Honbridge Holdings Limited — Proxy Solicitation & Information Statement 2004

May 14, 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

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JESSICA PUBLICATIONS LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8137)

MAJOR TRANSACTION

The acquisition of 55% equity interests in

Shanghai South China & Boyang Culture Media Co., Ltd.

This circular will remain on the “Latest Company Announcements” page of the GEM website at www.hkgem.com for at least seven days from the date of its publication and on the website of Jessica Publications Limited at www.jessicahk.com.

13th May, 2004

CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET (“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 profitablility 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. Propsective 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 professonal 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. 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.

— i —

CONTENTS

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|Page|
|DEFINITIONS|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|1|
|LETTER|FROM|THE|BOARD|
|A)|Introduction|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|3|
|B)|The|Option|Agreement|
|1.|The|Option|Agreement|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|4|
|2.|Major|terms|of|the|Option|Agreement|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|4|
|3.|Consideration|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|5|
|C)|Loan|Agreement|
|1.|Loan|Agreement|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|5|
|2.|Major|Terms|of|the|Loan|Agreement|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|5|
|D)|Information|on|BCM|
|1.|Business|scope|of|BCM|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|5|
|2.|Paralife|(“|”)|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|6|
|3.|8|Weekly|(“|”)|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|6|
|4.|Carplus|CN|(“|”)|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|6|
|5.|Management|of|BCM|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|6|
|E)|Information|about|Boyang|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|6|
|F)|Reasons|for|entering|into|the|Acquisition|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|7|
|G)|Financial|effects|of|the|Acquisition|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|7|
|H)|Financial|and|trading|propects|of|the|Group|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|7|
|I)|General|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|7|
|J)|Additional|Information|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|8|
|APPENDIX|I|—|FINANCIAL|INFORMATION|OF|THE|JESSICA|GROUP|.|.|.|.|.|.|.|.|9|
|APPENDIX|II|—|FINANCIAL|INFORMATION|OF|THE|ENLARGED|JESSICA|
|GROUP|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|28|
|APPENDIX|III|—|ACCOUNTANTS’|REPORT|ON|BCM|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|32|
|APPENDIX|IV|—|GENERAL|INFORMATION|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|.|41|

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— ii —

DEFINITIONS

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

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||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|“Acquisition”|means|the|acquisition|by|Grandpress|of|55%|of|equity|interest|
|in|BCM.|
|“BBC”|means|(“Shanghai|South|China|&|
|Boyang|Business|Consultation|Co.,|Ltd”),|a|sino-foreign|joint|
|venture|organized|and|existing|under|the|laws|of|the|PRC.|
|“BCM”|means|(“Shanghai|South|China|&|
|Boyang|Culture|Media|Co.,|Ltd.”),|a|domestic|PRC|enterprise|
|organized|and|existing|under|the|laws|of|the|PRC.|
|“Board”|means|the|board|of|Directors|of|the|Company.|
|“Boyang”|means|Shanghai|Boyang|Advertising|Limited|
|(|),|a|company|organized|and|existing|
|under|the|laws|of|the|PRC,|which|is|not|a|connected|person|to|
|the|Company|(as|defined|in|the|GEM|Listing|Rules).|
|“Chongqing|Co.”|means|,|a|domestic|PRC|company|
|whose|equity|interest|is|held|as|to|50%|by|,|as|to|30%|
|by|and|as|to|20%|by|,|all|of|them|are|not|
|connected|persons|to|the|Company|(as|defined|in|the|GEM|
|Listing|Rules).|
|“Company”|means|Jessica|Publications|Limited,|an|exempted|limited|
|liability|company|incorporated|in|the|Cayman|Islands,|whose|
|shares|are|listed|on|GEM.|
|“Director(s)”|means|the|director(s)|of|the|Company.|
|“EGM”|means|extraordinary|general|meeting|of|the|Company.|
|“Enlarged|Jessica|Group”|means|the|Jessica|Group,|together|with|BCM.|
|“GEM”|means|Growth|Enterprise|Market|of|the|Stock|Exchange.|
|“GEM|Listing|Rules”|means|the|Rules|Governing|the|Listing|of|Securities|on|the|
|GEM.|
|“Grandpress”|means|Grandpress|Limited,|one|of|the|wholly|owned|
|subsidiaries|of|the|Company|and|was|incorporated|in|Hong|
|Kong|whose|registered|office|is|at|28th|Floor,|Bank|of|China|
|Tower,|1|Garden|Road,|Central,|Hong|Kong.|
|“HK$”|means|the|lawful|currency|of|the|Hong|Kong.|

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— 1 —

DEFINITIONS

“Jessica Group”	means the Company and its subsidiaries.
“Jessica Share(s)”	means ordinary share(s) of HK$0.001 each in the share capital
	of the Company.
“Latest Practicable Date”	means 10th May, 2004, being the latest practicable date prior
	to the printing of this circular for ascertaining certain
	information for inclusion in this circular.
“Loan Agreement”	means the loan agreement dated 30th March, 2004 between
	BBC and BCM whereby BBC agreed to grant a loan of
	HK$5.1 million to BCM.
“Option Agreement”	means the agreement entered into between Grandpress and
	Chongqing Co., under which Chongqing Co. has agreed to
	grant an option to Grandpress so that Grandpress is entitled,
	at any time during the initial term of 10 years of the Option
	Agreement, to acquire the 55% equity interests held by
	Chongqing Co. in BCM at nil consideration. Chongqing Co.
	has pledged all its 55% interests in BCM to Grandpress,
	which serves to secure its obligations under the option.
	Grandpress also agreed to grant an interest-free loan (“Loan
	1”) of RMB550,000 (equivalent to approximately
	HK$518,868) to Chongqing Co.. Upon exercise of the said
	option, Chongqing Co. will not be liable to repay the Loan 1.
“PRC”	means the People’s Republic of China.
“RMB”	means Renminbi the lawful currency of the PRC.
“SFO”	means the Securities and Futures Ordinance (chapter 571 of
	the laws of Hong Kong).
“Shareholder(s)”	means holders of the Jessica Shares.
“South China Group”	means South China Holdings Limited and its subsidiaries.
“Stock Exchange”	means The Stock Exchange of Hong Kong Limited.

Unless otherwise specifically provided in this circular, for the purpose of illustration only, the following exchange rate is used throughout this circular:

HK$1 = RMB1.06

— 2 —

LETTER FROM THE BOARD

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JESSICA PUBLICATIONS LIMITED

(Incorporated in the Cayman Islands with limited liability)

Directors: Registered Office Mr NG Hung Sang, Robert (Chairman) The offices of M&C Corporate Ms NG, Jessica Yuk Mui (Chief Executive Officer) Services Limited Ms FOO Kit Tak P.O. Box 309 MS CHEUNG Mei Yu George Town Ms PONG Oi Lan, Scarlett Grand Cayman Mr SO George Siu Ming Cayman Islands British West Indies

* independent non-executive director

Head office and principal place of business Unit C, 3rd Floor Wah Shing Centre 5 Fung Yip Street Chai Wan Hong Kong

13th May, 2004

To the Shareholders

Dear Sir or Madam:

MAJOR TRANSACTION The acquisition of 55% equity interests in Shanghai South China & Boyang Culture Media Co., Ltd.

A) INTRODUCTION

It was announced on 31st March, 2004 that Grandpress, a wholly-owned subsidiary of the Company, has entered into a legally binding Option Agreement with Chongqing Co., an independent third party which is not a connected person to the Company (as defined in the GEM Listing Rules). Pursuant to the Option Agreement, Grandpress is entitled, at any time during the initial term of 10 years of the Option Agreement, to acquire the 55% equity interests held by Chongqing Co. in BCM, a domestic PRC entity. Upon signing of the Option Agreement, BBC agreed to grant an interest-free loan of HK$5.1 million to BCM for the purpose of repayment of shareholder loans previously granted by Boyang. The details of the other terms of the Option Agreement and the Loan Agreement are set out in sections B and C of this letter respectively.

— 3 —

LETTER FROM THE BOARD

As it may take many months to obtain the necessary approvals from the PRC Government for converting a PRC domestic entity to a sino-foreign joint venture should Grandpress directly acquire the 55% equity interest owned by Chongqing Co. in BCM, the Directors consider that through the Option Agreement which, enables Grandpress to acquire the 55% interest in BCM whilst allows BCM to remain a PRC domestic entity, is more efficient so far as the Shareholders is concerned.

The purpose of this circular is to provide the Shareholders with further information relating to the Option Agreement and the Loan Agreement and any transactions contemplated thereunder. This circular also contains information in compliance with the GEM Listing Rules.

B) THE OPTION AGREEMENT

1. The Option Agreement

Date : 30th March, 2004 Parties : (1) Grandpress (2) Chongqing Co.

2. Major terms of the Option Agreement

Pursuant to the Option Agreement, Chongqing Co. has agreed to grant an option to Grandpress so that Grandpress is entitled, at any time during the initial term of 10 years of the Option Agreement, to acquire the 55% equity interests held by Chongqing Co. in BCM. After expiry of the initial term, both parties are entitled to renew the term of the Option Agreement in writing.

Chongqing Co. has pledged all its 55% interests in BCM to Grandpress, which serves to secure its obligations under the option. Grandpress also agreed to grant an interest-free loan of RMB550,000 (“Loan 1”) (equivalent to approximately HK$518,868) to Chongqing Co.. Upon exercise of the said option, Chongqing Co. will not be liable to repay the Loan 1.

Upon entering into the Option Agreement, Chongqing Co. is regarded as a nominee for Grandpress to hold the 55% equity interest in BCM. As a result, Chongqing Co. remains as a registered shareholder of BCM holding 55% interest (the “Interest”) thereof till the option is exercised, however, the Interest together with all the rights and entitlements attached to the Interest are considered as having been transferred to Grandpress upon signing of the Option Agreement according to the PRC legal advice, and such Interest is secured by having Chongqing Co. pledged all its registered 55% interests in BCM to Grandpress. Therefore, in substance, Grandpress can be regarded as the beneficial shareholder of the Interest from the date of signing of the Option Agreement.

The PRC legal advisers to the Jessica Group have confirmed that there is no legal restrictions contemplated under the prevailing PRC laws in respect of the foreign investment in the BCM. The Company has also sought PRC legal advice on the legality of the transactions contemplated under the Option Agreement and the Loan Agreement and has received a legal opinion that the transactions contemplated under such agreements will not violate the laws of the PRC.

— 4 —

LETTER FROM THE BOARD

The Company has also discussed with the auditors and they take the preliminary view that the Company can consolidate BCM’s financial results as a subsidiary if Grandpress controls BCM’s board of directors and its appropriation of funds. The Company considers that since Grandpress will control BCM’s board of directors, both conditions can be satisfied after completion.

3. Consideration

The consideration for the Option Agreement, being the Loan 1 in the amount of RMB550,000 (equivalent to approximately HK$518,868), of which Grandpress has already paid a deposit of RMB478,060 (equivalent to approximately HK$451,000) to Chongqing Co. and the remaining consideration is payable within 7 days after signing of the Option Agreement by cash. The consideration was arrived at after arm’s length negotiations between the parties with reference to the registered capital of BCM of RMB1 million. Upon exercise of the said option, Chongqing Co. will not be liable to repay the Loan 1.

C) LOAN AGREEMENT

1. Loan Agreement

Date : 30th March, 2004 Parties : (1) BBC as the lender (2) BCM as the borrower

2. Major terms of the Loan Agreement

Upon signing of the Option Agreement, BBC agrees to grant an interest-free loan of HK$5.1 million to BCM. The purpose of the loan is to reduce the outstanding shareholder loans previously granted by Boyang.

D) INFORMATION OF BCM

1. Business scope of BCM

As at the date of the Option Agreement, the equity interest of BCM is held as to 55% by Chongqing Co. and as to 45% by Boyang with a registered capital of RMB1 million. Based on the BCM’s unaudited management accounts as at 29th February, 2004, BCM recorded net liabilities of approximately RMB5.1 million. BCM is a PRC domestic company established in December 2003, which is carrying on the businesses of distribution and selling of all advertising space in the Chinese language publications that incorporate contents from the three titles namely Paralife (“ ”), 8 Weekly (“ ”) and Carplus CN(“ ”), weekly magazines in the PRC.

— 5 —

LETTER FROM THE BOARD

2. Paralife (“ ”)

Paralife has two localized editions, one circulated in Shanghai (“Paralife Shanghai”), and the other in Beijing (“Paralife Beijing”).

Paralife Shanghai is currently the second largest lifestyle weekly in Shanghai, with an aggressive cover-price strategy. It is a unique in terms of quality and editorial. The magazine is targeted at affluent readers between the ages of 25-35 yuppies seeking for quality lifestyle and trends. This magazine is expected to be a key driver of the Jessica Group’s China business.

Paralife Beijing was launched in September 2003, as a spin off from the success of Paralife Shanghai. Although competition is more severe in the local Beijing market, the magazine has already captured a sizeable share of the market.

3. 8 Weekly” (“ ”)

The first issue of 8 Weekly was launched in January 2004, and is an entertainment and lifestyle weekly with news on Hong Kong and mainland celebrities. The magazine has swept the Shanghai local market, with the first issue sold out in a matter of days and demand of the magazine continues to grow strongly. This magazine is expected to be another key driver of the Jessica Group’s China business.

4. Carplus CN (“ ”)

Carplus CN was launched in December 2003, focusing on the booming automobile market in Beijing. The magazine is distributed predominantly in Beijing and is a leading car weekly magazine in the capital city.

5. Management of BCM

BCM’s board of directors consists of five members. Pursuant to the Option Agreement, Chongqing Co. shall procure appointment of three members nominated by Grandpress and the other two members shall be appointed by Boyang.

E) INFORMATION ABOUT BOYANG

Boyang is a company incorporated in the PRC and is engaged in the businesses of advertising agent, contents provider for various print media, publication and distribution of magazines in the PRC. Boyang, who is not a connected person to the Company (as defined in the GEM Listing Rules), is a shareholder of BBC which is owned as to 45% by Boyang and as to 55% by Grandpress.

— 6 —

LETTER FROM THE BOARD

F) REASONS FOR ENTERING INTO THE ACQUISITION

The Directors believe that Boyang is a promising player in the PRC print media businesses. With the acquisition of 55% interests in BCM, the Company would further expand in the Chinese language print media business. The Directors consider that the Acquisition will help the Company to penetrate the PRC market and provide synergies to its existing print media businesses (such as content provision, content syndication, content aggregation, sales and distribution) including, “ Jessica” magazine, “ Lisa” magazine and “Jessicacode” magazine.

Although, the Acquisition was not specifically disclosed in the Company’s prospectus dated 31st December, 2001, the Directors believe that the Acquisition is in line with the Company’s statement of business objectives of expanding into other Chinese-speaking markets by providing contents to suitable PRC publishing partners.

G) FINANCIAL EFFECTS OF THE ACQUISITION

The net tangible asset value of the Jessica Group based on its audited balance sheet as at 31st December, 2003 was approximately HK$3,408,000 or approximately HK0.67 cents per share. However, after completion of the Acquisition, the Jessica Group would record a net tangible liability of approximately HK$2,498,000 or approximately HK0.49 cents per share according to the unaudited proforma statement of adjusted combined net tangible liabilities of the Enlarged Jessica Group set out in Appendix II. Although, the Enlarged Jessica Group would record a net tangible liability after completion of the Acquisition, the Directors believe that the Acquisition will not adversely affect the earnings of the Jessica Group and are optimistic that BCM will provide a positive contribution to the Jessica Group in the near future.

H) FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The Directors are positive towards the rest of 2004. Advertising revenue bases continue to grow aggressively. The Jessica Group will continue to expand its advertising and circulation revenues, locating corporate partners to further expand its businesses in Hong Kong. It will remain the focus of the Jessica Group to strengthen its brand names in Hong Kong, through further partnerships, events and promotional efforts. The Jessica Group will continue to look closely at its cost efficiencies as well as building up its human resources pool for further expansion locally and in the PRC. The Jessica Group is now also in the process of preparing for the launch of JESSICA China edition in the early second half of 2004. The Jessica Group will continue to aggressively grow our readership base and build the brands of our magazines in the PRC.

I) GENERAL

The Directors consider that the Option Agreement and the Loan Agreement are entered into on normal commercial terms in the ordinary and usual course of business of Jessica Group and that the terms of the Option Agreement and the Loan Agreement are fair and reasonable and in the interests of the Jessica Group so far as the interests of the shareholders of the Company are concerned.

— 7 —

LETTER FROM THE BOARD

Based on BCM’s unaudited management accounts as at 29th February, 2004, BCM recorded a net tangible liability of approximately RMB5.1 million (equivalent to approximately HK$4.8 million). Upon signing the Option Agreement, BBC agreed to grant an interest free loan (“Loan 2”) of HK$5.1 million to BCM to reduce the outstanding shareholder loans previously granted by Boyang, which results the commitment of Grandpress, being the Loan 2 of HK$5.1 million plus the Loan 1 of RMB550,000 (equivalent to approximately HK$518,868), represents approximately 165% of the net tangible assets value of the Jessica Group as shown in its audited consolidated financial statements as at 31st December, 2003. Accordingly, the Option Agreement constitutes a major transaction of the Company under the GEM Listing Rules.

On 30th March, 2004, the Company has received written approval on the entering into the Option Agreement and the Loan Agreement from a closely allied group of Shareholders, namely Mr. Ng Hung Sang, Robert, Parkfield Holdings Limited, Fung Shing Group Limited, Ronastar Investments Limited, Earntrade Investments Limited and Bannock Investment Limited (all of which are being controlled by Mr. Ng Hung Sang, Robert), being the shareholders of the Company, which has no interest in the Option Agreement and the Loan Agreement and collectively own approximately 66.4% in nominal value of the Jessica Shares having the right to attend and vote at the general meeting of the Company. Accordingly, given no shareholder of the Company will be required to abstain from voting on the relevant resolution should an EGM be held, pursuant to Rule 19.39 of the GEM Listing Rules, the Company needs not hold a general meeting to consider the Option Agreement and the Loan Agreement.

The principal business activity of Jessica Group is the publication of two monthly Chinese language magazines, namely “ Jessica” magazine and “JESSICACODE” magazine and one bi-weekly Chinese language magazine, namely “ Lisa” magazine for female readers. The magazines of the Group are principally marketed in Hong Kong. It is also the Company’s business objective to increase revenue from advertising and circulation and to expand its business into other Chinese-speaking markets such as the PRC and Taiwan.

J) ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the Appendices hereto.

Yours faithfully For and on behalf of JESSICA PUBLICATIONS LIMITED Ng, Jessica Yuk Mui Director

— 8 —

FINANCIAL INFORMATION OF THE JESSICA GROUP

APPENDIX I

1. SHARE CAPITAL

(i) Jessica Shares

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

Authorised: HK$ 1,000,000,000,000 Jessica Shares 1,000,000,000 Issued and fully paid: 506,639,716 Jessica Shares 506,640

(ii) Outstanding share options

As at the Latest Practicable Date, details of the share options granted and outstanding under the share option scheme of the Company as adopted on 20th December, 2001 are as follows:-

		No. of Jessica Shares
	Exercise Price	to be issued upon
Month of Grant	per Jessica Share	exercise of options
	HK$
April 2002	0.69	8,720,000
September 2002	0.31	7,520,160
		16,240,160

Notes:

• (a) The vesting period of the share options is the period from the date of grant until the commencement of the exercise period. All share options referred to above are subject to one year’s vesting period. The share options may be exercised, in whole or in part, in the following manner:-

From the date of grant of share options	Exerciable percentage
Within 12 months	Nil
13th - 24th months	331⁄3%
25th - 36th months	331⁄3%
37th - 48th months	331⁄3%

• (b) The exercise price is subject to adjustment. Provided always that any part of the share options not exercised in full in accordance with the periods specified above shall remain exercisable during the exercise period of share options but the exercise price shall be adjusted by increasing 5% per annum (on a cumulative basis) until such time as the relevant portion of the share options shall have been fully exercised or lapsed in accordance with the share option scheme of the Company.

— 9 —

FINANCIAL INFORMATION OF THE JESSICA GROUP

APPENDIX I

2. CONSOLIDATED FINANCIAL STATEMENTS OF THE JESSICA GROUP

Set out on pages 10 to 27 is an extract from the audited consolidated financial statements of the Jessica Group for the year ended 31st December, 2003 (the date of which the latest audited financial statements were made up), together with the comparative figures for the year ended 31st December, 2002 and relevant notes to the audited financial statements of the Jessica Group.

CONSOLIDATED INCOME STATEMENT

For the year ended 31st December, 2003

NOTES Turnover 4 Direct operating expenses Other operating income 5 Selling and distribution costs Administrative expenses Loss before taxation 6 Taxation credit 8 Net loss for the year Basic loss per share 9	2003 HK$’000 41,287 (27,260) 164 (11,377) (4,329)	2002 HK$’000 27,599 (18,668) 104 (6,488) (4,591) (2,044) 117 (1,927) HK(0.38) cents
	(1,515) —	(2,044 117
	(1,515) HK(0.30) cents

— 10 —

FINANCIAL INFORMATION OF THE JESSICA GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

As at 31st December, 2003

NOTES 2003 2002 HK$’000 HK$’000 Non-current assets Plant and equipment 10 746 586 Deposit for investment 12 451 — 1,197 586 Current assets Trade receivables 13 9,825 5,566 Other receivables 264 703 Amount due from a related company 19 77 — Bank balances and cash 5,813 7,293 15,979 13,562 Current liabilities Trade payables 14 9,674 6,469 Other payables and accrued charges 3,434 2,057 Receipts in advance 660 737 Amount due to a related company 19 — 12 13,768 9,275 Net current assets 2,211 4,287 3,408 4,873 Capital and reserves Share capital 16 507 506 Share premium and reserves 2,901 4,367 3,408 4,873	NOTES 2003 2002 HK$’000 HK$’000 Non-current assets Plant and equipment 10 746 586 Deposit for investment 12 451 — 1,197 586 Current assets Trade receivables 13 9,825 5,566 Other receivables 264 703 Amount due from a related company 19 77 — Bank balances and cash 5,813 7,293 15,979 13,562 Current liabilities Trade payables 14 9,674 6,469 Other payables and accrued charges 3,434 2,057 Receipts in advance 660 737 Amount due to a related company 19 — 12 13,768 9,275 Net current assets 2,211 4,287 3,408 4,873 Capital and reserves Share capital 16 507 506 Share premium and reserves 2,901 4,367 3,408 4,873	NOTES 2003 2002 HK$’000 HK$’000 Non-current assets Plant and equipment 10 746 586 Deposit for investment 12 451 — 1,197 586 Current assets Trade receivables 13 9,825 5,566 Other receivables 264 703 Amount due from a related company 19 77 — Bank balances and cash 5,813 7,293 15,979 13,562 Current liabilities Trade payables 14 9,674 6,469 Other payables and accrued charges 3,434 2,057 Receipts in advance 660 737 Amount due to a related company 19 — 12 13,768 9,275 Net current assets 2,211 4,287 3,408 4,873 Capital and reserves Share capital 16 507 506 Share premium and reserves 2,901 4,367 3,408 4,873
	1,197 9,825 264 77 5,813 15,979 9,674 3,434 660 — 13,768 2,211	586
		5,566 703 — 7,293
		13,562
		6,469 2,057 737 12
		9,275
		4,287
	3,408	4,873
	507 2,901	506 4,367
	3,408	4,873

— 11 —

FINANCIAL INFORMATION OF THE JESSICA GROUP

APPENDIX I

BALANCE SHEET

As at 31st December, 2003

NOTES 2003 2002 HK$’000 HK$’000 Non-current assets Investments in subsidiaries 11 510 510 Current assets Amount due from a subsidiary 15 8,489 8,761 Bank balances 216 70 8,705 8,831 Current liabilities Other payables and accrued charges 132 45 Net current assets 8,573 8,786 9,083 9,296 Capital and reserves Share capital 16 507 506 Share premium and reserves 17 8,576 8,790 9,083 9,296	NOTES 2003 2002 HK$’000 HK$’000 Non-current assets Investments in subsidiaries 11 510 510 Current assets Amount due from a subsidiary 15 8,489 8,761 Bank balances 216 70 8,705 8,831 Current liabilities Other payables and accrued charges 132 45 Net current assets 8,573 8,786 9,083 9,296 Capital and reserves Share capital 16 507 506 Share premium and reserves 17 8,576 8,790 9,083 9,296	NOTES 2003 2002 HK$’000 HK$’000 Non-current assets Investments in subsidiaries 11 510 510 Current assets Amount due from a subsidiary 15 8,489 8,761 Bank balances 216 70 8,705 8,831 Current liabilities Other payables and accrued charges 132 45 Net current assets 8,573 8,786 9,083 9,296 Capital and reserves Share capital 16 507 506 Share premium and reserves 17 8,576 8,790 9,083 9,296
	8,489 216 8,705 132 8,573	8,761 70
		8,831
		45
		8,786
	9,083	9,296
	507 8,576	506 8,790
	9,083	9,296

— 12 —

FINANCIAL INFORMATION OF THE JESSICA GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31st December, 2003

			Capital
	Share	Share	reserve	Accumulated
	capital	premium	(note)	losses	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
At 1st January, 2002	456	54	(510)	(2,365)	(2,365)
Placing of shares	50	12,612	—	—	12,662
Share issue expenses	—	(3,497)	—	—	(3,497)
Net loss for the year	—	—	—	(1,927)	(1,927)
At 31st December, 2002	506	9,169	(510)	(4,292)	4,873
Exercise of share options	1	49	—	—	50
Net loss for the year	—	—	—	(1,515)	(1,515)
At 31st December, 2003	507	9,218	(510)	(5,807)	3,408

Note: Capital reserve represents the difference between the nominal value and premium of the shares issued by the Company and the aggregate of the share capital of a subsidiary acquired through an exchange of shares pursuant to the reorganisation in 2001.

— 13 —

FINANCIAL INFORMATION OF THE JESSICA GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31st December, 2003

	2003	2002
	HK$’000	HK$’000
OPERATING ACTIVITIES
Loss before taxation	(1,515)	(2,044)
Adjustments for:
Interest income	(31)	(74)
Depreciation of plant and equipment	165	65
Operating cash flows before movements in working capital	(1,381)	(2,053)
Increase in trade and other receivables	(3,820)	(2,751)
Increase in amount due from a related company	(77)	—
Increase in trade payables	3,205	1,553
Increase (decrease) in other payables and accrued charges	1,377	(1,319)
Decrease in receipts in advance	(77)	(115)
Decrease in amount due to a related company	(12)	(447)
NET CASH USED IN OPERATING ACTIVITIES	(785)	(5,132)
INVESTING ACTIVITIES
Deposit paid for investment	(451)	—
Purchases of plant and equipment	(325)	(561)
Interest received	31	74
NET CASH USED IN INVESTING ACTIVITIES	(745)	(487)
FINANCING ACTIVITIES
Proceeds from issue of shares	50	12,662
Expenses incurred in connection with the issue of shares	—	(347)
NET CASH FROM FINANCING ACTIVITIES	50	12,315
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS	(1,480)	6,696
CASH AND CASH EQUIVALENTS AT 1ST JANUARY	7,293	597
CASH AND CASH EQUIVALENTS AT 31ST DECEMBER
representing bank balances and cash	5,813	7,293

— 14 —

FINANCIAL INFORMATION OF THE JESSICA GROUP

APPENDIX I

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31st December, 2003

1. GENERAL

The Company was incorporated in the Cayman Islands on 29th June, 2001 as an exempted limited company under the Companies Law (2001 Revision) of the Cayman Islands. The Company’s shares were listed on the Growth Enterprise Market (“GEM”) of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on 8th January, 2002.

The Company acts as an investment holding company. Details of the principal activities of its subsidiaries are set out in note 26.

2. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS

In the current year, the Group has adopted the following Hong Kong Financial Reporting Standard (“HKFRS”) - Statement of Standard Accounting Practice (“SSAP”) 12 (Revised) “Income Taxes” issued by the Hong Kong Society of Accountants (“HKSA”). The term of HKFRSs is inclusive of SSAPs and Interpretations approved by the HKSA.

The principal effect of the implementation of SSAP 12 (Revised) is in relation to deferred tax. In previous years, partial provision was made for deferred tax using the income statement liability method, i.e. a liability was recognised in respect of timing differences arising, except where those timing differences were not expected to reverse in the foreseeable future. SSAP 12 (Revised) requires the adoption of a balance sheet liability method, whereby deferred tax is recognised in respect of all temporary differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit, with limited exceptions. The adoption of this revised SSAP has had no material effect on the results for the current or prior accounting periods. Accordingly, no prior period adjustment has been required.

3. SIGNIFICANT ACCOUNTING POLICIES

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

Basis of consolidation

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

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

Investments in subsidiaries

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

Turnover

Turnover represents (i) sale of magazines after allowances for returns and discounts; (ii) advertising income from publications, and (iii) promotion and marketing income.

— 15 —

FINANCIAL INFORMATION OF THE JESSICA GROUP

APPENDIX I

Revenue recognition

Revenue from sale of magazines is recognised when the magazines are delivered and title has passed, with advance subscription fees received from subscribers recorded as receipts in advance.

Advertising income is recognised when the advertisements are published.

Promotion and marketing income is recognised when the service is rendered.

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

Advertising barter transactions

Revenue and expense from an advertising barter transaction are recognised at fair value only if the fair value of the advertisement surrendered in the transaction is determinable based on the Company’s historical practice of receiving cash or other consideration that is readily convertible to a known amount of cash for similar advertisement from buyers unrelated to the counter-party in the barter transaction.

Plant and equipment

Plant and equipment are stated at cost less depreciation and accumulated impairment losses.

Depreciation is provided to write off the cost of plant and equipment over their estimated useful lives and after taking into account their estimated residual value, using the straight-line method, at 20% per annum.

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

Impairment

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

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

Foreign currencies

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

Taxation

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

— 16 —

APPENDIX I

FINANCIAL INFORMATION OF THE JESSICA GROUP

The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

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

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

Retirement benefits scheme

Payments to the Group’s Mandatory Provident Fund Scheme and defined contribution retirement benefit plans are charged as an expense as they fall due.

Operating leases

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

4. TURNOVER

Turnover represents the net amounts received and receivable for the following:

Sale of magazines Advertising income Promotion and marketing income	2003 HK$’000 11,217 26,069 4,001 41,287	2002 HK$’000 9,943 16,964 692
		27,599

No revenue was recognised from advertising barter transactions during the year (2002: HK$37,000).

— 17 —

APPENDIX I

FINANCIAL INFORMATION OF THE JESSICA GROUP

5. OTHER OPERATING INCOME

	2003	2002
	HK$’000	HK$’000
Bank interest income	31	74
Sundry income	133	30
	164	104

6. LOSS BEFORE TAXATION

Loss before taxation has been arrived at after charging (crediting): Staff costs including directors’ emoluments Retirement benefits scheme contributions Allowance for bad and doubtful debts made (written back) Auditors’ remuneration Bad debt written off Depreciation	2003 HK$’000 11,778 493 12,271 20 300 183 165	2002 HK$’000 6,075 262
		6,337 (61 300 — 65

7. DIRECTORS’ EMOLUMENTS AND HIGHEST PAID EMPLOYEES

(a) Directors’ emoluments

Independent Non-Executive Directors Fees Executive Directors Salaries and other benefits Retirement benefits scheme contributions Total emoluments	2003 HK$’000 100	2002 HK$’000 100
	1,413 66 1,479	1,389 59
		1,448
	1,579	1,548

For the year ended 31st December, 2003, the executive directors received individual emoluments of HK$Nil (2002: HK$Nil), HK$504,000 (2002: HK$431,828), HK$558,735 (2002: HK$638,758) and HK$415,800 (2002: HK$377,288).

— 18 —

APPENDIX I

8.

FINANCIAL INFORMATION OF THE JESSICA GROUP

(b) Employees’ emoluments

Of the five highest paid individuals in the Group, two (2002: three) were Directors of the Company whose remunerations were set out in (a) above. The emoluments of the remaining three (2002: two) individuals were as follows:

Salaries and other benefits Retirement benefits scheme contributions	2003 HK$’000 1,580 39 1,619	2002 HK$’000 795 29
		824

The aggregate emoluments of each of the individuals were below HK$1,000,000 for both years.

During each of the two years ended 31st December, 2003, no emoluments were paid by the Group to the five highest paid individuals, including Directors, as an inducement to join or upon joining the Group or as a compensation for loss of office.

TAXATION CREDIT

No provision for Hong Kong Profits Tax has been made as the Group incurred a tax loss for the year. The taxation credit for the year ended 31st December, 2002 represented the overprovision in prior year.

The taxation for the year can be reconciled to the loss per the income statements as follows:

Loss before taxation Tax at the domestic income tax rate of 17.5% (2002: 16%) Tax effect of expenses that are not deductible in determining taxable profit Tax effect of income that is not taxable in determining taxable profit Overprovision in previous year Unrecognised tax losses Taxation credit for the year	2003 HK$’000 (1,515)	2002 HK$’000 (2,044)
	(265) 9 (5) — 261	(327) 3 (11) (117) 335
	—	(117)

Details of the deferred taxation are set out in note 24.

— 19 —

FINANCIAL INFORMATION OF THE JESSICA GROUP

APPENDIX I

9. BASIC LOSS PER SHARE

The calculation of basic loss per share for the year is based on the net loss for the year of approximately HK$1,515,000 (2002: HK$1,927,000) and on the weighted average number of 506,516,223 (2002: 506,063,591) shares in issue during the year.

No diluted loss per share has been presented because the exercise price of the Company’s share options was higher than the average market price per share for the year.

10. PLANT AND EQUIPMENT

			Furniture
		Leasehold	and office
		improvements	equipment	Total
		HK$’000	HK$’000	HK$’000
	COST
	At 1st January, 2003	479	182	661
	Additions	—	325	325
	At 31st December, 2003	479	507	986
	DEPRECIATION
	At 1st January, 2003	39	36	75
	Provided for the year	96	69	165
	At 31st December, 2003	135	105	240
	NET BOOK VALUE
	At 31st December, 2003	344	402	746
	At 31st December, 2002	440	146	586
11.	INVESTMENTS IN SUBSIDIARIES
			2003	2002
			HK$’000	HK$’000
	Unlisted shares		510	510

None of the subsidiaries had any debt securities issued during the year or outstanding at the end of the year.

Details of the company’s subsidiaries are set out in note 26.

— 20 —

FINANCIAL INFORMATION OF THE JESSICA GROUP

APPENDIX I

12. DEPOSIT FOR INVESTMENT

At 31st December, 2003, the amount represented a deposit for the establishment of a cooperative joint venture in the People’s Republic of China (the “PRC”). Details are set out in note 25.

13. TRADE RECEIVABLES

The Group allows an average credit period of 30 to 90 days to its customers.

The following is an aged analysis of trade receivables:

0 - 30 days 31 - 60 days 61 - 90 days 91 to 180 days Over 180 days Less: allowance for bad and doubtful debts	2003 HK$’000 3,739 2,819 685 2,410 549 10,202 (377) 9,825	2002 HK$’000 2,475 1,270 193 1,597 388
		5,923 (357)
		5,566

14. TRADE PAYABLES

The following is an aged analysis of trade payables:

0 - 30 days 31 - 60 days 61 - 90 days 91 to 180 days Over 180 days	2003 HK$’000 1,129 2,268 2,051 3,857 369 9,674	2002 HK$’000 624 1,567 1,553 2,371 354
		6,469

15. AMOUNT DUE FROM A SUBSIDIARY

The amount is unsecured, interest-free and has no fixed repayment terms.

— 21 —

FINANCIAL INFORMATION OF THE JESSICA GROUP

APPENDIX I

16. SHARE CAPITAL

Shares of HK$0.001 each Authorised: At 31st December, 2002 and 31st December, 2003 Issued and fully paid: At 1st January, 2002 Placing of shares At 31st December, 2002 Shares issued on exercise of share options At 31st December, 2003	Number of shares Share capital HK$’000 1,000,000,000,000 1,000,000	Number of shares Share capital HK$’000 1,000,000,000,000 1,000,000
	455,831,888 50,647,988 506,479,876 159,840	456 50
		506 1
	506,639,716	507

Pursuant to the Prospectus dated 31st December, 2001 and by means of placing, the Company issued at total of 50,647,988 new shares of HK$0.001 each at a price of HK$0.25 per share. The new shares rank pari passu with the existing shares in all respects.

17. SHARE PREMIUM AND RESERVES

THE COMPANY At 1st January, 2002 Premium arising on issue of shares by means of placing Expenses incurred in connection with the issue of shares Net loss for the year At 31st December, 2002 Exercise of share options Net loss for the year At 31st December, 2003	Share premium Accumulated losses HK$’000 HK$’000 54 (137) 12,612 — (3,497) — — (242)	Share premium Accumulated losses HK$’000 HK$’000 54 (137) 12,612 — (3,497) — — (242)	Total HK$’000 (83 12,612 (3,497 (242
	9,169 49 —	(379) — (263)	8,790 49 (263
	9,218	(642)	8,576

Under the Companies Law (Revised) (Chapter 22) of the Cayman Islands, the share premium of the Company is available for paying distributions or dividends to shareholders subject to the provisions of its articles of association and a statutory solvency test. It is provided that a dividend cannot be paid if this would result in the Company being unable to pay its debts as they fall due. In accordance with the Company’s articles of association, the Company’s reserves available for distribution to shareholders represent the accumulated losses and share premium which in total amounted to approximately HK$8,576,000 (2002: HK$8,790,000).

— 22 —

FINANCIAL INFORMATION OF THE JESSICA GROUP

APPENDIX I

18. BUSINESS AND GEOGRAPHICAL SEGMENTS

The Group is principally engaged in magazine publishing and advertising activities carried out in Hong Kong. Accordingly, the Directors consider there is only one business and geographical segment and no analysis of segmental assets and liabilities by geographical location is presented.

19. RELATED PARTY TRANSACTIONS

During the year, the Group had significant transactions with companies controlled by, or affiliated with, South China Holdings Limited (“South China Holdings”). These companies are collectively referred to as South China Group. A Director of the Company, Mr. Ng Hung Sang, Robert, is a substantial shareholder and a director of South China Holdings. Details of these transactions are as follows:

Nature of transactions	2003	2002
	HK$’000	HK$’000
Expenses:
Administrative service fees	978	944
Color separation and photo processing fees	969	996
Corporate finance service fee	—	300
Marketing service fees	16	122
Phototaking service fees	509	470
Rental expenses in respect of office premises	237	119
Underwriting commission	—	317

Tek Lee Finance and Investment Corporation Limited (“Tek Lee Finance”), an intermediate holding company, up to 10th September, 2001 had undertaken to provide continuing financial support to the Company to enable it to meet its liabilities as they fall due. This undertaking was terminated when the Company ceased to be a subsidiary of Tek Lee Finance on 10th September, 2001. Thereafter, Mr. Ng Hung Sang, Robert, a major shareholder of the Company, had undertaken to provide continuing financial support to the Group to enable the Group to meet its liabilities as they fall due up to 8th January, 2002, when the Company’s shares were listed on the GEM.

Mr. Ng Hung Sang, Robert, Parkfield, Fung Shing, Ronastar, Earntrade and Bannock, shareholders of the Company, have provided indemnities in favour of the Group in the event that the Group incurs any liability as a result of the wavier of amounts due to related companies (see note 21(a)).

In the opinion of the Directors, the above transactions during the year ended 31st December, 2003 were conducted in accordance with the respective arrangements between the Group and the related parties.

At the balance sheet date, the Group had amounts due from/to related company arising from certain of the above related party transactions. The amounts are unsecured, interest-free and have no fixed repayment terms.

20. OPERATING LEASE COMMITMENTS

	2003	2002
	HK$’000	HK$’000
The minimum lease payments paid under operating leases
during the year in respect of premises	237	640

— 23 —

APPENDIX I

FINANCIAL INFORMATION OF THE JESSICA GROUP

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

	2003	2002
	HK$’000	HK$’000
Within one year	237	237
In the second to fifth year inclusive	119	356
	356	593

The leases are negotiated for an average term of three years and the rentals are fixed for an average term of three years.

At the balance sheet date, the Company had no arrangement under non-cancellable operating leases.

21. CONTINGENT LIABILITIES

As at 31st December, 2003, the Group had the following contingent liabilities:

• (a) On 30th June, 2001, three related companies waived certain balances due to them by the Group amounting to approximately HK$7,611,000 at no consideration (the “Waiver”). As advised by the Group’s legal counsel, in the event that any one of these related companies is wound up by reason of insolvency or the Waiver is ordered by courts or other competent authorities to be restored to the related companies, the Group may be required to compensate these related companies. In the opinion of Directors, the risk of winding up of these related companies by reason of insolvency or restoring the balances to these related companies is remote, and therefore, it is not probable that the Group will compensate those related companies. Accordingly, no provision has been made in the financial statements with respect to such compensation. In addition, in the event that the Group incurs any liability as a result of the Waiver, such liability would fall within the indemnity given by Mr. Ng Hung Sang, Robert, Parkfield Holdings Limited, Fung Shing Group Limited, Ronastar Investments Limited, Earntrade Investments Limited and Bannock Investment Limited, shareholders of the Company, in favour of the Group.

• (b) As at 31st December, 2003, the Company had provided a corporate guarantee to a bank to secure a bank facility of HK$1,000,000 (2002: HK$1,000,000) granted to a subsidiary, which remained unused as at 31st December, 2003.

22. SHARE OPTION SCHEME

The Company’s share option scheme (the “Scheme”) was adopted pursuant to a resolution passed on 20th December, 2001 for the primary purpose of providing incentives to directors and eligible employees and will be expired on 7th January, 2012. Under the Scheme, the board of directors of the Company may offer to any director or employee of the Company, or any of its subsidiaries, options to subscribe for shares in the Company.

At 31st December, 2003, the number of shares in respect of which options were granted under the Scheme was 16,560,160 (2002: 22,400,000), representing approximately 3.3% (2002: approximately 4.4%) of the shares of the Company in issue at that date. As at 31st December, 2003, the total number of Shares available for issue pursuant to the grant of further options under the Scheme was 50,647,987, representing approximately 10% of the issued share capital of the Company as at 26th March, 2004. Without prior approval from the Company’s shareholders, the total aggregate number of shares in respect of which options may be granted under the Scheme is not permitted to exceed 10% of the shares of the Company in issue at any point in time, and the aggregate number of shares in respect of which options may be granted to any individual is not permitted to exceed 1% of the shares of the Company in issue at any point in time.

— 24 —

APPENDIX I

FINANCIAL INFORMATION OF THE JESSICA GROUP

The consideration payable on the grant of an option is HK$1 per option. Options may be exercised at any time for a period of ten years commencing on the first anniversary of the date of grant. The exercise price of the option shares would be at a price equal to the higher of (i) the closing price of the Company’s shares as stated in the Stock Exchange’s daily quotations sheet on the date of the offer (ii) the average closing price of the shares of the Company on the Stock Exchange for the five trading days immediately preceding the date of offer of the options; and (iii) the nominal value of a share.

The following tables disclose details of the Company’s share options held by employees (including directors) and movements in such holdings during the year:

		Granted	Outstanding	Exercised	Lapsed
	Outstanding	during	at 31.12.2002	during	during	Outstanding at
Date of grant	at 1.1.2002	2002	and 1.1.2003	the year	the year	31.12.2003
15th April, 2002	—	14,800,000	12,640,000	—	3,760,000	8,880,000
2nd September, 2002	—	10,240,000	9,760,000	159,840	1,920,000	7,680,160
	—	25,040,000	22,400,000	159,840	5,680,000	16,560,160

Details of specific categories of options are as follows:

			Number of	Number of
			**options **	vested at
Date of grant	Exercise period	Exercise price	31.12.2002	31.12.2003
15th April, 2002	15th April, 2003 to 7th January, 2012	HK$0.69	—	8,880,000
2nd September, 2002	2nd September, 2003 to 7th January, 2012	HK$0.31	—	7,680,160
			—	16,560,160

The vesting period of share options is the period from the date of grant until the commencement of the exercise period. All share options referred to above are subject to one year’s vesting period.

The share options may be exercised, in whole or in part, in the following manner:

From the date of grant of share options	Exerciable percentage
Within 12 months	Nil
13th - 24th months	331⁄3%
25th - 36th months	331⁄3%
37th - 48th months	331⁄3%

The exercise price is subject to adjustment. Provided always that any part of the share options not exercised in full in accordance with the periods specified above shall remain exercisable during the exercise period of share options but the exercise price shall be adjusted by increasing 5% per annum (on a cumulative basis) until such time as the relevant portion of the share options shall have been fully exercised or lapsed in accordance with the scheme.

— 25 —

APPENDIX I

FINANCIAL INFORMATION OF THE JESSICA GROUP

For the year ended 31st December, 2002, total consideration received during the year from grantee for taking up the options granted amounted to HK$89.

No charge is recognised in the income statement in respect of the value of options granted during the year.

23. RETIREMENT BENEFITS SCHEME

The Group participates in both a defined contribution scheme which is registered under the Occupational Retirement Scheme Ordinance (the “ORSO Scheme”) and a Mandatory Provident Fund Scheme (the “MPF Scheme”) established under the Mandatory Provident Fund Ordinance in December 2000. The assets of the schemes are held separately from those of the Company, in funds under the control of trustees. Employees who were members of the ORSO Scheme prior to the establishment of the MPF Scheme were offered a choice of staying within the ORSO Scheme or switching to the MPF Scheme, whereas all new employees joining the Group on or after 1st December, 2000 are required to join the MPF Scheme.

For members of the MPF Scheme, the Group contributes 5% of relevant payroll costs to the Scheme, which contribution is matched by the employee. Both the employer’s and the employees’ contributions are subject to maximum of monthly earnings of HK$20,000 per employee and thereabove contributions are voluntary.

The ORSO Scheme is funded by monthly contributions from the both employees and the Group at 5% of the employee’s basic salary. The employees are entitled to receive their entire contributions and the accrued interest thereon, and 100% of the employer’s contributions and the accrued interest thereon upon retirement or leaving the employer after completing 10 years of service or at a reduced scale of between 30% to 90% after completing 3 to 9 years of service.

Where there are employees who leave the ORSO Scheme prior to vesting fully in the contributions, the contributions payable by the Group are reduced by the amount of forfeited contributions. The amount of forfeited contributions utilised in this manner during the year was HK$5,224 (2002: HK$17,821). As at 31st December, 2003, no material forfeited contributions, which arose upon employees leaving the ORSO Scheme, are available to reduce the contributions payables in future years.

24. DEFERRED TAXATION

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

Accelerated tax depreciation HK$’000 At 1st January, 2002 — as previously reported — — adjustment on adoption of SSAP 12 (Revised) 15 — as restated 15 Charge (credit) to income 14 At 31st December, 2002 29 Charge (credit) to income 33 At 31st December, 2003 62	Accelerated tax depreciation HK$’000 At 1st January, 2002 — as previously reported — — adjustment on adoption of SSAP 12 (Revised) 15 — as restated 15 Charge (credit) to income 14 At 31st December, 2002 29 Charge (credit) to income 33 At 31st December, 2003 62	Tax losses HK$’000 — (15)	Total HK$’000 — —
	15 14 29 33	(15) (14) (29) (33)	— —
			— —
	62	(62)	—

— 26 —

APPENDIX I

FINANCIAL INFORMATION OF THE JESSICA GROUP

At 31st December, 2003, the Group had unused tax losses of HK$13,772,000 (2002: HK$11,718,000) available for offset against future profits. A deferred tax asset has been recognised in respect of HK$354,000 (2002: HK$180,000) of such losses. No deferred tax asset has been recognised in respect of the remaining HK$13,418,000 (2002: HK$11,538,000) due to the unpredictability of future profit streams. The losses may be carried forward indefinitely.

25. SUBSEQUENT EVENT

On 11th August, 2003, the Group entered into an agreement with a company in the People’s Republic of China (the “PRC”) to establish a Sino-foreign joint venture in the PRC, namely Shanghai South China & Boyang Business Consultation Co., Ltd. , in which the Group is committed to investing HK$2.86 million for a 55% interest. The joint venture will be engaged in the media business. At 31st December, 2003, the Group had paid a deposit of approximately HK$451,000 for this investment project.

26. PARTICULARS OF SUBSIDIARIES

		Issued and	Proportion of nominal	Proportion of nominal
	Place of	fully paid	value of issued capital
Name of subsidiary	incorporation	share capital	held by Company		Principal activity
			Directly	Indirectly
Beforward Trading	British Virgin Islands	US$2	—	100%	Investment holding
Limited
Cathy Success Limited	British Virgin Islands	US$1	—	100%	Investment holding
Grandpress Limited	Hong Kong	HK$2	—	100%	Investment holding
Great Ready Assets	British Virgin Islands	US$2	100%	—	Investment holding
Limited
Jessica Publications	British Virgin Islands	US$2	—	100%	Investment holding
(BVI) Limited
Jessica Beaute Limited	Hong Kong	HK$2	—	100%	Inactive
Jessica (BVI) Limited	British Virgin Islands	US$2	—	100%	Investment holding
Jessicacode Limited	Hong Kong	HK$2	—	100%	Publication of
(formerly known as					“ JESSICACODE”
Jessica Girl Limited)					magazine
Jessica Management	Hong Kong	HK$2	—	100%	Provision of employee
Limited (formerly					and personnel services
known as Kewell					and holding of a	lease
Limited)					agreement
Jessica Limited	Hong Kong	HK$2	—	100%	Publication of “
(formerly known as					JESSICA” magazine
Deemwell Limited)
JPR Agency Limited	Hong Kong	HK$2	—	100%	Inactive
Superb Taste Company	Hong Kong	HK$2	—	100%	Publication of “
Limited					LISA” magazine

— 27 —

APPENDIX II FINANCIAL INFORMATION OF THE ENLARGED JESSICA GROUP

1. PROFORMA STATEMENT OF UNAUDITED ADJUSTED COMBINED ASSETS AND LIABILITIES OF THE ENLARGED JESSICA GROUP

The following is a summary of the proforma statement of unaudited adjusted combined assets and liabilities of the Enlarged Jessica Group based on the audited consolidated net assets of the Jessica Group as at 31st December, 2003 as extracted from its annual report for the year ended 31st December, 2003, the audited net assets of BCM as at 29th February, 2004 as set out in Appendix III to this circular and adjusted to reflect the effect of the Acquisition.

	The Jessica
	Group as at	BCM as at
	31st December,	29th February,
	2003	**2004 **	Adjustments	Notes	Total
	HK$’000	HK$’000	HK$’000		HK$’000
Plant and equipment	746	546	—		1,292
Goodwill	—	—	155	1	155
Intangible assets	—	5,751	—		5,751
Deposit for investment	451	—	(451)		—
Current assets	15,979	208	(218)	1	10,869
			(5,100)	2
Current liabilities	(13,768)	(5,570)	5,100	2	(14,238)
Minority interests	—	—	(421)	3	(421)
Net assets	3,408	935	(935)		3,408

Notes:

1. The goodwill arising on the acquisition of a 55% equity interest in BCM amounts to approximately HK$155,000 which represents the difference between the total consideration of HK$669,000 (the Loan 1 of RMB550,000 (equivalent to approximately HK$519,000) and the estimated expenses of HK$150,000) and the share of net asset value of BCM of HK$514,000 prior to the Acquisition.

2. The adjustment represents BBC agrees to grant an interest-free loan (the Loan 2 of HK$5.1 million) to BCM for the repayment of shareholder loans previously granted by Boyang upon signing of the Option Agreement.

3. The adjustment represents the interest attributable to minority shareholders of the Jessica Group following the Acquisition.

— 28 —

APPENDIX II FINANCIAL INFORMATION OF THE ENLARGED JESSICA GROUP

2. UNAUDITED PROFORMA STATEMENT OF ADJUSTED COMBINED NET TANGIBLE LIABILITIES OF THE ENLARGED JESSICA GROUP AFTER THE ACQUISITION

Set out below is an unaudited proforma statement of adjusted combined net tangible liabilities of the Enlarged Jessica Group after the Acquisition based on the audited consolidated balance sheet of the Jessica Group as at 31st December, 2003 and the audited balance sheet of BCM as at 29th February, 2004 and adjusted to reflect the effect of the Acquisition:

Audited consolidated net asset value of the Jessica Group as at 31st December, 2003 Share of net asset value of BCM as at 29th February, 2004 Consideration payable for the Acquisition Estimated expenses relating to the Acquisition Less: Estimated goodwill arising from the Acquisition Less: Intangible assets of BCM as at 29th February, 2004 Unaudited proforma adjusted combined net tangible liabilities of the Enlarged Jessica Group Audited consolidated net asset value of the Jessica Group per share (based on 506,639,716 shares in issue as at the Latest Practicable Date) Unaudited proforma adjusted combined net tangible liabilities of the Enlarged Jessica Group per Share (based on 506,639,716 shares in issue as at the Latest Practicable date)

HK$’000 HK$’000 3,408 514 (519) (150) (155) (5,751) (2,498) HK 0.67 cents HK (0.49) cents

3. INDEBTEDNESS

Borrowing

As at 31st March, 2004, the Enlarged Jessica Group had an amount of approximately HK$5,570,000 due to a minority shareholder of BCM.

Contingent Liabilities

• (a) On 30th June, 2001, South China Media Management Limited, Success Production Limited and South China Publishing Limited (formerly known as Yongder Hall Management Limited), subsidiaries of the South China Group, waived certain balances due to them by the Jessica Group amounting to approximately HK$7,611,000 at no consideration (the “Waiver”). As advised by the Jessica Group’s legal counsel, in the event that any one of these related companies is wound up by reason of insolvency or the Waiver is ordered by

— 29 —

APPENDIX II FINANCIAL INFORMATION OF THE ENLARGED JESSICA GROUP

courts or other competent authorities to be restored to the related companies, the Jessica Group may be required to compensate these related companies for approximately HK$7,611,000. In the opinion of the Directors, the risk of winding up of these related companies by reason of insolvency or restoring the balances to these related companies is remote, and therefore, it is not probable that the Jessica Group will compensate those related companies. Accordingly, no provision has been made in the financial statements with respect to such compensation. In addition, in the event that the Jessica Group incurs any liability as a result of the Waiver, such liability would fall within the indemnity given by Mr. Ng Hung Sang, Robert, Parkfield Holdings Limited, Fung Shing Group Limited, Ronastar Investments Limited, Earntrade Investments Limited and Bannock Investment Limited, being Shareholders, in favour of the Jessica Group.

• (b) As at 31st March, 2004, the Company had provided a corporate guarantee to a bank to secure a bank facility of HK$1 million granted to a subsidiary, which remained unused as at 31st March, 2004.

Capital Commitments

As at 31st March, 2004, save for the Acquisition, the Enlarged Jessica Group had no significant capital commitment.

Mortgages and Charges

As at 31st March, 2004, the Enlarged Jessica Group had no outstanding mortgages or charges.

Debt Securities

As at 31st March, 2004, the Enlarged Jessica Group had no outstanding debt securities.

— 30 —

APPENDIX II FINANCIAL INFORMATION OF THE ENLARGED JESSICA GROUP

Disclaimer

Save as aforesaid and apart from the intra-group liabilities and normal trade payables, as at 31st March, 2004, none of the companies comprising the Enlarged Jessica Group had any mortgages, charges, debentures or other loan capital, bank overdrafts, loans or other similar indebtedness, hire purchase or other finance lease commitments, liabilities under acceptance (other than normal trade bills), acceptance credits, guarantees or other material contingent liabilities.

Save as disclosed above, the Directors have confirmed that there has been no material change in the indebtedness or contingent liabilities of the Enlarged Jessica Group since 31st March, 2004 and up to the Latest Practicable Date.

4. WORKING CAPITAL

On 10th May, 2004, Mr. Ng Hung Sang, Robert, a major shareholder of the Company, has agreed to provide continuing financial support to the Jessica Group to meet its liabilities as they fall due for the period from 1st March, 2004 to 30th June, 2005.

Taking into account the internal and financial resources available to the Enlarged Jessica Group and the financial support to be provided to the Enlarged Jessica Group by Mr. Ng Hung Sang, Robert, the Directors are of the opinion that the Enlarged Jessica Group will have sufficient working capital for its present requirements.

The granting of financial support by Mr. Ng constitutes a connected transaction under the GEM Listing Rules. However, such transaction will be exempt from reporting in accordance with Rule 20.65(4) if the financial support or assistance is made on normal commercial terms (or better) where no security over the assets of the Company is granted in respect of the financial assistance. The Company will closely monitor the situations and if any financial assistance granted by Mr. Ng is not in accordance with Rule 20.65(4), the Company will make the relevant disclosures in accordance with the GEM Listing Rules.

5. MATERIAL ADVERSE 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 Jessica Group since 31st December, 2003, the date to which the latest published audited consolidated financial statements of the Jessica group were made up.

— 31 —

ACCOUNTANTS’ REPORT ON BCM

APPENDIX III

==> picture [87 x 55] intentionally omitted <==

==> picture [203 x 63] intentionally omitted <==

13th May, 2004

The Directors Jessica Publications Limited Shanghai South China & Boyang Culture Media Co., Ltd.

We set out below our report on the financial information regarding Shanghai South China & Boyang Culture Media Co., Ltd. (“BCM”) for the period from 16th December, 2003 (date of incorporation) to 29th February, 2004 (the “Relevant Period”) for inclusion in a circular dated 13th May, 2004 (the “Circular”) issued by Jessica Publications Limited (“Jessica”) in connection with its proposed acquisition of a 55% equity interest in BCM (the “Acquisition”).

BCM is a domestic private limited company established in the People’s Republic of China (the “PRC”) on 16th December, 2003 for an operating period of fifty years. It is engaged in the distribution and selling of all advertising space in the Chinese language publications of , and in the PRC.

No audited statutory financial statements have been prepared for BCM for the period from 16th December, 2003 (date of incorporation) to 29th February, 2004 as it has not carried on any business.

For the purpose of this report, management of BCM has prepared management accounts for the Relevant Period in accordance with accounting principles generally accepted in Hong Kong (the “Underlying Financial Statements”). We have undertaken an independent audit of the Underlying Financial Statements in accordance with the Statements of Auditing Standards issued by the Hong Kong Society of Accountants (“HKSA”).

The financial information for the Relevant Period set out in this report has been prepared from the Underlying Financial Statements. As mentioned in note 1 to the financial information, as at 29th February, 2004, BCM had net current liabilities of approximately HK$5.4 million. The financial information has been prepared on a going concern basis because a major shareholder of Jessica has agreed to provide adequate funds to enable BCM to meet in full its financial obligations as they fall due for the foreseeable future, provided that the Acquisition is completed. We have examined the Underlying Financial Statements for the Relevant Period in accordance with the Auditing Guideline “Prospectuses and the Reporting Accountant” as recommended by the HKSA.

The Underlying Financial Statements are the responsibility of the directors of BCM who approved their issue. The directors of Jessica are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the financial information set out in this report from the Underlying Financial Statements, to form an independent opinion on the financial information and to report our opinion to you.

— 32 —

ACCOUNTANTS’ REPORT ON BCM

APPENDIX III

In our opinion, the financial information together with the notes thereon gives, for the purpose of this report, a true and fair view of the state of affairs of BCM as at 29th February, 2004 and of the loss and cash flows of BCM for the Relevant Period.

I. FINANCIAL INFORMATION

The following is the financial information of BCM for the Relevant Period.

INCOME STATEMENT

		16.12.2003
	NOTE	to 29.2.2004
		HK$
Turnover		—
Administrative expenses		(8,243)
Loss for the period	4	(8,243)
BALANCE SHEET
	NOTES	At 29.2.2004
		HK$
Non-current assets
Furniture and office equipment	8	545,719
Intangible assets	9	5,750,688
		6,296,407
Current assets
Prepayments		207,547
Bank balance		1,155
		208,702
Current liability
Amount due to a shareholder	14	5,569,956
Net current liabilities		(5,361,254)
		935,153
Capital and reserve
Share capital	10	943,396
Accumulated loss		(8,243)
		935,153

— 33 —

ACCOUNTANTS’ REPORT ON BCM

APPENDIX III

STATEMENT OF CHANGES IN EQUITY

	Share	Accumulated
	capital	loss	Total
	HK$	HK$	HK$
On incorporation	943,396	—	943,396
Loss for the period	—	(8,243)	(8,243)
At 29th February, 2004	943,396	(8,243)	935,153
CASH FLOW STATEMENT
			16.12.2003
	NOTE		to 29.2.2004
			HK$
CASH FLOW FROM OPERATING ACTIVITIES
Loss for the period and cash used in operating expenses			(8,243)
CASH USED IN INVESTING ACTIVITY
Acquisition of a business		11	(923,373)
CASH FROM FINANCING ACTIVITIES
Issue of shares			924,528
Advance from a shareholder			8,243
			932,771
CASH AND CASH EQUIVALENTS AT END OF THE
PERIOD, representing bank balance			1,155

— 34 —

ACCOUNTANTS’ REPORT ON BCM

APPENDIX III

NOTES TO THE FINANCIAL INFORMATION

1. BASIS OF PREPARATION

As at 29th February, 2004, BCM had net current liabilities of approximately HK$5,361,000. The financial information has been prepared on a going concern basis because a major shareholder of Jessica has agreed to provide adequate funds to enable BCM to meet in full its financial obligations as they fall due for the foreseeable future, provided that the Acquisition is completed.

2. SIGNIFICANT ACCOUNTING POLICIES

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

Furniture and office equipment

Furniture and office equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Depreciation is provided to write off the cost of items of furniture and office equipment over their estimated useful lives and after taking into account their estimated residual value, using the straight-line method, at 20% - 30% per annum.

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

Intangible assets

Intangible assets are measured initially at cost and amortised on a straight-line basis over their estimated useful lives.

Impairment

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

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

Foreign currencies

BCM maintains its books and records in Renminbi (“RMB”). Transactions in currencies other than RMB are initially recorded at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in currencies other than RMB are re-translated at the rates prevailing on the balance sheet date. Profits and losses arising on exchange are included in the income statement.

— 35 —

ACCOUNTANTS’ REPORT ON BCM

APPENDIX III

Taxation

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

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

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

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

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

3. SEGMENTAL INFORMATION

No analysis of BCM’s segmental information by business or geographical segments is presented as BCM did not trade in the PRC during the period. All identifiable assets of BCM are located in the PRC.

4. LOSS FOR THE PERIOD

	16.12.2003
	to 29.2.2004
	HK$
Loss for the period has been arrived at after charging:
Auditors’ remuneration	—
Directors’ remuneration	—
Pre-operating expenses	8,243

5. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

During the period, no emoluments were paid by BCM to any of the directors and employees of BCM as an inducement to join or upon joining or as compensation for loss of office. None of the directors waived any emoluments during the period.

— 36 —

ACCOUNTANTS’ REPORT ON BCM

APPENDIX III

6. TAXATION

Pursuant to the relevant laws and regulations in the PRC, BCM is subject to PRC enterprise income tax at 33%. No provision for PRC enterprise income tax has been made in the financial statements as BCM incurred a tax loss for the period.

The nil provision for the period can be reconciled to the loss per the income statement as follows:

	16.12.2003
	to 29.2.2004
	HK$
Loss for the period	(8,243)
Tax at the domestic income tax of 33%	(2,720)
Tax effect of tax loss not recognised	2,720
Tax expense for the period	—

BCM had an unutilised tax loss of HK$8,243 at the balance sheet date. Pursuant to the relevant laws and regulations in the PRC, the unutilised tax loss can be carried forward for a period of five years.

BCM did not recognise a deferred tax asset in respect of the tax loss because of the unpredictability of its future profit stream that can be applied to utilise such loss.

7. LOSS PER SHARE

Information of loss per share is not presented as such information is not meaningful given the purpose of this report.

8. FURNITURE AND OFFICE EQUIPMENT

COST Acquired on acquisition of a business and at 29th February, 2004 DEPRECIATION Provided for the period and at 29th February, 2004 NET BOOK VALUE At 29th February, 2004	HK$ 545,719
	—
	545,719

— 37 —

ACCOUNTANTS’ REPORT ON BCM

APPENDIX III

9. INTANGIBLE ASSETS

Trademark HK$ COST Additions 18,868 Acquired on acquisition of a business — At 29th February, 2004 18,868 AMORTISATION Provided for the period and at 29th February, 2004 — CARRYING AMOUNT At 29th February, 2004 18,868	Trademark HK$ COST Additions 18,868 Acquired on acquisition of a business — At 29th February, 2004 18,868 AMORTISATION Provided for the period and at 29th February, 2004 — CARRYING AMOUNT At 29th February, 2004 18,868	Goodwill HK$ — 5,731,820	Total HK$ 18,868 5,731,820
	18,868 —	5,731,820 —	5,750,688
			—
	18,868	5,731,820	5,750,688

Trademark was part of the capital contribution by a shareholder, and the amount represents the cost paid by the shareholder for the registration of a Chinese language publication in the PRC.

Goodwill was acquired by BCM on 29th February, 2004 through the acquisition of a business of distribution and selling of advertising space in the Chinese language publications of , and from a shareholder of BCM.

All of BCM’s intangible assets are amortised over the estimated useful lives of five years.

10. SHARE CAPITAL

Number of shares Domestic shares of RMB1.00 each Authorised: On incorporation and at 29th February, 2004 1,500,000 Registered, issued and fully paid: On incorporation and at 29th February, 2004 1,000,000 Shown in the financial information as	Share capital RMB 1,500,000
	1,000,000
	HK$943,396

On the date of incorporation, 1,000,000 domestic shares of RMB1.00 each were issued, for cash of RMB980,000 (equivalent of HK$924,528) and a trademark of RMB20,000 (equivalent to HK$18,868), to provide the initial capital of BCM.

— 38 —

ACCOUNTANTS’ REPORT ON BCM

APPENDIX III

11. ACQUISITION OF A BUSINESS

On 29th February, 2004, BCM acquired a business of distribution and selling of all advertising space in the Chinese language publications of , and from Shanghai Boyang Advertising Limited, a shareholder of BCM at a consideration of RMB6,874,192 (equivalent of HK$6,485,086).

Net assets acquired: Property, plant and equipment Prepayments Net assets Goodwill Total consideration Satisfied by: Bank balance Amount due to a shareholder Net cash outflow arising on acquisition: Bank balance	29.2.2004 HK$ 545,719 207,547 753,266 5,731,820 6,485,086 923,373 5,561,713 6,485,086 (923,373)

In the opinion of the directors of BCM, the above transaction was carried out on terms mutually agreed and determined by BCM and the relevant party.

12. MAJOR NON-CASH TRANSACTIONS

On the date of incorporation, trademark held by Shanghai Boyang Advertising Limited was injected into BCM at an amount of RMB20,000 (equivalent to HK$18,868) as part of its capital contribution.

Part of the consideration for the acquisition of a business, amounting to RMB5,561,713, was not settled at 29th February, 2004, and was included in the amount due to a shareholder.

13. CONTINGENT LIABILITY

At the balance sheet date, BCM had no material contingent liability.

— 39 —

ACCOUNTANTS’ REPORT ON BCM

APPENDIX III

14. RELATED PARTY TRANSACTIONS AND BALANCE

(a) Transactions

Other than those disclosed in notes 9 and 11, BCM had the following related party transaction during the Relevant Period.

During the Relevant Period, Shanghai Boyang Advertising Limited received reimbursements on an actual basis of expenses paid on behalf of BCM, amounting to HK$8,243.

(b) Balance

Amount due to a shareholder:

				29.2.2004
				HK$
Shanghai	Boyang	Advertising	Limited	5,569,956

The amount is unsecured, interest-free and repayable within one year from the balance sheet date.

II. ULTIMATE HOLDING COMPANY

At 29th February, 2004, the ultimate holding company of BCM is , a domestic PRC company.

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by BCM in respect of any period subsequent to 29th February, 2004.

Yours faithfully,

DELOITTE TOUCHE TOHMATSU

Certified Public Accountants

Hong Kong

— 40 —

GENERAL INFORMATION

APPENDIX IV

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief:

• (a) the information contained in this circular is accurate and complete in all material respects and not misleading;

• (b) there are no other matters the omission of which would make any statement in this circular misleading; and

• (c) all opinions expressed in this circular have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

2. DISCLOSURE OF INTERESTS AND DIRECTORS’ RIGHTS TO ACQUIRE JESSICA SHARES

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company in the Jessica Shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to Rules 5.40 to 5.58 of the GEM Listing Rules, relating to the minimum standards of dealings by directors of listed issuers, to be notified to the Company and the Stock Exchange, were as follows:

(1) Directors’ and chief executive’s interests in Jessica Shares

			Number	Approximate
	Name of		of Jessica	percentage of
Name of Directors	company	Capacity	Shares held	shareholding
Mr Ng Hung Sang,	The Company	Beneficial owner	18,102,800	3.57%
Robert
	The Company	Corporate	318,132,403	62.79%
		Interest	(Note)
Ms. Ng, Jessica Yuk	The Company	Beneficial owner	416,000	0.08%
Mui

Note: The 318,132,403 Jessica Shares referred to above include 92,966,000 Jessica Shares held by Parkfield Holdings Limited, 99,012,563 Jessica Shares held by Fung Shing Group Limited, 4,166,400 Jessica Shares held by Ronastar Investments Limited and 121,987,440 Jessica Shares held by Earntrade Investments

— 41 —

GENERAL INFORMATION

APPENDIX IV

Limited, which is owned as to 60%, 20% and 20% by Mr Ng Hung Sang, Robert, Ms Cheung Choi Ngor, Christina and Mr Richard Howard Gorges, directors of South China Holdings Limited, respectively. The 121,987,440 Jessica Shares referred to above include the 59,325,840 Jessica Shares held by Bannock Investment Limited which is a wholly-owned subsidiary of Earntrade Investments Limited. Each of Parkfield Holdings Limited, Fung Shing Group Limited and Ronastar Investments Limited is whollyowned by Mr Ng Hung Sang, Robert.

(2) Directors’ rights to acquire Jessica Shares

The Company’s existing share option scheme (the “Scheme”) was adopted on 20th December, 2001 and became effective on 8th January, 2002. Pursuant to the Scheme, certain Directors were granted share options to subscribe for Jessica Shares, details of which as at the Latest Practicable Date were as follows:

		Number of
		share options		Exercise
		outstanding		price per
Name of		as at the Latest		Jessica
Directors	Date of grant	Practicable Date	Exercise period	Share
	(note a)			HK$
				(note b)
Ms Foo Kit Tak	15th April, 2002	1,600,000	15th April, 2003	0.69
			to 7th January,
			2012
	2nd September,	1,600,000	2nd September,	0.31
	2002		2003 to 7th
			January, 2012
Ms Cheung Mei Yu 15th April, 2002		1,600,000	15th April, 2003	0.69
			to 7th January,
			2012
	2nd September,	1,600,000	2nd September,	0.31
	2002		2003 to 7th
			January, 2012

Notes:

(a) The vesting period of the share options is the period from the date of grant until the commencement of the exercise period. All share options to above are subject to one year’s vesting period. The share options may be exercised, in whole or in part, in the following manner:-

— 42 —

GENERAL INFORMATION

APPENDIX IV

From the date of grant of share options	Exerciable percentage
Within 12 months	Nil
13th - 24th months	331⁄3%
25th - 36th months	331⁄3%
37th - 48th months	331⁄3%

• (b) The exercise price is subject to adjustment. Provided always that any part of the share options not exercised in full in accordance with the periods specified above shall remain exercisable during the exercise period of share options but the exercise price shall be adjusted by increasing 5% per annum (on a cumulative basis) until such time as the relevant portion of the share options shall have been fully exercised or lapsed in accordance with the Scheme.

Save as disclosed herein, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interest or short positions in any Jessica Shares, underlying shares or debentures of the Company or any 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 or short positions which they are taken or deemed to have under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to Rules 5.40 to 5.58 of the GEM Listing Rules, to be notified to the Company and the Stock Exchange.

3. SUBSTANTIAL SHAREHOLDERS

So for as is known to any Director or chief executive of the Company, as at the Latest Practicable Date, the Shareholders who had interests or short positions in the Jessica Shares or underlying shares of the Company which would fall to be disclosed to the Company under provisions of Divisions 2 and 3 of Part XV of the SFO or, who were directly, or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any other members of the Jessica Group were as follows:

			Number of	Approximate
Name of	Name of		Jessica Shares	percentage of
Shareholder	Company	Capacity	held	shareholding
Mr Ng Hung Sang,	The Company	Beneficial owner	18,102,800	3.57%
Robert
	The Company	Corporate interest	318,132,403	62.79%
			(Note a)
Parkfield Holdings	The Company	Beneficial owner	92,966,000	18.35%
Limited			(Note a)
Fung Shing Group	The Company	Beneficial owner	99,012,563	19.54%
Limited			(Note a)

— 43 —

GENERAL INFORMATION

APPENDIX IV

			Number of	Approximate
Name of	Name of		Jessica Shares	percentage of
Shareholder	Company	Capacity	held	shareholding
Earntrade Investments	The Company	Beneficial owner	62,661,600	12.37%
Limited			(Note b)
	The Company	Corporate interest	59,325,840	11.71%
			(Note b)
Bannock Investment	The Company	Beneficial owner	59,325,840	11.71%
Limited			(Note b)

Notes:

• (a) The 318,132,403 Jessica Shares referred to above include 92,966,000 Jessica Shares held by Parkfield Holdings Limited, 99,012,563 Jessica Shares held by Fung Shing Group Limited, 4,166,400 Jesssica Shares held by Ronastar Investments Limited and 121,987,440 Jessica Shares held by Earntrade Investments Limited, which is owned as to 60%, 20% and 20% by Mr Ng. Hung Sang, Robert, Ms Cheung Choi Ngor, Christina and Mr Richard Howard Gorges, directors of South China Holdings Limited, respectively. Each of Parkfield Holdings Limited, Fung Shing Group Limited and Ronastar Investments Limited is wholly-owned by Mr Ng Hung Sang, Robert.

• (b) Earntrade Investments Limited is the holding company of Bannock Investment Limited. Thus, Earntrade Investments Limited is deemed to be interested in the 59,325,840 Jessica Shares held by Bannock Investment Limited.

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

4. COMPETING INTERESTS

Mr. Ng Hung Sang, Robert, Chairman and management shareholder of the Company, is also Chairman of South China Holdings Limited (“South China Holdings”), a company listed on the Main Board of the Stock Exchange and Co-Chairman and Chief Executive Officer of Capital Publications Limited (“Capital”), a company listed on GEM of the Stock Exchange. Mr. Ng Hung Sang, Robert, personally and through Parkfield Holdings Limited, Fung Shing Group Limited and Ronastar Investments Limited, has interest in South China Holdings and Capital. Mr. Ng Hung Sang, Robert together with Ms. Cheung Choi Ngor, Christina and Mr. Richard Howard Gorges, management shareholders of the Company, have beneficial interests in Earntrade Investments Limited, which directly and indirectly through Bannock Investment Limited holds shares in South China Holdings and Capital. Ms. Cheung Choi Ngor, Christina, who is an ex-director of Capital Publishing Limited, a wholly-owned subsidiary of Capital and Mr. Richard Howard Gorges, are also directors of various members of South China Group. As Capital and certain members of South China Media Limited, a subsidiary of South China Holdings, are principally engaged in magazine publication, Mr. Ng Hung

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Sang, Robert, Ms. Cheung Choi Ngor, Christina and Mr. Richard Howard Gorges are regarded to be interested in such competing businesses of the Jessica Group. Likewise, Ms. Ng, Jessica Yuk Mui, Chief Executive Officer of the Company, is also a director of South China Holdings, director of certain members of South China Media Limited and a non-executive director of Capital.

Save as disclosed above, none of the Directors or chief executives of the Jessica Group, the initial management shareholders or the substantial shareholders (as defined under the GEM Listing Rules) of the Company or their respective associates had any interest in a business which competes or may compete or had any conflicts of interest with the business of the Jessica Group.

5. MATERIAL ADVERSE CHANGE

Save as disclosed herein, the Directors are not aware of any material adverse change in the financial positions or prospects of trading position of the Jessica Group since 31st December, 2003, the date to which the latest published audited consolidated financial statements of the Jessica Group for the year ended 31st December, 2003.

6. LITIGATION

As at the Latest Practicable Date, no member of the Jessica Group was engaged in any litigation or arbitration of material importance and there is no litigation or claim of material importance known to the Directors to be pending or threatened by or against any member of the Jessica Group.

7. SERVICE CONTRACTS

The executive Directors have entered into service contracts with the Company. Particulars of these contracts, except as indicated, are in all material respects identical and are set out below:

• (a) Each service contract is for an initial term of 1 year commencing on 1st October, 2001, in the case of Ms. Cheung Mei Yu and 24th August, 2001, in the case of Mr. Ng Hung Sang, Robert, Ms. Ng, Jessica Yuk Mui and Ms. Foo Fit Tak and will continue thereafter unless and until terminated by either party by giving 3 months prior written notice to the other and each executive Directors (other than Mr. Ng Hung Sang, Robert and Ms. Ng, Jessica Yuk Mui) is required to work full time for the Company;

• (b) The salary of each executive Directors during their terms of appointment is set out below which shall be subject to review at the discretion of the Company by a committee comprising two or more independent non-executive directors:

Name of Director	Annual salary
Mr. Ng Hung Sang, Robert	Nil
Ms. Ng, Jessica Yuk Mui	HK$431,828
Ms. Foo Kit Tak	HK$638,758
Ms. Cheung Mei Yu	HK$377,288

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• (c) Mr. Ng Hung Sang, Robert and Ms. Ng, Jessica Yuk Mui are entitled to be engaged, concerned or interested in the non-Jessica group business, trades or others as disclosed in prospectus of the Company dated 31st December, 2001.

Each non-executive Director is appointed for an initial terms of 2 years commencing from 4th September, 2001 and will thereafter be subject to retirement at the annual general meeting according to the articles of association of the Company.

Save as disclosed, as at the Latest Practicable Date, none of the Directors has entered into any service agreements with any member of the Jessica Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation other than statutory compensation).

Save as disclosed herein, no director is proposed to be appointed to the Jessica Group upon the formation of the Joint Venture.

8. MATERIAL CONTRACTS

The following contract, not being contract in the ordinary course of business, has been entered into by the Jessica Group within two years preceding the Latest Practicable Date and are or may be material:

• (a) The agreement dated 11th August, 2003 entered into between Grandpress Limited and Shanghai Boyang Advertising Limited for the establishment of Shanghai South China & Boyang Business Consultation Co., Ltd.; and

• (b) The Option Agreement and the Loan Agreement.

9. SPONSOR’S INTERESTS

As at the Latest Practicable Date, MasterLink Securities (Hong Kong) Corporation Limited (“MasterLink”), its directors, employees or associates (as referred to in Note 3 to Rule 6.35 of the GEM Listing Rules) did not have any interests in the securities of the Company or any members of the Jessica Group, or any rights to subscribe for or to nominate persons to subscribe for the securities of the Company or any members of the Jessica Group.

Pursuant to the agreement dated 27th November, 2002 entered into between the Company and MasterLink, MasterLink has received and will receive fees for acting as the Company’s sponsor for the period from 26th November, 2002 to 31st December, 2004 or until the termination of the agreement upon the terms and conditions as set out therein.

Save as disclosed above, MasterLink (including its directors and employees) and its associates, did not have any interests in the Company as at the Latest Practicable Date.

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10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the principal of business of the Company at Unit C, 3rd Floor, Wah Shing Centre, 5 Fung Yip Street, Chai Wan, Hong Kong during normal business hours on any weekday other than public holidays, up to and including 29th May 2004:

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

• (b) the prospectus of the Company dated 31st December, 2001;

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

• (d) the service contracts referred to in the paragraph headed “Service Contracts” in this appendix; and

• (e) the annual reports of the Company for the two years ended 31st December, 2002 and 31st December, 2003.

11. GENERAL

• (a) The registered office of the Company is at The Offices of M & C Corporate Services Limited, PO Box 309, George Town, Grand Cayman, Cayman Islands, British West Indies and the head office and principal place of business of the Company is at Unit C, 3rd Floor, Wah Shing Centre, 5 Fung Yip Street, Chai Wan, Hong Kong. The share registrar and transfer office of the Company is Standard Registrars Limited, Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.

• (b) The compliance officer of the Company is Ms. Ng, Jessica Yuk Mui, an executive Director and the Chief Executive Officer of the Company, who holds a bachelor’s degree in law from King’s College London, University of London in the United Kingdom. Ms. Ng is an associated member of the Chartered Institute of Management Accountants.

• (c) The qualified accountant and company secretary of the Company is Mr. Au Yeung, Keung Steve who is a fellow member of both Hong Kong Society of Accountants and The Chartered Institute of Management Accountants.

• (d) The Company established an audit committee on 4th September, 2001 with written terms of reference in compliance with Rules 5.23 to 5.25 of the GEM Listing Rules. The primary duties of the audit committee are to review and supervise the financial reporting and internal control procedures of the Jessica Group, and to review the Company’s annual

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reports and accounts, interim and quarterly reports. The audit committee comprises two members, Mr. So, George Siu Ming and Ms. Pong Oi Lan, Scarlett, who are independent non-executive Directors, further details of whom are set out below:

Mr. So, George Siu Ming, aged 45, is an Executive Director of Forefront International Holdings Limited, a company listed on the Stock Exchange. Mr. So obtained a Bachelor of Arts degree from the University of Toronto in Canada. He is an associate member of the Canadian Institute of Chartered Accountants, the Society of Management Accountants of Canada and the Hong Kong Society of Accountants. Mr. So has extensive experience in auditing, accounting and finance. Mr. So was appointed as an independent non-executive Director of the Company on 4th September, 2001. He is also an independent non-executive Director of Wah Shing International Holdings Limited, a company listed on the Singapore Stock Exchange.

Ms. Pong Oi Lan, Scarlett, aged 44, is the Managing Director of Realchamp Asset Management Limited and Health Quotient HQ International Holdings Limited. She completed her executive program at Harvard Business School in the United States. She also obtained a graduate diploma in business administration at Monash University in Australia, and a Bachelor’s degree in pharmaceutical sciences from the University of Saskatchewan in Canada. She is the honorary adviser of the advisory board of Hong Kong Federation of Business Students and a member of the HKSAR Election Committee (1998 & 2000). She has been the president of The Practising Pharmacists Association of Hong Kong for over eight years. She is being appointed in a number of government boards and committees such as the Hospital Authority, Action Committee Against Narcotics, Committee on Trust Fund for Severe Acute Respiratory Syndrome, Hong Kong Air Cadet Corps and the Hong Kong Council on Smoking and Health. She received an award of the Ten Outstanding Young Persons’ Selection in 1998. Ms. Pong was appointed as an independent non-executive Director of the Company on 4th September, 2001.

• (e) Save as disclosed in this circular:

• (i) none of the Directors has any direct or indirect interest in any assets which have been, since 31st December, 2003, the date to which the latest published audited financial results of the Company were made up, to the Latest Practicable Date, acquired or disposed of by or leased to any member of the Jessica Group or are proposed to be acquired or disposed of by or leased to any member of the Jessica Group; and

• (ii) none of the Directors is materially interested in any contract or arrangement subsisting at the Latest Practicable Date which is significant in relation to the business of the Jessica Group.

• (f) The English text of this circular shall prevail over the Chinese text.

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12. EXPERT AND CONSENT

The following is the qualification of the accountant who has given its opinions included in Appendix III in this circular:

Name

Qualification

Deloitte Touche Tohmatsu (“Deloitte”) Certified public accountants

Deloitte has given and has not withdrawn its written consent to the issue of this circular with the inclusion of Appendix III and the references to its names in the form and context in which it appears.

As at the Latest Practicable Date, Deloitte was not interested beneficially or otherwise in any Jessica Shares or shares in any of the Company’s subsidiaries and did not have any right, whether legally enforceable or not, or option to subscribe for or to nominate persons to subscribe for any Jessica Shares or shares in any of the Company’s subsidiaries nor did it has any interest, either direct or indirect interest in any assets which have been, since date to which the latest published audited financial statements of the Jessica Group were made up, acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Jessica Group.

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