hmvod Limited — Proxy Solicitation & Information Statement 2004

Apr 22, 2004

IMPORTANT

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.

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 advisor.

If you have sold or transferred all your shares in Tai Shing International (Holdings) Limited (the “Company”), you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee, or to the bank, stockbroker or other agent through whom the sale or the transfer was effected for transmission to the purchaser or the transferee.

This circular does not constitute an offer of, nor is it intended to invite offers for, the securities of the Company.

TAI SHING INTERNATIONAL (HOLDINGS) LIMITED 9 : ; <= > ? @- A B C[*]

(incorporated in the Cayman Islands with limited liability) www.taishingintl.com Stock code : 8103

MAJOR TRANSACTION

PROPOSED ACQUISITION

INVOLVING ISSUANCE OF NEW SHARES

Financial adviser to Tai Shing International (Holdings) Limited

A notice convening an extraordinary general meeting (“EGM”) of the Company to be held at Yat Tung Heen Chinese Restaurant, 2/F, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong on Friday, 7 May 2004 at 2:45 p.m. is set out on pages 67 to 68 of this circular. A proxy form is also enclosed. Whether or not you intend to attend and vote at the EGM, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited at Rooms 1901-1905, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjourned meeting should you so wish.

This circular together with the notice of the EGM will remain on the GEM website at www.hkgem.com on the “Latest Company Announcements” page for at least 7 days from the date of its posting and on the website of the Company at www.taishingintl.com.

20 April 2004

* For identification purpose only

CHARACTERISTICS OF GEM

GEM has been established as a market designed to accommodate companies to which a high investment risk may be attached. In particular, companies may list on GEM with neither a track record of profitability nor any obligation to forecast future profitability. Furthermore, there may be risks arising out of the emerging nature of companies listed on GEM and the business sectors or countries in which the companies operate. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the main board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

The principal means of information dissemination on GEM is publication on the internet website operated by the Stock Exchange. GEM-listed companies are not generally required to issue paid announcements in gazetted newspapers. Accordingly, prospective investors should note that they need to have access to the GEM website in order to obtain up-to-date information on GEM-listed issuers.

CONTENT

	page
Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
The Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Reasons and benefits of the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Background of Tongfang Electronic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Financial information of Tongfang Electronic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Listing and dealing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Extraordinary general meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Further information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Appendix I – Financial information on the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . 13
Appendix II – Accountants’ Report on Treasure Wise . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . 56
Appendix III – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . 60
Notice of Extraordinary General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	67

– 1 –

DEFINITION

In this circular (other than the notice of EGM), the following expressions have the meanings set out below unless the context requires otherwise.

• “Acquired Interest”

the entire issued share capital of Treasure Wise

“Acquisition” the acquisition of the Acquired Interest by the Company from the Vendor for a consideration of HK$9,080,000 pursuant to the S&P Deed

• “associate(s)” has the meaning ascribed to it under the GEM Listing Rules

“Beijing Tongfang” Beijing Tongfang Electronic Science & Technology Company Limited † M N • ` O P Q R ( ) * +ˆ , a company incorporated in the PRC, and is owned as to 100% by Tongfang Electronic (Hong Kong) Company Limited which is in turn owned as to 100% by Tongfang Electronic and its directors are not connected with any of the directors, chief executive, substantial shareholders or management shareholders of the Company, or any of its subsidiaries or their respective associates

• “Board” The board of Directors

• “Business Day” means a day (other than a Saturday) on which banks in Hong Kong are generally open for business

• “Company” Tai Shing International (Holdings) Limited, a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed and traded on GEM

• “Completion” completion of the S&P Deed in accordance with the terms therein

• “Consideration Shares” 18,160,000 new Shares to be issued and allotted (credited as fully paid) at HK$0.50 per Share to the Vendor or her nominees under the S&P Deed as consideration for the Acquisition

• “Director(s)” director(s) of the Company

– 2 –

	DEFINITION
“EGM”	an extraordinary general meeting of the Company to be
	convened for approving the S&P Deed and the transactions
	contemplated thereunder, the notice for which is contained
	in the last pages to this circular
“GEM”	The Growth Enterprise Market of the Stock Exchange
“GEM Listing Committee”	the listing sub-committee of the board of the Stock Exchange
	with responsibility for GEM
“GEM Listing Rules”	the Rules Governing the Listing of Securities on GEM
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Independent Third Party”	a person or a company which is independent of and not
	connected with any of the directors, chief executive,
	substantial shareholders or management shareholders of the
	Company or any of its subsidiaries or their respective
	associates (as defined in the GEM Listing Rules)
“Latest Practicable Date”	15 April 2004, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information
	contained herein
“Long Stop Date”	23 September 2004 (or such other date as the parties to the
	S&P Deed may agree in writing), being the long stop date
	of the S&P Deed
“PRC”	the People’s Republic of China
“S&P Deed”	the conditional sale and purchase deed dated 23 March 2004
	entered into between the Company and the Vendor in relation
	to the Acquisition
“SFO”	the Securities and Futures Ordinance, Chapter 571 of the
	Laws of Hong Kong
“Shareholders”	holders of the Shares from time to time

– 3 –

DEFINITION

• “Share(s)” ordinary share(s) of nominal value HK$0.05 each in the share capital of the Company

• “Stock Exchange” The Stock Exchange of Hong Kong Limited “subsidiary” the company, which is for the time being and from time to time, a subsidiary (within the meaning of the Companies Ordinance, Chapter 32 of the Laws of Hong Kong)

• “Tongfang Electronic” Tongfang Electronic Company Limited, a company incorporated with limited liability in the British Virgin Islands and its directors are not connected with any of the directors, chief executive, substantial shareholders or management shareholders of the Company or any of its subsidiaries or their respective associates

• “Treasure Wise” Treasure Wise Enterprises Limited, a private limited company incorporated in the British Virgin Islands which upon completion of the Acquisition, is to become the indirect beneficial owner of 40% of the entire equity of Beijing Tongfang through its 40% shareholding in the issued share capital of Tongfang Electronic (subject to the warranties under the S&P Deed being true and correct as at Completion thereof)

• “Vendor” or “Ms. Li” Ms. Li Lu Yuan †›œ•ˆ , Independent Third Party and is not acting in concert with any other Shareholder that would result in her and parties acting in concert with her having 30% or more interest in the voting rights of the Company upon Completion

• “Wide Source” Wide Source Group Ltd., a private company incorporated in the British Virgin Islands with limited liability, its sole director is Mr. Luk Yat Hung and its entire issued share capital is ultimately and beneficially owned by Mr. Luk Yat Hung and Mr. Ma Bing in equal shares

• “HK$” Hong Kong dollars, the lawful currency of Hong Kong “%” per cent.

– 4 –

LETTER FROM THE BOARD

TAI SHING INTERNATIONAL (HOLDINGS) LIMITED 9 : ; <= > ? @- A B C[*]

(incorporated in the Cayman Islands with limited liability)

www.taishingintl.com

Stock code : 8103

Executive Directors: Mr. Luk Yat Hung – Chairman Mr. Ho Cho Hang

Independent non-executive Directors: Mr. Chung Shui Ming, Timpson Professor Ip Ho Shing, Horace

Registered office: Century Yard, Cricket Square Hutchins Drive P.O. Box 2681GT George Town Grand Cayman British West Indies

Head Office and principal place of business in Hong Kong: 24/F, Prosperous Commercial Building 54-58 Jardine’s Bazaar Causeway Bay Hong Kong

20 April 2004

To the Shareholders

MAJOR TRANSACTION

PROPOSED ACQUISITION

INVOLVING ISSUANCE OF NEW SHARES

Dear Sir or Madam,

INTRODUCTION

The Board announced that on 23 March 2004, the Company entered into a conditional sale and purchase deed with the Vendor to purchase the entire issued share capital of Treasure Wise which holds 40% interest in Tongfang Electronic (subject to the warranties under the S&P Deed

• For identification purpose only

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LETTER FROM THE BOARD

being true and correct as at Completion thereof) for a consideration of HK$9,080,000. The consideration for the Acquisition will be satisfied by the Company by way of issuance of 18,160,000 Consideration Shares at an issue price of HK$0.50 per Share to the Vendor or her nominees upon Completion.

Pursuant to Chapter 19 of the GEM Listing Rules, the Acquisition constitutes a major transaction involving the issuance of new Shares and is subject to, among other things, the approval of the Shareholders.

The purpose of this circular is to provide you with further information of the Acquisition together with a notice of EGM to be held on 7 May 2004 to consider and approve the Acquisition and all other transactions contemplated thereunder.

THE ACQUISITION

Date: 23 March 2004

Parties:

Vendor: Ms. Li, who is, to the best of the knowledge, information and belief of the Directors after having made all reasonable enquiries, the Independent Third Party of the Company and any of its connected person (as defined in the GEM Listing Rules) and is not acting in concert with any other Shareholder which would result in her and her concert parties having 30% or more interest in the voting rights of the Company upon completion of the S&P Deed

Purchaser: the Company

The interest to be acquired

Pursuant to the S&P Deed, the Company conditionally agreed to purchase and the Vendor conditionally agreed to sell the Acquired Interest, representing the entire issued share capital of Treasure Wise (which holds 40% interest in Tongfang Electronic (subject to the warranties under the S&P Deed being true and correct as at Completion thereof)), for a consideration of HK$9,080,000.

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LETTER FROM THE BOARD

Consideration and terms of payment

The consideration for the Acquisition will be satisfied by the Purchaser by way of issuance of 18,160,000 Consideration Shares to the Vendor or her nominees on Completion.

The Consideration Shares represent approximately 38.27% of all existing issued Shares as at the Latest Practicable Date and approximately 27.68% of the enlarged issued share capital of the Company upon Completion.

The issue price of HK$0.50 per Consideration Share is identical to the closing price of HK$0.50 per Share as quoted on the Stock Exchange on 23 March 2004 (being the last trading day immediately preceding the suspension of trading in the Shares on 24 March 2004) and represents a premium of approximately 0.50% to the average closing price of HK$0.4975 per Share for the last ten trading days up to and including the Latest Practicable Date. The market value of the Consideration Shares as at the Latest Practicable Date was HK$8,989,200 which represents 1% discount to the consideration of the Acquisition. The Directors considered that the issue price of the Consideration Shares at HK$0.50 per Share is fair and reasonable.

The consideration for the Acquisition (being HK$9,080,000) was arrived at based on arm’s length negotiations between the Company and the Vendor and is by reference to the audited consolidated net assets value of Tongfang Electronic of approximately HK$23.8 million as at 31 December 2003 (the “NAV”) (based on the Generally Accepted Accounting Principles in Hong Kong). The consideration for the Acquisition also represents approximately 38.15% of the NAV.

The Consideration Shares, when allotted and issued, shall rank pari passu in all respects with the Shares in issue on the date of allotment and issue of the Consideration Shares including the right to all dividends, distribution and other payments made or to be made, the record date for which falls on or after the date of such allotment and issue.

Conditions Precedent

Completion is conditional upon, among other things, the following conditions being fulfilled on or before the Long Stop Date:

• (i) the GEM Listing Committee granting the listing of, and permission to deal in, the Consideration Shares;

• (ii) the Shareholders having approved the entering into and performance of the S&P Deed, the allotment and issue of the Consideration Shares and the transactions contemplated thereunder in the manner as required under and in full compliance with the GEM Listing Rules at a general meeting;

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LETTER FROM THE BOARD

• (iii) all necessary consents, authorizations and approvals required to be obtained in connection with the entering into, and performance of the terms of the S&P Deed, and of the transaction contemplated thereunder having been obtained by the Vendor from the relevant government authorities (if any);

• (iv) no breach of the warranties has occurred or subsisted as at the Long Stop Date; and

• (v) all necessary approvals and consents from the relevant regulatory authorities in Hong Kong and the PRC or any other jurisdiction, if applicable, having been obtained by the Vendor.

In the event that any of the conditions above has not been fulfilled or satisfied by the Long Stop Date, the S&P Deed shall be terminated with immediate effect (provided that such termination shall be without prejudice to any rights or remedies of the parties which shall have accrued prior to such termination). None of the conditions mentioned above can be waived under the S&P Deed.

Completion

Completion of the Acquisition shall take place within three Business Days after the fulfillment of the conditions of the S&P Deed.

• .

Changes to the shareholding of the Company as a result of the issue of the Consideration Shares

Upon Completion, the issue of the Consideration Shares will not result in a change of control of the Company. The effect of the issue of the Consideration Shares on the shareholding structure of the Company before and immediately after completion of the Acquisition is as follows:

As at the date hereof Shareholders No. of Shares Wide Source_(notes 1 & 2) 21,542,476 Suez Asia Holdings Pte. Ltd.(note 3) 3,412,000 Ms. Li(note 4)_ – Others 22,500,524 Total issued share capital 47,455,000	Immediately upon completion of the Acquisition % No. of Shares % 45.40% 21,542,476 32.83% 7.19% 3,412,000 5.20% 0.00% 18,160,000 27.68% 47.41% 22,500,524 34.29% 100.00% 65,615,000 100.00%	Immediately upon completion of the Acquisition % No. of Shares % 45.40% 21,542,476 32.83% 7.19% 3,412,000 5.20% 0.00% 18,160,000 27.68% 47.41% 22,500,524 34.29% 100.00% 65,615,000 100.00%
		100.00%

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LETTER FROM THE BOARD

Notes:

1. Shares held by Wide Source represent the corporate interest of Mr. Luk Yat Hung in the Company.

2. Mr. Ma Bing will be taken to be interested in 21,542,476 Shares as a result of him being beneficially interested in 50% of the issued share capital of Wide Source which in turn holds 21,542,476 Shares.

3. Suez Asia Holdings Pte. Ltd. is a private equity investor in Asia holding the said number of Shares in trust.

4. Ms. Li graduated from Hua Zhong Polytechnic University †† -x ? È @ˆ in September 2000 and joined the research and development department of Lang Chao Group †CD tuˆ in 2001. She is a co-founder of Shen Si Guan Jie Limited †HIJK ()*+ˆ , a software development company incorporated in the PRC. Ms. Li has been an active direct investor in a number of hi-tech companies providing software solutions and application services to the power and energy industry and tax bureau as well as tax related services.

REASONS AND BENEFITS OF THE ACQUISITION

The Company is an investment holding company with its operating subsidiaries principally engaged in the design, development and deployment of internet enabling software solutions and the provision of information technology consulting and e-business innovation services for commercial enterprises in Hong Kong seeking to deploy and improve their use of the internet and e-business applications.

As stated in the third quarterly report of the Company for the nine months ended 31 December 2003, the Group would execute strategic acquisition in order to enhance the profitability of the Group. In view of the satisfactory historic financial performance of Tongfang Electronic for each of the two financial years ended 31 December 2002 and 2003, the Directors believe that Tongfang Electronic would continue to have a steady and recurring income stream so as to improve the Group’s overall financial performance in the long run. Moreover, the Directors consider that the Acquisition presents a good opportunity for the Group to further invest in information technology related business in the PRC which offers attractive growth potential for the Company and is in the interest of the Company and the Shareholders as a whole. The Directors also believe that the Acquisition provides an opportunity for the Company to widen its earning base and to diversify its business portfolio by capturing a suitable investment opportunity in the information technology industry in the PRC and provide synergy to enhance its existing products and services with the technical support from Tongfang Electronic.

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LETTER FROM THE BOARD

Through the Acquired Interest, the Company will become the indirect beneficial owner of 40% interest in the registered capital of Beijing Tongfang with the remaining 60% owned by two independent third parties not connected with any of the directors, chief executive, substantial shareholders or management shareholders of the Company or its subsidiaries or any of their respective associates. In addition, upon completion of the Acquisition, it is currently intended that no representative from the Company will be nominated to join and participate in the management of Tongfang Electronic. The Directors are satisfied with the existing state of affairs of Tongfang Electronic which currently represents a passive investment and expansion to the revenue base of the Company, as such, the Directors have no present intention to seek any active representation in the board of directors of Tongfang Electronic. Upon completion of the Acquisition, it is currently intended that neither the Vendor nor her representative will be nominated to the Board.

The Directors (including the independent non-executive Directors) consider that the terms of the Acquisition are fair and reasonable and the Acquisition is in line with the business objective of the Group. The Company currently does not have any intention to increase its interest in Tongfang Electronic apart from the Acquisition; in the event that there is such increase, the Company will comply with the relevant disclosure and Shareholders’ approval requirements, if applicable, of the GEM Listing Rules.

BACKGROUND OF TONGFANG ELECTRONIC

Tongfang Electronic is an investment holding company and its sole asset is the entire issued share capital of Tongfang Electronic (Hong Kong) Company Limited. Beijing Tongfang is a wholly owned foreign enterprise owned by Tongfang Electronic (Hong Kong) Company Limited and incorporated under the laws of the PRC on 5 May 2001.

Beijing Tongfang is principally engaged in research, development and provision of (i) integrated management information system for application in electricity generation and operations of power plant; and (ii) total solutions for application in banking business (including customer relationship management, office automation, branch operation, cash management, credit management, data interchange, phone banking and internet banking).

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LETTER FROM THE BOARD

FINANCIAL INFORMATION OF TONGFANG ELECTRONIC

Set out below is the audited consolidated financial information of Tongfang Electronic under the Generally Accepted Accounting Principles in Hong Kong:

	Year ended	Year ended	Year ended
	31 December 2001	31 December 2002	31 December 2003
	HK$ million	HK$ million	HK$ million
	(approximately)	(approximately)	(approximately)
(Loss)/profit before taxation	(23.3)	4.2	4.0
Net (loss)/profit after taxation	(23.3)	4.2	4.0
Net assets value as at
31 December	15.6	19.9	23.8
Net tangible assets value as at
31 December	15.6	19.9	23.8

LISTING AND DEALING

Application has been made by the Company to the GEM Listing Committee of the Stock Exchange for the approval of the listing of, and permission to deal in, the Consideration Shares.

No part of the share capital of the Company is listed or dealt in on any other stock exchange or permission to deal in any Shares on any other stock exchange is being or is planned to be sought.

Subject to the grant of the above approval by the Stock Exchange, such Consideration Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings on the Stock Exchange in such Consideration Shares or such other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

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LETTER FROM THE BOARD

EXTRAORDINARY GENERAL MEETING

At the EGM, an ordinary resolution will be proposed to approve the Acquisition and all transactions contemplated thereunder.

A form of proxy for use by the Shareholders at the EGM is enclosed. Whether or not you are available to attend the EGM in person, you are requested to complete the accompanying proxy form in accordance with the instructions printed thereon and return the same to the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited at Rooms 19011905, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding of the EGM or any adjournment thereof. Completion and return of a proxy form will not preclude you from attending and voting in person at the EGM or any adjourned meeting should you so wish.

RECOMMENDATION

The Board considers that the Acquisition is in the best interest of the Company and its Shareholders as a whole, and accordingly recommends the Shareholders to vote in favour of the resolution to be proposed at the EGM.

Any Shareholder with a material interest in the transactions involving or pertaining to the Acquisition and his associates shall abstain from voting on the proposed resolution purporting to approve the same. So far as the Company is aware, no Shareholder should be required to abstain from voting in the resolution approving the Acquisition under the GEM Listing Rules.

FURTHER INFORMATION

Your attention is drawn to the appendices to this circular.

Yours faithfully,

By order of the Board

Tai Shing International (Holdings) Limited

Luk Yat Hung

Chairman

– 12 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SUMMARY OF AUDITED FINANCIAL STATEMENTS

The following is a summary of the audited financial statements of the Group for the three years ended 31 March 2003 together with the accompanying notes as extracted from the annual reports of the Company for the years ended 31 March 2002 and 2003:

Consolidated Income Statement

For the year ended 31 March 2003 (Expressed in Hong Kong dollars)

Note Turnover 2 Cost of services and merchandise sold Gross profit Other revenue and net income 3 Research and development costs 4(c) Selling expenses General and administrative expenses Other operating expenses Loss from operations Finance costs 4(a) Loss from ordinary activities before taxation 4 Taxation 5(a) Loss from ordinary activities after taxation Minority interests Loss attributable to shareholders 8 Dividends 9 Loss per share – Basic_(HK cents) _10 – Diluted_(HK cents)_	2003 $’000 37,698 (25,490) 12,208 27 (36,343) (3,160) (25,692) (3,894) (56,854) (50) (56,904) 75 (56,829) – (56,829) – (5.48) N/A	2002 $’000 35,292 (21,724) 13,568 1,118 (15,366) (10,781) (36,589) (6,080) (54,130) (23) (54,153) – (54,153) – (54,153) – (5.23) N/A	2001 $’000 35,628 (15,020) 20,608 3,591 (7,906) (17,191) (24,543) (3,200) (28,641) (592) (29,233) (295) (29,528) 987 (28,541) – (3.36) N/A

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Balance Sheet

At 31 March 2003 (Expressed in Hong Kong dollars)

Note Non-current assets Fixed assets 12 Intangible assets 14 Investment securities 15 Current assets Gross amount due from customers for contracts 16 Inventories 17 Accounts receivable 18 Prepayments, deposits and other receivables Tax recoverable 5(b) Pledged deposits 20 Cash and cash equivalents 21 Current liabilities Receipts in advance 22 Other payables and accruals Tax payable 5(b) Net current assets Total assets less current liabilities Minority interests NET ASSETS CAPITAL AND RESERVES Share capital 23 Reserves 24(a)	2003 $’000 4,452 – – 4,452 ---------------- 1,601 240 6,059 792 – 526 2,107 11,325 ---------------- 1,971 8,369 – 10,340 ---------------- 985 ---------------- 5,437 – 5,437 103,638 (98,201) 5,437	2002 $’000 8,407 30,109 700 39,216 ---------------- 2,381 153 8,453 1,803 1,302 4,342 13,600 32,034 ---------------- 1,345 8,536 266 10,147 ---------------- 21,887 ---------------- 61,103 – 61,103 103,638 (42,535) 61,103	2001 $’000 9,710 20,404 4,795
			34,909 ---------------- 984 – 11,445 2,926 1,302 40,188 34,392
			91,237 ---------------- – 11,283 266
			11,549 ----------------
			79,688 ----------------
			114,597 985
			115,582
			103,638 11,944
			115,582

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Balance Sheet

At 31 March 2003 (Expressed in Hong Kong dollars)

Note Non-current assets Investments in subsidiaries 13 Current assets Amounts due from subsidiaries 19 Prepayments, deposits and other receivables Pledged deposits 20 Cash and cash equivalents 21 Current liabilities Other payables and accruals Net current (liabilities)/assets NET ASSETS CAPITAL AND RESERVES Share capital 23 Reserves 24(b)	2003 $’000 6,900 ---------------- 1,741 – – – 1,741 2,635 (894) ---------------- 6,006 103,638 (97,632) 6,006	2002 $’000 3,800 ---------------- 123,983 113 3,742 20 127,858 1,717 126,141 ---------------- 129,941 103,638 26,303 129,941	2001 $’000 3,800 ---------------- 69,055 368 39,023 22,915
			131,361 844
			130,517 ----------------
			134,317
			103,638 30,679
			134,317

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

For the year ended 31 March 2003 (Expressed in Hong Kong dollars)

Note Shareholders’ equity at 1 April Exchange differences on translation of the financial statements of subsidiaries outside Hong Kong 24(a) Net loss not recognised in the income statement Net loss for the year 24(a) Movements in shareholders’ equity arising from capital transactions with shareholders: Share eliminated on consolidation 23 Issuance of shares for the acquisition of subsidiaries 23 Issuance of shares upon the conversion of convertible notes 23 Issuance of shares for cash 23 Movement in capital reserve: Waiver of amount due to a shareholder 24(a) Shareholders’ equity at 31 March	2003 $’000 61,103 ---------------- (37) (37) ---------------- (56,829) – – – – (56,829) 1,200 (55,629) ---------------- 5,437	2002 $’000 115,582 ---------------- (326) (326) ---------------- (54,153) – – – – (54,153) – (54,153) ---------------- 61,103	2001 $’000 7,914 ---------------- (73) (73) ---------------- (28,541) (500) 520 173 136,089 107,741 – 107,741 ---------------- 115,582

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 31 March 2003 (Expressed in Hong Kong dollars) Note Operating activities Loss from ordinary activities before taxation Interest income from bank deposits Depreciation Amortisation of intangible assets Impairment loss on intangible assets Impairment loss on fixed assets Finance costs Loss on disposal of fixed assets Barter sales revenue Provision for diminution in value against investment securities Gain on disposal of a subsidiary Provision for bad and doubtful debts Provision for receivable from minority shareholder Provision for foreseeable losses on systems development projects Settlement to a labour dispute paid by a shareholder_(note 4(c))_ Operating loss before changes in working capital Decrease/(increase) in gross amount due from customers for contracts Decrease in gross amount due to customers for contracts Increase in inventories Decrease/(increase) in accounts receivable Decrease/(increase) in prepayments, deposits and other receivables Increase/(decrease) in receipts in advance Increase/(decrease) in other payables and accruals Decrease in amounts due to related parties Decrease in amounts due from related parties Cash used in operations Tax paid – Hong Kong Profits Tax refunded/(paid) – Overseas tax paid Net cash used in operating activities	2003 $’000 (56,904) (19) 2,527 8,439 25,542 391 50 1,293 – 700 – 242 – – 1,200 (16,539) 780 – (87) 2,152 1,011 626 (167) – – (12,224) 1,302 (191) (11,113) ----------------	2002 $’000 (54,153) (977) 2,617 6,971 – – 23 828 – 5,095 – 1,266 985 – – (37,345) (1,397) – (153) 1,726 1,123 1,345 (797) – – (35,498) – – (35,498) ----------------	2001 $’000 (29,233) (3,160) 1,441 2,299 – – 592 170 (195) 3,200 (430) 5,942 – 2,573 – (16,801) (1,356) (330) – (4,753) (893) (156) 3,111 (2,659) 1,583 (22,254) (2,606) (11) (24,871) ----------------

– 17 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note Investing activities Payment for purchase of fixed assets Proceeds from disposal of fixed assets Proceeds from disposal of a subsidiary Pledged deposits Payment for purchase of investment securities Payment for acquisition of intangible assets Interest received Net cash (used in)/generated from investing activities Financing activities New short-term bank loans and other borrowings Proceeds from issuance of convertible notes Repayment of short-term bank loans and other borrowings Repayment of convertible notes Net proceeds from issuance of new shares Interest paid Net cash (used in)/generated from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1 April Effect of foreign exchange rates changes Cash and cash equivalents at 31 March 21	2003 $’000 (424) 168 – 3,816 – (3,872) 19 (293) ---------------- – – – – – (50) (50) ---------------- (11,456) 13,600 (37) 2,107	2002 $’000 (2,142) – – 35,846 (2,950) (16,676) 977 15,055 ---------------- – – – – – (23) (23) ---------------- (20,466) 34,392 (326) 13,600	2001 $’000 (9,352) – 430 (40,188) (5,850) (22,703) 3,160 (74,503) ---------------- 5,500 8,000 (5,500) (2,000) 120,282 (592) 125,690 ---------------- 26,316 8,162 (86) 34,392

– 18 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Financial Statements

For the year ended 31 March 2003 (Expressed in Hong Kong dollars)

1. Significant accounting policies

(a) Statement of compliance

These financial statements have been prepared in accordance with all applicable Statements of Standard Accounting Practice and Interpretations issued by the Hong Kong Society of Accountants, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance.

These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). A summary of the significant accounting policies adopted by the Group is set out below.

(b) Basis of preparation of the financial statements

The Group continued to make significant losses in the current financial year and its cash position was reduced to $2.1 million as at 31 March 2003. The sustainability of the Group is dependent on its ability to generate sufficient cash flows from its operations, which are dependent on, among other things, its ability to successfully implement its business development plans. Upon the completion of a sale and purchase agreement in relation to the sale of the Company’s shares on 14 May 2003, Wide Source Group Ltd. (“Wide Source”) becomes the largest single shareholder of the Company (see note 29) . The Directors and Wide Source’s directors do not expect that there will have been any material impact on the business operation of the Group after the completion of the sale and purchase agreement. The Directors have evaluated all the relevant facts available to them and are of the opinion that there do not exist any material adverse conditions precluding the Group from generating sufficient cash flows from its operations or implementing its business development plans. Accordingly, the financial statements have been prepared on a going concern basis.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets amounts or to amounts and classification of liabilities that might be necessary should the going concern basis not be applicable.

The measurement basis used in the preparation of the financial statements is historical costs.

(c) Subsidiaries and controlled enterprises

A subsidiary is an enterprise controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities.

An investment in a controlled subsidiary is consolidated into the consolidated financial statements, unless it is acquired and held exclusively with a view to subsequent disposal in the near future or operates under severe long-term restrictions which significantly impair its ability to transfer funds to the Group, in which case, it is stated in the consolidated balance sheet at fair value with changes in fair value recognised in the consolidated income statement as they arise.

– 19 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Intra-group balances and transactions, and any unrealised profits arising from intra-group transactions, are eliminated in full in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gain, but only to the extent that there is no evidence of impairment.

In the Company’s balance sheet, an investment in a subsidiary is stated at cost less any impairment losses (see note 1(i)) , unless it is acquired and held exclusively with a view to subsequent disposal in the near future or operates under severe long-term restrictions which significantly impair its ability to transfer funds to the Company, in which case, it is stated at fair value with changes in fair value recognised in the income statement as they arise.

(d) Investments in securities

The Group’s and the Company’s policies for investments in securities other than investments in subsidiaries are as follows:

• (i) Investment held on a continuing basis for an identified long-term purpose is classified as investment securities. Investment securities are stated in the balance sheet at cost less any provisions for diminution in value. Provisions are made when the fair values have declined below the carrying amounts, unless there is evidence that the decline is temporary, and are recognised as an expense in the income statement, such provisions being determined for each investment individually.

• (ii) Provisions against the carrying value of investment securities are written back when the circumstances and events that led to the write-down or write-off cease to exist and there is persuasive evidence that the new circumstances and events will persist for the foreseeable future.

• (iii) Profits or losses on disposal of investments in securities are determined as the difference between the estimated net disposal proceeds and the carrying amount of the investments and are accounted for in the income statement as they arise.

(e) Fixed assets

• (i) Fixed assets are stated in the balance sheet at cost less accumulated depreciation (see note 1(h)) and impairment losses (see note 1(i)) .

• (ii) Subsequent expenditure relating to a fixed asset that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the Group. All other subsequent expenditure is recognised as an expense in the period in which it is incurred.

• (iii) Gains or losses arising from the retirement or disposal of a fixed asset are determined as the difference between the estimated net disposal proceeds and the carrying amount of the asset and are recognised in the income statement on the date of retirement or disposal.

– 20 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(f) Intangible assets

• (i) Research and development costs

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised as an expense in the period in which it is incurred.

Expenditure on development activities is capitalised if the product or process is technically and commercially feasible and the Group has sufficient resources and the intention to complete development. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Capitalised development costs are stated at cost less accumulated amortisation (see note 1(h)) and impairment losses (see note 1(i)) . Other development expenditure is recognised as an expense in the period in which it is incurred.

(ii) Deferred asset

Deferred asset represents the signing bonus paid to certain staff upon joining the Group which is stated at cost less accumulated amortisation (see note 1(h)) and impairment losses (see note 1(i)) .

• (iii) Subsequent expenditure on an intangible asset after its purchase or its completion is recognised as an expense when it is incurred unless it is probable that this expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standard of performance and this expenditure can be measured and attributed to the asset reliably. If these conditions are met, the subsequent expenditure is added to the cost of the intangible asset.

(g) Leased assets

Leases of assets under which the lessor has not transferred all the risks and benefits of ownership are classified as operating leases.

Where the Group has the use of assets under operating leases, payments made under the leases are charged to the income statement in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in the income statement as an integral part of the aggregate net lease payments made. Contingent rentals are charged to the income statement in the accounting period in which they are incurred.

– 21 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(h) Amortisation and depreciation

• (i) Depreciation is calculated to write off the cost of fixed assets over their estimated useful lives on a straight-line basis, after taking into account their estimated residual values, as follows:

– Leasehold improvement Over the shorter of remaining lease term and 5 years Furniture and fixtures – 5 years – Computer and office equipment 5 years

• (ii) Amortisation of intangible assets is charged to the income statement on a straight-line basis over the assets’ estimated useful lives as follows:

– Capitalised development costs Over the life of the relevant project from the date of commencement of commercial operations subject to a maximum of 5 years

Deferred asset – Over the respective service term of the relevant employment contracts

(i) Impairment of assets

Internal and external sources of information are reviewed at each balance sheet date to identify indications that the following assets may be impaired or an impairment loss previously recognised no longer exists or may have decreased:

• fixed assets;

• – intangible assets;

• investments securities; and

– investments in subsidiaries.

If any such indication exists, the asset’s recoverable amount is estimated. For intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount.

(i) Calculation of recoverable amount

The recoverable amount of an asset is the greater of its net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

– 22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) Reversals of impairment losses

An impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.

A reversal of impairment losses is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to the income statement in the year in which the reversals are recognised.

(j) Inventories

Inventories are carried at the lower of cost and net realisable value.

Cost is calculated using the first-in first-out cost formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

(k) Cash equivalents

Cash and cash equivalents comprise cash at bank and in hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition.

(l) Employee benefits

• (i) Salaries, annual bonuses, paid annual leave, leave passage and the cost to the Group of nonmonetary benefits are accrued in the year in which the associated services are rendered by employees of the Group. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

• (ii) Contributions to Mandatory Provident Funds as required under the Hong Kong Mandatory Provident Fund Schemes Ordinance or other retirement benefit schemes, are recognised as an expense in the income statement as incurred, except to the extent that they are included in the cost of intangible assets and inventories not yet recognised as an expense.

• (iii) When the Group grants employees options to acquire shares of the Company at nil consideration, no employee benefit cost or obligations is recognised at the date of grant. When the options are exercised, equity is increased by the amount of the proceeds received.

– 23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(iv) Termination benefits are recognised when, and only when, the Group demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal.

(m) Deferred taxation

Deferred taxation is provided using the liability method in respect of the taxation effect arising from all material timing differences between the accounting and tax treatment of income and expenditure, which are expected with reasonable probability to crystallise in the foreseeable future.

Future deferred tax benefits are not recognised unless their realisation is assured beyond reasonable

doubt.

(n) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Company or Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(o) Service contracts

The accounting policy for the revenue derived from systems development and consultancy services is set out in note 1(p)(i). When the outcome of a service contract can be estimated reliably, contract costs are recognised as expense by reference to the stage of completion of the contract activity at the balance sheet date. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. When the outcome of a service contract cannot be estimated reliably, contract costs are recognised as an expense in the period in which they are incurred.

Service contracts in progress at the balance sheet date are recorded in the balance sheet at the net amount of costs incurred plus recognised profit less recognised losses and progress billings, and are presented in the balance sheet as the “Gross amount due from customers for contracts” (as an asset) or the “Gross amount due to customers for contracts” (as a liability), as applicable. Progress billings not yet paid by the customer are included in the balance sheet under “Accounts receivable”. Amounts received before the related work is performed are included in the balance sheet, as a liability, as “Receipts in advance”.

– 24 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(p) Revenue recognition

Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in the income statement as follows:

(i) Systems development and consultancy services

Revenue arising from the provision of systems development, maintenance and installation as well as consultancy services is recognised when the underlying services are rendered which is estimated by apportionment over the expected duration of each engagement; and the outcome of the contract can be estimated with reasonable certainty.

(ii) Sale of software and hardware products

Revenue arising from the sale of software and hardware products is recognised when the customer has accepted the goods and the related risks and rewards of ownership. Revenue is stated after deduction of any trade discounts.

• (iii) Professional service fees

Professional service fees represent fees for the provision of IT engineering services and are recognised when the underlying professional services are rendered.

• (iv) Training fees

Training fees represent income earned from the provision of training courses, which is recognised when the related courses are held.

• (v) Interest income

Interest income from bank deposits is accrued on a time-apportioned basis by reference to the principal outstanding and the rate applicable.

(q) Translation of foreign currencies

Foreign currency transactions during the year are translated into Hong Kong dollars at the exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated into Hong Kong dollars at the exchange rates ruling at the balance sheet date. Exchange gains and losses are dealt with in the income statement.

The results of foreign subsidiaries are translated into Hong Kong dollars at the average exchange rates for the year; balance sheet items are translated into Hong Kong dollars at the rates of exchange ruling at the balance sheet date. The resulting exchange differences are dealt with as a movement in reserves.

On disposal of a foreign subsidiary, the cumulative amount of the exchange differences which relate to that foreign enterprise is included in the calculation of the profit or loss on disposal.

– 25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(r) Warranty costs

Warranty costs are charged to the income statement as and when incurred.

(s) Related parties

For the purposes of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

(t) Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

In accordance with the Group’s internal financial reporting system, the Group has chosen business segment information as the primary reporting format and geographical segment information as the secondary reporting format for the purposes of these financial statements.

Segment revenue, expenses, results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis to that segment. For example, segment assets may include inventories, accounts receivable and fixed assets. Segment revenue, expenses, assets, and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between group enterprises within a single segment. Inter-segment pricing is based on similar terms as those available to other external parties.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets (both tangible and intangible) that are expected to be used for more than one period.

Unallocated items mainly comprise financial and corporate assets, interest-bearing loans, borrowings, corporate and financing expenses and minority interests.

– 26 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. Turnover

The principal activities of the Group are the provision of systems development, sale of software and hardware products, training and technical support services. Turnover represents income arising from the provision of systems development and consultancy services, provision of IT engineering and technical support services, provision of training courses and the sale of software and hardware products.

The amount of each significant category of revenue recognised in turnover during the year is as follows:

3.

Systems development Software and hardware products Professional service fees Training fees Other revenue and net income Interest income Sundry income Gain on disposal of a subsidiary upon Reorganisation	2003 $’000 20,039 3,984 11,351 2,324 37,698 2003 $’000 19 8 – 27	2002 $’000 18,933 4,583 9,382 2,394 35,292 2002 $’000 977 141 – 1,118	2001 $’000 14,637 9,990 7,639 3,362
			35,628
			2001 $’000 3,160 1 430
			3,591

– 27 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. Loss from ordinary activities before taxation

Loss from ordinary activities before taxation is arrived at after charging:

(a) Finance costs: Interest on bank overdrafts and other borrowings repayable within five years (b) Staff costs: # Salaries, wages and other benefits _Less:_Amount capitalised as intangible assets Retirement costs (c) Other items: Cost of services and merchandise sold # Research and development costs # _Less:_Amount capitalised as intangible assets _Add:_Amortisation of research and development costs _Add:_Amount impaired Operating lease rentals – properties _Less:_Amount capitalised as intangible assets Pre-operating costs written off Amortisation of deferred assets # Auditors’ remuneration Impairment loss on fixed assets Depreciation Loss on disposal of fixed assets Provision for bad and doubtful debts Provision for foreseeable losses on system development projects Provision for receivable from minority shareholder Provision for diminution in value against investment securities Settlement to a labour dispute @	2003 $’000 50 38,945 (3,537) 35,408 1,389 36,797 25,490 6,282 (3,872) 8,391 25,542 36,343 5,008 (335) 4,673 – 48 600 391 2,527 1,293 242 – – 700 1,850	2002 $’000 23 62,551 (14,286) 48,265 1,980 50,245 21,724 25,167 (16,676) 6,875 – 15,366 9,602 (1,832) 7,770 67 96 750 – 2,617 828 1,266 – 985 5,095 –	2001 $’000 592 54,795 (18,464) 36,331 579 36,910 15,020 28,166 (22,511) 2,251 – 7,906 4,476 (1,172) 3,304 236 48 950 – 1,441 170 5,942 2,573 – 3,200 –

– 28 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• Cost of services and merchandise sold, research and development costs, and amortisation of deferred assets include $23,311,000 (2002: $27,243,000 and 2001: 18,727,000) staff costs.

• @ For the year ended 31 March 2002, a claim was made against one of the Company’s wholly-owned subsidiaries in relation to a labour dispute instigated by a former employee, claiming $9,522,400 (inclusive of interest and cost). The Group had sought legal advice on the claim that it was not possible to determine the outcome of this matter with reasonable uncertainty as at 31 March 2002. However, based on additional information available to the Group as at 31 March 2002, the Directors had considered that the claim was unlikely to be successful, therefore no provision was made in respect of the alleged claims in the financial statements for the year ended 31 March 2002. On 26 August 2002, the claim was transferred from the Labour Tribunal to the High Court. On 27 February 2003, a consent order was filed by the Group and the former employee with the High Court. According to the consent order, the Group paid a sum of $650,000 and caused 20,000,000 shares of the Company at market value of $1,200,000 to be transferred from the substantial shareholder of the Company to the former employee. The aforesaid $1,200,000 due to the substantial shareholder was waived during the year. The waived amount is in substance equivalent to a capital contribution to the Group. As such the Group records an increase in capital reserve (note 24(a)) .

5. Taxation

(a) Taxation in the consolidated income statement represents:

Provision for Hong Kong Profits Tax for the year Underprovision in respect of prior years Deferred taxation Overprovision for overseas tax in respect of prior years	2003 $’000 – – – – – 2003 $’000 75	2002 $’000 – – – – – 2002 $’000 –	2001 $’000 – 32
			32 263
			295
			2001 $’000 –

No provision for taxation has been made for the years ended 31 March 2003, 2002 and 2001 as the Group sustained losses for taxation purpose during the three years.

– 29 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Subsidiaries operating in the PRC are exempted from PRC income tax for two years commencing from the first profit making year and are entitled to a 50% relief from PRC income tax for the following three years, after which the profits are subject to PRC income tax at the standard rate of 33%. These subsidiaries sustained losses since establishment and the two-year tax exemption period has not commenced.

(b) Tax (recoverable)/payable in the consolidated balance sheet represents:

Provision for Hong Kong Profits Tax for the year Provisional Hong Kong Profits Tax paid Balance of Hong Kong Profits Tax recoverable relating to prior years Balance of income tax payable outside Hong Kong relating to prior years Representing: Tax recoverable Tax payable	2003 $’000 – – – – – – – – –	2002 $’000 – – – (1,302) 266 (1,036) (1,302) 266 (1,036)	2001 $’000 – (1,302)
			(1,302) – 266
			(1,036)
			(1,302) 266
			(1,036)

(c) Deferred taxation

Major components of unrecognised deferred tax assets are set out below:

		The	Group		The Company
	2003	2002	2001	2003	2002	2001
	$’000	$’000	$’000	$’000	$’000	$’000
Unutilised tax losses
carried forward	18,079	11,219	–	2,157	1,215	–

No deferred tax asset in respect of unutilised tax losses carried forward, which are available to set off against future assessable profits, has been recognised as it is uncertain that these tax losses will be utilised in the foreseeable future.

There were no other material unprovided deferred taxation assets or liabilities as at 31 March 2003, 2002 and 2001.

– 30 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. Directors’ remuneration

Directors’ remuneration disclosed pursuant to section 161 of the Hong Kong Companies Ordinance is as follows:

Executive Directors: Salaries and other emoluments Retirement scheme contributions Other allowances Non-executive Directors: Fees	2003 $’000 2,712 53 – 2,765 179	2002 $’000 4,285 42 335 4,662 321	2001 $’000 5,800 15 1,731
			7,546
			204

The remuneration of the Directors is within the following bands:

		Number of Directors
	2003	2002	2001
Nil – $1,000,000	14	10	8
$1,000,001 – $2,000,000	–	3	4
$2,000,001 – $3,000,000	–	–	–
$3,000,001 – $4,000,000	–	–	1

The executive Directors and non-executive Directors received individual emoluments of approximately Nil (2002: $1,000,000), $870,000 (2002: $1,095,000), $579,000 (2002: $1,012,000), $306,000 (2002: Nil), $469,000 (2002: Nil), $541,000 (2002: Nil), Nil (2002: $621,000), Nil (2002: $647,000), Nil (2002: $287,000), $21,000 (2002: $50,000), $50,000 (2002: $50,000), Nil (2002: $21,000) and $50,000 (2002: $50,000) respectively.

The independent non-executive Directors received individual emoluments of approximately $17,000 (2002: Nil), Nil (2002: Nil), $29,000 (2002: $50,000), $4,000 (2002: $50,000) and $8,000 (2002: $50,000) respectively.

During the year, Directors’ remuneration of $547,000 (2002 and 2001: Nil) was waived.

– 31 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. Individuals with highest emoluments

Of the five individuals with the highest emoluments, three (2002 and 2001: three) are Directors whose emoluments are disclosed in note 6 above. The aggregate of the emoluments in respect of the other two (2002 and 2001: two) individuals are as follows:

Salaries and other emoluments Retirement scheme contributions Other allowances	2003 $’000 1,169 24 – 1,193	2002 $’000 2,944 22 – 2,966	2001 $’000 3,125 6 500
			3,631

The emoluments of the two (2002 and 2001: two) individuals with the highest emoluments are within the following bands:

		Number of individuals
	2003	2002	2001
Nil – $1,000,000	2	–	–
$1,000,001 – $2,000,000	–	2	1
$2,000,001 – $3,000,000	–	–	–
$3,000,001 – $4,000,000	–	–	1

8. Loss attributable to shareholders

The loss attributable to shareholders includes a loss of $125,135,000 (2002: $4,376,000 and 2001: $2,465,000) which has been dealt with in the financial statements of the Company.

9. Dividends

The Directors do not recommend the payment of any final dividends for the year ended 31 March 2003 (2002 and 2001: Nil).

– 32 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. Loss per share

(a) Basic loss per share

The calculation of basic loss per share is based on the loss attributable to shareholders of $56,829,000 (2002: $54,153,000 and 2001: $28,541,000) divided by the weighted average number of 1,036,375,000 (2002: 1,036,375,000 and 2001: 848,922,921) shares in issue during the year.

(b) Diluted earnings per share

There were no potential dilutive ordinary shares in issue as at 31 March 2003, 2002 and 2001.

11. Segment reporting

Segment information is presented in respect of the Group’s business and geographical segments. Business segment information is chosen as the primary reporting format because this is more relevant to the Group’s internal financial reporting.

Business segments

The Group comprises the following main business segments:

Systems development:

Provision of systems development, maintenance and installation as well as consulting services

Software and hardware products:

Sales of computer software and hardware products

Professional services:

Provision of IT engineering and technical support services

Training:

Provision of training courses

– 33 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

	Consolidated	2002 2001	$’000 $’000		35,292 35,628		13,568 20,608		(67,698) (49,249)	(54,130) (28,641)	(23) (592)	– (295)	– 987		(54,153) (28,541)			9,588 3,740		– –				2,094 8,685				6,080 3,200	8,174 11,885		51,306 45,469	19,944 80,677	71,250 126,146		9,881 11,283	266 266	10,147 11,549			18,818 32,055			1,000 7,995	19,818 40,050
		2003	$’000		37,698		12,208		(69,062)	(56,854)	(50)	75	–		(56,829)			10,966		25,933				1,536				1,900	3,436		13,144	2,633	15,777		7,253	3,087	10,340			4,296			–	4,296
		2001	$’000		3,362		2,016											117		–				–							680				362					–
	Training	2002	$’000		2,394		1,283											125		–				–							783				368					–
		2003	$’000		2,324		531											126		–				–							638				585					–
Professional	services	2002 2001	$’000 $’000		9,382 7,639		4,448 4,139											– –		– –				– –							1,667 988				1,265 –					– –
		2003	$’000		11,351		4,432											–		–				–							1,394				2,316					–
Software and	hardware products	2003 2002 2001	$’000 $’000 $’000		3,984 4,583 9,990		1,778 2,548 6,805											– – –		– – –				– – –							1,000 279 504				196 441 75					– – –
Systems	development	2002 2001	$’000 $’000		18,933 14,637		5,289 7,648											9,463 3,623		– –				2,094 8,685							48,577 43,297				7,807 10,846					18,818 32,055
		2003	$’000		20,039		5,467											10,840		25,933				1,536							10,112				4,156					4,296
				Revenue from external	customers		Contribution from operations	Unallocated operating	income and expenses	Loss from operations	Finance costs	Taxation	Minority interests	Loss attributable to	shareholders		Depreciation and amortisation	for the year		Impairment loss for the year		Significant non-cash expenses	(other than depreciation and	amortisation)		Unallocated significant non-cash	expenses (other than	depreciation and amortisation)			Segment assets	Unallocated assets	Total assets		Segment liabilities	Unallocated liabilities	Total liabilities		Capital expenditure incurred	during the year		Unallocated capital expenditure	incurred during the year

– 34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group does not have any inter-segment sales.

Geographical segments

The Group’s four business segments are conducted mainly in Hong Kong and elsewhere in the PRC.

In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets and capital expenditure are based on the geographical location of the assets.

		Hong Kong	Hong Kong		The PRC		Other Countries	Other Countries	Other Countries
	2003	2002	2001	2003	2002	2001	2003	2002	2001
	$’000	$’000	$’000	$’000	$’000	$’000	$’000	$’000	$’000
Revenue from
external customers	32,428	31,316	35,087	3,598	3,505	456	1,672	471	85
Segment assets	11,897	55,869	120,919	3,512	14,571	3,990	368	810	1,237
Capital expenditure
incurred during
the year	3,883	13,380	27,976	323	5,373	3,873	90	1,065	8,201

– 35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12. Fixed assets

The Group

Cost: At 1 April 2001 Additions Disposals At 31 March 2002 Aggregate depreciation: At 1 April 2001 Charge for the year Written back on disposal At 31 March 2002 At 1 April 2002 Additions Disposals At 31 March 2003 Aggregate depreciation: At 1 April 2002 Charge for the year Written back on disposal Impairment loss At 31 March 2003 Net book value: At 31 March 2003 At 31 March 2002 At 31 March 2001	Leasehold improvements $’000 2,915 368 (1,307) 1,976 526 628 (479) 675 1,976 44 (818) 1,202 --------------------- 675 398 (460) – 613 --------------------- 589 1,301 2,389	Computer and office equipment $’000 10,424 1,566 – 11,990 4,216 1,709 – 5,925 11,990 356 (1,155) 11,191 --------------------- 5,925 1,845 (456) 260 7,574 --------------------- 3,617 6,065 6,208	Furniture and fixtures $’000 1,744 208 – 1,952 631 280 – 911 1,952 24 (801) 1,175 --------------------- 911 284 (397) 131 929 --------------------- 246 1,041 1,113	Total $’000 15,083 2,142 (1,307) 15,918 5,373 2,617 (479) 7,511 15,918 424 (2,774) 13,568 --------------------- 7,511 2,527 (1,313) 391 9,116 --------------------- 4,452 8,407 9,710

– 36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. Investments in subsidiaries

Unlisted investments, at cost Balance brought forward Additions_(note 19)_ _Less:_Impairment loss Balance carried forward	2003 $’000 3,800 120,856 124,656 (117,756) 6,900	2002 $’000 3,800 – 3,800 – 3,800	2001 $’000 3,800 –
			3,800 –
			3,800

Owing to continuous losses incurred by the Group’s certain subsidiaries, the Directors have performed an assessment of the recoverable amount of investments in these subsidiaries. Based on this assessment, the carrying amount of investments in these subsidiaries was written down by $117,756,000. The estimates of recoverable amount were based on their net selling prices by reference to net assets value of these subsidiaries.

Details of the subsidiaries at 31 March 2003 are as follows. The class of shares held is ordinary unless otherwise stated. All of these are controlled subsidiaries as defined under note 1(c), and have been consolidated into the Group’s financial statements.

	Place of	Percentage	of ownership	interest
	incorporation/	Group’s	held		Issued/
Name of	establishment	effective	by the	held by	registered
Company	and operation	holding	Company	subsidiary	capital	Principal activities
Productive Finance	British Virgin	100%	100%	–	US$5,200	Investment holding
Limited (“PFL”)	Islands (“BVI”)
Absolute Great	BVI	100%	–	100%	US$1	Dormant
Technology
Limited
Systek Information	PRC	100%	–	100%	US$200,000	Dormant
System (Shanghai)
Limited_(Note)_
Systek Information	United States	100%	–	100%	US$10	Dormant
Technology Inc.	of America

– 37 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

	Place of	Percentage	of ownership	interest
	incorporation/	Group’s	held		Issued/
Name of	establishment	effective	by the	held by	registered
Company	and operation	holding	Company	subsidiary	capital	Principal activities
Systek Information	Hong Kong	100%	–	100%	$520,000	Development and
Technology						trading of
Limited						software products
(“SITL”)						and provision of
						training services
Systek Information	Singapore	100%	–	100%	S$2	Dormant
Technology
(Pte) Limited
Systek Information	PRC	100%	–	100%	US$200,000	Development and
Technology						trading of
(Shanghai)						software products
Limited_(Note)_
Systek International	PRC	100%	–	100%	US$200,000	Dormant
Trading Company
(Shanghai) Limited
(Note)
Systek Investment Inc.	BVI	100%	–	100%	US$1	Investment holding
Systek Solutions	Hong Kong	100%	–	100%	$2	Investment holding
(China) Limited
SYSTEKIT	Canada	100%	–	100%	C$1,000	Provision of market
Innovations Inc.						research services
Telecare Limited	Hong Kong	80%	–	80%	$10,000	Provision of interactive
						customer care services
Systek Research	BVI	100%	–	100%	US$1	Dormant
Limited (formerly
named Tiger Magic
Holdings Limited)

– 38 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Place of Percentage of ownership interest incorporation/ Group’s held Issued/ Name of establishment effective by the held by registered Company and operation holding Company subsidiary capital Principal activities Transaction Hong Kong 100% – 100% $2 Dormant Technologies Limited (formerly named United Venture Group Limited) WinClient Hong Kong 100% – 100% $10,000 Development and Technologies trading of (HK) Limited software products and provision of training services Wingreat Investments BVI 100% – 100% US$1 Investment holding Limited

Note: The companies were established as wholly-foreign owned enterprises in the PRC.

– 39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. Intangible assets

Cost: At 1 April 2001 Additions through internal development At 31 March 2002 Accumulated amortisation: At 1 April 2001 Charge for the year At 31 March 2002 At 1 April 2002 Addition through internal development At 31 March 2003 Accumulated amortisation: At 1 April 2002 Charge for the year Impairment loss At 31 March 2003 Net book value: At 31 March 2003 At 31 March 2002 At 31 March 2001	Development costs $’000 22,511 16,676 39,187 2,251 6,875 9,126 39,187 3,872 43,059 --------------------- 9,126 8,391 25,542 43,059 --------------------- – 30,061 20,260	The Group Deferred assets $’000 192 – 192 48 96 144 192 – 192 --------------------- 144 48 – 192 --------------------- – 48 144	Total $’000 22,703 16,676
			39,379
			2,299 6,971
			9,270
			39,379 3,872
			43,251 --------------------- 9,270 8,439 25,542
			43,251 ---------------------
			–
			30,109
			20,404

Owing to unsatisfactory sales records on those self-developed products, the Directors have performed an assessment of the recoverable amount of research and development costs. Based on this assessment, the Directors consider that it is unlikely that these research and development costs have any future value in use and hence the carrying amount of research and development costs was fully impaired (included in “Research and development costs”).

– 40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15. Investment securities

Unlisted equity securities, at cost _Less:_Provision for diminution in value	2003 $’000 8,995 (8,995) –	The Group 2002 2001 $’000 $’000 8,995 7,995 (8,295) (3,200) 700 4,795	The Group 2002 2001 $’000 $’000 8,995 7,995 (8,295) (3,200) 700 4,795
			4,795

16. Gross amount due from customers for contracts

Costs incurred Recognised profits less (losses), net _Less:_Progress billings _Less:_Provision for foreseeable losses	2003 $’000 15,182 (1,728) 13,454 (11,853) 1,601 – 1,601	The Group 2002 2001 $’000 $’000 8,773 6,386 (627) 5,665 8,146 12,051 (5,765) (8,494) 2,381 3,557 – (2,573) 2,381 984	The Group 2002 2001 $’000 $’000 8,773 6,386 (627) 5,665 8,146 12,051 (5,765) (8,494) 2,381 3,557 – (2,573) 2,381 984
			12,051 (8,494)
			3,557 (2,573)
			984

The gross amount due from customers for contracts at 31 March 2003 is expected to be recovered in the next twelve months.

17. Inventories

		The Group
	2003	2002	2001
	$’000	$’000	$’000
Finished goods	240	153	–

None of the inventories at 31 March 2003 was carried at net realisable value.

– 41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. Accounts receivable

An ageing analysis of accounts receivable is as follows:

Within 1 month More than 1 month but within 3 months More than 3 months but less than 12 months Beyond 1 year	2003 $’000 4,511 1,013 497 38 6,059	The Group 2002 2001 $’000 $’000 4,129 4,151 2,968 3,116 607 1,847 749 2,331 8,453 11,445	The Group 2002 2001 $’000 $’000 4,129 4,151 2,968 3,116 607 1,847 749 2,331 8,453 11,445
			11,445

All of the accounts receivable are expected to be recovered within one year. General credit term is 30 to 45 days from the date of billing. Debtors with balances that are more than 9 months overdue are requested to settle all outstanding balances before any further credit is granted.

19. Amounts due from subsidiaries

During the year, amounts due from subsidiaries, totalling $120,856,000 (2002 and 2001: Nil) were waived. The waived amount is in substance equivalent to a capital contribution to the subsidiaries. As such, the Company records an increase in the carrying value of its investment and the subsidiaries record an increase in capital reserve.

During the year, provision for amount due from a subsidiary, totalling $1,500,000 (2002 and 2001: Nil), was made. This subsidiary has been making losses and has net liabilities as at 31 March 2003. Accordingly, the Directors consider that it is unlikely that the amount due from the subsidiary would be recoverable.

Amounts due from subsidiaries were unsecured and interest free and have no fixed terms of repayment.

20. Pledged deposits

Pledged deposits Banking facilities granted Banking facilities utilised	2003 $’000 526 526 526	The Group 2002 $’000 4,342 4,042 100	2001 $’000 40,188 40,523 –	2003 $’000 – – –	The Company 2002 $’000 3,742 3,742 –	2001 $’000 39,023
						39,023
						–

Deposits with banks were pledged to secure certain general banking facilities granted to the Group. At 31 March 2003, banking facilities were utilised to issue a bank guarantee to a customer of the Group.

– 42 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

21. Cash and cash equivalents

Deposits with banks Cash at bank and in hand	2003 $’000 – 2,107 2,107	The Group 2002 $’000 729 12,871 13,600	2001 $’000 22,763 11,629 34,392	2003 $’000 – – –	The Company 2002 $’000 – 20 20	2001 $’000 22,639 276
						22,915

22. Receipts in advance

Receipts in advance represent advance payments of systems development service fees from customers pursuant to the respective service contracts.

23. Share capital

Note Authorised: Ordinary shares of $0.1 each (ii) Issued and fully paid: At 1 April (i) Capital eliminated on consolidation (ii) Issuance of shares for the acquisition of subsidiaries (ii) Issuance of shares upon the conversion of convertible notes (iii) Capitalisation issue (iv) Issuance of shares for cash (v) At 31 March	2003 Number of shares ’000 2,000,000 1,036,375 – – – – – 1,036,375	and 2002 Amounts $’000 200,000 103,638 – – – – – 103,638	2001 Number of shares Amounts ’000 $’000 2,000,000 200,000 5,000 500 (5,000) (500) 5,200 520 1,733 173 793,067 79,307 236,375 23,638 1,036,375 103,638	2001 Number of shares Amounts ’000 $’000 2,000,000 200,000 5,000 500 (5,000) (500) 5,200 520 1,733 173 793,067 79,307 236,375 23,638 1,036,375 103,638
				500 (500) 520 173 79,307 23,638
				103,638

Notes :

(i) The share capital as at 1 April 2000 represented the issued capital of SITL.

– 43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• (ii) The Company became the holding company of the Group on 26 August 2000 through the Reorganisation under which 5,199,999 shares of $0.1 each were issued to acquire the entire equity interest of PFL, giving rise a share premium of approximately $3,280,000.

• (iii) On 26 August 2000, an aggregate of 1,733,334 shares of $0.1 each were issued and credited as fully paid, upon the conversion of the outstanding principal amount of $16,000,000 pursuant to the terms of convertible note.

• (iv) On 26 August 2000, an amount of $79,306,667 standing to the credits of the share premium account was applied in paying up in full at par 793,066,666 shares of $0.1 each which were allotted and distributed as fully paid to the then shareholders pursuant to their equity percentages.

• (v) On 7 September 2000, a further 236,375,000 shares of $0.1 each were issued and offered for subscription at a price of $0.56 per share upon the listing of the Company’s shares on the Stock Exchange. The Group raised approximately $120,015,000 (including interest income) net of related expenses from the issue.

• (vi) All the shares issued by the Company rank pari passu and do not carry pre-emptive rights.

– 44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. Reserves

(a) The Group

At 1 April 2000 Premium on the issuance of shares Shares issue expenses Capitalisation issue Exchange differences on translation of financial statements of subsidiaries outside Hong Kong Loss for the year At 31 March 2001 At 1 April 2001 Exchange differences on translation of financial statements of subsidiaries outside Hong Kong Loss for the year At 31 March 2002 At 1 April 2002 Waiver of amount due to a shareholder_(note 4(c))_ Exchange differences on translation of financial statements of subsidiaries outside Hong Kong Loss for the year At 31 March 2003	Share premium $’000 – 127,840 (15,389) (79,307) – – 33,144 33,144 – – 33,144 33,144 – – – 33,144	Capital reserve $’000 – – – – – – – – – – – – 1,200 – – 1,200	Exchange reserves $’000 41 – – – (73 ) – (32 ) (32 ) (326) – (358) (358) – (37 ) – (395)	Accumulated losses $’000 7,373 – – – – (28,541) (21,168) (21,168) – (54,153) (75,321) (75,321) – – (56,829) (132,150)	Total $’000 7,414 127,840 (15,389) (79,307) (73 ) (28,541) 11,944 11,944 (326) (54,153) (42,535) (42,535) 1,200 (37 ) (56,829) (98,201)

According to the relevant PRC accounting rules and regulations, the PRC subsidiaries may appropriate part of its profits after tax to general reserve, at the discretion of the board of directors of the subsidiaries. The general reserve can be used to make good losses and to convert into paid-up capital.

No transfer to the general reserve was made by the PRC subsidiaries which sustained losses during

the year.

– 45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) The Company

At 1 April 2000 Premium on the issuance of shares Shares issue expenses Capitalisation issue Loss for the year At 31 March 2001 At 1 April 2001 Loss for the year_(note 8) At 31 March 2002 At 1 April 2002 Waiver of amount due to a shareholder(note 4(c)) Loss for the year(note 8)_ At 31 March 2003	Share premium $’000 – 127,840 (15,389) (79,307) – 33,144 33,144 – 33,144 33,144 – – 33,144	Capital reserve $’000 – – – – – – – – – – 1,200 – 1,200	Accumulated losses $’000 – – – – (2,465) (2,465) (2,465) (4,376) (6,841) (6,841) – (125,135) (131,976)	Total $’000 – 127,840 (15,389) (79,307) (2,465) 30,679 30,679 (4,376) 26,303 26,303 1,200 (125,135) (97,632)

Under the Companies Law (revised) of the Cayman Islands, the funds in the share premium account and capital reserve of the Company are distributable to the shareholders of the Company provided that immediately following the date on which the dividend is proposed to be distributed, the Company will be in a position to pay off its debts as they fall due in the ordinary course of business.

As at 31 March 2003, in the opinion of the Directors of the Company, no reserves of the Company are available for distribution to shareholders (2002: $26,303,000 and 2001: $30,679,000), subject to the restriction stated above.

– 46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

25. Commitments under operating leases

At 31 March 2003, the total future minimum lease payment under non-cancellable operating leases payable are as follows:

Within 1 year After 1 year but within 5 years	2003 $’000 2,046 1,914 3,960	The Group 2002 2001 $’000 $’000 3,194 6,087 344 5,275 3,538 11,362	The Group 2002 2001 $’000 $’000 3,194 6,087 344 5,275 3,538 11,362
			11,362

The Group leases a number of properties under operating leases. The leases typically run for an initial period of one year to two years, with an option to renew the lease when all terms are renegotiated. Lease payments are usually increased annually to reflect market rentals. None of the leases includes contingent rentals.

26. Retirement benefits schemes

Hong Kong

Since 1 December 2000, the Hong Kong subsidiaries are required to join the Mandatory Provident Fund (the “MPF”), managed by an independent approved MPF trustee, under the requirements of the Mandatory Provident Fund Schemes Ordinance.

The Group operates a Mandatory Provident Fund Scheme (“the MPF scheme”) under the Hong Kong Mandatory Provident Fund Schemes Ordinance for employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The MPF scheme is a defined contribution retirement scheme administered by independent trustees. Under the MPF scheme, the employer and its employees are each required to make contributions to the scheme at 5% of the employees’ relevant income, subject to a cap of monthly relevant income of $20,000. Contributions to the scheme vest immediately.

Total retirement benefits costs under the MPF charged to the income statement amounted to $944,000 (2002: $1,464,000 and 2001: $463,000), net of forfeited contributions of $79,000 (2002 and 2001: Nil). Minimum contribution to the MPF is 5% of the employees’ basic salaries.

PRC, other than Hong Kong

The PRC subsidiaries of the Group participate in pension schemes organised by the respective municipal governments whereby they are required to pay annual contributions at the rates ranging from 19% to 25.5% of the standard wages determined by the relevant authorities in the PRC.

Under the above schemes, retirement benefits of existing and retired employees are payable by the relevant PRC scheme administrators and the Group has no further obligations beyond the annual contributions.

The aggregate employers’ contributions by the Group under the PRC pension schemes amounted to $445,000 (2002: $425,000 and 2001: $107,000) during the year.

– 47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Singapore

A subsidiary of the Group participates in the mandatory central provident fund (the “CPF”) in Singapore. This is a defined contribution scheme available to the employees in Singapore and is funded by contributions from the subsidiary and its employees who contribute respectively to the CPF based on fixed percentages of employees’ salaries as defined under the relevant regulations in Singapore. No contributions to the CPF in respect of the year ended 31 March 2003 were made (2002: Nil and 2001: $8,700).

The Group does not operate any other schemes for retirement benefits provided to the Group’s employees.

27. Share option scheme

The Company has a share option scheme which was adopted on 26 August 2000 whereby the Directors of the Company are authorised, at their discretion, to invite full time employees of the Group, including executive Directors of any Company in the Group excluding non-executive Directors and independent non-executive Directors, to take up options to subscribe for shares of the Company. The exercise price of options was determined by the board and was the higher of (i) the closing price of the shares as stated on the Stock Exchange of Hong Kong Limited’s (“Exchange’s”) daily quotations sheet on the date of grant; (ii) the average closing price of the shares as stated on the Exchange’s daily quotations sheets for the five trading days immediately preceding the date of grant; (iii) the nominal value of the shares. Each option gives the holder the right to subscribe for one share.

No option was granted since the inception of the share option scheme.

28. Material related party transactions

During the year, the Group had the following significant transaction with a related party:

Rentals of an office premises in Hong Kong occupied by the Group totalling $856,730 during the year ended 31 March 2003 (2002: $856,730 and 2001: $286,000) were borne by a related company which is controlled by an executive director of the Company.

29. Post balance sheet event

On 8 April 2003, Trouble Free Technology Limited and Brainy Technology Limited, both of them are 100% beneficially owned by Mr To Cho Kei, an Executive Director of the Company, has entered a conditional sale and purchase agreement with Wide Source for the sale of 529,421,914 shares, approximately 51.08% issued share of the Company for an aggregate consideration of $7,300,000, equivalent to approximately $0.0138 per share.

Upon completion of the transaction on 14 May 2003, Wide Source becomes the largest single shareholder of the Company.

– 48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

30. Comparative figures

The presentation and classification of items in the consolidated cash flow statement have been changed due to the adoption of the requirements of SSAP 15 (revised 2001) “Cash flow statements”. As a result, certain advances from banks have been excluded from the definition of cash equivalents, cash flow items from taxation, returns on investments and servicing of finance have been classified into operating, investing and financing activities respectively and a detailed breakdown of cash flows from operating activities has been included on the face of the consolidated cash flow statement. Comparative figures have been reclassified to conform with the current year’s presentation.

31. Ultimate holding company

The Directors consider the ultimate holding company at 31 March 2003 to be Trouble Free Technology Limited, which is incorporated in the BVI.

– 49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. 2003 THIRD QUARTERLY REPORT (UNAUDITED)

The unaudited consolidated results of the Group for the nine months ended 31 December 2003, together with the comparatively figures for the corresponding period in 2002 extracted from the Company’s quarterly report for the nine months ended 31 December 2003 are as follows:

Consolidated Income Statement

Note Turnover 2 Cost of services and merchandise sold Gross Profit Other revenue Research and development costs Selling expenses General and administrative expenses Profit/(Loss) from operations 3 Exceptional item – severance payment Finance cost Loss on disposal of subsidiaries Profit/(Loss) from ordinary activities before taxation Taxation 4 Profit/(Loss) from ordinary activities after taxation Minority interests Profit/(Loss) attributable to the shareholders Earnings/(Loss) per share – basic_(HK cents) _5	Unaudited Three months ended 31 December 2003 2002 HK$’000 HK$’000 2,349 9,995 (1,421) (7,249) 928 2,746 – 8 – (2,127) (11) (291) (566) (4,835) 351 (4,499) – (421) (2) – (285) – 64 (4,920) – – 64 (4,920) – – 64 (4,920) 0.006 (0.475)	Unaudited Nine months ended 31 December 2003 2002 HK$’000 HK$’000 18,301 31,155 (12,195) (21,762) 6,106 9,393 22 26 (623) (6,238) (588) (2,517) (5,414) (19,323) (497) (18,659) – (421) (16) – (193) – (706) (19,080) – – (706) (19,080) – – (706) (19,080) (0.068) (1.841)

– 50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Accounts

1. Basis of presentation

The unaudited consolidated results of the Group (the “results”) have been prepared in accordance with the Statement of Standard Accounting Practice issued by the Hong Kong Society of Accountants, and with the applicable disclosure requirements of Chapter 18 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of the Stock Exchange of Hong Kong Limited and the Hong Kong Companies Ordinance (Chapter 32).

The accounting policies and methods of computation used in the preparation of the results are consistent with those used in the audited annual accounts for the year ended 31 March, 2003.

All significant intra-group transactions and balances have been eliminated in the preparation of the results.

2. Turnover

The principal activities of the Group are the provision of systems development, sale of software and hardware products, provision of professional services and provision of training. Turnover represents income arising from the provision of systems development and consultancy services, provision of IT engineering and technical support services, provision of training courses and the sale of software and hardware products.

An analysis of the turnover by principal activities of the operations of the Group during the reporting periods is as follows:

Principal activities Systems development Sales of software and hardware products Professional services fees Training fees	Unaudited Three months ended 31 December 2003 2002 HK$’000 HK$’000 1,056 4,883 370 1,718 890 2,892 33 502 2,349 9,995	Unaudited Nine months ended 31 December 2003 2002 HK$’000 HK$’000 9,693 18,454 3,102 2,789 4,725 8,638 781 1,274 18,301 31,155	Unaudited Nine months ended 31 December 2003 2002 HK$’000 HK$’000 9,693 18,454 3,102 2,789 4,725 8,638 781 1,274 18,301 31,155
			31,155

– 51 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. Profit/(Loss) from operations

Profit/(Loss) from operations is stated after charging/(crediting):

Crediting Interest income Charging Auditors’ remuneration Depreciation Finance cost – bank interests Amortisation of deferred assets Operating lease Staff costs Exceptional item – severance payment	2003 HK$’000 – – – 10 2 – 110 1,527 –	Unaudited Unaudited Three months ended Nine months ended 31 December 31 December 2002 2003 2002 HK$’000 HK$’000 HK$’000 1 1 18 1 1 18 150 145 450 646 767 1,911 – 16 – – – 48 1,030 1,300 3,231 7,299 12,791 22,038 421 – 421	Unaudited Unaudited Three months ended Nine months ended 31 December 31 December 2002 2003 2002 HK$’000 HK$’000 HK$’000 1 1 18 1 1 18 150 145 450 646 767 1,911 – 16 – – – 48 1,030 1,300 3,231 7,299 12,791 22,038 421 – 421
			18
			450 1,911 – 48 3,231 22,038 421

4. Taxation

No provision for Hong Kong profits tax has been made for the nine months ended 31 December, 2003 and 2002 as the Group sustained losses for taxation purpose during the periods.

Subsidiaries operating in the PRC are exempted from PRC income tax for two years commencing from the first profit making year and are entitled to a 50% relief from PRC income tax for the following three years, after which the profits are subject to PRC income tax at the standard rate of 33%. These subsidiaries sustained losses since incorporation and the two-year tax exemption period has not commenced.

– 52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. Earnings/(Loss) per share

The calculation of basic earnings per share for the three months and basic loss per share for the nine months ended 31 December, 2003 were based on the profit attributable to the shareholders of approximately of HK$64,000 (2002: loss of HK$4,920,000) and the loss attributable to the shareholders of approximately of HK$706,000 (2002: loss of HK$19,080,000) respectively divided by the weighted average number of 1,036,375,000 (2002: 1,036,375,000) shares in issue during the year.

There were no potential dilutive ordinary shares in issue for the three months and nine months ended 31 December, 2003 and 2002.

3. INDEBTEDNESS

Apart from intra-group liabilities and normal trade payables, the Group did not have any loan capital issued or agreed to be issued, bank overdrafts, loans, debt securities or other similar indebtedness, liabilities under acceptance (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, finance lease or hire purchase commitments, guarantees or other material contingent liabilities outstanding at the close of business on 29 February 2004.

The Directors have confirmed that there had been no material change in the indebtedness and contingent liabilities of the Group since 31 March 2003 up to the Latest Practicable Date.

– 53 –

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

4. PRO FORMA STATEMENT OF UNAUDITED ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

	The following pro forma statement of unaudited adjusted consolidated net tangible assets of	The following pro forma statement of unaudited adjusted consolidated net tangible assets of
the	Group is based on the audited consolidated net tangible assets of the Group as at 31 March 2003
and	adjusted as follows:
		HK$’000
	Audited consolidated net tangible assets of the Group as at 31 March 2003	5,437
	_Less:_Reserve movement during the period from 1 April 2003 to
	31 December 2003	1,081
	Unaudited adjusted consolidated net tangible assets of the Group
	as at 31 December 2003	4,356
	Add:_Estimated net proceeds from the placing of 6,000,000 shares(Note 1)_	2,500
	Unaudited adjusted consolidated net tangible assets of
	the Group prior to the issue of the Consideration Shares	6,856
	Add: Issue of the Consideration Shares	9,080
	Negative goodwill arising from acquisition of Treasure Wise_(Note 2)_	457
	Pro forma unaudited adjusted consolidated net tangible assets of the Group
	immediately following the issue of the Consideration Shares	16,393
	Unaudited adjusted consolidated net tangible assets of the Group per
	Share prior to the issue of the Consideration Shares
	(based on 47,455,000 Shares in issue as at the Latest Practicable Date)	HK$0.14
	Pro forma unaudited adjusted consolidated net tangible assets of the Group
	per Share immediately after the issue of the Consideration Shares
	(based on 47,455,000 Shares in issue as at the Latest Practicable Date,
	plus 18,160,000 Consideration Shares to be issued for the Acquisition)	HK$0.25

Notes:

1. details of the placing were set out in the circular of the Company dated 5 March 2004 and was completed on 17 March 2004

2. represents the excess of the Group’s share of the fair value of the identifiable assets and liabilities over the cost of the acquisition

– 54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. WORKING CAPITAL

The Directors are of the opinion that, based on the internal resources of the Group, the Group has sufficient working capital for its present requirement.

6. DIVIDENDS

The amount of any dividends to be declared in the future will depend on, among other things, the Company’s results of operations, cash flows and financial conditions, operating and capital requirements. Dividends for the Shares, if any, will be paid in Hong Kong dollars.

7. BUSINESS TREND AND PROSPECTS

The Board will continue to simplify the organization of the Group, tightly manage expenses, develop new products and services, dispose of unprofitable businesses and execute strategic acquisitions in order to enhance the profitability of the Group. The Board remains cautiously optimistic about the prospects of the Group.

8. MATERIAL CHANGE

Save as disclosed in this circular, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 March 2003, being the date to which the latest published audited financial statements of the Group were made up.

– 55 –

APPENDIX II ACCOUNTANTS’ REPORT ON TREASURE WISE

The following is the text of a report, prepared for the purpose of inclusion in this circular, received from the reporting accountants of Tai Shing International (Holdings) Limited, Charles Chan, Ip & Fung CPA Ltd., Certified Public Accountants, Hong Kong.

Charles Chan, Ip & Fung CPA Ltd.

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

20 April 2004

The Directors

Tai Shing International (Holdings) Limited

Dear Sirs

We set out below our report on the financial information relating to Treasure Wise Enterprises Limited (the “Company”) for the period from 2 January 2004 (date of incorporation) to 31 March 2004 (the “Relevant Period”) for inclusion in the circular of Tai Shing International (Holdings) Limited (“Tai Shing”) dated 20 April 2004 (the “Circular”) in connection with the acquisition of 100% interest in the Company by Tai Shing.

The Company was incorporated in the British Virgin Islands under the International Business Companies Act on 2 January 2004. The Company is engaged in investment holding since its incorporation.

We have acted as auditors of the Company since 2 January 2004 (date of incorporation) to 31 March 2004. For the purpose of this report, we have performed an independent audit of the financial statements of the Company for the Relevant Period in accordance with the Statements of Auditing Standards issued by the Hong Kong Society of Accountants and carried out such additional procedures as are necessary in accordance with the Auditing Guideline “Prospectuses and the Reporting Accountant” issued by the Hong Kong Society of Accountants.

The financial information as set out in Sections A to C (the “Financial Information”) has been prepared based on the audited statements of the Company. The directors of the Company are responsible for preparing the respective financial statements, which give a true and fair view. In preparing these financial statements, it is fundamental that appropriate accounting policies are selected and applied consistently.

– 56 –

APPENDIX II ACCOUNTANTS’ REPORT ON TREASURE WISE

The directors of the Company are responsible for the Financial Information. It is our responsibility to form an independent opinion on the Financial Information.

In our opinion, on the basis of preparation set out in note 1 (principal accounting policies) of Section B below the Financial Information, for the purpose of this report, gives a true and fair view of the results of the Company for the Relevant Period and of the state of affairs of the Company as at 31 March 2004.

A. BALANCE SHEET

Note of Section B ASSET Cash in hand CAPITAL Issued capital 4	HK$ 7,800
	7,800

B. NOTES TO THE FINANCIAL STATEMENTS

1. Principal accounting policies

The financial statements have been prepared in accordance with generally accepted accounting principles in Hong Kong and comply with Statements of Standard Accounting Practice issued by the Hong Kong Society of Accountants and the disclosure requirements of the Hong Kong Companies Ordinance. The financial statements are prepared under the historical cost convention. A summary of the principal accounting policies adopted by the Company is set out below.

a) Provisions and Contingent Liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Company has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

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ACCOUNTANTS’ REPORT ON TREASURE WISE

APPENDIX II

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

b) Deferred Taxation

Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Taxation rates enacted or substantively enacted by the balance sheet date are used to determine deferred taxation.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

c) Translation of Foreign Currencies

Transactions in foreign currencies during the period are translated at exchange rates ruling at the transaction dates. Monetary assets and liabilities expressed in foreign currencies are translated at rates of exchange ruling at the balance sheet date. Exchange differences arising in these cases are dealt with in the income statement.

2. Turnover

The Company has been dormant and has no turnover for the Relevant Period.

3. Taxation

No provision for Hong Kong profits tax has been made in the financial statements as the Company has no assessable profits for the Relevant Period.

– 58 –

APPENDIX II ACCOUNTANTS’ REPORT ON TREASURE WISE

4. Issued capital

Authorised: 50,000 shares of US$1 each Issued and fully paid: 1,000 shares of US$1 each	HK$ 390,000
	7,800

5. Capital commitments

The Company has no capital commitments as at 31 March 2004.

6. Contingent liabilities

The Company has no contingent liabilities as at 31 March 2004.

7. Subsequent events

The Company has no material events subsequent to 31 March to be disclosed.

C. SUBSEQUENT ACCOUNTS

No audited financial statements have been prepared for the Company in respect of any period subsequent to 31 March 2004.

Yours faithfully,

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

Hong Kong

Kwok Cheuk Yuen, Nickson

Practising Certificate Number: P02412

– 59 –

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquires, that to the best of their knowledge and belief, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular the omission of which would make any statement in this circular misleading.

2. DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS IN THE COMPANY

(a) Interest in shares of the Company

As at the Latest Practicable Date, the relevant interests or short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571, the Laws of Hong Kong) (“SFO”)) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they have taken or deemed to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which are required, pursuant to Rules 5.46 to 5.68 of the GEM Listing Rules relating to securities transactions by Directors, to be notified to the Company and the Stock Exchange, were as follows:–

			Approximate
		Number of	percentage of
Name of Director	Capacity	Shares interested	shareholding
Mr. Luk Yat Hung	Interest of a controlled	21,542,476	45.40%
	corporation_(Note)_

Note: Mr. Luk Yat Hung will be taken to be interested in 21,542,476 Shares as a result of him being beneficially interested in 50% of the issued share capital of Wide Source which in turn holds 21,542,476 Shares.

(b) Service contract

None of the Directors has or is proposed to have a service contract with any member of the Group (other than contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

– 60 –

GENERAL INFORMATION

APPENDIX III

(c) Other interests of the Directors

A Director is not required to hold any share by way of qualification.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executives of the Company or their respective associates had any interests or short positions in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they have taken or deemed to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which are required, pursuant to Rules 5.46 to 5.68 of the GEM Listing Rules relating to securities transactions by Directors, to be notified to the Company and the Stock Exchange.

3. SUBSTANTIAL SHAREHOLDERS

• (a) As at the Latest Practicable Date, so far as is known to the Directors, the following persons (other than a Director or chief executive of the Company) had an interest or a short position in the shares and underlying shares in the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:

			Approximate
		Number of	percentage of
Name of shareholder	Note	Shares interested	shareholding
Wide Source	1	21,542,476	45.40%
Mr. Ma Bing	2	21,542,476	45.40%
Suez Asia Holdings Pte. Ltd.	3	3,412,000	7.19%

Notes:

1. The Shares held by Wide Source also represent the corporate interest of Mr. Luk Yat Hung in the Company, details of which are set out in the sub-section headed “Interest in shares of the Company” under the section headed of “Directors’ and Chief Executive’s Interests in the Company” above.

2. Mr. Ma Bing will be taken to be interested in 21,542,476 Shares as a result of him being beneficially interested in 50% of the issued share capital of Wide Source which in turn holds 21,542,476 Shares.

3. Suez Asia Holdings Pte. Ltd. is a private equity investor in Asia holding the shares of the Company in trust.

– 61 –

GENERAL INFORMATION

APPENDIX III

Save as disclosed above, as at the Latest Practicable Date, so far as is known to the Directors, there is no other person who has an interest or a short position in the shares and underlying shares (including interests in options, if any) of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

4. DIRECTORS’ INTERESTS IN CONTRACTS AND ASSETS

Save as disclosed in this circular, no contract or arrangement of significance in relation to the Group’s business to which the Company or any of its subsidiaries was a party and in which any of the Directors had a material interest, whether directly or indirectly, subsisted as at the Latest Practicable Date.

Save as disclosed in this circular, none of the Directors is interested in any assets which have been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 March 2003, the date to which the latest published audited accounts of the Company were made up.

5. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors, the substantial shareholder or the management shareholders of the Company (as defined in the GEM Listing Rules) or their respective associates had any interest in a business which competes or is likely to compete, directly or indirectly, with the businesses of the Group or had any other conflict of interest with the Group.

6. EXPERT

(a) Qualifications

The following is the qualification of the expert who has given its opinion(s) which is (are) contained in this circular:

Names	Qualifications
Charles Chan, Ip & Fung CPA Limited	Certified Public Accountants

– 62 –

GENERAL INFORMATION

APPENDIX III

(b) Disclosure of interest

As at the Latest Practicable Date, the expert referred to in this paragraph has no shareholding interest in any member of the Group or any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

The expert referred to in this paragraph has, since 31 March 2003, being the date to which the latest published audited consolidated financial statements of the Group have been made up, no direct or indirect interest in any assets acquired or disposed of by or leased or proposed to be acquired or disposed of by or leased to any member of the Group.

7. CONSENT

The expert named in the paragraph headed “Expert” in this circular has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its report(s) and/or the reference(s) to its name in the form and context in which they are included in this circular.

8. FINANCIAL ADVISER’S INTERESTS

None of VC CEF Capital Limited, its respective directors or associates has any interests in any securities of the Company as at the Latest Practicable Date.

9. LITIGATION

As at the Latest Practicable Date, none of the members of the Group is engaged in any litigation or arbitration or claim of material importance and there is no litigation or arbitration or claim of material importance which is known to the Directors to be pending or threatened against any member of the Group.

– 63 –

GENERAL INFORMATION

APPENDIX III

10. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by the Company within the two years preceding the date of this circular:

• i. the sale and purchase agreement dated 8 September 2003 in relation to the acquisition of 40% interest in MN - ¡¤ # " Û R € ()*+ , details of which are disclosed in the circular of the Company dated 30 September 2003;

• ii. the placing agreement dated 13 February 2004 between the Company and VC CEF Brokerage Limited (as placing agent) in relation to the placing of 6,000,000 Shares at HK$0.48 per Share; and

• iii. the S&P Deed.

11. GENERAL

• i. The registered office of the Company is located at Century Yard, Cricket Square, Hutchins Drive, P.O. Box 2681GT, George Town, Grand Cayman, British West Indies. As at the date hereof, the head office and principal place of business of the Company is situated at 24/F, Prosperous Commercial Building, 54-58 Jardine’s Bazaar, Causeway Bay, Hong Kong.

• ii. The Compliance Officer and the Qualified Accountant of the Company is Mr. Luk Yat Hung. He is a member of the Chartered Association of Certified Accountants of the United Kingdom and a member of the Hong Kong Society of Accountants with a master degree in business administration with Oklahoma City University, the United States of America. Mr. Luk has over 18 years of working experience with a number of international conglomerates performing functions of chief financial officer.

• iii. The Company has established an audit committee on 18 May 2000 with written terms of reference in compliance with the then Rules 5.23 and 5.24 (now Rules 5.28 and 5.29) of the GEM Listing Rules. The primary duties of the audit committee are to review and supervise the financial reporting process and internal control system of the Group. The audit committee comprises two independent non-executive Directors, namely Mr. Chung Shui Ming, Timpson and Professor Ip Ho Shing, Horace, further details of whom are set out below:

– 64 –

GENERAL INFORMATION

APPENDIX III

Mr. Chung Shui Ming, Timpson, GBS, JP, aged 51, graduated from the University of Hong Kong with a Bachelor of Science degree and holds a Master of Business Administration degree with the Chinese University of Hong Kong. Mr. Chung is a Fellow member of the Hong Kong Society of Accountants and a member of the Supervisory Board of Hong Kong Housing Society and a member of the National Committee of the 10th Chinese People’s Political Consultative Conference.

Professor Ip Ho Shing, Horace, aged 46, graduated from the University of London with a Bachelor of Science degree in Applied Physics and a Doctorate degree in Image Processing. He is the Chair Professor of the Department of Computer Science and a director of the Centre for Innovative Applications of Internet and Multimedia Technologies - AIMtech Centre of the City University of Hong Kong.

• iv. As at the Latest Practicable Date, the authorized share capital of the Company is HK$200,000,000 divided into 4,000,000,000 Shares and the issued share capital of the Company is HK$2,372,750 divided into 47,455,000 Shares.

• v. Dealings in the shares of the Company may be settled through CCASS and operated by HKSCC, and investors should seek the advice of their stockbroker or other professional adviser for details of those settlement arrangement and how such arrangement will affect their rights and interests.

• vi. The company secretary of the Company is Mr. Young Wai Ching, a Practicing member of the Hong Kong Society of Accountants and a Member of Chartered Association of Certified Accountants of the United Kingdom.

• vii. The Company’s Hong Kong branch share registrar is Computershare Hong Kong Investor Services Limited at Shops 1901-1905, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

• viii. The English text of this circular and the accompanying form of proxy shall prevail over the Chinese text in the case of any inconsistency.

– 65 –

GENERAL INFORMATION

APPENDIX III

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the office of the legal advisor to the Company, P C Woo & Co. at 12/F., Prince’s Building, 10 Chater Road, Hong Kong from the date of this circular up to and including 7 May 2004:

• (i) the memorandum and articles of association of the Company;

• (ii) the annual reports of the Company for the two financial years ended 31 March 2002 and 31 March 2003 and the third quarterly report of the Company for the period ended 31 December 2003;

• (iii) the audited financial information of Treasure Wise for the period from 2 January 2004 to 31 March 2004;

• (iv) the composite document of the Company dated 16 May 2003;

• (v) the circulars of the Company dated 30 September 2003 and 5 March 2004;

• (vi) the material contracts referred to under the paragraph headed “Material Contracts” in this appendix; and

• (vii) the written consent of Charles Chan, Ip & Fung CPA Limited referred to under the paragraph headed “Consent” in this appendix.

– 66 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

TAI SHING INTERNATIONAL (HOLDINGS) LIMITED 9 : ; <= > ? @- A B C[*]

(incorporated in the Cayman Islands with limited liability)

www.taishingintl.com

Stock code : 8103

NOTICE IS HEREBY GIVEN (the “ Notice ”) that an extraordinary general meeting (the “ Meeting ”) of Tai Shing International (Holdings) Limited (the “ Company ”) will be held at Yat Tung Heen Chinese Restaurant, 2/F, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong on Friday, 7 May 2004 at 2:45 p.m. for the purpose of considering and, if thought fit, passing (with or without amendments) the following as, an ordinary resolution of the Company:–

ORDINARY RESOLUTION

“ THAT the acquisition of the entire issued share capital of Treasure Wise Enterprises Limited from Ms. Li Lu Yuan (the “ Vendor ”) at a consideration of HK$9,080,000 through the issue and allotment by the Company of 18,160,000 of its shares of nominal value HK$0.05 each (each a “ Share ”, altogether the “ Consideration Shares ”) at the issue price of HK$0.50 per Share to the Vendor or her nominees pursuant to the conditional sale and purchase deed dated 23rd March, 2004 and entered into between the Company and the Vendor (the “ Deed ”) be and is hereby approved, confirmed and ratified and that any director of the Company (a “ Director ”) be and is hereby authorized generally to do or execute for and on behalf of the Company all such acts, deeds and things as he may deem in his absolute discretion, necessary, desirable or appropriate to effect or carry into effect any of the foregoing, including but not limited to the issue and allotment by the Company of 18,160,000 Shares as Consideration Shares at the issue price of HK$0.50 per Share to the Vendor or her nominees pursuant to the Deed and the terms of the Deed and the transactions contemplated therein.”

By order of the board of Directors Tai Shing International (Holdings) Limited Young Wai Ching

Company Secretary

Hong Kong, 20 April, 2004

* For identification purpose only

– 67 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

Registered Office:

Century Yard, Cricket Square Hutchins Drive P. O. Box 2681GT George Town Grand Cayman British West Indies

Head Office and principal place of business:

24/F., Prosperous Commercial Building 54 - 58 Jardine’s Bazaar Causeway Bay Hong Kong

Notes:

1. Any member of the Company entitled to attend and vote at the Meeting may appoint one or more than one proxy to attend and to vote in his stead. A proxy need not be a member of the Company.

2. Where there are joint registered holders of any Share, any one of such persons may vote at the Meeting, either personally or by proxy, in respect of such Share as if he were solely entitled thereto; but if more than one of such joint holders be present at the meeting personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof.

3. In order to be valid, the form of proxy duly completed and signed in accordance with the instructions printed thereon together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof must be delivered to the office of the branch share registrar of the Company, Computershare Hong Kong Investor Services Limited at Rooms 1901-1905, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time appointed for holding the Meeting or any adjournment thereof.

4. Whether or not you propose to attend the Meeting in person, you are strongly urged to complete and return the form of proxy in accordance with the instructions printed thereon. Completion and return of the form of proxy will not preclude you from attending the Meeting and voting in person if you so wish. In the event that you attend the Meeting after having lodged the form of proxy, it will be deemed to have been revoked.

– 68 –