services Secondment of employees	2001 HK$’000 4,056 1,313 – 5,369	2000 HK$’000 6,238 7,920 11,691
		25,849

(ii) As further detailed in note 29(e)(ii) to the financial statements, the Group acquired certain computer equipment and software of HK$8,587,000 from a former related company by assignment of and transferring the obligations and liabilities under finance leases of HK$8,587,000 to the Group.

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FINANCIAL INFORMATION

APPENDIX 1

34. COMPARATIVE AMOUNTS

As further explained in notes 2 and 5 to the financial statements, due to the adoption of new and revised SSAPs and the disposals of ASL and AIL during the current year, the accounting treatment and presentation of certain items and balances in the financial statements have been revised to comply with the new requirements and give more details about the Group’s current business operations. Accordingly, certain comparative amounts have been reclassified to conform with the current year’s presentation.

35. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of directors on 23rd March, 2002.

Note: The acquisitions of Grandmax International Limited and Magna Steels had no impact as to the remuneration payable to and the benefits in kind receivable by Directors.

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FINANCIAL INFORMATION

APPENDIX 1

The following table, which is extracted from the Company’s annual report 2001, lists the subsidiaries of the Company which, in opinion of the Directors, principally affected the results for 2001 or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the Directors, result in particulars of excessive length.

		Nominal value	Percentage	Percentage	Percentage	Percentage
	Place of	of issued		of	equity
	incorporation/	ordinary/	attributable			to
	registration	registered	the Company				Principal
Name	and operations	share capital	Direct		Indirect		activities
renren Internet Limited	Cayman Islands	US$2	100			–	Investment
							holding
Ankor Investments Limited*	British Virgin Islands	US$10,000	100			–	Investment
	(“BVI”)						holding
renren Asset Management	BVI	US$1	100			–	Investment
Limited#							holding
renren Financial Limited	BVI	US$1	100			–	Securities
(formerly Top Vision							investment
Investments Limited)#
Wiseford Ltd.#	BVI	US$1,000	51			–	Investment
							holding
Cofidelen Profits Limited#	BVI	US$1	–		100		Investment
							holding
Gold Cross Investments	BVI	US$1	–		100		Securities
Limited#							investment
Global Deluxe Limited#	BVI	US$1	–		100		Securities
							investment
Global Focus Inc.#	BVI	US$1	–		100		Investment
							holding
Info Century Inc.#	BVI	US$1,000	–		100		Investment
							holding
Jet Concord Inc.#	BVI	US$1	–		100		Investment
							holding
Luckco Assets Limited#	BVI	US$1	–		100		Investment
							holding
Magic Tech Limited#	BVI	US$1	–		100		Investment
							holding

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FINANCIAL INFORMATION

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		Nominal value	Percentage	Percentage	Percentage
	Place of	of issued		of	equity
	incorporation/	ordinary/	attributable to
	registration	registered	the Company			Principal
Name	and operations	share capital	Direct		Indirect	activities
Sky Top Consultants	BVI	US$1	–		100	Holding of
Limited#						domain name
						“renren TV”
Starluck Limited#	BVI	US$1	–		100	Investment
						holding
Union Sun Trading Ltd.#	BVI	US$1	–		100	Securities
						investment
Well Trinity Ltd.#	BVI	US$1	–		100	Investment
						holding
Wide Approach Enterprises	BVI	US$1	–		100	Investment
Co., Ltd.#						holding
Ankor Service Limited*	Hong Kong	HK$20	–		100	Servicing of
						motor vehicles
Comstar Hong Kong	Hong Kong	HK$2	–		100	Provision of
Limited#						short message
						system
						technology
Great Toll Investment	Hong Kong	HK$2	–		100	Holding of
Limited#						properties
renren Capital (Asia)	Hong Kong	HK$2	–		100	Dormant
Limited (formerly Max
Success Trading Limited)#
renren Finance and Credit	Hong Kong	HK$100	–		100	Dormant
Limited (formerly Sunny
Zone Enterprises Limited)#
renren Limited	Hong Kong	HK$2	–		100	Provision of
						administration
						services to
						companies
						in the Group
renren Telecom Limited	Hong Kong	HK$1,000	–		26	Provision of
(formerly Royal Sun						telecommuni-
Development Limited)#						cation services

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FINANCIAL INFORMATION

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		Nominal value	Percentage	Percentage	Percentage
	Place of	of issued		of	equity
	incorporation/	ordinary/	attributable to
	registration	registered	the Company			Principal
Name	and operations	share capital	Direct		Indirect	activities
Smart Info Holdings	Hong Kong	HK$1,000	–		60	Dormant
Limited#
Univision Telecom Limited	Hong Kong	HK$1,000	–		14	Provision of
(formerly Max Crest						telecommuni-
Limited)#						cation services
Well Trade Technology	Hong Kong	HK$2	–		100	Leasing of
Limited (formerly renren						office premises
Holdings Limited)#
Wonder Tech Holdings	Hong Kong	HK$1,000	–		60	Provision of short
Limited #						message
						system
						technology

# Being subsidiaries acquired/incorporated during the year * Being subsidiaries disposed of during the year

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FINANCIAL INFORMATION

APPENDIX 1

Set out below is the unaudited consolidated profit and loss account of the Company for the 6 months ended 30th June, 2002, and the unaudited consolidated balance sheets as at 30th June, 2002 together with the comparative figures for the previous corresponding period:

CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT

(unaudited)

Notes Turnover 2 Cost of sales Gross profit/(loss) Other revenue Administrative expenses Other operating expenses Loss from operating activities 3 Finance costs Gain on disposal of discontinued operations Loss before taxation Taxation 4 Loss attributable to shareholders Loss per share (basic) 5	6 months ended 30th June 2002 2001 HK$000 HK$000 15,326 277 (14,662) (1,365) 664 (1,088) 251 1,965 (50,350) (41,298) (3,516) (25,900) (52,951) (66,321) (753) (877) – 10,405 (53,704) (56,793) – – (53,704) (56,793) (0.65)cents (0.7)cents

There were no recognized gains or losses other than the net loss for the period.

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FINANCIAL INFORMATION

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CONDENSED CONSOLIDATED BALANCE SHEET

(in HK$ thousands) Notes Non-current Assets Fixed assets Goodwill Investment in securities 6 Current Assets Accounts receivable 7 Deposits, prepayments and other receivables Investments in securities 6 Pledged time deposits Cash and cash equivalents Current Liabilities Accounts payable 8 Accrued liabilities and other payables Convertible bonds and notes payable Current portion of finance lease payables 9 Net Current Assets Total Assets less Current Liabilities Non-current Liabilities Finance lease payables 9 Capital Employed Share capital 10 Reserves 11	Unaudited 30th June 2002 11,696 87,970 7,003 106,669 7,467 3,181 9,306 671 4,564 25,189 683 9,494 9,150 5,455 24,782 407 107,076 197 197 106,879 76,332 30,547 106,879	Audited 31st December 2001 13,630 18,287 10,000 41,917 1,315 1,931 36,233 774 6,168 46,421 412 9,659 12,150 9,361 31,582 14,839 56,756 1,005 1,005 55,751 100,302 (44,551) 55,751

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FINANCIAL INFORMATION

APPENDIX 1

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

(unaudited)

(in HK$ thousands) Net cash outflow from operating activities Net cash outflow from investing activities Net cash inflow from financing activities Decrease in cash and cash equivalents Cash and cash equivalents at 1st January Cash and cash equivalents at 30th June Analysis of the balance of cash and cash equivalents Cash and bank balances	6 months ended 30th June 2002 2001 (42,909) (42,715) (55,096) (50,124) 96,401 41,165 (1,604) (51,674) 6,168 84,925 4,564 33,251 4,564 33,251

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS

1. Principal accounting policies

These unaudited condensed consolidated interim accounts (“interim accounts”) are prepared in accordance with Hong Kong Statement of Standard Accounting Practice (“SSAP”) No.25, “Interim Financial Reporting”, issued by the Hong Kong Society of Accountants, (as applicable to condensed interim accounts) and Appendix 16 of the Listing Rules of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

2. Segment information

The Group’s principal activities are engaged in the provision of Internet products and services.

An analysis of the Group’s turnover and contribution to the loss for the period by principal activities is as follows:

Revenues Segment results Unallocated cost Operating loss Finance cost Loss before tax Tax Loss attributable to shareholders	6 Online operations – (26,476)	months ended 30th June 2002 *HK$000* Offline Investment operations holding Consolidated 15,326 – 15,326 (1,372) (21,587) (49,435) (3,516) (52,951) (753) (53,704) – (53,704)

Revenues Segment results Unallocated gain Operating loss Finance cost Loss before tax Tax Loss attributable to shareholders	6 Online operations 277 (66,321)	months ended 30th June 2001 *HK$000* Offline Investment operations holding Consolidated – – 277 – – (66,321) 10,405 (55,916) (877) (56,793) – (56,793)

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FINANCIAL INFORMATION

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An analysis of the Group’s turnover and contribution to operating loss for the period by geographical segment is as follows:

Geographical segment: Hong Kong Mainland China United State	Unaudited Turnover 6 months ended 30th June 2002 2001 HK$000 HK$000 15,326 41 – 163 – 73 15,326 277	Unaudited Operating loss 6 months ended 30th June 2002 2001 HK$000 HK$000 (52,951) (45,526 – (10,139 – (251 (52,951) (55,916	Unaudited Operating loss 6 months ended 30th June 2002 2001 HK$000 HK$000 (52,951) (45,526 – (10,139 – (251 (52,951) (55,916
			(55,916

3. Loss from operating activities

Operating loss is stated after crediting and charging the following:

Crediting Exchange gain Gain on disposal of fixed assets Charging Write off of investment in websites Write off of fixed assets Loss on disposal of investment in securities Amortisation of goodwill Depreciation Owned fixed assets Leased fixed assets Unrealised holding loss on investment in securities	Unaudited 30th June 2002 HK$000 – – – – 5,239 10,758 638 2,357 19,864	Unaudited 30th June 2001 HK$000 26 756

		26,220 267 – – 2,003 3,875 169

4. Taxation

No provision for Hong Kong Profits Tax has been made in the interim accounts as the Company and its subsidiaries have no assessable income for the period ended.

5. Loss per share

The calculation of the loss per share is based on the net loss from ordinary activities attributable to shareholders for the period ended 30th June 2002 of HK$53,704,000 (2001:HK$56,793,000), and the weighted average of 8,211,271,603 (2001:7,765,021,988) ordinary shares in issue during the period. Diluted loss per share has not been calculated as no diluting events existed during both periods.

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FINANCIAL INFORMATION

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6. Investment in securities

Investment securities: Unlisted in Hong Kong, at cost Other investments: Listed in Hong Kong, at market value Listed outside Hong Kong, at market value Carrying amount analysed for reporting purpose as: Non-current Current	Unaudited Audited 30th June 31st December 2002 2001 HK$000 HK$000 7,003 10,000 9,306 36,031 – 202 9,306 36,233 16,309 46,233 7,003 10,000 9,306 36,233 16,309 46,233	Unaudited Audited 30th June 31st December 2002 2001 HK$000 HK$000 7,003 10,000 9,306 36,031 – 202 9,306 36,233 16,309 46,233 7,003 10,000 9,306 36,233 16,309 46,233
		36,031 202
		36,233
		46,233

		10,000 36,233
		46,233

7. Accounts receivable

Within 30 days 31-60 days 61-90 days Over 90 days Accounts payable Within 30 days 31-60 days 61-90 days Over 90 days	Unaudited Audited 30th June 31st December 2002 2001 HK$000 HK$000 6,185 1,090 238 225 244 – 800 – 7,467 1,315 Unaudited Audited 30th June 31st December 2002 2001 HK$000 HK$000 421 372 126 31 – 9 136 – 683 412	Unaudited Audited 30th June 31st December 2002 2001 HK$000 HK$000 6,185 1,090 238 225 244 – 800 – 7,467 1,315 Unaudited Audited 30th June 31st December 2002 2001 HK$000 HK$000 421 372 126 31 – 9 136 – 683 412
		412

8. Accounts payable

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FINANCIAL INFORMATION

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9. Finance leases payables

Amounts payable: Within one year In the second year 10. Share capital Authorised: At 31st December 2001 and 30th June 2002 Issued and fully paid: At 31st December 2001 Reduction of issued and paid-up ordinary share capital from HK$0.01 each to HK$0.0008 each and transferred to accumulated losses Consolidation of issued and paid-up ordinary share capital on the basis of 25 issued shares of HK$0.0008 each consolidated into 2 new shares of HK$0.01 each Issue of shares Exercise of warrants 11. Reserves Accumulated losses Balance brought forward Cancelled paid-up ordinary share capital Loss for the period or year Balance carried forward Share premium Balance brought forward Issue of shares Issue expenses Balance carried forward Total Reserves	Unaudited 30th June 2002 HK$000 5,455 197 5,652 Number of ordinary shares of HK$0.01 each 30,000,000,000 10,030,150,989 – (9,227,738,911) 6,820,502,663 10,277,905 7,633,192,646 Unaudited 30th June 2002 HK$000 (521,826) 92,277 (53,704) (483,253) 477,275 40,924 (4,399) 513,800 30,547	Audited 31st December 2001 HK$000 9,361 1,005 10,366 Nominal value of ordinary shares HK$000 300,000 100,302 (92,277) – 68,205 102 76,332 Audited 31st December 2001 HK$000 (437,001) – (84,825) (521,826) 429,870 50,567 (3,162) 477,275 (44,551)

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FINANCIAL INFORMATION

APPENDIX 1

The following is the accountant’s report extracted from the Company’s circular to Shareholders dated 10th January, 2002 which is included in this circular for information purpose only.

==> picture [131 x 34] intentionally omitted <==

15th Floor Hutchison House 10 Harcourt Road Central Hong Kong

10th January, 2002

The Directors renren Holdings Limited 3rd Floor, Dotcom House 128 Wellington Street Hong Kong

Dear Sirs,

We set out below our report on the financial information regarding Magna Steels Co., Ltd. (the “Company”) and its associates (the “Group”) for inclusion in the circular issued by renren Holdings Limited dated 10th January, 2002 (the “Circular”).

The Company was incorporated with limited liability in the British Virgin Islands on 9th August, 2001 with an authorised share capital of US$50,000 divided into 50,000 shares of US$1.00 each, of which 1,000 shares were issued at par for cash to the shareholder. The Company did not carry out any business from the date of its incorporation to 30th November, 2001, save for, on 7th November, 2001, the initial subscription of a 35% equity interest in Seven Perfect Investment Co., Ltd. (“Seven Perfect”), a company incorporated in the British Virgin Islands, which in turn beneficially owns the entire equity interests in Twin Faces Co., Ltd. (“Twin Faces”). Particulars of Seven Perfect and Twin Faces are set out in section A below. Apart from the aforesaid investments, the Group did not carry out any other transactions during the period from 9th August, 2001 to 30th November, 2001. Accordingly, no profit and loss account has been presented for the Group for the period ended 30th November, 2001.

The Group has adopted 31st December, as its financial year end date for statutory reporting purposes. As at the date of this report, no audited financial statements have been prepared for the companies comprising the Group since their respective dates of incorporation.

The summary of the consolidated net tangible assets of the Group as at 30th November, 2001 (the “Summary”) set out in this report has been prepared from the unaudited management accounts of the Group. We have, however, performed procedures in accordance with the Statements of Auditing Standard and Auditing Guideline “Prospectuses and the Reporting Accountants” issued by the Hong Kong Society of Accountants for the inclusion of the financial information relating to the Group in this report.

The preparation of unaudited management accounts are the responsibility of the directors of those companies who approve the issue. In preparing financial statements, it is fundamental that appropriate accounting policies are selected and applied consistently. The directors of renren Holdings Limited are also responsible for the Summary. It is our responsibility to form an independent opinion on the Summary.

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FINANCIAL INFORMATION

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In our opinion, the Summary together with the notes thereon give, for the purpose of this report, a true and fair view of the net tangible assets of the Group as at 30th November, 2001.

A. NET TANGIBLE ASSETS

A summary of the consolidated net tangible assets of the Group as at 30th November, 2001 is set out below.

Interests in associates_(note)_ Cash in hand Net tangible assets Represented by share capital	HK$ 2,730 5,070
	7,800

	7,800

Note: On 7th November, 2001, the Company subscribed 350 shares of (or 35% equity interest in) Seven Perfect for a cash consideration of HK$2,730. Seven Perfect in turn beneficially holds the entire equity interests in Twin Faces.

Particulars of the Company’s associates, disclosed pursuant to Section 129 of the Hong Kong Companies Ordinance, are as follows:–

			Percentage of	Percentage of
	Place and		equity attributable
	date of	Paid-up	to the Company		Principal
Company name	incorporation	share capital	Direct	Indirect	activities
Seven Perfect	British Virgin	US$1,000	35%	–	Investment
Investment Co., Ltd.	Islands	ordinary			holding
	18th June, 2001
Twin Faces Co., Ltd.	British Virgin	US$1,000	–	35%	Not yet
	Islands	ordinary			commenced
	27th July, 2001				operations
					(please refer
					to Section
					E below)

At 30th November, 2001, the Group’s share of the net assets of the associates amounted to HK$2,730.

Extracts of the consolidated financial position of Seven Perfect as at 30th November, 2001, which are based on the management accounts prepared in accordance with generally accepted accounting principles in Hong Kong, are as follows:

HK$ Net assets – Cash in hand 7,800

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FINANCIAL INFORMATION

APPENDIX 1

B. PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies adopted by the Group in arriving at the financial information set out in this report, which conform with accounting principles generally accepted in Hong Kong, are as follows:–

Subsidiary

A subsidiary is a company in which the Company, directly or in directly, controls more than half of its voting power or issued share capital or controls the composition of its board of directors.

Interests in subsidiaries are stated at cost unless, in the opinion of the directors, there have been permanent diminutions in values, when they are written down to values determined by the directors.

Associate

The Group’s share of the post-acquisition results and reserves of associates is included in the consolidated profit and loss account and consolidated reserves, respectively. The Group’s interests in associates are stated in the consolidated balance sheet at the Group’s share of net assets under the equity method of accounting less any provisions for diminutions in values, other than those considered to be temporary in nature, deemed necessary by the directors.

Translation of foreign currencies

Transactions in foreign currencies are translated at applicable rates of exchange ruling at the transaction dates. Monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated at applicable rates of exchange ruling at the balance sheet date. All exchange differences arising are dealt with in the profit and loss account.

C. CONTINGENT LIABILITIES

The Group did not have any material contingent liabilities as at 30th November, 2001.

D. COMMITMENTS

The Group did not have any material outstanding commitments as at 30th November, 2001.

E. SUBSEQUENT EVENTS

On 26th December, 2001, in fulfilling part of the conditions contemplated in relation to the acquisition of the entire equity interests in the Company by renren Holdings Limited, Twin Faces entered into a service agreement with Shanghai Ke Zhen Investment and Consultant Company Limited. Pursuant to which Twin Faces has agreed to provide consultation and management services

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FINANCIAL INFORMATION

APPENDIX 1

to Shanghai Ke Zhen Investment and Consultant Company Limited for a period of 10 years from 1st January, 2002 to 31st December, 2011. Further details of the service agreement are set out in the paragraph headed “The Magna Steels Agreement” under the section headed “Letter from the Board” in the circular.

Save as aforesaid, no other significant events took place subsequent to 30th November, 2001.

F. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared for the companies comprising the Group in respect of any periods subsequent to 30th November, 2001.

Yours faithfully, Ernst & Young Certified Public Accountants Hong Kong

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FINANCIAL INFORMATION

APPENDIX 1

Unaudited consolidated net tangible assets of the Group as at 30th June, 2002 Net proceeds from the conversion of the convertible notes under July Bond Issue on 27th July, 2002 and the conversion of the convertible notes on 15th October, 2002 which were issued in relation to the acquisition by the Company as announced on 11th September, 2001 Proceeds from December Placement Pro forma adjusted consolidated net tangible assets of the Group before the Rights Issue Estimated net proceeds of the Rights Issue (based on 620,000,554 Rights Shares to be issued) Pro forma adjusted consolidated net tangible assets after the Rights Issue Pro forma consolidated net tangible assets per Share: – before the Rights Issue (based on 620,000,554 Shares in issue) – after the Rights Issue (based on 620,000,554 Rights Shares to be issued) – after the Rights Issue (assuming the full exercise of the Options and based on 620,778,154 Rights Shares to be issued)	HK$’000 18,909 9,114 9,535
	37,558 10,000
	47,558

	HK$0.061

	HK$0.038

	HK$0.038

– 74 –

FINANCIAL INFORMATION

APPENDIX 1

INDEBTEDNESS

At the close of business on 28th February, 2003, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Group has no outstanding bank borrowings.

As at 28th February, 2003, the Company had unsettled promissory notes with principal amount of HK$1.2 million in aggregate which were issued by the Company in November 2002 in relation to the acquisition of Union Key Limited by the Group. The promissory notes bear interest at a rate of 3% per anum from the date of issue to the date of payment. The promissory notes will be payable on or before 31st October, 2003.

As at 28th February, 2003, the Group had an outstanding borrowings of HK$4 million comprising of unsecured third parties loans. These loans are chargeable with commercial interest rates agreed between the parties and are repayable upon demand by the lenders.

As at 28th February, 2003, the Company had given corporate guarantee to various securities companies in approximately HK$10 million to support the securities investment activities of its subsidiaries, however, none of the securities accounts maintained by these subsidiaries are operated under margin financing or require any loan from the securities company as at 28th February, 2003.

Pursuant to the terms of the consent order for the Action as detailed on page 15 of this circular under “Letter from the Board”, the Group is liable for a sum of approximately HK$5.7 million to GE Capital being settlement payments of the Action under which GE Capital claimed against the Company and renren Limited for unpaid rent under various lease agreements for servers and computer equipment.

Save as aforesaid and apart from intra-Group liabilities and normal accounts payable in the ordinary course of business of the Group such as printing charges and professional fees, the Group did not have any outstanding mortgages, charges, debentures, or other loan capital or bank overdrafts, loans or other similar indebtedness or acceptance credits or hire purchase commitments or any guarantees or other material contingent liabilities as at the close of business on 28th February, 2003.

WORKING CAPITAL

Taking into account the existing cash and bank balances and the estimated net proceeds from the Rights Issue, the Directors are of the opinion that the Group will have sufficient working capital for its present requirements.

MATERIAL ADVERSE CHANGES

Save and except the Action which will affect the cash flow of the Group and therefore affect the smooth operation of the Group’s business, the Directors are not aware of any material adverse changes in the financial or trading position or prospects of the Group since 31st December, 2001, being the date to which the latest published audited consolidated financial statements of the Group were made up.

– 75 –

EXPLANATORY STATEMENT

APPENDIX 2

LISTING RULES FOR REPURCHASES OF SHARES

The Listing Rules permit companies whose primary listings are on the Stock Exchange to repurchase their securities on the Stock Exchange subject to certain restrictions, the most important of which are summarised as follows:

Share Capital

Based on the 620,000,554 Shares in issue as at the Latest Practicable Date and on the assumptions that (i) the resolutions approving the issue of the Rights Shares and the Repurchase Mandate are passed at the SGM; (ii) no further Shares are issued or repurchased between the Latest Practicable Date and the date of the SGM; (iii) all the outstanding Options are exercised prior to the SGM; and (iv) the Rights Shares are duly allotted and issued, the Company would be allowed under the Repurchase Mandate to repurchase a maximum of 124,155,630 Shares.

Reasons for the Repurchase Mandate

The Directors believe that the granting of the Repurchase Mandate is in the interests of the Company and the Shareholders as a whole. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value and/or earnings per Share and will only be made when the Directors believe that such a repurchase will benefit the Company and the Shareholders as a whole.

The Directors seek the approval of Shareholders to grant the Repurchase Mandate at the SGM. The Directors have no immediate plan to issue any fresh Shares other than those which may fall to be issued pursuant to the exercise of Options and the Rights Issue or any scrip dividend scheme of the Company providing for the allotment of Shares in lieu of whole or part of dividend on Shares in accordance with the bye-laws of the Company as approved by the Shareholders.

Funding of Repurchases

In repurchasing Shares, the Company may only apply funds legally available for such purpose in accordance with its memorandum of association and bye-laws and the laws of Bermuda. Any repurchase under the Repurchase Mandate shall be repurchased out of the capital paid up on the repurchased Shares or out of the profits of the Company which would otherwise be available for dividend or distribution or out of the proceeds of a fresh issue of Shares made for the purpose of repurchase. The premium, if any, payable on redemption shall be provided for out of the funds of the Company which would otherwise be available for dividend or distribution or out of the Company’s share premium account before the Shares are repurchased, in each case to the extent as permitted by the laws of Bermuda.

There might be an adverse impact on the working capital or gearing position of the Company as compared with the position disclosed in the latest audited consolidated accounts contained in the annual report of the Company for the year ended 31st December, 2001 in the event that the Repurchase Mandate was to be exercised in full. However, the Directors do not propose to exercise the Repurchase Mandate to such extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or the gearing level of the Company which in the opinion of the Directors are from time to time appropriate for the Company.

– 76 –

EXPLANATORY STATEMENT

APPENDIX 2

SHARE PRICES

The highest and lowest prices at which the Shares were traded on the Stock Exchange during each of the twelve months immediately before the Latest Practicable Date were as follows:

	Shares	Shares
	Highest	Lowest
	HK$	HK$
March 2002	0.052	0.010
April 2002	0.013	0.011
May 2002	0.016	0.010
June 2002	0.012	0.010
July 2002	0.010	0.010
August 2002	0.010	0.010
September 2002_(note)_	0.087	0.031
October 2002	0.056	0.034
November 2002	0.055	0.035
December 2002	0.045	0.010
January 2003	0.034	0.028
February 2003	0.032	0.027
March 2003 (up to the Latest Practicable Date)	0.026	0.018

Note: Since September 2002, prices of the shares of Company were adjusted as a result of the consolidation of the shares of the Company which took effect on 30th August, 2002.

UNDERTAKING

The Directors have undertaken to the Stock Exchange that they will exercise the powers of the Company to make repurchases in accordance with the Listing Rules and the applicable laws of Bermuda so far as the same may be applicable and in accordance with the memorandum of association and bye-laws of the Company.

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, their respective associates (as defined in the Listing Rules) have any present intention to sell Shares to the Company under the Repurchase Mandate if such is approved by the Shareholders.

No connected person (as defined in the Listing Rules) has notified the Company that he has any present intention to sell Shares to the Company, nor has undertaken not to do so, in the event that the Repurchase Mandate is approved by the Shareholders.

TAKEOVERS CODE

If on exercise of the power to repurchase Shares pursuant to the Repurchase Mandate, a shareholder’s proportionate interest in the voting rights of the Company is increased, such increase will be treated as an acquisition of voting rights for the purpose of the Takeovers Code.

As at the Latest Practicable Date, to the best knowledge and belief of the Directors, Rich Delta is beneficially interested in 316,092,279 Shares (representing approximately 50.98% of the

– 77 –

EXPLANATORY STATEMENT

APPENDIX 2

issued share capital of the Company). In the event that the Repurchase Mandate is exercised in full and no further Shares are issued other than Shares to be issued upon the full exercise of the Options and the Rights Issue, the beneficial interest of Rich Delta in the issued share capital of the Company will increase to approximately 56.58%.

On such basis, Rich Delta would not be required under the Takeovers Code to make an offer for all the issued Shares as a result of such increase. The Directors have no present intention to exercise the Repurchase Mandate to such extent.

SHARE REPURCHASE MADE BY THE COMPANY

The Company has not repurchased any Shares (whether on the Stock Exchange or otherwise) in the six months immediately before the date of this circular.

– 78 –

GENERAL INFORMATION

APPENDIX 3

1. SHARE CAPITAL

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

Authorised: 30,000,000,000 Shares as at the Latest Practicable Date Issued and fully paid: 620,000,000 Shares as at the date of the Announcement 554 Shares issued pursuant to the exercise of the subscription rights attaching to the Warrants 620,000,554 Shares as at the Latest Practicable Date not less than 620,000,554 Shares to be issued pursuant to the Rights Issue not more than 620,778,154 not less than 1,240,001,108 Total of Shares after Rights Issue not more than 1,241,556,308	HK$ 300,000,000

	6,200,000 5.54 6,200,006 6,200,006 6,207,782
	12,400,011

	12,415,563

No part of the share capital of the Company is listed or dealt in on any stock exchange other than the Stock Exchange and no application is being made or is currently proposed or sought for the Shares to be listed or dealt in on any other stock exchange.

As at the Latest Practicable Date, save for the Options, there are no outstanding convertible debts, options or warrants of the Company.

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GENERAL INFORMATION

APPENDIX 3

2. DISCLOSURE OF INTERESTS

Interests in the Company

Substantial Shareholders

As at the Latest Practicable Date, according to the register kept by the Company under the SDI Ordinance and so far as is known to the Directors, the persons (not being a Director or chief executive of the Company) 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 the Company were as follows:

Name	Number of Shares	Percentage (%)	Percentage (%)
Rich Delta	316,092,279	(Note)	50.98
Sky Concord	316,092,279		50.98

Note : These 316,092,279 Shares are registered in the name of and are beneficially owned by Rich Delta. Rich Delta is a wholly-owned subsidiary of Sky Concord which in turn is wholly owned by Mr. Mak.

Directors

As at the Latest Practicable Date, the interests of the Directors in the share capital of the Company and any of its associated corporations (as defined in the SDI Ordinance) which were notifiable to the Company and the Stock Exchange pursuant to Section 28 or Section 31 of the SDI Ordinance or Part I of the Schedule to the SDI Ordinance or the Model Code for Securities Transactions by Directors of Listed Companies or which were required pursuant to Section 29 of the SDI Ordinance to be entered in the register referred to therein were as follows:

		Number of	Percentage
Name of Director	Nature of interests	Shares	(%)
Mr. Mak	Corporate_(note)_	316,092,279	50.98

Note: These 316,092,279 Shares are registered in the name of and are beneficially owned by Rich Delta. Rich Delta is a wholly owned subsidiary of Sky Concord which in turn is wholly owned by Mr. Mak.

As at the Latest Practicable Date, so far as the Directors were aware, the following Director was interested in the following Options:

	Number of	Date of grant	Exercise period	Exercise price
Name	Options	of Options	of Options	of Options
Mr. Mak	576,000	23rd July, 2001	23rd July, 2001 to	HK$4.05
			25th June, 2010	(note)

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

Save as disclosed above, none of the Directors hold any Shares or interests in Shares as at the Latest Practicable Date.

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GENERAL INFORMATION

APPENDIX 3

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors has any existing or proposed service contract with the Company or any of its subsidiaries (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

4. DIRECTORS

Mr. Mak Chi Yeung , aged 46, has been involved in property development and investment in Hong Kong and the PRC for 20 years. He has substantial experience in corporate planning and business administration in property investment. Mr. Mak was appointed as a Director on 2nd May, 2001 and was appointed as the chairman of the Board on 11th June, 2001.

Ms. Mak Shuk Yin , aged 41, holds a bachelor degree in arts majoring in business administration. Ms. Mak has over 16 years’ experience in corporate and marketing management working for several well-known corporations in the leisure and finance sectors. Ms. Mak was appointed as a Director on 23rd September, 2002.

Mr. Lo Chi Man, Joseph , aged 53, was graduated from the University of Hong Kong. Mr. Lo has over 20 years’ experience in corporate management in private sector and local listed companies. Mr. Lo was appointed as an independent non-executive Director on 26th May, 2001.

Mr. Wong Kwong Lung, Terence , aged 40, has over 10 years’ experience in property development and investment in Hong Kong and the PRC. Mr. Wong was appointed as an independent non-executive Director on 20th June, 2001.

The business address of the Directors is at the head office and principal place of business of the Company in Hong Kong at Room 601, Pacific House, 20 Queen’s Road Central, Hong Kong.

5. CORPORATE INFORMATION

Registered Office

Clarendon House, 2 Church Street Hamilton HM 11, Bermuda

Resident Representative in Bermuda

Codan Services Limited Clarendon House, 2 Church Street Hamilton HM 11, Bermuda

Head Office and Principal Place of Business

Room 601, Pacific House 20 Queen’s Road Central Hong Kong

Principal Registrar and Transfer Office

The Bank of Bermuda Limited 6 Front Street Hamilton HM 11, Bermuda

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GENERAL INFORMATION

APPENDIX 3

Hong Kong Branch Registrar and Transfer Office

Abacus Share Registrars Limited G/F., Bank of East Asia Harbour View Centre 56 Gloucester Road Wanchai Hong Kong

Legal Advisers on Hong Kong Law Fairbairn Catley Low & Kong 43rd Floor Gloucester Tower The Landmark 11 Pedder Street Central, Hong Kong

Legal Advisers on Bermuda Law

Conyers Dill & Pearman 2901, One Exchange Square 8 Connaught Place Central Hong Kong

Auditors

Albert Lam & Co. Certified Public Accountants 12th Floor, Hong Kong Trade Centre 161-167 Des Voeux Road Central Hong Kong

Principal Bank

The Hongkong and Shanghai Banking Corporation Limited 1st Floor, Causeway Bay Plaza II 463-483 Lockhart Road Hong Kong

Authorised Representatives

Mak Chi Yeung Mak Shuk Yin

6. MATERIAL CONTRACTS

Save as disclosed below, there are no material contracts (other than contracts entered into in the ordinary course of business) which have been entered into by the Company or its subsidiaries in the two years immediately preceding the date of this circular:

(a) the placement agreement dated 13th June, 2001 entered into between Rich Delta and Ever-Long and the placing agents named therein in relation to the placement of 1,300,000,000 Shares at a price of HK$0.036 per Share;
(b) the subscription agreement dated 13th June, 2001 entered into between the Company and Rich Delta in relation to the subscription of 1,300,000,000 Shares by Rich Delta at a price of HK$0.036 per Share;

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GENERAL INFORMATION

APPENDIX 3

(c) the placement agreement dated 23rd July, 2001 entered into between the Company, Ever-Long, First Securities (HK) Limited, Trustful Securities Limited and Emperor Securities Limited for the issue of convertible bonds in the aggregate principal amount of HK$12,000,000;
(d) the agreement dated 11th September, 2001 entered into between Starluck Limited, a wholly-owned subsidiary of the Company, Pioneer Hero Limited and Fatt Choy Services Limited in relation to the acquisition of 40% equity interests in Internet Marketing & Services Limited by Starluck Limited for an aggregate consideration of HK$15.18 million;
(e) the sale and purchase agreement dated 18th December, 2001 entered into between Offshore Trinity Limited and Ms. So Siu Ngan in relation to the sale and purchase of the entire issued share capital of Grandmax International Limited at a consideration of HK$36,000,000;
(f) the sale and purchase agreement dated 18th December, 2001 entered into between Winning Luck International Limited and Beach Sun Company Limited in relation to the sale and purchase of the entire issued share capital of Magna Steels at a consideration of HK$54,000,000;
(g) the underwriting agreement dated 20th December, 2001 entered into between the Company, Mr. Mak and the underwriters named therein in relation to the rights issue of not less than 6,820,502,663 shares and not more than 7,575,982,663 shares of the Company;
(h) the supplemental agreement dated 4th January, 2002 entered into between the Company, Mr. Mak and the underwriters named therein in relation to the underwriting agreement referred to in paragraph (g) above;
(i) the agreement dated 24th January, 2002 entered into between Info Century Inc. and Financial Players Limited and Mr. Wong Kwok Ming, Mr. Kok Ping Kam, Sunny, Mr. Wong Sau Yuen and Mr. Leung Siu Pan, Benny in connection with the establishment of Imoeba Holdings Limited and acquisition of 27% equity interests in Imoeba Holdings Limited;
(j) the underwriting agreement dated 17th July, 2002 entered into between the Company, Mr. Mak and the underwriters named therein in relation to the rights issue of not less than 534,323,510 shares and not more than 649,731,635 shares of the Company;
(k) the sale and purchase agreement dated 5th November, 2002 entered into between Scopwick Resources Limited and Polywise Limited in relation to the acquisition of the entire issued share capital of Union Key Limited at a consideration of HK$9 million;
(l) the placement agreement dated 6th November, 2002 entered into between the Company and Ever-Long, South China Securities Limited, Taiwan Concord in relation to the placement of 150,000,000 shares of the Company at a price of HK$0.031 per share;
(m) the subscription agreement dated 6th November, 2002 entered into between the Company and Rich Delta in relation to the subscription of 157,586,193 shares of the Company at HK$0.031 per share; and
(n) the Underwriting Agreement.

– 83 –

GENERAL INFORMATION

APPENDIX 3

7. LITIGATION

As at the Latest Practicable Date, save and except the Action, neither the Company nor any of its subsidiaries were engaged in any litigation or arbitration of material importance and no litigation or arbitration of material importance is known to the Directors to be pending or threatened against the Company or any of its subsidiaries.

Under the Action, GE Capital claimed against the Company and renren Limited for an aggregate sum of approximately HK$5.7 million, being unpaid rental and overdue interest pursuant to various lease agreements for products supplied to the Group by GE Capital. A consent order for full and final settlement of the Action has been executed by the parties of the Action on 17th March, 2003 and the Court has on 18th March, 2003 granted an order in terms of the executed consent order. Details of the settlement terms are set out on page 15 of this circular under “Letter from the Board”.

8. EXPERT CONSENT

Menlo has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and the references to its name in the form and context which it appears.

The qualification of the expert who has given advice or opinion which are contained in this circular:

Name Qualification Menlo investment adviser registered under Securities Ordinance, Chapter 333 of the Laws of Hong Kong

9. MISCELLANEOUS

(a) Menlo does not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate person to subscribe for securities in any member of the Group;
(b) Save as the acquisition by a subsidiary of the Company from Ms. So Siu Ngan in relation to Grandmax International Limited, details of which are disclosed on page 57 of this circular, none of the Directors has, or has had, any direct or indirect interest in any assets which have been acquired, disposed of or leased to or which are proposed to be acquired, disposed of or leased to the Company or any of its subsidiaries since 31st December, 2001, the date to which the latest published audited consolidated financial statements of the Group were made up;
(c) There is no contract or agreement entered into by any member of the Group, subsisting at the Latest Practicable Date in which any of the Directors is materially interested and which is significant in relation to the business of the Group as a whole; and
(d) As at the Latest Practicable Date, none of the Directors and Menlo has any interest, direct or indirect, in any assets which have been acquired or disposed of by or leased to any member of the Group or which are proposed to be acquired or disposed of by or leased to any member of the Group since 31st December, 2001, the date to which the latest published audited consolidated financial statements of the Group were made up.

– 84 –

GENERAL INFORMATION

APPENDIX 3

10. COMPANY SECRETARY

Mr. Ng Kay Kwok , aged 40, gained his university qualifications in Australia. Mr. Ng has over 12 years’ experience in audit, accounting and management in private sector, international accounting firms and listed companies. He is an associate member of Certified Public Accountants, Australia. Mr. Ng was appointed as the company secretary of the Company on 24th September, 2002. He is also the financial controller of the Company.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the head office and principal place of business of the Company in Hong Kong at Room 601, Pacific House, 20 Queen’s Road Central, Hong Kong up to and including 7th April, 2003:

(a) the memorandum of association and bye-laws of the Company;
(b) the annual reports of the Company for the two financial years ended 31st December, 2000 and 31st December, 2001;
(c) the interim report of the Company for the six months ended 30th June, 2002;
(d) the letter of advice from Menlo to the Independent Board Committee, the text of which is set out on pages 22 to 30 of this circular;
(e) the written consent referred to in the section headed “Expert consent” in this appendix;
(f) the material contracts referred to in the section headed “Material contracts” in this appendix;
(g) the letter from the Independent Board Committee, the text of which is set out on page 21 of this circular;
(h) circular of the Company dated 5th December, 2002 in relation to the acquisition of Union Key Limited;
(i) circular of the Company dated 10th January, 2002 in relation to the acquisition of Magna Steels and Grandmax International Limited;
(j) the letter dated 17th March, 2003 from Ever-Long, on behalf of the Underwriters, to the Company in relation to the Action; and
(k) the consent order dated 18th March, 2003 in relation to the Action.

– 85 –

NOTICE OF SGM

==> picture [68 x 43] intentionally omitted <==

**renren Holdings Limited 人人控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

NOTICE IS HEREBY GIVEN that a special general meeting of renren Holdings Limited (the “Company”) will be held at 9:30 a.m. on 7th April, 2003 at 27/F., Park Lane Room 3, Park Lane Hotel, 310 Gloucester Road, Causeway Bay, Hong Kong for the purpose of considering and, if thought fit, passing the following resolutions as ordinary resolutions:

1. ORDINARY RESOLUTION 1

“THAT

conditional upon the conditions in respect of the Rights Issue (as defined below) as stated in the underwriting agreement (the “Underwriting Agreement”) dated 26th February, 2003 made between Ever-Long Securities Company Limited (“Ever-Long”) and Taiwan Concord Capital Securities (Hong Kong) Limited (collectively referred to as the “Underwriters”), the Company and Mr. Mak Chi Yeung, being fulfilled or otherwise waived by Ever-Long on behalf of the Underwriters and the Underwriting Agreement not being terminated in accordance with the terms thereof on or before 4:00 p.m. on the second business day (as defined in the Circular referred to below) following the last day for acceptance of provisional allotments under the Rights Issue:

(i) the issue by way of rights (the “Rights Issue”) of not less than 620,000,554 shares of HK$0.01 each in the capital of the Company (each a “Share”) and not more than 620,778,154 Shares (the “Rights Shares”) to the holders of the Shares (the “Shareholders”) whose names appear on the register of members of the Company on 7th April, 2003 (excluding those Shareholders with registered addresses outside Hong Kong) in the proportion of one Rights Share for every one Share then held and otherwise pursuant to and in accordance with the terms and conditions set out in the circular of the Company dated 21st March, 2003 despatched to Shareholders (the “Circular” a copy of which has been produced to the meeting marked “A” and signed by the chairman of the meeting for the purpose of identification) be and is hereby approved and the directors of the Company (the “Directors”) be and are hereby authorised to allot and issue the Rights Shares to the Shareholders pursuant to or in connection with the Rights Issue notwithstanding that the same may be offered, allotted or issued otherwise than pro rata to the existing Shareholders and, in particular, the Directors be and are hereby authorised to make such exclusions or other arrangements in relation to the entitlements of overseas Shareholders as they deem necessary or expedient having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory outside Hong Kong; and

* for identification purpose only

– 86 –

NOTICE OF SGM

(ii) the Directors be and are hereby authorised to do all such acts and things which in their opinion are necessary or expedient in connection with the creation, allotment and issue of the Rights Shares.”

2. ORDINARY RESOLUTION 2

“THAT conditional upon the passing of ordinary resolution numbered 1 and completion of the Rights Issue:

(a) the general mandate granted to the Directors to exercise the powers of the Company to allot, issue and deal with Shares as approved by the Shareholders at the annual general meeting of the Company held on 30th May, 2002 be and is hereby revoked (without prejudice to any valid exercise of such general mandate prior to the passing of this resolution);
(b) the exercise by the Directors during the Relevant Period (as defined below) of all the powers of the Company to allot, issue and deal with additional Shares and to make or grant offers, agreements and options, including warrants to subscribe for Shares, which might require the exercise of such powers be and is hereby generally and unconditionally approved;
(c) the approval in paragraph (b) of this resolution shall authorise the Directors during the Relevant Period to make or grant offers, agreements and options, including warrants to subscribe for Shares, which might require the exercise of such powers after the end of the Relevant Period;
(d) the aggregate nominal amount of share capital of the Company allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) and issued by the Directors pursuant to the approval in paragraph (b) of this resolution, otherwise than pursuant to (i) a Rights Issue (as defined below), or (ii) an issue of Shares upon the exercise of the subscription rights attaching to any warrants of the Company, or (iii) an issue of Shares upon the exercise of options granted under any share option scheme or similar arrangement for the time being adopted for the grant or issue to officers and/or employees of the Company and/or any of its subsidiaries of Shares or rights to acquire Shares, or (iv) any scrip dividend or similar arrangement of the Company providing for the allotment of Shares in lieu of the whole or part of a dividend on Shares in accordance with bye-laws of the Company, not exceed the aggregate of 20% of the aggregate nominal amount of the total number of Shares in issue as enlarged by the issue of the Rights Shares under the Rights Issue and the said approval shall be limited accordingly; and
(e) for the purpose of this resolution:

“Relevant Period” means the period from the date of passing of this resolution until whichever is the earliest of:

(i) the conclusion of the next annual general meeting of the Company; or
(ii) the expiration of the period within which the next annual general meeting of the Company is required by the bye-laws of the Company or the Companies Act 1981 of Bermuda or any other applicable law to be held; or

– 87 –

NOTICE OF SGM

(iii) the passing of an ordinary resolution by Shareholders in general meeting revoking or varying the authority given to the Directors by this resolution; and

“Rights Issue” means an offer of Shares open for a period fixed by the Directors to holders of Shares or any class thereof whose names appear on the register of members of the Company on a fixed record date in proportion to their then holdings of such Shares or class thereof (subject to such exclusion or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory applicable to the Company).”

3. ORDINARY RESOLUTION 3

“THAT conditional upon the passing of ordinary resolution numbered 1 above and completion of the Rights Issue:

(a) the general mandate granted to the Directors to exercise the powers of the Company to repurchase Shares as approved by the Shareholders at the annual general meeting of the Company held on 30th May, 2002 be and is hereby revoked (without prejudice to any valid exercise of such general mandate prior to the passing of this resolution);
(b) the exercise by the Directors during the Relevant Period (as defined below) of all powers of the Company to repurchase Shares on the Stock Exchange or on any other stock exchange on which the Shares may be listed and which is recognised by the Securities and Futures Commission of Hong Kong and the Stock Exchange for this purpose (“Recognised Stock Exchange”), subject to and in accordance with all applicable laws and/or the requirements of the Rules Governing the Listing of Securities on the Stock Exchange as amended from time to time or those of any other Recognised Stock Exchange, be and is hereby generally and unconditionally approved;
(c) the aggregate nominal amount of Shares repurchased by the Company pursuant to paragraph (b) above during the Relevant Period shall not exceed 10 per cent. of the aggregate nominal amount of the total number of Shares in issue as enlarged by the issue of the Rights Shares under the Rights Issue and the said approval shall be limited accordingly; and
(d) for the purposes of this resolution:

“Relevant Period” means the period from the date of passing of this resolution until whichever is the earliest of

(i) the conclusion of the next annual general meeting of the Company; or
(ii) the expiration of the period within which the next annual general meeting of the Company is required by the bye-laws of the Company or the Companies Act 1981 of Bermuda or any other applicable law to be held; or

– 88 –

NOTICE OF SGM

(iii) the passing of an ordinary resolution by Shareholders in general meeting revoking or varying the authority given to the Directors by this resolution.

4. ORDINARY RESOLUTION 4

“THAT subject to the passing of ordinary resolutions numbered 2 and 3 and their becoming unconditional, the general mandate granted to the Directors and for the time being in force to exercise the powers of the Company to allot, issue and deal with additional Shares pursuant to resolution numbered 2 be and is hereby extended by the addition to the aggregate nominal amount of the Shares which may be allotted or agreed conditionally or unconditionally to be allotted by the Directors pursuant to such general mandate of an amount representing the aggregate nominal amount of the Shares repurchased by the Company under the authority granted pursuant to resolution numbered 3, provided that such extended amount shall not exceed 10% of the share capital of the Company in issue as enlarged by the issue of the Rights Shares under the Rights Issue.”

By order of the board of directors of renren Holdings Limited Mak Chi Yeung Chairman

Hong Kong, 21st March, 2003

Notes:

Any member of the Company entitled to attend and vote at the meeting convened by the above notice is entitled to appoint another person as his proxy to attend and vote instead of him. A proxy need not be a member of the Company but must be present in person to represent the member.
Where there are joint registered holders of any Share, any one of such persons may vote at any meeting, either personally or by proxy, in respect of such Share as if he was solely entitled thereto, but if more than one of such joint holders be present at any meeting personally or by proxy, that one of the said persons so present whose name stands first in the register of members in respect of such Share shall alone be entitled to vote in respect thereof.
A form of proxy for use at the meeting is enclosed with the Circular.
The form of proxy and power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power or authority must be delivered to the office of Abacus Share Registrars Limited, G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or adjourned meeting (as the case may be) and in default the form of proxy shall not be treated as valid. Completion and return of the form of proxy shall not preclude members from attending and voting in person at the meeting or at any adjourned meeting (as the case may be) should they so wish. If a member who has lodged a form of proxy attends the meeting, his form of proxy will be deemed to have been revoked.

– 89 –

AI assistant

Greenheart Group Limited — Proxy Solicitation & Information Statement 2003

48939_rns_2003-03-21_dfed586a-1402-4261-8789-b96ffa6ed51f.pdf

IMPORTANT

renren Holdings Limited 人人控股有限公司[*]

PROPOSED RIGHTS ISSUE

Menlo Capital Limited

RESPONSIBILITY STATEMENT

DEFINITIONS

DEFINITIONS

renren Holdings Limited 人人控股有限公司[*]

INTRODUCTION

PROPOSED RIGHTS ISSUE

Issue statistics

Qualifying Shareholders

Basis of the Rights Issue

Subscription Price

Warning of the risks in trading of Shares

If in any doubt, investors should consider obtaining professional advice on this.

Status of the Rights Shares

Certificates of the Rights Shares

Rights of Overseas Shareholders

Application for excess Rights Shares

Listing and dealings

PERMISSION OF THE BMA

THE UNDERWRITING AGREEMENT

Undertaking from Mr. Mak

Termination of the Underwriting Agreement

Conditions of the Rights Issue

Use of proceeds

Reasons for the Rights Issue

LETTER FROM THE BOARD

Expenses

BUSINESS REVIEW AND PROSPECTS

LETTER FROM THE BOARD

INFORMATION ON THE USE OF PROCEEDS FROM PAST PLACEMENTS AND SUBSCRIPTIONS SINCE FEBRUARY 2001

June Placement

July Bond Issue

March Rights Issue

December Placement

GENERAL MANDATES

THE SGM

RECOMMENDATION

FURTHER INFORMATION

renren Holdings Limited 人人控股有限公司[*]

Yours faithfully,

Independent Board Committee

Menlo Capital Limited

PROPOSED RIGHTS ISSUE

PRINCIPAL FACTORS TAKEN INTO ACCOUNT

I. Background and Reasons for the Rights Issue

LETTER FROM MENLO

II. Terms of the Rights Issue

LETTER FROM MENLO

III. Dilution of percentage shareholding

IV. Financial effects of the Rights Issue

(a) Net tangible assets

(b) Gearing ratio

V. Use of proceeds

VI. Underwriting arrangements

LETTER FROM MENLO

RECOMMENDATION

CONSOLIDATED PROFIT AND LOSS ACCOUNT

CONSOLIDATED BALANCE SHEET

CONSOLIDATED CASH FLOW STATEMENT

BALANCE SHEET

NOTES TO FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

2. IMPACT OF NEW AND REVISED HONG KONG STATEMENTS OF STANDARD ACCOUNTING PRACTICE

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

Basis of consolidation

Subsidiaries

Associates

Goodwill

Impairment of assets

Fixed assets and depreciation

Leased assets

Investment in securities

Inventories

Greenheart Group Limited Proxy Solicitation & Information Statement 2003

**renren Holdings Limited 人人控股有限公司[*]**

**renren Holdings Limited 人人控股有限公司[*]**

**renren Holdings Limited 人人控股有限公司[*]**