Imperium Financial Group Limited - M&A Activity 2003

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or otherwise transferred all your shares in L.P. Lammas International Limited, you should at once hand this document, the accompanying form of acceptance and transfer of the Shares to the purchaser(s) or transferee(s) or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s). This document should be read in conjunction with the form of acceptance and transfer of the Shares and the form of acceptance and cancellation of the outstanding Options, the contents of which form part of the terms of the Offers contained herein.

Pursuant to Chapter 36 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited, the Securities and Futures Commission regulates L. P. Lammas International Limited in relation to the listing of its shares on The Stock Exchange of Hong Kong Limited. The Securities and Futures Commission takes no responsibility for the contents of this document, 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 document.

Link Wise Investments Limited

(Incorporated in the British Virgin Islands with limited liability)

L. P. Lammas International Limited 豐裕興業國際有限公司

(Incorporated in the Cayman Islands with limited liability)

MANDATORY UNCONDITIONAL CASH OFFERS BY SUN HUNG KAI INTERNATIONAL LIMITED ON BEHALF OF LINK WISE INVESTMENTS LIMITED TO ACQUIRE ALL THE ISSUED SHARES IN L. P. LAMMAS INTERNATIONAL LIMITED OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY LINK WISE INVESTMENTS LIMITED OR PARTIES ACTING IN CONCERT WITH IT AT HK$0.0173 EACH AND FOR CANCELLATION OF ALL THE OUTSTANDING OPTIONS TO SUBSCRIBE FOR SHARES IN L. P. LAMMAS INTERNATIONAL LIMITED AT A PRICE EQUAL TO HK$0.0685 PER EVERY 1,000 OPTIONS

Financial Adviser to Link Wise Investments Limited

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Independent Financial Adviser to the Independent Board Committee

SOMERLEY LIMITED

A letter from the board of directors of L.P. Lammas International Limited is set out on pages 7 to 14 of this document. A letter from the independent financial adviser, Somerley Limited, containing its opinion and advice to the Independent Board Committee (as defined in this document) is set out on pages 26 to 40 of this document. A letter from the Independent Board Committee to the Shareholders and the Optionholders is set out on pages 24 to 25 of this document.

The procedures for acceptance and settlement of the Offers are set out on pages 21 to 23 in the letter from Sun Hung Kai International Limited, on pages 41 to 43 in appendix I to this document and in the accompanying form of acceptance and transfer of the Shares and form of acceptance and cancellation of the outstanding Options. Acceptance of the Offers should be received by no later than 4:00 p.m. on 22nd December, 2003 or such later date as the Offeror may determine and announce.

This document will remain on the GEM website at www.hkgem.com for at least 7 days after the date of despatch of this document.

1st December, 2003

CHARACTERISTICS OF GEM

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

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board 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 the GEM-listed issuers.

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	Page
Expected timetable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Letter from Sun Hung Kai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Letter from Somerley. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Appendix I – Further terms of the Offers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	41
Appendix II – Financial information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . .	47
Appendix III – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	80

– ii –

EXPECTED TIMETABLE

2003

Commencement of the Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 1st December

Latest time and date for acceptance of the Offers . . . . 4:00 p.m. on Monday, 22nd December

Closing Date (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Monday, 22nd December

Latest date for posting of remittances for the

amounts due under the Offers in respect of valid acceptance received on or before

the latest time for acceptance (Note 2) . . . . . . . . . . . . . . . . . . . . Wednesday, 31st December

Notes:

The Offers, which are unconditional, will be closed at 4:00 p.m. on Monday, 22nd December, 2003 unless the Offeror revises or extends the Offers in accordance with the Takeovers Code. The Offeror reserves the right to extend the Offers until such date as it may determine. The Offeror will issue a teletext announcement through the Stock Exchange by 7:00 p.m. on the Closing Date as to whether the Offers have expired, or in relation to any extension of the Offers to state either the next closing date or the Offers will remain open until further notice. Such announcement will be republished in the newspapers and on the GEM website at www.hkgem.com on the next business day thereafter. If the Offeror decides to extend the Offers, at least 14 days’ notice in writing will be given, before the Offers are closed, to those Shareholders and Optionholders who have not accepted the Offers.
Acceptance of the Offers shall be irrevocable and not capable of being withdrawn subject to compliance by the Offeror with Rule 19 of the Takeovers Code.
Remittances in respect of the cash consideration payable for the Shares and Options tendered under the Offers will be posted to the relevant Shareholder or Optionholder by ordinary post at his/her/its own risk within 10 days of the date of receipt by the Registrar from the Shareholders or by the Company from the Optionholders of all the relevant documents which render the relevant acceptance under the Offers complete and valid.
Although the Offeror does not intend to extend the Offers, it reserves the right to do so.

All time references contained in this document refer to Hong Kong time.

– 1 –

DEFINITIONS

In this document, the following expressions have the meanings respectively set opposite them unless the context requires otherwise:

“associates”	has the meaning ascribed thereto under the GEM Listing
	Rules
“Board”	the board of Directors
“Business Day”	a day (excluding a Sunday, a Saturday and any day on
	which a tropical cyclone warning no. 8 or above is hoisted
	or remains hoisted between 9:00 a.m. and 12:00 noon
	and is not lowered at or before 12:00 noon or on which
	a “black” rainstorm warning is hoisted or remains in
	effect between 9:00 a.m. and 12:00 noon and is not
	discontinued at or before 12:00 noon) on which banks in
	Hong Kong are generally open for business
“CCASS”	the Central Clearing and Settlement System established
	and operated by HKSCC
“Closing Date”	4:00 p.m. on 22nd December, 2003 or if the Offers are
	extended, the date of closing of the Offers as extended
	by the Offeror in accordance with the Takeovers Code
“Companies Law”	the Companies Law, Cap. 22 (Law 3 of 1961, as
	consolidated or revised) of Cayman Islands
“Companies Ordinance”	the Companies Ordinance (Cap. 32 of the Laws of Hong
	Kong)
“Company”	L. P. Lammas International Limited, a company
	incorporated in the Cayman Islands with limited liability
	and the shares of which are listed on the GEM of the
	Stock Exchange
“Completion”	completion of the Sale and Purchase Agreement in
	accordance with its terms
“Completion Date”	27th November, 2003, being the date of Completion
“Composite Document”	this composite document dated 1st December, 2003
	issued jointly by the Offeror and the Company in
	connection with the Offers

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DEFINITIONS

“Conditions”	the conditions precedent to the Sale and Purchase
	Agreement, details of which are set out in the section
	headed “Conditions of the Sale and Purchase Agreement”
	in the letter from the Board in this document
“Consideration”	HK$11,000,000, being the aggregate purchase price for
	the Sale Shares at approximately HK$0.0173 per Sale
	Share
“Directors”	the directors, including independent non-executive
	directors, of the Company
“Executive”	the Executive Director of the Corporate Finance Division
	of the Securities and Futures Commission or any delegate
	of the Executive Director
“Forms of Acceptance”	the accompanyingWHITEform of acceptance and
	transfer in respect of the Share Offer and/or the
	YELLOWform of acceptance and cancellation in respect
	of the Option Offer
“GEM”	the Growth Enterprise Market of The Stock Exchange of
	Hong Kong Limited
“GEM Listing Rules”	the Rules Governing the Listing of Securities on the
	GEM
“Group”	the Company and its subsidiaries (as defined in the
	Companies Ordinance)
“HKSCC”	Hong Kong Securities Clearing Company Limited
“HK$”	Hong Kong Dollars, the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the
	People’s Republic of China
“Huge Profit”	Huge Profit Team Limited, a company incorporated in
	the British Virgin Islands with limited liability and the
	entire issued share capital of which is ultimately and
	beneficially owned by Mr. Liu

– 3 –

DEFINITIONS

“Independent Board Committee”	an independent committee of the Board comprising Dr.
	Chan Man Hung, Ms. Yu Yuk Ying, Vivian and Mr.
	Leung Wai Man, Raymond for the purpose of advising
	the Shareholders and the Optionholders on the Offers
“Joint Announcement”	the joint announcement dated 3rd November, 2003 made
	by the Offeror and the Company relating to the Sale and
	Purchase Agreement and the Offers
“Latest Practicable Date”	28th November, 2003, being the latest practicable date
	prior to the printing of this document for ascertaining
	certain information contained herein
“LPLA”	L. P. Lammas Asia Limited, a wholly-owned subsidiary
	of the Company and a licensed corporation carrying on
	Type 6 (advising on corporate finance) regulated activity
	under Part V of the Securities and Futures Ordinance
“Mr. Liu”	Mr. Liu Ka Lim, the ultimate beneficial owner and
	director of the Offeror
“Mr. Pong”	Mr. Pong Wai Yan, Louis, the chairman of the Company
	and an executive Director
“Offeror”	Link Wise Investments Limited, a company incorporated
	in the British Virgin Islands with limited liability and
	the entire issued share capital of which is beneficially
	owned by Huge Profit
“Offers”	the Share Offer and the Option Offer
“Option Offer”	the mandatory unconditional cash offer by Sun Hung
	Kai on behalf of the Offeror to cancel all the outstanding
	Options at HK$0.0685 in cash, per every 1,000 Options
“Optionholders”	holder(s) of the Options
“Options”	options to subscribe for Shares granted under the Share
	Option Scheme
“Overseas Shareholders”	Shareholders whose respective addresses appearing on
	the register of members of the Company are outside Hong
	Kong from time to time

– 4 –

DEFINITIONS

“Registrar”	Tengis Limited, the branch share registrar of the
	Company in Hong Kong, at G/F, Bank of East Asia
	Harbour View Centre, 56 Gloucester Road, Wanchai,
	Hong Kong
“Relevant Period”	the period between 4th May, 2003 (being the date falling
	six months prior to 3rd November, 2003, the date of the
	Joint Announcement) and the Latest Practicable Date
“Sale and Purchase Agreement”	a conditional agreement dated 24th October, 2003
	pursuant to which the Offeror agreed to purchase and
	the Vendor agreed to sell the Sale Shares at the
	Consideration
“Sale Shares”	636,400,000 Shares, representing 79.55% of the entire
	issued share capital of the Company as at the date of the
	Sale and Purchase Agreement, held by the Vendor prior
	to Completion
“Securities and Futures Ordinance”	Securities and Futures Ordinance (Cap. 571 of the Laws
	of Hong Kong)
“SFC”	Securities and Futures Commission
“Share(s)”	share(s) of HK$0.02 each in the capital of the Company
“Share Offer”	the mandatory unconditional cash offer made by Sun
	Hung Kai on behalf of the Offeror to acquire all the
	issued Shares other than those held or agreed to be
	acquired by the Offeror or parties acting in concert with
	it at HK$0.0173 per Share
“Share Offer Price”	HK$0.0173 per Share
“Share Option Scheme”	the share option scheme adopted by the Company on
	29th November, 2000
“Shareholders”	holders of the Shares

– 5 –

DEFINITIONS

“Somerley”

“Stock Exchange”
“Sun Hung Kai”
“Takeovers Code”
“Vendor”

Somerley Limited, which is a corporation licensed to undertake type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the Securities and Futures Ordinance and being the independent financial adviser to the Independent Board Committee in relation to the Offers

The Stock Exchange of Hong Kong Limited

Sun Hung Kai International Limited, which is a corporation licensed to undertake type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the Securities and Futures Ordinance and being the financial adviser to the Offeror in relation to the Offers

the Hong Kong Code on Takeovers and Mergers

WYP Holdings Limited, a company incorporated in the British Virgin Islands with limited liability, which directly owned 79.55% of the issued share capital of the Company as at the date of the Sale and Purchase Agreement and is wholly and beneficially owned by Mr. Pong

– 6 –

LETTER FROM THE BOARD

Link Wise Investments Limited

(Incorporated in the British Virgin Islands with limited liability)

L. P. Lammas International Limited 豐裕興業國際有限公司

(Incorporated in the Cayman Islands with limited liability)

Executive Directors:

Pong Wai Yan (Chairman) Kan Siu Lun (Chief Executive Officer) Yu Yan Chun

Non Executive Director

Dr. Chan Man Hung

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

Independent non-executive Directors: Yu Yuk Ying, Vivian Leung Wai Man, Raymond

Head Office and

Principal place of business: 12/F., Club Lusitano House 16 Ice House Street Central, Hong Kong

1st December, 2003

To the Shareholders and the Optionholders

Dear Sir or Madam,

MANDATORY UNCONDITIONAL CASH OFFERS BY

SUN HUNG KAI INTERNATIONAL LIMITED ON BEHALF OF LINK WISE INVESTMENTS LIMITED TO ACQUIRE ALL THE ISSUED SHARES IN L. P. LAMMAS INTERNATIONAL LIMITED OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY LINK WISE INVESTMENTS LIMITED OR PARTIES ACTING IN CONCERT WITH IT AT HK$0.0173 EACH AND FOR CANCELLATION OF ALL THE OUTSTANDING OPTIONS TO SUBSCRIBE FOR SHARES IN L. P. LAMMAS INTERNATIONAL LIMITED AT A PRICE EQUAL TO HK$0.0685 PER EVERY 1,000 OPTIONS

INTRODUCTION

– 7 –

LETTER FROM THE BOARD

Vendor agreed to sell an aggregate of 636,400,000 Shares for a total consideration of HK$11,000,000 (equivalent to approximately HK$0.0173 per Sale Share) subject to fulfillment of certain conditions. Completion took place on 27th November, 2003.

Immediately following Completion, the Offeror owns in aggregate 636,400,000 Shares, representing 79.55% of the issued share capital of the Company. Under Rule 26.1 of the Takeovers Code, the Offeror will be required to make a mandatory unconditional cash offer to acquire all the issued Shares not already owned and/or agreed to be acquired by it or parties acting in concert with it and a mandatory unconditional cash offer for cancellation of the outstanding Options. As such, Sun Hung Kai is making the Offers on behalf of the Offeror.

Mr. Pong, the chairman of the Company and an executive Director, is the sole shareholder of WYP Holdings Limited, which in turn is the Vendor of the Sale Shares. Furthermore, Mr. Pong is an Optionholder. Mr. Kan Siu Lun, an executive Director, is an Optionholder and owns 3,600,000 Shares, which represented 0.45% of the issued share capital of the Company as at the Latest Practicable Date. Mr. Yu Yan Chun, an executive Director, is also an Optionholder. Also, Mr. Pong, Mr. Kan Siu Lun and Mr. Yu Yan Chun are all salaried Directors. Accordingly, Mr. Pong, Mr. Kan Siu Lun and Mr. Yu Yan Chun are not considered to be sufficiently independent for the purpose of advising the Shareholders and the Optionholders in respect of the Offers. Accordingly, in accordance with Rule 2.1 of the Takeovers Code, the Independent Board Committee comprising Dr. Chan Man Hung who is a non-executive Director, and Ms. Vivian Yu Yuk Ying and Mr. Raymond Leung Wai Man who are independent non-executive Directors, has been established to consider the Offers and to advise the Shareholders and the Optionholders as to whether or not the respective terms of the Offers are fair and reasonable and whether or not to accept the Offers.

Somerley has been appointed as the independent financial adviser to advise the Independent Board Committee on the Offers.

The purpose of this document is to provide you with, amongst other things, information relating to the Offers. The terms of the Offers are set out in this letter from the Board, in the letter from Sun Hung Kai on pages 15 to 23 of this document, in appendix I to this document, and in the Forms of Acceptance. The letter from the Independent Board Committee containing its recommendation on the Offers and the letter from Somerley containing its advice to the Independent Board Committee in respect of the Offers are set out on pages 24 to 25 and pages 26 to 40 of this document respectively.

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LETTER FROM THE BOARD

THE SALE AND PURCHASE AGREEMENT

Date: 24th October, 2003

Vendor: WYP Holdings Limited, which is a company incorporated in the British Virgin Islands with limited liability, directly owned 79.55% of the issued share capital of the Company immediately prior to Completion and is wholly and beneficially owned by Mr. Pong

Purchaser: the Offeror

Sale Shares

636,400,000 Shares, which represented 79.55% of the issued share capital of the Company as at the date of the Sale and Purchase Agreement. The Sale Shares which were owned by the Vendor prior to Completion were acquired by the Offeror, free from all encumbrances and together with all rights and benefits attached or accruing thereto, including all rights to any dividend or other distribution declared, made or paid after the Completion Date.

Consideration

HK$11,000,000 (equivalent to approximately HK$0.0173 per Sale Share), which was negotiated and determined on arm’s length basis with reference to the audited consolidated net asset value of the Group of approximately HK$3.7 million as at 31st March, 2003. The purchase price of approximately HK$0.0173 per Sale Share represents a discount of approximately 42.33% to the closing price of HK$0.03 per Share as quoted on the Stock Exchange on 24th October, 2003, being the last trading day of the Shares prior to the issue of the Joint Announcement, and a discount of approximately 42.33% to the average closing price of approximately HK$0.03 per Share for the 10 trading days up to and including 24th October, 2003.

Basis of determination of the Consideration

The Consideration was arrived at after arm’s length negotiation between the Vendor and the Offeror and principally on the following basis:

(a) the parties to the Sale and Purchase Agreement considered that, given the trading volume of the Shares was relatively thin in the past few months, it might be difficult for the Vendor to dispose of the Sale Shares in the open market without depressing the market price; and

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LETTER FROM THE BOARD

(b) HK$11,000,000, equivalent to about HK$0.0173 (rounded up to the fourth decimal point) per Sale Share, represents approximately 11.36 times over the unaudited net asset value of about HK$0.0014 per Share as at 22nd October, 2003.

Payment terms

The Consideration was paid by the Offeror to the Vendor in the following manner:

(a) a deposit of HK$1.1 million, being 10% of the Consideration, was paid upon signing of the Sale and Purchase Agreement; and
(b) the balance of the Consideration was paid upon Completion.

The above payment terms were agreed upon after commercial arm’s length negotiations between the Offeror and the Vendor.

Conditions of the Sale and Purchase Agreement

Completion was conditional upon the following Conditions:

(a) all relevant regulatory consent for the change in control of the Company and all transactions contemplated under the Sale and Purchase Agreement having been obtained and no indication having been received on or before the Completion Date from the Stock Exchange or the SFC to the effect that the listing status of the Shares may be withdrawn or objected to (or conditions will or may be attached thereto) including but not limited to as a result of Completion or in connection with the terms of the Sale and Purchase Agreement or for any other reasons other than an inadequate percentage of the issued share capital of the Company being in public hands following the close of the Offers;
(b) completion of a due diligence review entitled (but not obliged) to be carried out by the Offeror and any of its officers, employees, agents, professional advisers or other persons authorised by the Offeror and confirmation by the Offeror or the Offeror’s solicitors to the Vendor or the Vendor’s solicitors that the results of such due diligence review are to the reasonable satisfaction of the Offeror. Such due diligence review refers to the review and investigation by the Offeror on the Group including without limitation its assets, liabilities, contracts, commitments, business, financial and legal and taxation aspects; and

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LETTER FROM THE BOARD

(c) the announcement in respect of the transactions contemplated under the Sale and Purchase Agreement having been cleared by the Stock Exchange and the SFC.

All the aforesaid Conditions have been fulfilled or waived (as the case may be).

Completion

Completion took place on 27th November, 2003.

THE OFFERS

As a result of the Offeror having become interested in 79.55% of the issued share capital of the Company upon Completion, the Offeror is obliged to make the Offers pursuant to the Takeovers Code.

As at the Latest Practicable Date, the Company had 800,000,000 Shares in issue. In addition, there are 13,800,000 outstanding Options entitling the Optionholders to subscribe for an aggregate of 13,800,000 Shares at an exercise price of between HK$0.02 and HK$0.2 per Share, with exercise periods expiring on various dates up to and including 13th June, 2008. The exercise prices of these Options are higher than the Share Offer Price.

Sun Hung Kai, on behalf of the Offeror, is making unconditional mandatory cash offers on the following basis:

For each Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.0173 in cash

For cancellation of each 1,000 Options . . . . . . . . . . . . . . . . . . . . . . HK$0.0685 in cash

Under the Offers, the Options will be cancelled, and the Shares will be acquired free from all encumbrances and together with all rights and benefits, including all rights to any dividend or other distribution declared, made or paid after the Completion Date.

An expected timetable of the Offers is set out under the heading “Expected Timetable” of this document. Further details of the terms of the Offers are set out in the letter from Sun Hung Kai on pages 15 to 23 of this document, in appendix I to this document, and in the Forms of Acceptance.

Apart from the Options referred to above, there were no other outstanding options, warrants, derivatives or conversion right affecting the Shares as at the Latest Practicable Date.

None of the Shareholders or Optionholders or Directors indicated to the Offeror or any person acting in concert with it any irrevocable commitment to accept or reject the Offers as at the Latest Practicable Date.

– 11 –

LETTER FROM THE BOARD

INFORMATION ABOUT THE GROUP

Business

The Company is an investment holding company with its operating subsidiaries principally engaged in the business brokerage services in connection with middle market of the mergers and acquisitions in the Greater China region. These services range from industry research, due diligence of potential investors and/or investment target to negotiation of the terms of proposed transactions. The Group also offers business introduction services and provides its clients with access to funding sources through credit financing introduction in order to foster appropriate business conditions which could facilitate completion of mergers and acquisitions transactions.

Shareholding structure

The changes in shareholding of the Company as a result of Completion are summarised as follows:

Name The Vendor_(Note 1) _Director Kan Siu Lun The Offeror_(Note 2)_ Other Shareholders Total	Number of Shares held before Completion 636,400,000 3,600,000 – 160,000,000 800,000,000	Number of Shares held Approximate immediately % of the after issued share Completion capital before and before Completion commencement Date of the Offers 79.55% – 0.45% 3,600,000 – 636,400,000 20.00% 160,000,000 100.00% 800,000,000	Approximate % of the issued share capital as at the Latest Practicable Date – 0.45% 79.55% 20.00%
			100.00%

Notes:

(1) WYP Holdings Limited, an investment company incorporated in the British Virgin Islands with limited liability, the entire issued share capital of which is ultimately and beneficially owned by Mr. Pong.

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LETTER FROM THE BOARD

(2) Link Wise Investments Limited, an investment company incorporated in the British Virgin Islands with limited liability, the entire issued share capital of which is beneficially owned by Huge Profit, which is an investment company incorporated in the British Virgin Islands with limited liability, the entire issued share capital of which is ultimately and beneficially owned by Mr. Liu.

Financial information

The audited consolidated net loss of the Group for the three years ended 31st March, 2003 were approximately HK$4.62 million, HK$10.51 million and HK$5.84 million respectively, and the unaudited consolidated net loss of the Group for the six months ended 30th September, 2003 was approximately HK$2.44 million. As at 30th September, 2003, the unaudited consolidated net asset value of the Group was approximately HK$1.28 million.

Further information

Further information in relation to the Group is set out in appendices II and III to this document.

INFORMATION ON THE OFFEROR AND INTENTION OF THE OFFEROR REGARDING THE FUTURE OF THE GROUP

Your attention is drawn to the sections headed “Information about the Offeror” and “Intention of the Offeror regarding the future of the Group” in the letter from Sun Hung Kai as set out on pages 15 to 23 of this document.

LISTING STATUS OF THE COMPANY

The Offeror intends that the Company will remain listed on GEM after Completion and the close of the Offers. In the event that, upon Completion and the close of the Offers, less than 20% of the Shares then in issue are held in the hands of the public, it is the intention of the Offeror to place down its shareholding interest in the Company to independent third parties not connected or acting in concert with any director, chief executive, substantial shareholder or management shareholder of the Company or any of its subsidiaries or their respective associates as soon as possible. However, no firm arrangement in respect of the placing has been made. Each of the Offeror and the sole director of the Offeror has undertaken to the SFC and the Company to take appropriate steps to ensure that not less than 20% of the issued Shares will be held by the public as required by the GEM Listing Rules (or such other percentage as may be required from time to time) as soon as possible upon the close of the Offers.

– 13 –

LETTER FROM THE BOARD

The SFC has indicated that, if upon the close of the Offers, less than 20% of the issued share capital of the Company is held in the hands of the public or if the SFC believes that (i) a false market exists or may exist in the trading of the Shares; or (ii) there are too few Shares in public hands to maintain an orderly market, then it will consider exercising its discretion to suspend trading in the Shares on the Stock Exchange. Accordingly, it should be noted that upon the close of the Offers, there may be insufficient public float for the Shares and therefore trading in the Shares may be suspended until a sufficient level of public float is attained. Shareholders and the public should exercise caution when dealing in the Shares.

The SFC will also closely monitor all future acquisitions or disposals of assets by the Company. The SFC has indicated that it has the discretion to require the Company to issue a circular to the Shareholders irrespective of the size of any proposed transactions, particularly when such proposed transactions represent a departure from the principal activities of the Company. The SFC also has the power to aggregate a series of transactions of the Company and any such transactions may result in the Company being treated as if it were a new listing applicant.

RECOMMENDATIONS

Your attention is drawn to the letters from the Independent Board Committee and Somerley, which set out their recommendations in relation to the Offers and the principal factors considered by them in arriving at their recommendations. The letter from the Independent Board Committee is set out on pages 24 to 25 to this document and the letter from Somerley is set out on pages 26 to 40 to this document.

ADDITIONAL INFORMATION

In considering what action to take in connection with the Offers, Shareholders should consider their own tax positions and, if they are in any doubt, they should consult their professional advisers.

You are recommended to read this document together with the accompanying Forms of Acceptance for details of the Offers. Your attention is also drawn to the additional information contained in the appendices to this document.

By Order of the Board of L. P. Lammas International Limited Pong Wai Yan Chairman

– 14 –

LETTER FROM SUN HUNG KAI

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1st December, 2003

To the Shareholders and the Optionholders

Dear Sir or Madam,

MANDATORY UNCONDITIONAL CASH OFFERS BY

INTRODUCTION

On 3rd November, 2003, it was announced jointly by the Offeror and the Company that a conditional Sale and Purchase Agreement was entered into between the Offeror and the Vendor on 24th October, 2003. Details of the Sale and Purchase Agreement are set out under the section headed “The Sale and Purchase Agreement” in the letter from the Board contained in this document.

Upon Completion taking place on 27th November, 2003, the Offeror owned in aggregate 636,400,000 Shares, representing 79.55% of the issued share capital of the Company. Under Rule 26.1 of the Takeovers Code, the Offeror is required to make a mandatory unconditional cash offer to acquire all the issued Shares not already owned and/or agreed to be acquired by it or parties acting in concert with it and a mandatory unconditional cash offer for cancellation of the outstanding Options. As such, Sun Hung Kai is making the Offers on behalf of the Offeror.

This letter, together with appendix I to this document and the Forms of Acceptance, set out, amongst other things, the terms of the Offers, procedures for acceptance of the Offers, information on the Offeror and the intentions of the Offeror regarding the future of the Group.

– 15 –

LETTER FROM SUN HUNG KAI

Shareholders and Optionholders are strongly advised to consider carefully the information contained in the letter from the Board set out on pages 7 to 14 of this document, the letter from the Independent Board Committee to the Shareholders and the Optionholders set out on pages 24 to 25 of this document and the letter from Somerley, the independent financial adviser, to the Independent Board Committee set out on pages 26 to 40 of this document.

THE OFFERS

Upon Completion, the Offeror is interested in 79.55% of the issued share capital of the Company and hence under Rule 26.1 of the Takeovers Code, the Offeror is required to make a mandatory unconditional cash offer to acquire all the issued Shares not already owned and/or agreed to be acquired by it or parties acting in concert with it and a mandatory unconditional cash offer for cancellation of the outstanding Options.

Accordingly, Sun Hung Kai, on behalf of the Offeror, is making the Offers on the following basis:

For each Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.0173 in cash

For cancellation of each 1,000 Options . . . . . . . . . . . . . . . . . . . . . . HK$0.0685 in cash

Acceptance of the Offers shall be unconditional and once given cannot be withdrawn subject to compliance by the Offeror with Rule 19 of the Takeovers Code.

The Share Offer

As at the Latest Practicable Date, the Company had 800,000,000 Shares in issue. Based on the Share Offer Price, the Share Offer values the issued share capital of the Company (other than those Shares already owned and/or agreed to be acquired by the Offeror or parties acting in concert with it) at HK$2,830,280.

The Share Offer Price of HK$0.0173 per Share is approximately the same as the price paid by the Offeror to the Vendor for each Sale Share under the Sale and Purchase Agreement.

The Share Offer Price represents:

(i) a discount of approximately 42.33% to the closing price of HK$0.030 per Share as quoted on the Stock Exchange on 24th October, 2003, being the last trading day of the Shares prior to the issue of the Joint Announcement;

– 16 –

LETTER FROM SUN HUNG KAI

(ii) a discount of approximately 42.33% to the average closing price of HK$0.030 per Share as quoted on the Stock Exchange for the 10 consecutive trading days up to and including the last trading day of the Shares prior to the issue of the Joint Announcement;
(iii) a discount of approximately 44.19% to the average closing price of approximately HK$0.031 per Share as quoted on the Stock Exchange for the 30 consecutive trading days up to and including the last trading day of the Shares prior to the issue of the Joint Announcement;
(iv) a discount of approximately 66.08% to the closing price of HK$0.051 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and
(v) approximately 2.68 times over the audited net asset value of approximately HK$0.0047 per Share as at 31st March, 2003.

The Option Offer

As at the Latest Practicable Date, there were 13,800,000 outstanding Options entitling the Optionholders to subscribe for an aggregate of 13,800,000 Shares at an exercise price of between HK$0.02 and HK$0.2 per Share, with exercise periods expiring on various dates up to and including 13th June, 2008. The exercise prices of these Options are higher than the Share Offer Price. Sun Hung Kai, on behalf of the Offeror, is making an offer to the Optionholders for cancellation of the outstanding Options at a nominal consideration of HK$0.0685 in cash in respect of every 1,000 Options to subscribe for 1,000 Shares.

Optionholders who hold, in aggregate, 13,800,000 outstanding Options comprise the three executive Directors, Mr. Pong, Mr. Kan Siu Lun and Mr. Yu Yan Chun (holding 6,600,000 outstanding Options, 5,600,000 outstanding Options and 800,000 outstanding Options respectively) and an employee of the Group (holding 800,000 outstanding Options).

On the basis of the price to be offered for cancellation of the Options under the Option Offer as mentioned above in this section, if all Optionholders agree to cancel their Options in full under the Option Offer made by Sun Hung Kai on behalf of the Offeror, the outstanding Options are valued at approximately HK$945 in total.

Apart from the Options referred to above, there were no other outstanding options, warrants, derivatives or conversion rights affecting the Shares as at the Latest Practicable Date.

– 17 –

LETTER FROM SUN HUNG KAI

On the basis that there were 800,000,000 Shares in issue and 13,800,000 outstanding Options as at the Latest Practicable Date, and assuming no further Shares will be issued or repurchased by the Company, the issued Shares will be increased to 813,800,000 Shares, and the Shares that will be subject to the Share Offer will become 177,400,000 Shares if all Options are exercised before the close of the Offers.

Effects of accepting the Offers

By accepting the Share Offer, the Shareholders will sell their Shares free from all encumbrances and together with all rights and benefits, including all rights to any dividend or other distribution declared, made or paid after the Completion Date. By accepting the Option Offer, the Optionholders will give up the subscription rights attaching to their Options which will be cancelled by the Company.

Sufficiency of financial resources

The Offers will be financed by internal resources of the Offeror. We are satisfied that there are sufficient resources available to the Offeror to satisfy acceptance of the Offers in full.

Highest and lowest prices

During the Relevant Period, the highest and lowest closing prices of the Shares on the Stock Exchange were HK$0.055 per Share as quoted on 17th November, 2003 and 18th November, 2003 and HK$0.012 per Share as quoted on 25 different trading days between 5th May, 2003 and 10th June, 2003, respectively.

Dealing in the Shares by the Offeror during the Relevant Period

Except for the Sale Shares acquired under the Sale and Purchase Agreement, none of the Offeror or its ultimate beneficial owner or parties acting in concert with any one of them owned or controlled (directly or indirectly) any Shares or Options as at the Latest Practicable Date, and there have been no dealings in the shares, options, warrants, derivatives, or conversion rights affecting the shares in the Company by the Offeror or parties acting in concert with it during the Relevant Period.

Compulsory acquisition

The Offeror does not intend to apply any right which may be available to it to acquire compulsorily any Shares outstanding after the close of the Offers.

– 18 –

LETTER FROM SUN HUNG KAI

Stamp duty

The Offeror will pay seller’s ad valorem stamp duty arising in connection with acceptance of the Share Offer, amounting to HK$1.00 for every HK$1,000 or part thereof of the consideration payable in respect of the relevant acceptance, which the Shareholders who accept the Share Offer will be liable to pay and be deducted from the proceeds due to such Shareholders under the Share Offer.

INFORMATION ABOUT THE OFFEROR

The Offeror is a private company incorporated in the British Virgin Islands with limited liability. Since its incorporation on 8th October, 2003, the Offeror has not carried on any business activity other than entering into the Sale and Purchase Agreement. The sole director of the Offeror is Mr. Liu and the entire issued share capital of the Offeror is ultimately and beneficially owned by Mr. Liu. Further biographical details of Mr. Liu are set out in the section headed “Proposed change of the composition of the Board” below.

Before Completion, the Offeror, its sole beneficial owner and director, and their respective associates are independent of and not connected with the Company, the directors, chief executive, substantial shareholder or management shareholders of the Company or any of its subsidiaries or their respective associates (as defined in the GEM Listing Rules) or parties acting in concert with any of them (as defined in the Takeovers Code).

INTENTION OF THE OFFEROR REGARDING THE FUTURE OF THE GROUP

It is the intention of the Offeror to hold the Sale Shares as a long term investment and to continue to carry on the business of the Group following Completion. Mr. Liu has over 15 years of professional experience in the fields of finance and accounting and also experience in diverse business areas. In the course of Mr. Liu’s professional practice and operation of his business, Mr. Liu has worked closely with business entrepreneurs and institutions, banks, financial advisers and investment funds, and established an extensive network of business connections over the years, which the Group can exploit to its advantage as it will provide a firm and sound base upon which the business of the Group can expand in volume as well as in the scope of operation. The Group will therefore benefit from Mr. Liu’s experience and professional expertise in business. It is expected that as the new controlling Shareholder with his new management team, Mr. Liu will be able to bring in new clientele and new business ventures and opportunities for the merger and acquisition brokerage business as well as the licensed activities of the Group, thus enhancing the market profile and broadening the earning base of the Group. Save as disclosed herein, it is the intention of the Offeror that there will be no material change in the existing management and employees of the Group by reason only of completion of the Offers. Hence, it is not expected that there will be any material impact on the business operations of the Group. The sole director of the Offeror also confirms that the Offeror has no intention to inject or re-deploy or to dispose of the fixed assets of the Group following completion of the Offers.

– 19 –

LETTER FROM SUN HUNG KAI

Any further investments or business integration that might be conducted by the Group will be subject to the constitutional documents, relevant regulatory requirements and approval of Shareholders where so required and will be in full compliance with the relevant GEM Listing Rules.

PROPOSED CHANGE OF THE COMPOSITION OF THE BOARD

It is intended that after the close of the Offers, Mr. Pong will remain as a Director and continue to act as the responsible officer of LPLA for a minimum period of one month from the close of the Offers until Mr. Pong shall be requested by the Offeror to vacate his office. Mr. Pong’s employment with the Company after Completion will be pursuant to the terms of his existing employment contract with the Company and alterations (if any) to his terms will not be on more favourable terms than those on which he has been previously employed by the Company. There is no intention to retain Mr. Pong on a long-term service basis. The Offeror currently intends that Mr. Pong’s continued service with LPLA would be a temporary and transitional measure to enable smooth transition and handover of the management of the ongoing jobs and projects handled by Mr. Pong to the new management to avoid undue disruption to the business of the Group and to enable LPLA to continue to carry on the licensed regulated activity pending the appointment of a new responsible officer and licensed representative, which appointment is subject to approval of the SFC.

The SFC granted an approval for the application for the Offeror to become a substantial shareholder of LPLA on 24th November, 2003.

The Company will ensure that, at all times, the Board includes at least two independent non-executive Directors and a compliance officer so as to comply with Rules 5.05 and 5.14 of the GEM Listing Rules.

It is the intention of the Offeror that Mr. Liu will be appointed as executive Director and such appointment will take effect not earlier than any date as permitted under the Takeovers Code, the GEM Listing Rules or other laws applicable to the Company. The Offeror may nominate additional Directors to the Board after the close of the Offers, but such persons have not yet been determined. Details of any appointments together with details of the appointees will be announced by the Company in compliance with the GEM Listing Rules. The sole director of the Offeror believes that the aforesaid proposed change in the composition of the

– 20 –

LETTER FROM SUN HUNG KAI

Board will not have any adverse impact on the Company. Further biographical details of Mr. Liu are set out below:

Mr. Liu

Mr. Liu, aged 47, has over 15 years of professional experience in the fields of finance and accounting. Mr. Liu is a fellow member of the Chartered Association of Certified Accountants and an associate member of the Hong Kong Society of Accountants. Mr. Liu is currently a director and the Chairman of Digital World Holdings Limited, the shares of which are listed on the main board of the Stock Exchange, as well as director of several private companies in Hong Kong which are principally engaged in health food production and marketing, investment holding, and are exploring business opportunities in the area of telecommunication.

TAXATION

Shareholders and Optionholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation implications of their accepting the Offers. It is emphasised that none of the Company, the Offeror or Sun Hung Kai or any of their respective directors or any persons involved in the Offers accepts responsibility for any tax effects or liabilities of any person or persons as a result of their acceptance of the Offers.

ACCEPTANCE AND SETTLEMENT

(a) Procedures for acceptance of the Offers

(i) The Share Offer

To accept the Share Offer, you should complete the accompanying WHITE form of acceptance and transfer of the Shares in accordance with the instructions printed thereon, which instructions form part of the terms of the Share Offer.

The completed WHITE form of acceptance and transfer of the Shares should then be forwarded, together with the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) for not less than the number of Shares in respect of which you intend to accept the Share Offer by post or by hand to the Registrar at Tengis Limited, G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong marked “ L.P. Lammas Share Offer ” on the envelope, as soon as practicable after receipt of this document and in any event no later than 4:00 p.m. on Monday, 22nd December, 2003 or such later time and/or date as the Offeror may announce.

– 21 –

LETTER FROM SUN HUNG KAI

(ii) The Option Offer

To accept the Option Offer, you should complete the YELLOW form of acceptance and cancellation of the outstanding Options obtainable from the head office and principal place of business of the Company at 12/F., Club Lusitano Building, 16 Ice House Street, Central, Hong Kong in accordance with the instructions printed thereon, which instructions form part of the terms of the Option Offer.

The completed YELLOW form of acceptance and cancellation of the outstanding Options should then be forwarded, together with the relevant Option certificate(s) (if any) stating the number of Options for not less than the number of Options in respect of which you intend to accept the Option Offer, by post or by hand to the company secretary of the Company at 12/F., Club Lusitano Building, 16 Ice House Street, Central, Hong Kong , marked “ L.P. Lammas Option Offer ” on the envelope, as soon as practicable after receipt of this document and in any event no later than 4:00 p.m. on Monday, 22nd December, 2003 or such later time and/or date as the Offeror may announce.

(b) Settlement of the Offers

(i) Share Offer

Provided that the relevant WHITE form(s) of acceptance and transfer of the Shares, Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) are in complete and good order in all respects and received by the Registrar by no later than 4:00 p.m. on Monday, 22nd December, 2003, a cheque for the amount representing the cash consideration (after deducting the relevant seller’s ad valorem stamp duty payable by you) due to you in respect of the Shares tendered by you under the Share Offer will be despatched to you by ordinary post at your own risk within 10 days of the date on which all the relevant documents which render such acceptance complete and valid are received by the Registrar.

(ii) Option Offer

Provided that the relevant YELLOW form of acceptance and cancellation of the outstanding Options (and/or any satisfactory indemnity or indemnities required in respect thereof) and Option certificate(s) (if any) are in complete and good order in all respects and received by the Company by no later than 4:00 p.m. on Monday, 22nd December, 2003, a cheque for the amount representing the cash consideration due to you in respect of the Options tendered by you for cancellation under the Option Offer will be despatched to you by ordinary post at your own risk within 10 days of the date on which all the relevant documents which render such acceptance complete and valid are received by the company secretary of the Company.

– 22 –

LETTER FROM SUN HUNG KAI

Settlement of the consideration to which any Shareholder and Optionholder is entitled under the Offers will be implemented in full in accordance with the terms of the Offers, without regard to any lien, right of set-off, counterclaim or other analogous right to which the Offeror may otherwise be, or claim to be, entitled against such Shareholder and Optionholder.

GENERAL

To ensure equality of treatment of all Shareholders, those Shareholders who hold Shares as nominee for more than one beneficial owner should, as far as practicable, treat the holding of each beneficial owner separately. In order for beneficial owners of Shares, whose investments are registered in nominee names, to accept the Share Offer, it is essential that they provide instructions to their nominees of their intentions with regard to the Share Offer.

The attention of Shareholders not resident in Hong Kong is drawn to paragraph 5 of the section headed “General” in appendix I to this document.

All documents and remittances sent to Shareholders and Optionholders by post will be sent to them at their own risk. Such documents and remittances will be sent to the Shareholders and the Optionholders at their addresses as they appear in the register of members of the Company or the register of Optionholders (as the case may be) or, in the case of joint Shareholders, to the Shareholder whose name stands first in the register of members of the Company, as applicable. None of the Offeror, the Company, Sun Hun Kai or any of their respective directors or any other persons involved in the Offers will be responsible for any loss or delay in transmission or any other liabilities that may arise as a result thereof.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendices which form part of this document.

Yours faithfully, For and on behalf of

Sun Hung Kai International Limited Manus Tam Eric Shum Director Director

– 23 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

L. P. Lammas International Limited 豐裕興業國際有限公司

(Incorporated in the Cayman Islands with limited liability)

1st December, 2003

To the Shareholders and the Optionholders

Dear Sir or Madam,

We refer to the document dated 1st December, 2003 jointly issued by the Company and the Offeror (the “Document”) of which this letter forms part. Terms defined in the Document shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed as members of the Independent Board Committee to consider the terms of the Offers and to advise you as to whether, in our opinion, the terms of the Offers are fair and reasonable so far as the Shareholders and the Optionholders are concerned. Somerley Limited has been appointed as the independent financial adviser to advise the Independent Board Committee in respect of the Offers. Details of its advice and the principal factors taken into consideration in arriving at its recommendation are set out in the “Letter from Somerley” on pages 26 to 40 of the Document.

Your attention is drawn to: (i) the “Letter from the Board”; (ii) the “Letter from Sun Hung Kai”; (iii) the “Letter from Somerley”; and (iv) the additional information set out in the appendices to the Document.

RECOMMENDATION

Share Offer

We, having taken into account the advice of Somerley, consider that the terms of the Share Offer are fair and reasonable so far as the Shareholders are concerned, and recommend the Shareholders to accept the Share Offer.

– 24 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Option Offer

We, having taken into account the advice of Somerley, consider that the offer price for the outstanding Options at HK$0.0685 in cash per 1,000 Options is fair and reasonable and recommend the Optionholders to accept the Option Offer.

Yours faithfully, For and on behalf of

Independent Board Committee

Dr. Chan Man Hung Ms. Yu Yuk Ying, Vivian Mr. Leung Wai Man, Raymond Non-executive Director Independent non-executive Directors

– 25 –

LETTER FROM SOMERLEY

The following is the text of a letter of advice from Somerley, the independent financial adviser to the Independent Board Committee, which has been prepared for the purpose of incorporation into this document, setting out its advice to the Independent Board Committee in connection with the Offers.

Somerley Limited

Suite 3108, One Exchange Square 8 Connaught Place Central Hong Kong

1st December, 2003

The Independent Board Committee L. P. Lammas International Limited 12th Floor, Club Lusitano Building 16 Ice House Street Central Hong Kong

Dear Sirs,

MANDATORY UNCONDITIONAL CASH OFFERS TO ACQUIRE ALL THE ISSUED SHARES IN L. P. LAMMAS INTERNATIONAL LIMITED AND FOR CANCELLATION OF ALL OUTSTANDING OPTIONS

We refer to our engagement to advise the Independent Board Committee in connection with the Offers. Details of the Offers are contained in the composite document to the Shareholders dated 1st December, 2003 (the “Document”), of which this letter forms part. Unless the context otherwise requires, capitalised terms used in this letter shall have the same meanings as those defined in the Document.

On 24th October, 2003, the Offeror entered into the Sale and Purchase Agreement with the Vendor, pursuant to which the Offeror agreed to purchase and the Vendor agreed to sell, subject to fulfillment of certain conditions, an aggregate of 636,400,000 Shares for a total consideration of HK$11,000,000. As at the date of the Sale and Purchase Agreement, the Company had 13,800,000 outstanding Options entitling the Optionholders to subscribe for a total of 13,800,000 Shares. Upon Completion which took place on 27th November, 2003, the Vendor has become interested in an aggregate of 636,400,000 Shares, representing 79.55% of the existing issued share capital of the Company. Under Rule 26.1 of the Takeovers Code, the Offeror is required to make the Share Offer to acquire all the issued Shares not already owned or agreed to be acquired by the Offeror or parties acting in concert with it and the Option Offer for cancellation of the outstanding Options.

– 26 –

LETTER FROM SOMERLEY

The Board currently consists of three executive Directors, one non-executive Director and two independent non-executive Directors. Of the executive Directors, Mr. Pong is the sole beneficial owner of the Vendor. Mr. Kan Siu Lun and Mr. Yu Yan Chun are salaried employees of the Company. Consequently, they are considered not independent in the context of the Offers. The remaining Directors, Dr. Chan Man Hung who is a non-executive Director and Ms. Vivian Yu Yuk Ying and Mr. Raymond Leung Wai Man who are independent nonexecutive Directors, have been appointed as the Independent Board Committee to give a recommendation to the Shareholders other than the Vendor (the “Independent Shareholders”) and the Optionholders as regards the Offers. We have been appointed to advise the Independent Board Committee on the fairness and reasonableness of the terms of the Offers.

In formulating our opinion, we have relied on the information and facts supplied, and the opinions expressed, by the Directors. We have assumed that all representations made to us are true, accurate and complete and that the information contained in the Document is fair and accurate and we have relied on them accordingly. We have also assumed that all representations contained or referred to in the Document were true at the time they were made and at the date of the Document. We have also sought and received confirmation from the Directors that no material facts have been omitted from the information supplied and opinions expressed by them. We consider that we have reviewed sufficient information to enable us to reach an informed view and to provide a reasonable basis for our recommendation. We have no reason to question the accuracy of the information provided to us or to believe that any material facts have been omitted or withheld. We have not, however, conducted any independent investigation into the business and affairs of the Group or into its prospects.

We have not considered the tax implications on the Independent Shareholders and the Optionholders of the acceptance of the Offers since these depend on their individual circumstances. In particular, Independent Shareholders and Optionholders who are residents overseas or subject to overseas taxes or Hong Kong taxation on securities dealings should consider their own tax position and, if in any doubt, should consult their own professional advisers.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion as regards the Offers, we have taken into consideration the following principal factors and reasons:

The Share Offer

1. Historical results and trading prospects

The Group is engaged in the provision of business brokerage services in connection with middle market of the mergers and acquisitions in the Greater China region. These services range from industry research, due diligence of potential investors and/or investment targets and negotiation of the terms of proposed transactions. The Group also offers business introduction services and provides its clients with access to funding sources through credit financing introduction in order to foster appropriate business conditions which could facilitate completion of mergers and acquisitions.

– 27 –

LETTER FROM SOMERLEY

The audited consolidated results of the Group for the three years ended 31st March, 2003 and the unaudited consolidated results for the six months ended 30th September, 2003, as disclosed in Appendix II to the Document, are summarised as follows:

Turnover
Cost of services
provided
Other revenue
Administrative and
other operating
expenses
Finance costs
Loss before tax
Taxation
Loss attributable
to Shareholders

For the six
months ended
For the year
30th September,
ended 31st March,
2003
2002
2003
2002
2001
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
371
2,225
3,480
2,926
3,787
(827)
(1,911)
(2,706)
(5,883)
(3,489)
(456)
314
774
(2,957)
298
100
298
142
420
409
(2,037)
(3,337)
(6,668)
(7,961)
(5,290)
(48)
(47)
(92)
(15)
–
(2,441)
(2,772)
(5,844)
(10,513)
(4,583)
–
–
–
–
(42)
(2,441)
(2,772)
(5,844)
(10,513)
(4,625)

Turnover of the Group represents net invoiced value of services provided. For the year ended 31st March, 2002, turnover amounted to HK$2.9 million, representing a decrease of 22.7% as compared to HK$3.8 million for 2001. The decrease in turnover was principally attributable to the economic downturn in Asia caused by political uncertainties in the United States since late 2000, which was exacerbated by the 9-11 incident in late 2001. Cost of services provided and administrative and operating expenses increased significantly by approximately 57.7% from HK$8.8 million in 2001 to HK$13.8 million in 2002, mainly due to the increase in staff salaries by HK$1.3 million for additional headcount and rental expenses of HK$0.7 million resulting from expansion in the operations, and a full-year payment of Directors’ remuneration of HK$3.6 million for service contracts commenced in December 2000. As a result, the Group recorded a loss attributable to Shareholders of HK$10.5 million in 2002, against a loss of HK$4.6 million for 2001.

– 28 –

LETTER FROM SOMERLEY

The year ended 31st March, 2003 remained a difficult year for the Group due to the continued distress economy which affected market sentiments negatively, leading to sluggish and hesitant investment responses as well as prolonged deal cycles. Despite the difficult market atmosphere, the Group continued to build on its past efforts in diversifying its services geographically to the PRC market. As a result, turnover of the Group for the year ended 31st March, 2003 recorded an increase of 18.9% over that of the previous year. On the other hand, the Group has taken measures to contain cost. Staff salaries dropped by HK$1.0 million due to a reduction in the number of headcount. Directors’ remuneration was reduced by HK$2.2 million as Mr. Pong agreed to waive his remuneration for the period from July 2002 to October 2003 while another executive Director agreed to change his remuneration terms from fixed salary to commission basis from October 2002. Rental expenses were reduced by HK$0.4 million due to the relocation to a new office premises with lower rental. These contributed to the reduction in the loss attributable to Shareholders to HK$5.8 million for the year ended 31st March, 2003.

During the six months ended 30th September, 2003, the Group was adversely affected by the outbreak of the Severe Acute Respiratory Syndrome which had serious impact on the Hong Kong and PRC markets. Market growth in Hong Kong continued to slacken, domestic demand remained sluggish and unemployment rate stayed at a high level. These adversely affected the mergers and acquisitions market and led to prolonged deal cycles. Turnover for this period amounted to HK$0.4 million, representing a decrease of 83.3% as compared to HK$2.2 million for the corresponding period in 2002. Despite the drop in turnover, loss attributable to Shareholders for this period was decreased by 11.9% to HK$2.4 million as compared to the loss of HK$2.8 million for the corresponding period in 2002. This was principally attributable to the reduction in Directors’ remuneration and staff salaries by HK$1.5 million as explained in the paragraph above as well as the decrease in legal and professional expenses due to the expiration of retained sponsorship agreement in March 2003.

The Company has not declared any dividend in the last three financial years. On the basis of the past losses and lack of dividend distribution by the Company in the past few financial years, the Shares are not considered to be an attractive investment in terms of earnings and dividend yield.

The Directors are of the view that the PRC regulations towards mergers and acquisitions activities are gradually becoming more transparent, both to stimulate foreign investment and to accommodate the development of the mergers and acquisitions market in the PRC. In addition, riding on the fact that China has posted strong foreign direct investment growth and has been regarded as one of the most attractive foreign direct investment destinations, the Directors consider that more foreign investments would enter the PRC market through mergers and acquisitions. In view of these, the Directors are optimistic about the prospects of the mergers and acquisitions market in the Greater China Region in general. Nevertheless, the Directors consider that the business of the

– 29 –

LETTER FROM SOMERLEY

Group will continue to face the challenges of the current depressed investment sentiment and upset market environment in Hong Kong. We concur with the Directors’ view that the closer economic ties between Hong Kong and the PRC will bring about more opportunity for merger and acquisition activities, in particular, the Closer Economic Partnership Arrangement protocol between the PRC and Hong Kong is expected to stimulate more business opportunities. Nonetheless, whether the Company will be able to benefit from such potential economic growth will depend on the Group’s ability to source and complete new projects. It is therefore premature at this stage to conclude that the Group’s performance would benefit from the economic recovery, if any, in the near terms.

2. Net asset value

As at the Latest Practicable Date, there were 800,000,000 Shares outstanding. At the Share Offer Price of HK$0.0173 per Share, the Company was valued at HK$13.84 million. The audited consolidated net tangible asset value of the Group as at 31st March, 2003 amounted to approximately HK$3.7 million, equivalent to approximately HK$0.0047 per Share. Taking into account the loss incurred by the Group of approximately HK$2.4 million in the six months ended 30th September, 2003 as disclosed in the interim report, the unaudited consolidated net tangible asset value of the Group as at that date would be approximately HK$1.3 million, or approximately HK$0.0016 per Share. The Share Offer Price therefore represents approximately 3.68 times of the audited consolidated net tangible asset value of the Group as at 31st March, 2003 and 10.81 times of the unaudited consolidated net tangible asset value of the Group as at 30th September, 2003 respectively.

3. Comparison against Comparable Companies

In assessing the Share Offer Price, we have evaluated the Share Offer Price in terms of various commonly adopted financial ratios it represents and compared such ratios against those for companies which are also listed on GEM and are engaged in business consultancy and advisory related businesses (the “Comparable Companies”). For this purpose, we could only identified two Comparable Companies which fit in with the aforesaid selection criteria. We have however excluded International Capital Network Holdings Limited as one of the Comparable Companies for our assessment of the Share Offer Price because it is currently in liquidation and trading of its shares on the Stock Exchange has been suspended since 13th November, 2002. The audited financials of the remaining Comparable Company as extracted from the audited accounts set out in its latest annual report for the year ended 30th April, 2003 are set out in the table below.

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LETTER FROM SOMERLEY

		Net		Audited net
	Audited	operating		tangible
	earnings	cashflow	Dividend	asset value
	per share	per share	per share	per share
	HK$	HK$	HK$	HK$
B M Intelligence
International Limited	Loss	Negative	0.004	0.076
the Company	Loss	Negative	Nil	0.0047

On the basis of the audited financials per share of the Comparable Company, the financial ratios represented by the latest market price of the shares of the Comparable Company are as follows:

Share price

	Share price
	as at
	the Latest	Price-to-	Price-to-		Price-to-
	Practicable	earnings	cashflow	Dividend	book
	Date	ratio	ratio	yield	ratio
	HK$
B M Intelligence
International Limited	0.04	N/A	N/A	10.0%	0.53
the Company	0.0173	N/A	N/A	N/A	3.68
	(Note)

Note: Being the Share Offer Price

In the normal instance of an enterprise engaged in business consulting services like the Company, we would have considered it appropriate to assess the Share Offer Price in light of its historical financial performance. However, in the case of the Company, given that the Group recorded audited losses and negative operating cashflow for the year ended 31st March, 2003, it would be impracticable for us to arrive at meaningful multiples for the Share Offer Price using price-to-earnings or price-to-cashflow ratio. The Company has not declared any dividends in the last three financial years. It is therefore also impracticable for us to assess the Share Offer Price in terms of the dividend yield it represents or to appraise the Share Offer Price against the dividend yield of the Comparable Company.

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LETTER FROM SOMERLEY

We consider that the price-to-revenue ratio is not an appropriate methodology for valuing companies in the business brokerage industry, as such methodology assumes a homogenous industry where the revenues can reasonably be expected to produce a consistent level of earnings. In the Company’s case, a substantial portion of its revenues is generated on success or completion basis depending on the size of the merger and acquisition transactions completed. The cost incurred on individual transaction may not be directly proportionate to the size of the transaction. Accordingly, the profit margin for different transactions as well as for different companies within the industry may vary substantially. We therefore do not consider that the price-to-revenue ratio is appropriate for the purpose of our assessment of the Share Offer Price.

In light of the above, we have evaluated the Share Offer Price using the price-tobook ratio it represents. As the Comparable Companies and the Company are operating in similar industry with similar asset base, we consider the price-to-book ratio is an appropriate reference in assessing the Share Offer Price in light of the impracticability in arriving at other multiples such as price-to-earnings, price-to-cashflow and dividend yield for the Share Offer Price. Given the financial losses sustained by the Group in recent years and the uncertainty as to when it will return to profitability and in view of the fact that the Group does not have any tangible assets which carry significant appreciation potential, we consider that it is unlikely that a prospective buyer would be prepared to pay a significant premium over the underlying net assets of the Group. As noted from the above table, the price-to-book ratio represented by the Share Offer Price is higher than that of the Comparable Company based on the latest market prices and latest available audited net tangible assets value.

4. Trading in the Shares on the Stock Exchange

(i) Market price of the Shares

Given the limited trading volume of the Shares as discussed below, it would not be appropriate to review the performance of the Shares over too short a period. Alternatively, the performance over a long historical period would not be reflective of the current market conditions. Accordingly, we consider that a oneyear period would be an appropriate time frame for a review of the price performance of the Shares for the purposes of the Offers.

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LETTER FROM SOMERLEY

The following chart illustrates the movement of daily closing price of the Share during the twelve-month period (the “Twelve-month Period”) prior to 24th October, 2003 (the “Pre-suspension Date”), being the last trading day prior to suspension in trading of the Shares on 27th October, 2003 pending the issue of the Joint Announcement, and up to the Latest Practicable Date:

==> picture [341 x 199] intentionally omitted <==

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

HK$
0.055
0.050
0.045
0.040
0.035
0.030
0.025
0.020
Share Offer Price
0.015
0.010
0.005
0
Source : Bloomberg
1 Nov 02 1 Dec 02 1 Jan 03 1 Feb 03 1 Mar 03 1 Apr 03 1 May 03 1 Jun 03 1 Jul 03 1 Aug 03 1 Sep 03 1 Oct 03 1 Nov 03
----- End of picture text -----

As shown in the chart above, the Share price was fairly stable during the first three months of the Twelve-month Period. Shares were traded within the range of HK$0.025 to HK$0.03 per Share during that period until 28th January, 2003 when the Share price dropped to HK$0.018 per Share after the release of the Group’s third quarter results. Share price further dropped to HK$0.012 per Share on 6th March, 2003 and stayed around that level for a few months. Share price rebounded to HK$0.018 on 30th June, 2003 and further to HK$0.032 per Share on 27th August, 2003. Share price surged to HK$0.055 per Share on 17th and 18th November, 2003. The Directors were not aware of any reason for such increase in the Share price. Since then, the Shares closed within a narrow range of HK$0.05 to HK$0.051 per Share up to the Latest Practicable Date.

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LETTER FROM SOMERLEY

The Share Offer Price of HK$0.0173 represents premium over or discount to the Share prices during the Twelve-month Period and as at the Latest Practicable Date as follows:

		Premium/
		(Discount)
	HK$	%
Average closing price of the Share during
the Twelve-month Period	0.021	(17.6)
Closing price of the Share on 24th October, 2003,
being the Pre-suspension Date	0.030	(42.3)
Average closing price of the Share for
the ten trading days up to and including
the Pre-suspension Date	0.030	(42.3)
Highest closing price of the Share during
the Twelve-month Period	0.032	(45.9)
Lowest closing price of the Share during
the Twelve-month Period	0.012	44.2
Closing price of the Share as at
the Latest Practicable Date	0.051	(66.1)

As illustrated above, despite the relative percentage changes in Share price, the Shares have been traded within a narrow range, in terms of absolute monetary value, of HK$0.012 to HK$0.032 per Share during the Twelve-month Period. Given the low liquidity of the Shares as discussed in more detail below, the Share price is vulnerable to fluctuations caused by small trading volume and may or may not remain at the current level after the close of the Offers.

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LETTER FROM SOMERLEY

(ii) Liquidity of the Shares

The total monthly volume of Shares traded and the percentage of such monthly volume to the total number of Shares in issue during the Twelve-month Period and up to the Latest Practicable Date are set out as follows:

		Days with
		trading of
		Shares/total	Percentage to
	Total monthly	number of	total issued
	trading volume	trading days	Shares
	(Shares)		(%)
			(Note 4)
2002
October_(Note 1)_	–	0/5	–
November	200,000	1/20	0.025
December	90,000	1/20	0.011
2003
January	80,000	1/21	0.010
February	–	0/19	–
March	10,000	1/21	0.001
April	–	0/20	–
May	–	0/20	–
June	800,000	3/20	0.100
July	100,000	1/22	0.013
August	740,000	2/21	0.093
September	–	0/21	–
October_(Note 2)_	–	0/27	–
November_(Note 3)_	3,170,000	4/20	0.396

Source : Bloomberg

Notes:

Since 25th October, 2002, being the first day of the Twelve-month Period.
Up to 24th October, 2003, being the Pre-suspension Date.
From 4th November, 2003 (being the first trading day of the Shares after the release of the Joint Announcement) up to and including the Latest Practicable Date.
The percentage is calculated based on 800,000,000 Shares in issue throughout the Twelve-month Period and up to the Latest Practicable Date.

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LETTER FROM SOMERLEY

As shown in the above table, trading of the Shares during the Twelvemonth Period was very inactive, with total monthly trading volume maintained at less than 0.1% of the total issued Shares. In fact, other than 10 trading days, no other trading of the Shares was recorded during the rest of the Twelve-month Period.

The following chart illustrates the daily trading volume of the Shares during the Twelve-month Period and up to the Latest Practicable Date:

==> picture [341 x 192] intentionally omitted <==

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

Shares
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
Source : Bloomberg
1 Nov 02 1 Dec 02 1 Jan 03 1 Feb 03 1 Mar 03 1 Apr 03 1 May 03 1 Jun 03 1 Jul 03 1 Aug 03 1 Sep 03 1 Oct 03 1 Nov 03
----- End of picture text -----

In view of the low liquidity of the Shares, we are of the opinion that it may be difficult for the Independent Shareholders to dispose of their Shares in the open market without adversely affecting the market price of the Shares. We therefore consider that the Share Offer provides an opportunity for the Independent Shareholders to realise their investment in the Company if they wish to do so in the current trading environment for the Shares.

5. Intention of the Offeror regarding the future of the Group

(i) Business and operations

It is the intention of the Offeror that following Completion, the Group will continue to carry on its existing business. Save for the proposed changes to the Board, it is the intention of the Offeror that there will be no material change in the existing management and employees of the Group by reason only of the Offers. Hence, it is not expected that there will be any material impact on the business operations of the Group. The sole director of the Offeror has confirmed that the Offeror has no intention to inject any materials assets into, or re-deploy or dispose of the fixed assets of, the Group following the Offers.

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LETTER FROM SOMERLEY

(ii) Management

Pursuant to the Sale and Purchase Agreement, all Directors except Mr. Pong will resign from their positions in the Company. Mr. Pong will continue to act as the responsible officer of LPLA for a minimum period of one month from the close of the Offers until he shall be requested by the Offeror to vacate his office. The continuation of Mr. Pong’s service would be a temporary and transitional arrangement to enable smooth transition and hand over of the management of the ongoing jobs and projects handled by Mr. Pong to the new management so as to avoid undue disruption to the business of the Group. It also enables LPLA to continue to carry on the licensed regulated activity pending the appointment of new responsible officer and licensed representative.

It is intended that Mr. Liu will be appointed as an executive Director. A brief biography of Mr. Liu is set out in the “Letter from Sun Hung Kai” contained in the Document. The Offeror may nominate additional Directors to the Board after the close of the Offers, but such persons have not yet been nominated. Mr. Liu is the ultimate beneficial owner of the Offeror. He is currently a director and Chairman of Digital World Holdings Limited, the shares of which are listed on the Main Board of the Stock Exchange. As Mr. Liu was just recently appointed as a director and chairman of Digital World Holdings Limited, his performance in chairing and managing a listed company is yet to be demonstrated. Nonetheless, with the professional experience of Mr. Liu as a qualified accountant and his business associations built up over the years, it is expected that the appointment of Mr. Liu as an executive Director could bring in new clientele and business opportunities to the Group.

(iii) Listing

The Offeror intends that the Company will remain listed on GEM upon the close of the Offers. In the event that upon the close of the Offers, less than 20% of the Shares then in issue are held in the hands of the public, it is the intention of the Offeror to place down its shareholding interest in the Company to independent third parties not connected or acting in concert with any director, chief executive, substantial shareholder or management shareholder of the Company or any of its subsidiaries or their respective associates as soon as possible. However, no firm arrangement in respect of the placing has been made. Each of the Offeror and the sole director of the Offeror has undertaken to the SFC and the Company to take appropriate steps to ensure that not less than 20% of the issued Shares will be held by the public as required by the GEM Listing Rules (or such other percentage as may be required from time to time) as soon as possible upon the close of the Offers.

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LETTER FROM SOMERLEY

6. Risk factors

The nature of the Group’s business is people-oriented. Its success is dependent, in part, upon the expertise of its key management as well as the relationship maintained by the senior personnel with the Group’s clients and other strategic parties. We understand from the Directors that Mr. Pong and Mr. Kan Siu Lun, both executive Directors, are the responsible officers and licensed representatives of LPLA. Both of them have handson involvement in the projects completed by the Group and are in charge of the ongoing projects being undertaken by the Group.

Pursuant to the Sale and Purchase Agreement, all Directors except Mr. Pong will resign from their positions in the Company. Although Mr. Pong will continue to act as the responsible officer of LPLA for a minimum period of one month from the close of the Offers, Mr. Pong’s service would be a temporary and transitional arrangement. Mr. Liu will be appointed as an executive Director while the nomination of additional new Directors, if any, have not been decided. The performance of the Group after the close of the Offers would be reliant on the Group’s ability to appoint appropriate replacement of the senior management promptly to administer the ongoing projects, as well as the capability of the new management in maintaining existing relationship with clients and strategic partners and fostering new business opportunities in the mergers and acquisitions market.

As disclosed in the interim report of the Group, the Group had approximately HK$1.8 million cash on hand as at 30th September, 2003, which declined from HK$4.3 million as at 31st March, 2003 primarily due to the loss incurred during the first half of the year. In addition, the Group has repaid an advance from Mr. Pong of approximately HK$0.9 million in October 2003 out of the Group’s internal resources. Subject to the successful completion of ongoing projects or other new projects to generate additional cash inflow and the availability of other new capital, the Group may operate under a tight cashflow.

In light of the above and the uncertainty as to the speed of recovery in the economy, we are at present not in a position to form a view on the effects of the new controlling shareholder and new management on the overall business, operating performance and financial position of the Group after the close of the Offers.

The Option Offer

As at the Latest Practicable Date, there were a total of 13,800,000 outstanding Options entitling the holders thereof to subscribe for a total of 13,800,000 Shares at exercise prices of HK$0.02 or HK$0.2, with exercise period expiring on various dates up to and including 13th June, 2008.

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LETTER FROM SOMERLEY

For the cancellation of the Options and renunciation of all rights thereunder, the Optionholders will receive HK$0.0685 in cash for every 1,000 Options. Given that the exercise prices of the Options are all above the Share Offer Price, the Options carry no intrinsic value based on the Share Offer Price and it is not reasonable to expect that the Options would be offered for more than a nominal sum in light of the Share Offer Price being offered for the Shares. In addition, apart from those Options which are exercisable at HK$0.02, the exercise price of the other Options is higher than the latest market price of the Shares and these Options carry no intrinsic value in the current market.

CONCLUSION AND ADVICE

The Share Offer

Having taken into account the above principal factors and reasons, and in particular:

the Share Offer Price is equivalent to the purchase price paid by the Offeror for the Sale Shares under the Sale and Purchase Agreement, which is arrived at after arm’s length negotiations between the Offeror and the Vendor;
the Group has been loss making for the past three financial years ended 31st March, 2003 and no dividend has been declared for these periods. The Group may operate under a tight cashflow due to losses incurred in 2003 and repayment of Director’s advances. Given the people-oriented nature of the business and the uncertainty in the speed of recovery in the market, we are not in a position to anticipate when a significant improvement in the Group’s financial position and performance could be seen;
the Share Offer Price represents a premium of 268% over the audited net tangible asset value per Share as at 31st March, 2003, which premium is higher than the price-to-book ratio of the Comparable Company. The existing tangible assets of the Group do not carry significant potential for appreciation in value; and
despite the Shares have been traded above the Share Offer Price during the three months period prior to the Joint Announcement and up to the Latest Practicable Date, the trading volume of the Shares has been thin. The Share price is vulnerable to fluctuations caused by small trading volume and may or may not remain at the current level after the close of the Offers,

we consider that the terms of the Share Offer are fair and reasonable so far as the Independent Shareholders are concerned and accordingly advise the Independent Board Committee to recommend the Independent Shareholders to accept the Share Offer.

Independent Shareholders should note that the Share Offer Price represents a discount to the closing price of the Shares in the range of HK$0.018 to HK$0.032 during the three months period prior to the Joint Announcement. The Share Offer Price also represents a discount of approximately 66.1% to the closing price of HK$0.051 per Share on the Latest Practicable Date. Independent Shareholders should also note the possibility that, following the

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LETTER FROM SOMERLEY

close of the Offers, the price of the Shares may or may not be higher than the Share Offer Price. Should the market price of the Shares continue to exceed the Share Offer Price during the period when the Share Offer remains open, and the sales proceeds, net of transactions costs, exceed the amount receivable under the Share Offer, Independent Shareholders should consider not accepting the Share Offer and should seek to sell their Shares on the market. However, Independent Shareholders should note that trading of the Shares has been minimal. As such, Independent Shareholders may or may not be able to dispose of their Shares in the market at the current Share price level.

For those Independent Shareholders who, after considering the information on the Offeror and the future intentions of the Offeror regarding the Group, are attracted by the future prospects of the Group following the Offers, should consider retaining some or all of their Shares.

The Option Offer

The exercise prices of all the Options are above the Share Offer Price. Based on the Share Offer Price, the Options carry no intrinsic value. On the basis of the terms of the Share Offer of which we consider to be fair and reasonable as explained above, despite the offer price for the Options is nominal, we consider that the terms for the Option Offer are fair and reasonable. Accordingly, we advise the Independent Board Committee to recommend the Optionholders to accept the Option Offer.

However, should the Optionholders wish to realise a higher effective value for their Options and the market price of the Shares exceeds the exercise price of the Options and the Offer Price for the Shares during the period when the Option Offer remains open, they should consider exercising their Options in accordance with the terms thereof and selling the Shares issued to them on the exercise of the Options in the market, if the net proceeds after deducting the expenses from such sale would be greater than the net proceeds receivable pursuant to the Option Offer. For those Optionholders who, after considering the information on the Offeror and the future intentions of the Offeror regarding the Group, are attracted by the future prospects of the Group following the Offers, should consider retaining some or all of their Options and exercising them in future instead of receiving the nominal value under the Option Offer. Optionholders should also note that pursuant to the terms of the Share Option Scheme, Options granted to them are not transferrable and any outstanding Options shall lapse if the Optionholder ceases to be an employee of the Group.

The procedure for acceptance of the Offers is set out in the letter from Sun Hung Kai contained in, and Appendix I to, the Document and the accompanied forms of acceptance. The latest time for lodging acceptances (unless extended by the Offeror) is 4:00 p.m. on 22nd December, 2003. Independent Shareholders and Optionholders are urged to act according to this timetable if they wish to accept the Offers.

Yours faithfully, for and on behalf of

SOMERLEY LIMITED Mei H. Leung Managing Director

– 40 –

FURTHER TERMS OF THE OFFERS

APPENDIX I

1. FURTHER PROCEDURES FOR ACCEPTANCE OF THE OFFERS

A. The Share Offer

(a) If the Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Share(s) is/are in the name of a nominee company or some name(s) other than your own, and you wish to accept the Share Offer (either in full or in respect of part of your holding(s)), you must either:
(i) lodge your Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) with the nominee company, or other nominee(s) with instructions authorising it to accept the Share Offer on your behalf and requesting it to deliver the duly completed WHITE form of acceptance and transfer of the Shares together with the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) to the Registrar; or
(ii) arrange for the Share certificate(s) to be registered in your name(s) by the Company through the Registrar, and send the duly completed WHITE form of acceptance and transfer of the Shares together with the relevant Share certificates and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) to the Registrar; or
(iii) if your Share certificate(s) has/have been lodged with your licensed securities dealer or custodian bank through CCASS, instruct your licensed securities dealer or custodian bank to authorise HKSCC Nominees Limited to accept the Share Offer on your behalf on or before the deadline set out by HKSCC Nominees Limited, which is normally one business day before the latest date for receiving acceptance of the Share Offer. In order to meet the deadline set by HKSCC Nominees Limited, you should check with your licensed securities dealer or custodian bank for the timing on processing of your instruction, and submit your instruction to your licensed securities dealer or custodian bank as required by it; or
(iv) if your Share certificate(s) has/have been lodged with your Investor Participant Account with CCASS, authorise your instruction via CCASS Phone System or CCASS Internet System not later than one business day before the latest date on which acceptance of the Share Offer must be received by the Registrar.

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FURTHER TERMS OF THE OFFERS

APPENDIX I

(b) If the certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Share(s) is/are not readily available and/or is/are lost and you wish to accept the Share Offer in respect of your Shares, the relevant WHITE form of acceptance and transfer of the Shares should nevertheless be completed and delivered to the Registrar accompanied by a letter stating that you have lost one or more of your Share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) or that it/ they is/are not readily available. If you find such document(s) and/or any other document(s) or if it/they become(s) available, the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) should be forwarded to the Registrar as soon as possible thereafter. If you have lost your Share certificate(s), you should also write to the Registrar for a letter of indemnity which, when completed in accordance with the instructions given, should be returned to the Registrar.
(c) If you have lodged (a) transfer(s) of any of your Share(s) for registration in your name(s) and have not yet received your Share certificate(s) and you wish to accept the Share Offer, you should nevertheless complete the relevant WHITE form of acceptance and transfer of the Shares and deliver it to the Registrar together with the transfer receipt(s) duly signed by yourself (yourselves). Such action will be deemed to be an irrevocable authority to the Offeror and/or Sun Hung Kai and/or their respective agent(s) to collect from the Company or the Registrar on your behalf the relevant Share certificate(s) when issued and to deliver such certificate(s) to the Registrar and to authorise and instruct the Registrar to hold such certificate(s), subject to the terms of the Share Offer as if it was/they were delivered to the Registrar with the relevant WHITE form of acceptance and transfer of the Shares.
(d) Acceptances of the Share Offer will only be treated as valid and the cheque(s) for the consideration due will only be despatched if the completed WHITE form of acceptance and transfer of the Shares accompanied by the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) are received by the Registrar by no later than 4:00 p.m. on Monday, 22nd December, 2003 or such later time and/or date as the Offeror may determine and announce with the consent of the Executive.
(e) No acknowledgment of receipt for any WHITE forms of acceptance and transfer of the Shares, Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) will be given.

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FURTHER TERMS OF THE OFFERS

APPENDIX I

(f) The address of the Registrar, Tengis Limited, is at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong .

B. The Option Offer

(a) If you accept the Option Offer, you should complete the YELLOW form of acceptance and cancellation of the outstanding Options obtainable from the head office and principal place of business of the Company at 12/F., Club Lusitano Building, 16 Ice House Street, Central, Hong Kong in accordance with the instructions printed thereon, which instructions form part of the terms of the Option Offer.
(b) The completed YELLOW form of acceptance and cancellation of the outstanding Options should be forwarded, together with the relevant Option certificate(s) (if any) stating the number of the outstanding Options for not less than the number of outstanding Options in respect of which you intend to accept the Option Offer, by post or by hand to the company secretary of the Company at 12/F., Club Lusitano Building, 16 Ice House Street, Central, Hong Kong , marked “ L.P. Lammas Option Offer ” on the envelope, as soon as possible and in any event so as to reach the company secretary of the Company at the aforesaid address by no later than 4:00 p.m. on Monday, 22nd December, 2003 or such later time and/or date as the Offeror may determine and announce with the consent of the Executive.

2. ACCEPTANCE PERIOD AND REVISIONS

The Offeror reserves the right, subject to the Takeovers Code, to extend the Offers after the despatch of this document or to revise it, either in its terms and conditions or in the value or nature of the consideration offered or otherwise.

Unless the Offers have previously been extended or revised, the Offers shall close at 4:00 p.m. on Monday, 22nd December, 2003.

If the Offers are extended or revised, a teletext announcement of such extension or revision will be issued by the Offeror through the Stock Exchange by 7:00 p.m. on the Closing Date which either states the next closing date or the Offers will remain open until further notice. If the Offers are extended or revised, it will remain open for acceptance for a period of not less than 14 days from the posting of the written notification of the extension or revision to those Shareholders and/or Optionholders who have not accepted the Offers and, unless previously extended or revised, shall be closed at 4:00 p.m. on the subsequent closing date. The benefit of any revision of the Offers will be available to any Shareholders and/or Optionholders who have previously accepted the Offers. The execution of any Form(s) of Acceptance by or on behalf of any Shareholders and/or Optionholders who have previously accepted the Offers shall be deemed to constitute acceptance of the revised Offers.

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FURTHER TERMS OF THE OFFERS

APPENDIX I

In order to be valid, acceptance must be received by the Registrar (in case of the Share Offer) or the company secretary of the Company (in case of the Option Offer) in accordance with the instructions printed on the relevant Form(s) of Acceptance by 4:00 p.m. on Monday, 22nd December, 2003, unless the Offers are extended or revised on or before the Closing Date.

If the Closing Date is not a Business Day, the closing date of the Offers shall be deemed to fall on the next day which is a Business Day and, any announcement required to be given on a closing date shall be properly given if made on the next following Business Day.

The Offeror may introduce new terms and conditions to be attached to any revision to the Offers, or any subsequent revision thereof but only to the extent necessary to implement the revised offer and subject to the consent of the Executive.

If the Closing Date of the Offers is extended, any reference in this document and in the Forms of Acceptance to the closing date shall, except where the context otherwise requires, be deemed to refer to the closing date of the Offers as so extended.

3. ANNOUNCEMENTS

By 6:00 p.m. on the Closing Date, or such later time and/or date as the Executive agrees, the Offeror shall inform the Executive and (if applicable) the Stock Exchange of its intentions in relation to the extension, revision, or expiry of the Offers. The Offeror shall publish a teletext announcement through the Stock Exchange by 7:00 p.m. on the Closing Date stating whether the Offers have been revised or extended. Such announcement will be republished in accordance with the Takeovers Code on the next Business Day thereafter, which shall state the total number of Shares and Options:

(i) for which acceptance of the Offers have been received;
(ii) held, controlled or directed by the Offeror or persons acting in concert with it before the offer period (i.e. 3rd November, 2003);
(iii) acquired or agreed to be acquired during the offer period by the Offeror or any persons acting in concert with it;
(iv) details of any outstanding derivative in respect of securities in the Company entered into by the Offeror or any persons acting in concert with it; and
(v) details of any arrangement (whether by way of option, indemnity or otherwise) in relation to shares of the Offeror or the Company and which might be material to the Offers.

The announcement must also specify the percentages of the issued share capital of the Company and voting rights of the Company represented by these numbers of Shares.

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FURTHER TERMS OF THE OFFERS

APPENDIX I

In computing the number of Shares and Options represented by acceptance, there may be included or excluded, for announcement purposes, acceptance which is subject to verification.

As required under the Takeovers Code and the GEM Listing Rules, all announcements in relation to the Offers in respect of which the Executive and (if applicable) the Stock Exchange have confirmed that they have no further comments, must be posted on the GEM website at www.hkgem.com.

4. RIGHT OF WITHDRAWAL

The Offers are unconditional and acceptance of the Offers tendered by the Shareholders and Optionholders shall be irrevocable and cannot be withdrawn, except in the circumstances set out in Rule 19.2 of the Takeovers Code which is to the effect that if the Offeror is unable to comply with any of the requirements of making announcements under Rule 19 of the Takeovers Code relating to the Offers, a summary of which has been set out in section 3 of this appendix above, the Executive may require that acceptors be granted a right of withdrawal, on terms acceptable to the Executive until the aforesaid requirements can be met.

5. GENERAL

(a) Acceptance of the Offers by any person will be deemed to constitute a warranty by such person to the Offeror and the Company that the Shares sold under the Share Offer or Options tendered for cancellation by the Company under the Option Offer are sold or tendered by such person free from all encumbrances and together with all rights and benefits, including all rights to any dividend or other distribution declared, made or paid after the Completion Date.
(b) All communications, notices, WHITE forms of acceptance and transfer of the Shares, YELLOW forms of acceptance and cancellation of the outstanding Options, Share or Option certificates, transfer receipts (only in the case of the Share Offer), other documents of title (and/or any satisfactory indemnity or indemnities required in respect thereof) will be delivered by or sent to or from the Shareholders and the Optionholders, or their designated agents, by post at their own risks, and neither the Offeror, the Company, Sun Hung Kai nor any of their respective directors accepts any liability for any loss in postage or other liabilities that may arise as a result thereof.
(c) The provisions set out in the accompanying WHITE form of acceptance and transfer of the Shares and the YELLOW form of acceptance and cancellation of the outstanding Options form part of the Offers.

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FURTHER TERMS OF THE OFFERS

APPENDIX I

(d) The accidental omission to despatch this document, the WHITE form of acceptance and transfer of the Shares to any person to whom the Share Offer is made, and the failure to obtain the YELLOW form of acceptance and cancellation of the outstanding Options from the head office and principal place of business of the Company by any person to whom the Option Offer is made, will not invalidate the Offers in any way.
(e) The Offers, all acceptance thereof and contracts resulting therefrom will be governed by and construed in accordance with the laws of Hong Kong.
(f) References to the Offers in this document and in the accompanying WHITE form of acceptance and transfer of the Shares and the YELLOW form of acceptance and cancellation of the outstanding Options shall include any revision or extension thereof.
(g) Due execution of the WHITE form of acceptance and transfer of the Shares or the YELLOW form of acceptance and cancellation of the outstanding Options will constitute an irrevocable authority to any director of the Offeror or Sun Hung Kai or such person or persons as either the Offeror or Sun Hung Kai may direct to complete and execute, on behalf of the person accepting the Offers, any document and to do any other act that may be necessary or expedient for the purpose of vesting in the Offeror, or such other person(s) as the Offeror shall direct, the Shares, or for the purpose of cancellation of the Options which are the subject of such acceptance.
(h) The making of the Offers to persons with a registered address in jurisdictions outside Hong Kong may be affected by the laws of the relevant jurisdictions. Shareholders or Optionholders who are citizens or residents or nationals of jurisdictions outside Hong Kong should inform themselves about and observe any applicable legal requirements. It is the responsibility of any such person who wishes to accept the Offers to satisfy himself or herself or itself as to the full observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental or other consent which may be required or the compliance with other necessary formalities and the payment of any transfer or other taxes due in respect of such jurisdiction.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

1. SUMMARY OF FINANCIAL INFORMATION

The following is a summary of the audited consolidated profit and loss accounts of the Group as extracted from the annual reports of the Company for the years ended 31st March, 2001, 2002 and 2003:

Results

Turnover Cost of services provided Gross profit/(loss) Other revenue and gain Administrative expenses Other operating expenses LOSS FROM OPERATING ACTIVITIES Finance costs LOSS BEFORE TAX Tax NET LOSS FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS LOSS PER SHARE – Basic – Diluted DIVIDENDS DIVIDENDS PER SHARE	2003 HK$ 3,480,193 (2,705,749) 774,444 141,858 (6,332,672) (334,889) (5,751,259) (92,253) (5,843,512) – (5,843,512) (HK0.7 cents) N/A N/A N/A	2002 HK$ 2,925,619 (5,883,188) (2,957,569) 420,206 (7,705,391) (255,026) (10,497,780) (14,750) (10,512,530) – (10,512,530) (HK1.3 cents) N/A N/A N/A	2001 HK$ 3,786,885 (3,489,076) 297,809 408,789 (4,853,469) (435,835) (4,582,706) – (4,582,706) (41,834) (4,624,540) (HK0.7 cents) N/A N/A N/A

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 31ST MARCH, 2003

Set out below is the audited consolidated profit and loss account, consolidated balance sheet, balance sheet, consolidated summary statement of changes in equity, consolidated cash flow statement, balance sheet and notes to the financial statements of the Group as extracted from the audited financial statements of the Group for the years ended 31st March, 2003:

CONSOLIDATED PROFIT AND LOSS ACCOUNT

Year ended 31 March 2003

Notes Turnover 5 Cost of services provided Gross profit/(loss) Other revenue and gain 5 Administrative expenses Other operating expenses LOSS FROM OPERATING ACTIVITIES 6 Finance costs 7 LOSS BEFORE TAX Tax 10 NET LOSS FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS 11, 19 LOSS PER SHARE 12 – Basic – Diluted	2003 HK$ 3,480,193 (2,705,749) 774,444 141,858 (6,332,672) (334,889) (5,751,259) (92,253) (5,843,512) – (5,843,512) (HK0.7 cents) N/A	2002 HK$ 2,925,619 (5,883,188) (2,957,569) 420,206 (7,705,391) (255,026) (10,497,780) (14,750) (10,512,530) – (10,512,530) (HK1.3 cents) N/A

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED BALANCE SHEET

CONSOLIDATED BALANCE SHEET
31 March 2003 Notes NON-CURRENT ASSETS Fixed assets 13 Rental deposit paid CURRENT ASSETS Accounts receivable 15 Prepayments, deposits and other receivables Cash and bank balances CURRENT LIABILITIES Accruals and other payables NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITY Advance from a director 16 CAPITAL AND DEFICITS Issued capital 17 Deficits 19		2003 HK$ 951,873 178,928 1,130,801 92,810 175,193 4,259,194 4,527,197 760,956 3,766,241 4,897,042 1,172,559 3,724,483 16,000,000 (12,275,517) 3,724,483		2002 HK$ 816,207 – 816,207 122,000 326,232 10,161,855 10,610,087 894,547 9,715,540 10,531,747 963,752 9,567,995 16,000,000 (6,432,005) 9,567,995

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED SUMMARY STATEMENT OF CHANGES IN EQUITY

Year ended 31 March 2003

Notes Total equity at 1 April Net loss for the year attributable to shareholders 19 Total equity at 31 March	2003 HK$ (6,432,005) (5,843,512) (12,275,517)	2002 HK$ 4,080,525 (10,512,530) (6,432,005)

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED CASH FLOW STATEMENT

Year ended 31 March 2003

Notes CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax Adjustments for: Depreciation 6 Loss on disposal of fixed assets 6 Negative goodwill recognised as income Interest income 6 Finance costs 7 Operating loss before working capital changes Decrease/(increase) in accounts receivable Increase in prepayments, deposits and other receivables (Decrease)/increase in accruals and other payables Cash used in operations Interest received Hong Kong profits tax paid Net cash outflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchases of fixed assets Proceeds from disposal of fixed assets Acquisition of a subsidiary 20 Net cash outflow from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in advance from a director Net cash inflow from financing activities NET DECREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and cash equivalents	2003 HK$ (5,843,512) 460,023 8,743 – (64,273) 92,253 (5,346,766) 29,190 (27,889) (133,591) (5,479,056) 64,273 – (5,414,783) (606,030) 1,598 – (604,432) 116,554 116,554 (5,902,661) 10,161,855 4,259,194 4,259,194	2002 HK$ (Restated) (10,512,530) 452,317 153,526 (9,000) (385,344) 14,750 (10,286,281) (122,000) (95,510) 177,490 (10,326,301) 385,344 (640,311) (10,581,268) (258,193) 3,000 9,000 (246,193) 949,002 949,002 (9,878,459) 20,040,314 10,161,855 10,161,855

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

BALANCE SHEET

31 March 2003

Notes NON-CURRENT ASSETS Interests in subsidiaries 14 CURRENT LIABILITIES Accruals and other payables CAPITAL AND DEFICITS Issued capital 17 Deficits 19	2003 HK$ 3,822,816 98,333 3,724,483 16,000,000 (12,275,517) 3,724,483	2002 HK$ 9,576,327 8,332 9,567,995 16,000,000 (6,432,005) 9,567,995

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO FINANCIAL STATEMENTS

31 March 2003

1. CORPORATE INFORMATION

During the year, the Group was principally engaged in the provision of business brokerage and business consultancy services.

In the opinion of the directors, as at the balance sheet date, the ultimate holding company of the Company was WYP Holdings Limited, a company incorporated in the British Virgin Islands.

2. IMPACT OF NEW AND REVISED STATEMENTS OF STANDARD ACCOUNTING PRACTICE (“SSAPs”)

The following new and revised SSAPs are effective for the first time for the current year’s financial statements:

• SSAP 1 (Revised): “Presentation of financial statements” • SSAP 11 (Revised): “Foreign currency translation” • SSAP 15 (Revised): “Cash flow statements” • SSAP 34: “Employee benefits”

These SSAPs prescribe new accounting measurement and disclosure practices. The major effects on the Group’s accounting policies and on the amounts disclosed in these financial statements of adopting those SSAPs which have had a significant effect on the financial statements, are summarised as follows:

SSAP 1 prescribes the basis for the presentation of financial statements and sets out guidelines for their structure and minimum requirements for the content thereof. The principal impact of the revision of this SSAP is that a consolidated summary statement of changes in equity is now presented on page 27 of the financial statements in place of the consolidated statement of recognised gains and losses that was previously required.

SSAP 11 (Revised) prescribes the basis for the translation of foreign currency transactions and financial statements. The adoption of the revised SSAP 11 has had no material effect on the financial statements.

SSAP 15 (Revised) prescribes the revised format for the cash flow statement. The principal impact of the revision of this SSAP is that the consolidated cash flow statement now presents cash flows under three headings, cash flows from operating, investing, and financing activities, rather than the five headings previously required. The format of the consolidated cash flow statements set out on page 28 of the financial statements has been revised in accordance with new requirements.

SSAP 34 prescribes the recognition and measurement criteria to apply to employee benefits, together with the required disclosures in respect thereof. The adoption of this SSAP has resulted in no change to the previously adopted accounting treatments for employee benefits and the recognition of an accrual as at the balance sheet date. In addition, disclosures are now required in respect of the Company’s share option scheme, as detailed in note 18 to the financial statements. These share option scheme disclosures are similar to the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Listing Rules”) disclosures previously included in the Report of the Directors, which are now required to be included in the notes to the financial statements as a consequence of the SSAP.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

These financial statements have been prepared in accordance with Hong Kong Statements of Standard Accounting Practice, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries for the year ended 31 March 2003. The results of subsidiaries acquired or disposed of during the year are consolidated from or to their effective dates of acquisition or disposal, respectively. All significant intercompany transactions and balances within the Group are eliminated on consolidation.

Subsidiaries

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

The results of subsidiaries are included in the Company’s profit and loss account to the extent of dividends and receivable. The Company’s interests in subsidiaries are stated at cost less any impairment losses.

Revenue recognition

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

the rendering of services, on an accrual basis and in accordance with the terms of the underlying agreements and mandates; and
interest income, on a time proportion basis, taking into account the principal outstanding and the effective interest rate applicable.

Negative goodwill

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

To the extent that negative goodwill relates to expectations of future losses and expenses that are identified in the acquisition plan and that can be measured reliably, but which do not represent identifiable liabilities as at the date of acquisition, that portion of negative goodwill is recognised as income in the consolidated profit and loss account when the future losses and expenses are recognised.

To the extent that negative goodwill does not relate to identifiable expected future losses and expenses as at the date of acquisition, negative goodwill is recognised in the consolidated profit and loss account on a systematic basis over the remaining average useful life of the acquired depreciable/amortisable assets. The amount of any negative goodwill in excess of the fair values of the acquired non-monetary assets is recognised as income immediately.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Related parties

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

Impairment of assets

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

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to the profit and loss account in the period in which it arises.

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

A reversal of an impairment loss is credited to the profit and loss account in the period in which it arises.

Fixed assets and depreciation

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

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

Motor vehicles 30% Computers 30% Office equipment 20% Furniture and fixtures 20%

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

Operating leases

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

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Cash and cash equivalents

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management.

Deferred tax

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

Share option scheme

The Company operates a share option scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations. The financial impact of share options granted under the share option scheme is not recorded in the Company’s or the Group’s balance sheet until such time as the options are exercised, and no charge is recorded in the profit and loss account or balance sheet for their cost. Upon the exercise of share options, the resulting shares issued are recorded by the Company as additional share capital at the nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares is recorded by the Company in the share premium account. Options which are cancelled prior to their exercise date, or which lapse, are deleted from the register of outstanding options.

Foreign currencies

The Company and its subsidiaries maintain their accounting records in Hong Kong dollars. Foreign currency transactions are recorded at the applicable exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable exchange rates ruling at that date. Exchange differences are dealt with in the profit and loss account.

Retirement benefits scheme

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

4. SEGMENT INFORMATION

Segment information is presented by way of two segment formats: (i) on a primary segment reporting basis, by business segment; and (ii) on a secondary segment reporting basis, by geographical segment.

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

(a) the business brokerage services segment provides services in connection with middle market mergers and acquisitions; and
(b) the business consultancy services segment provides services to assist clients on various business or management issues.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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

(a) Business segments

The following table presents revenue and loss for the Group’s business segments.

Group

Sales to external customers Segment results Interest income Other revenue and gain Unallocated expenses Loss before tax Tax Net loss from ordinary activities attributable to shareholders	Business brokerage services 2003 2002 HK$ HK$ 3,120,193 2,715,619 (4,813,984) (9,225,483)	Business consultancy services 2003 2002 HK$ HK$ 360,000 210,000 (547,860) (713,411)	Consolidated 2003 2002 HK$ HK$ 3,480,193 2,925,619 (5,361,844) (9,938,894) 64,273 385,344 77,585 34,862 (623,526) (993,842) (5,843,512) (10,512,530) – – (5,843,512) (10,512,530)	Consolidated 2003 2002 HK$ HK$ 3,480,193 2,925,619 (5,361,844) (9,938,894) 64,273 385,344 77,585 34,862 (623,526) (993,842) (5,843,512) (10,512,530) – – (5,843,512) (10,512,530)

				(9,938,894)
				385,344 34,862 (993,842)
				(10,512,530) –
				(10,512,530)

Analyses of the assets and liabilities of the business segments have not been prepared as most of the Group’s assets and liabilities are unallocated. Accordingly, the directors consider that such information is not meaningful or representative for the purpose of the financial statements.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(b)

Geographical segments

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

Group

Segment revenue: Sales to external customers Other segment information: Segment assets Capital expenditure	Hong Kong 2003 2002 HK$ HK$ 2,805,050 2,715,619 Hong Kong 2003 2002 HK$ HK$ 5,087,966 11,011,908 575,933 240,130	Mainland China 2003 2002 HK$ HK$ 675,143 210,000 Mainland China 2003 2002 HK$ HK$ 570,032 414,386 30,097 18,063	Consolidated 2003 2002 HK$ HK$ 3,480,193 2,925,619 Consolidated 2003 2002 HK$ HK$ 5,657,998 11,426,294 606,030 258,193	Consolidated 2003 2002 HK$ HK$ 3,480,193 2,925,619 Consolidated 2003 2002 HK$ HK$ 5,657,998 11,426,294 606,030 258,193

				258,193

5. TURNOVER, OTHER REVENUE AND GAIN

Turnover represents the net invoiced value of services provided.

An analysis of other revenue and gain is as follows:

Other revenue: Interest income Others Gain: Negative goodwill recognised	2003 HK$ 64,273 77,585 141,858 – 141,858	2002 HK$ 385,344 25,862
		411,206
		9,000
		420,206

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

6. LOSS FROM OPERATING ACTIVITIES

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

	2003	2002
	HK$	HK$
Cost of services provided	2,705,749	5,883,188
Auditors’ remuneration	135,000	338,000
Depreciation	460,023	452,317
Operating lease rentals in respect of land and buildings	686,856	1,179,504
Pension scheme contributions
(excluding directors’ remuneration_(note 8)_)	105,171	120,510
Staff costs (excluding directors’ remuneration_(note 8)_)*	2,815,855	3,418,615
Provision for doubtful debts	324,049	51,500
Loss on disposal of fixed assets	8,743	153,526
Exchange losses, net	115	31,853
Negative goodwill recognised as income	–	(9,000)
Interest income	(64,273)	(385,344)

Inclusive of an amount of HK$1,541,080 (2002: HK$2,537,299) classified under cost of services provided.

7. FINANCE COSTS

	Group
	2003	2002
	HK$	HK$
Interest on an advance from a director	92,253	14,750

8. DIRECTORS’ REMUNERATION

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

Fees: Executive directors Non-executive directors Independent non-executive directors Other emoluments of executive directors: Basic salaries, bonuses, housing benefits, other allowances and benefits in kind Pension scheme contributions	Group 2003 2002 HK$ HK$ – – – – – – 1,350,713 3,598,714 16,000 25,000 1,366,713 3,623,714	Group 2003 2002 HK$ HK$ – – – – – – 1,350,713 3,598,714 16,000 25,000 1,366,713 3,623,714
		3,623,714

There were three (2002: four) executive directors receiving individual emoluments of HK$509,000 (2002: HK$2,012,000), HK$700,000 (2002: HK$1,302,000), HK$157,713 (2002: HK$154,129) and nil (2002: HK$155,585), respectively, for the year ended 31 March 2003.

None of the non-executive and independent non-executive directors received any fees or other reimbursements or emoluments for the year ended 31 March 2003.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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

	Number of directors	Number of directors
	2003	2002
Nil to HK$1,000,000	8	8
HK$1,000,001 – HK$1,500,000	–	1
HK$2,000,001 – HK$2,500,000	–	1

During the year, Mr. Pong Wai Yan agreed to waive his remuneration for the period from 1 July 2002 to 31 March 2003. Save as aforesaid, there was no arrangement under which a director waived or agreed to waive any remuneration during the year.

During the year, no emoluments were paid by the Group to the directors as inducement to join, or upon joining the Group, or as compensation for loss of office.

During the year, no share options were granted to the directors, further details of which are set out in note 18 to the financial statements (2002: Nil).

9. FIVE HIGHEST PAID EMPLOYEES

The five highest paid individuals during the year included two (2002: two) directors, details of whose emoluments are set out in note 8 to the financial statements. The emoluments and designated band of the remaining three (2002: three) highest paid, non-director individuals during the year were as follows:

Basic salaries, bonuses, housing benefits, other allowances and benefits in kind Pension scheme contributions	2003 HK$ 1,090,166 34,640 1,124,806	2002 HK$ 1,256,030 36,000
		1,292,030

The remuneration of the three (2002: three) highest paid, non-director individuals fell within the band of nil to HK$1,000,000. These three highest paid, non-director individuals during the year received remuneration of HK$540,000 (2002: HK$510,780), HK$372,000 (2002: HK$415,000) and HK$212,806 (2002: nil) respectively. During the year ended 31 March 2002, another highest paid, non-director individual received remuneration of HK$336,250.

During the year, no emoluments were paid by the Group to any of the highest paid, non-director individuals as an inducement to join, or upon joining the Group, or as compensation for loss of office.

During the year, no share options were granted to the highest paid, non-director individuals (2002:

Nil).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

10. TAX

Hong Kong profits tax has not been provided for the year as the Group did not generate any assessable profits in Hong Kong during the year (2002: Nil). No provision for overseas income tax has been made for both years presented as the Group did not earn any assessable profits in other jurisdictions during these years.

The principal components of the Group’s net deferred tax assets not recognised in the financial statements are as follows:

Accelerated depreciation allowances Tax losses	2003 HK$ (52,211) 1,868,553 1,816,342	2002 HK$ (71,026) 1,273,094 1,202,068

As at 31 March 2003, the Company had unprovided deferred tax asset amounting to HK$293,122 (2002: HK$267,997) and related primarily to unused tax losses.

11. NET LOSS FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS

The net loss from ordinary activities attributable to shareholders dealt with in the financial statements of the Company for the year ended 31 March 2003 is HK$5,843,512 (2002: HK$13,220,853).

12. LOSS PER SHARE

The calculation of basic loss per share is based on the net loss attributable to shareholders for the year of HK$5,843,512 (2002: HK$10,512,530) and the weighted average number of 800,000,000 (2002: 800,000,000) ordinary shares of the Company in issue during the year.

Diluted loss per share amounts for the years ended 31 March 2002 and 2003 have not been shown as the potential ordinary shares outstanding had an anti-dilutive effect on the basic loss per share for both years.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

13. FIXED ASSETS

Group

Cost: At beginning of year Additions Disposals At 31 March 2003 Accumulated depreciation and impairment: At beginning of year Provided during the year Disposals At 31 March 2003 Net book value: At 31 March 2003 At 31 March 2002	Motor vehicles HK$ 649,505 – – 649,505 478,986 85,259 – 564,245 85,260 170,519	Computers HK$ 580,854 104,448 (7,970) 677,332 309,350 149,100 (3,512) 454,938 222,394 271,504	Office equipment HK$ 215,912 90,894 – 306,806 64,533 54,352 – 118,885 187,921 151,379	Furniture and fixtures HK$ 556,527 410,688 (7,780) 959,435 333,722 171,312 (1,897) 503,137 456,298 222,805	Total HK$ 2,002,798 606,030 (15,750) 2,593,078 1,186,591 460,023 (5,409) 1,641,205 951,873 816,207

14. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Due from subsidiaries Provision for impairment Provision for amounts due from subsidiaries	Company 2003 2002 HK$ HK$ 567,874 567,874 15,992,445 17,952,869 16,560,319 18,520,743 (567,874) (567,874) (12,169,629) (8,376,542) 3,822,816 9,576,327

The balances with subsidiaries are unsecured, interest-free and have no fixed terms of repayment.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Particulars of the subsidiaries are as follows:

		Nominal	Percentage of	Percentage of
	Place of	value of	equity attributable
	incorporation	paid-up	to the	Company		Principal
Company name	and operations	capital	Direct	Indirect		activities
L.P. Lammas	The British	US$10,000	100		–	Investment
International (BVI)	Virgin Islands					holding
Limited
L.P. Lammas Asia	Hong Kong	HK$10,000,000	–	100		Provision of
Limited						business
						information
						and business
						brokerage
						services
Hong Kong Asset and	Hong Kong	HK$10,000	–	100		Dormant
Equity Market Limited
(formerly known as
L.P. Lammas China
Limited)
LPL Group Limited	Hong Kong	HK$10,000	–	100		Investment
						holding
Hong Kong Enterprise	Hong Kong	HK$60,000	–	100		Provision of
Equity Market Limited						business
(formerly known as						information
Hong Kong Enterprise						and business
Asset and Equity						brokerage
Market Limited and						services
Hong Kong Enterprise
Exchange Limited)
Hong Kong Enterprise	Hong Kong	HK$2	–	100		Dormant
Market Limited
(formerly known as
L.P. Lammas
Finance Limited)
Hong Kong Enterprise	Hong Kong	HK$10,000	–	100		Dormant
Exchange Limited
(formerly known as
Hong Kong Enterprise
Asset and Equity
Exchange Limited and
L.P. Lammas Holdings
Limited)

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

15. ACCOUNTS RECEIVABLE

The general credit terms is seven days from the date of issue of payment invoice and the Group also offers extended credit terms to certain customers with reference to their respective financial background, reputation and credit worthiness.

An analysis of the accounts receivable, net of provision, is as follows:

Within 90 days Between 91 days and 180 days	Group 2003 2002 HK$ HK$ 92,810 82,000 – 40,000 92,810 122,000	Group 2003 2002 HK$ HK$ 92,810 82,000 – 40,000 92,810 122,000
		122,000

16. ADVANCE FROM A DIRECTOR

The advance from Mr. Pong Wai Yan (“Mr. Pong”), an executive director of the Company, is unsecured, bears interest at 6.5% per annum and is repayable on 1 July 2004, subject to renewal.

17. SHARE CAPITAL

Authorised: 6,000,000,000 ordinary shares of HK$0.02 each Issued and fully paid: 800,000,000 ordinary shares of HK$0.02 each	2003 HK$ 120,000,000 16,000,000	2002 HK$ 120,000,000

		16,000,000

During the year, there was no movement in the Company’s authorised and issued share capital.

18. SHARE OPTION SCHEME

Share option scheme

SSAP 34 was adopted during the year, as explained in note 2 and under the heading “Share option scheme” in note 3 to the financial statements. As a result, the following detailed disclosures relating to the Company’s share option scheme are now included in the notes to the financial statements. In the prior year, these disclosures were included in the Report of the Directors, as their disclosure is also a requirement of the GEM Listing Rules.

The Company operates a share option scheme (the “Scheme”) for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations. Eligible participants of the Scheme include any employee (including any executive director) of the Company or any of its subsidiaries, who is in full-time employment with the Company or any such subsidiary at the time when an option is granted to such employee. A nominal consideration of HK$1 is payable on acceptance of the grant of an option. The Scheme will remain in force for a period of 10 years commencing on 29 November 2000.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The maximum number of shares in respect of which share options may be granted under the Scheme may not exceed, in nominal amount, 30% of the issued share capital of the Company. At 31 March 2003, the number of shares issuable under share options granted under the Scheme was 14,800,000, which represented approximately 1.9% of the Company’s shares in issue as at that date. The maximum number of shares issuable under share options to each eligible participant in the Scheme is limited to 25% of the maximum aggregate number of shares for the time being issued and which may fall to be issued under the Scheme.

The offer of a grant of share options, after the listing of the Company’s shares on the Growth Enterprise Market (the “GEM”) of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”), may be accepted within 21 days inclusive of and from the date of the offer. The exercise period of the share options granted is determinable by the directors, and commences after a certain vesting period and ends on a date which is not later than 10 years from the date of the offer of the share options.

In respect of the share options to be granted after the listing of the Company’s shares on the GEM of the Stock Exchange, the subscription price will be a price determined by the directors, but may not be less than the highest of the closing price of the shares on the GEM of the Stock Exchange on the date of grant of the particular option or the average of the closing prices of the shares on the GEM of the Stock Exchange for the five trading days immediately preceding the date of the offer of grant of the particular option or the nominal value of a share.

In respect of the share options granted prior to the listing of the Company’s shares on the GEM of the Stock Exchange (the “Pre-IPO Share Options”), the subscription price of the Pre-IPO Share Options should not be less than the nominal value of a share.

Share options do not confer rights on the holders to dividends or to vote at shareholders’ meetings.

The following Pre-IPO Share Options were outstanding under the Scheme during the year:

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Name or category of participant Executive directors Mr. Pong Wai Yan Mr. Kan Siu Lun Mr. Yu Yan Chun Senior management Mr. Teng Kin Ting Ms. Kuo Kwan Other employees In aggregate	Numb	er of share options Cancelled At 31 Exercise price during March Date of grant of Exercise period of share the year 2003 share options of share options options *** HK$ – 1,400,000 29 November 2000 14 June 2001 to 13 June 2006 0.2 – 1,400,000 29 November 2000 14 June 2002 to 13 June 2007 0.2 – 1,000,000 29 November 2000 14 June 2002 to 13 June 2007 0.02 – 1,400,000 29 November 2000 14 June 2003 to 13 June 2008 0.2 – 1,400,000 29 November 2000 14 June 2003 to 13 June 2008 0.02 – 6,600,000 – 1,200,000 29 November 2000 14 June 2001 to 13 June 2006 0.2 – 1,200,000 29 November 2000 14 June 2002 to 13 June 2007 0.2 – 800,000 29 November 2000 14 June 2002 to 13 June 2007 0.02 – 1,200,000 29 November 2000 14 June 2003 to 13 June 2008 0.2 – 1,200,000 29 November 2000 14 June 2003 to 13 June 2008 0.02 – 5,600,000 – 400,000 29 November 2000 14 June 2001 to 13 June 2006 0.2 – 400,000 29 November 2000 14 June 2002 to 13 June 2007 0.2 – 800,000 – 400,000 29 November 2000 14 June 2001 to 13 June 2006 0.2 – 400,000 29 November 2000 14 June 2002 to 13 June 2007 0.2 – 800,000 – 400,000 29 November 2000 14 June 2001 to 13 June 2006 0.2 – 400,000 29 November 2000 14 June 2002 to 13 June 2007 0.2 – 800,000 (400,000) 200,000 29 November 2000 14 June 2001 to 13 June 2006 0.2 (400,000) 200,000 (400,000) 14,800,000
	At 1 April 2002 1,400,000 1,400,000 1,000,000 1,400,000 1,400,000 6,600,000 1,200,000 1,200,000 800,000 1,200,000 1,200,000 5,600,000 400,000 400,000 800,000 400,000 400,000 800,000 400,000 400,000 800,000 600,000 600,000 15,200,000	Cancelled during the year – – – – – – – – – – – – – – – – – – – – – (400,000) (400,000) (400,000)

The vesting period of the share options is from the date of the grant until the commencement of the exercise period.
** The exercise price of the share options is subject to adjustment in the case of rights or bonus issues, or other similar changes in the Company’s share capital.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

19. DEFICITS

Group

At 1 April 2001 Net loss for the year At 31 March 2002 and 1 April 2002 Net loss for the year At 31 March 2003 Company	Share premium Accumulated account losses HK$ HK$ 7,975,958 (3,895,433) – (10,512,530) 7,975,958 (14,407,963) – (5,843,512) 7,975,958 (20,251,475)	Total HK$ 4,080,525 (10,512,530) (6,432,005) (5,843,512) (12,275,517)

At 1 April 2001 Net loss for the year At 31 March 2002 and 1 April 2002 Net loss for the year At 31 March 2003	Share premium Accumulated account losses HK$ HK$ 8,463,830 (1,674,982) – (13,220,853) 8,463,830 (14,895,835) – (5,843,512) 8,463,830 (20,739,347)	Total HK$ 6,788,848 (13,220,853) (6,432,005) (5,843,512) (12,275,517)

The share premium account of the Group includes (i) shares issued at a premium; and (ii) the difference between the nominal value of the shares of the subsidiaries acquired over the nominal value of the share capital of the Company issued in exchange therefor.

The share premium account of the Company includes (i) shares issued at a premium; and (ii) the difference between the then consolidated net assets of the subsidiaries acquired over the nominal value of the share capital of the Company issued in exchange therefor.

In accordance with the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands, the share premium account is distributable to the shareholders of the Company provided that immediately following the date on which the dividend is proposed to be distributed, the Company will be in a position to pay off its debts as they fall due in the ordinary course of business. The share premium may also be distributed in the form of fully paid bonus shares.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

20. NOTE TO THE CONSOLIDATED CASH FLOW STATEMENT

Acquisition of a subsidiary

Net asset acquired: Cash on hand Negative goodwill on acquisition Satisfied by: Cash	2003 HK$ – – – –	2002 HK$ 10,000 (9,000) 1,000 1,000

An analysis of the net cash inflow of cash and cash equivalents in respect of the acquisition of a subsidiary is as follows:

Cash consideration Cash on hand acquired Net inflow of cash and cash equivalent in respect of the acquisition of a subsidiary	2003 HK$ – – –	2002 HK$ (1,000) 10,000 9,000

21. RELATED PARTY AND CONNECTED TRANSACTIONS

(a) On 1 April 2002, Mr. Pong, an executive director and a controlling shareholder of the Company, entered into an agreement (the “Advance Agreement”) with the Group for providing an advance of HK$165,667 each month to the Group for 12 months commencing from 1 April 2002. The advance was unsecured, bore interests at 6.5% per annum and was payable on 1 July 2003, subject to renewal. Pursuant to the terms of the Advance Agreement, Mr. Pong was entitled to request for the repayment of the advance in whole or in part (the “Early Repayment”) prior to 1 July 2003. If requested by Mr. Pong, the Group may make the Early Repayment to Mr. Pong only if the directors of the Company are of the opinion that the Group will have adequate funds to meet its financial obligations as they fall due for the foreseeable future following the Early Repayment.

During the year, Mr. Pong requested for the early termination of the Advance Agreement (the “Early Termination”) in view of the improvement of the Group’s financial results. After careful consideration of the adequacy of the Group’s working capital, the directors of the Company agreed for the Early Termination. As a result, Mr. Pong made a net advance of HK$116,554 (2002: HK$949,002) to the Group during the year.

The advance is unsecured, bears interests at 6.5% per annum and is payable on 1 July 2004, subject to renewal. During the year, an interest of HK$92,253 (2002: HK$14,750) on the advance was charged to the Group.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(b) During the year, the Group recorded service income of HK$560,000 in connection with acting as financial advisor to Tung Shing Fire Services Technology Holdings Limited (“Tung Shing”) regarding the proposed placement of shares of Tung Shing on the GEM of the Stock Exchange. Mr. Pong Wai San, Wilson, who is considered as a substantial shareholder of Tung Shing under the GEM Listing Rules, is the brother of Mr. Pong. Such advisory fee was determined with reference to the scope of services provided by the Group to Tung Shing and on the basis of the number of staff of the Group involved in providing the services to Tung Shing. As at the balance sheet date, HK$336,000 of the service income was settled by Tung Shing while full provision was made by the Group against the unsettled amount of HK$224,000.

22. OPERATING LEASE ARRANGEMENTS

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

At 31 March 2003, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

Within one year In the second to fifth years, inclusive	2003 HK$ 576,267 111,900 688,167	2002 HK$ 1,106,147 –
		1,106,147

As at 31 March 2003, the Company had no significant operating lease commitments.

23. COMPARATIVE AMOUNTS

As further explained in note 2 to the financial statements, due to the adoption of certain new and revised SSAPs during the current year, the accounting treatment and presentation of certain items and balances in the financial statements have been revised to comply with the new requirements. Accordingly, the comparative amounts have been restated to conform with the current year’s presentation.

24. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of directors on 26 June 2003.

– 69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

3. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP

Set out below are the unaudited interim financial results of the Group for the six months ended 30th September, 2003:

Unaudited condensed consolidated profit and loss account

For the three months and six months ended 30 September 2003

Notes Turnover 2 Cost of services provided Gross profit/(loss) Other revenue and gain Administrative expenses Other operating expenses LOSS FROM OPERATING ACTIVITIES 4 Finance costs LOSS BEFORE TAX Tax 5 NET LOSS FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS LOSS PER SHARE 6 – Basic – Diluted DIVIDENDS DIVIDENDS PER SHARE	Three months ended 30 September 2003 2002 HK$ HK$ Unaudited Unaudited 113,333 418,000 (366,455) (730,505) (253,122) (312,505) 39,470 240,865 (927,145) (1,647,813) (7,810) – (1,148,607) (1,719,453) (21,831) (24,467) (1,170,438) (1,743,920) – – (1,170,438) (1,743,920) (0.1 cents) (0.2 cents) N/A N/A N/A N/A N/A N/A	Six months ended 30 September 2003 2002 HK$ HK$ Unaudited Unaudited 370,522 2,224,693 (826,446) (1,910,911) (455,924) 313,782 99,661 297,523 (2,029,425) (3,327,721) (7,810) (8,742) (2,393,498) (2,725,158) (47,705) (47,157) (2,441,203) (2,772,315) – – (2,441,203) (2,772,315) (0.3 cents) (0.3 cents) N/A N/A N/A N/A N/A N/A

– 70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Unaudited condensed consolidated balance sheet

At Note NON-CURRENT ASSETS Fixed assets 7 Rental deposit paid CURRENT ASSETS Accounts receivable 8 Prepayments, deposits and other receivables Cash and bank balances CURRENT LIABILITIES Accruals and other payables Advance from a director 9 NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON CURRENT LIABILITY Advance from a director 9 CAPITAL AND DEFICITS Issued capital Deficits 10	30 September 2003 HK$ Unaudited 709,853 – 709,853 – 365,131 1,804,676 2,169,807 689,395 906,985 1,596,380 573,427 1,283,280 – 1,283,280 16,000,000 (14,716,720) 1,283,280	At 31 March 2003 HK$ Audited 951,873 178,928 1,130,801 92,810 175,193 4,259,194 4,527,197 760,956 – 760,956 3,766,241 4,897,042 1,172,559 3,724,483 16,000,000 (12,275,517) 3,724,483

– 71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Unaudited consolidated statement of changes in equity

For the six months ended 30 September 2003

At 1 April 2003 Net loss for the period At 30 September 2003	Share capital 16,000,000 – 16,000,000	Share premium 7,975,958 – 7,975,958	Accumulated losses (20,251,475) (2,441,203) (22,692,678)	Total 3,724,483 (2,441,203) 1,283,280

Unaudited condensed consolidated cash flow statement

Net cash outflow from operating activities Net cash outflow from investing activities Net cash inflow/(outflow) from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period Analysis of balances of cash and cash equivalents Cash and bank balances	Six months ended 30th September 2003 2002 HK$ HK$ Unaudited Unaudited (Restated) (2,122,006) (3,465,759) (19,233) (532,907) (313,279) 484,190 (2,454,518) (3,514,476) 4,259,194 10,161,855 1,804,676 6,647,379 1,804,676 6,647,379

– 72 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Notes:

1. BASIS OF PREPARATION

The unaudited condensed consolidated interim accounts (“interim accounts”) have been prepared in accordance with Statement of Standard Accounting Practice (“SSAP”) No. 25 “Interim Financial Reporting” issued by the Hong Kong Society of Accountants, and with the applicable disclosure requirements of Chapter 18 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited. The interim accounts should be read in conjunction with the 2003 audited annual accounts.

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

Certain comparative figures have been reclassified to conform to the current period’s presentation.

2. TURNOVER

Turnover represents the net invoiced value of services provided.

3. SEGMENT INFORMATION

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

(a) the business brokerage services segment provides services in connection with middle market mergers and acquisitions; and
(b) the business consultancy services segment provides services to assist clients on various business or management issues.

(a) Business segments

The following table presents revenue and loss for the Group’s business segments.

Business brokerage services 2003 2002 HK$ HK$ Sales to external customers 317,000 1,984,693 Segment results (1,945,839) (2,520,655) Interest income Other revenue and gain Unallocated expenses Loss before tax Tax Net loss from ordinary activities attributable to shareholders	Business consultancy services Consolidation Six months ended 30 September 2003 2002 2003 2002 HK$ HK$ HK$ HK$ 53,522 240,000 370,522 2,224,693 (328,534) (304,811) (2,274,373) (2,825,466) 6,496 45,684 93,165 251,839 (266,491) (244,372) (2,441,203) (2,772,315) – – (2,441,203) (2,772,315)	Business consultancy services Consolidation Six months ended 30 September 2003 2002 2003 2002 HK$ HK$ HK$ HK$ 53,522 240,000 370,522 2,224,693 (328,534) (304,811) (2,274,373) (2,825,466) 6,496 45,684 93,165 251,839 (266,491) (244,372) (2,441,203) (2,772,315) – – (2,441,203) (2,772,315)

		(2,825,466)
		45,684 251,839 (244,372)
		(2,772,315) –
		(2,772,315)

– 73 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

(b) Geographical segments

Hong Kong 2003 2002 HK$ HK$ Segment revenue: Sales to external customers 140,000 1,978,374 Hong Kong 2003 2002 HK$ HK$ Other segment information: Segment assets 531,005 871,791 Capital expenditure 1,908 528,333	Mainland China Consolidation Six months ended 30 September 2003 2002 2003 2002 HK$ HK$ HK$ HK$ 230,522 246,319 370,522 2,224,693 Mainland China Consolidation Six months ended 30 September 2003 2002 2003 2002 HK$ HK$ HK$ HK$ 178,848 237,712 709,853 1,109,503 22,810 6,173 24,718 534,506	Mainland China Consolidation Six months ended 30 September 2003 2002 2003 2002 HK$ HK$ HK$ HK$ 230,522 246,319 370,522 2,224,693 Mainland China Consolidation Six months ended 30 September 2003 2002 2003 2002 HK$ HK$ HK$ HK$ 178,848 237,712 709,853 1,109,503 22,810 6,173 24,718 534,506

		534,506

4. LOSS FROM OPERATING ACTIVITIES

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

	Three months ended	Three months ended	Six months ended	Six months ended
	30 September		30 September
	2003	2002	2003	2002
	HK$	HK$	HK$	HK$
Cost of services provided	366,455	730,505	826,446	1,910,911
Depreciation	112,735	123,031	232,945	230,869
Operating lease rentals in respect of
land and buildings	152,205	168,765	394,598	502,509
Pension contributions
(excluding directors’ remuneration)	19,444	27,259	42,224	59,493
Staff costs (excluding directors’
remuneration)	525,253	694,874	1,107,166	1,633,326
Loss on disposal of fixed assets	–	–	28,308	8,742
Exchange losses, net	12,811	512	13,525	1,576
Interest income	(2,247)	(19,065)	(6,496)	(45,684)

5. TAX

Hong Kong profits tax has not been provided for the three months and six months ended 30 September 2003 as the Group did not generate any assessable profits in Hong Kong during the period (2002: Nil). No provision for overseas income tax has been made for the three months and six months ended 30 September 2003 and the corresponding periods in 2002 as the Group did not earn any assessable profits in other jurisdictions during these periods.

As at the balance sheet date, there were no significant deferred tax liabilities for which a recognition/ provision has not been made (2002: Nil).

– 74 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

6. LOSS PER SHARE

The calculation of basic loss per share for the three months and six months ended 30 September 2003 is based on the respective net loss attributable to shareholders of HK$1,170,438 and HK$2,441,203 and the weighted average number of 800,000,000 ordinary shares of the Company in issue during the respective periods. The basic loss per share in respect of the three months and six months ended 30 September 2002 is based on the respective net loss attributable to shareholders of HK$1,743,920 and HK$2,772,315 and the weighted average number of 800,000,000 ordinary shares of the Company in issue during the respective periods. Diluted loss per share for the three months and six months ended 30 September 2003 and 2002 has not been shown as the potential ordinary shares outstanding had an anti-dilutive effect on the basic loss per share for the periods.

7. FIXED ASSETS

During the six months period, the Group has acquired HK$24,718 and disposed HK$33,794 fixed assets.

8. ACCOUNTS RECEIVABLE

The general credit term is seven days from the date of issue of payment invoice and the Group also offers extended credit terms to certain customers with reference to their respective financial background, reputation and credit worthiness.

An analysis of the accounts receivable is as follows:

			September	March
			2003	2003
			HK$	HK$
Within	90	days	–	92,810

9. ADVANCE FROM A DIRECTOR

The advance from Mr. Pong Wai Yan (“Mr. Pong”), an executive director of the Company, is unsecured, bears interest at 6.5% per annum and is repayable on 1 July 2004, subject to renewal. During the period, an interest of HK$40,368 (2002: HK$44,781) on the advance was charged to the Group.

10. DEFICITS

There were no movements in deficits of the Group, other than accumulated losses, for the three months and six months ended 30 September 2003.

11. Subsequent event

According to the terms of the advance agreement in respect to the advance under the section headed “Advance from a director”, Mr. Pong was entitled to request for the repayment of the advance in whole or in part (the “Early Repayment”) prior to 1 July 2004. Subsequent to the balance sheet date of 30 September 2003, Mr. Pong requested for the Early Repayment, and thus the advance was fully repaid in October 2003.

12. DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS OR SHORT POSITIONS IN THE SHARES AND UNDERLYING SHARES

As at 30 September 2003, the interests or short positions of the Directors and chief executives of the Company in the shares and underlying shares of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (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,

– 75 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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, were as follows:

(1) Interests in shares

		Number of issued	ordinary shares	ordinary shares
		held and nature of interests
Name of director	Personal	Corporate	Total	Shareholdings
Mr. Pong Wai Yan	4,000,000	632,400,000	636,400,000	79.55%
		(note)
Mr. Kan Siu Lun	3,600,000	–	3,600,000	0.45%

Note: These shares are held by WYP Holdings Limited, a company incorporated in the British Virgin Islands with limited liability. The entire share capital in WYP Holdings Limited is registered in the name of and is beneficially owned by Mr. Pong Wai Yan.

(2) Interests in underlying shares

The Company operates a share option scheme (the “Scheme”) of which the eligible participants include any employee (including any executive director) of the Company or any of its subsidiaries, who is in full time employment with the Company or any such subsidiary at the time when an option is granted to such employee. The Scheme will remain in force for a period of 10 years commencing on 29 November 2000.

The maximum number of shares in respect of which share options may be granted under the Scheme may not exceed, in nominal amount, 30% of the issued share capital of the Company. At 30 September 2003, the number of shares issuable under share options granted under the Scheme was 14,600,000, which represented approximately 1.83% of the Company’s shares in issue as at that date. The maximum number of shares issuable under share options to each eligible participant in the Scheme is limited to 25% of the maximum aggregate number of shares for the time being issued and which may fall to be issued under the Scheme.

The offer of a grant of share options, after the listing of the Company’s share on the Growth Enterprise Market (the “GEM”) of the Stock Exchange of Hong Kong Limited (the “Stock Exchange”), may be accepted within 21 days inclusive of, and from the date of the offer. The exercise period of the share options granted is determined by the directors, and commences after a certain vesting period and ends on a date which is not later than 10 years from the date of the offer of the share options.

In respect of the share options to be granted after the listing of the Company’s shares on the GEM of the Stock Exchange, the subscription price will be a price determined by the directors, but may not be less than the highest of the closing price of the shares on the GEM on the date of grant of the particular option or the average of the closing prices of the shares on the GEM for the five trading days immediately preceding the date of the offer of grant of the particular option or the nominal value of a share.

– 76 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The following Pre-IPO Share Options were outstanding under the Scheme during the period:

Name or category of participant Executive directors Mr. Pong Wai Yan Mr. Kan Siu Lun Mr. Yu Yan Chun	Numb	er of share options Exercise Cancelled At 30 price of during the September Date of grant of Exercise period of share period 2003 share options share options options HK$ – 1,400,000 29th November 2000 14th June 2001 to 0.2 13th June 2006 – 1,400,000 29th November 2000 14th June 2002 to 0.2 13th June 2007 – 1,000,000 29th November 2000 14th June 2002 to 0.02 13th June 2007 – 1,400,000 29th November 2000 14th June 2003 to 0.2 13th June 2008 – 1,400,000 29th November 2000 14th June 2003 to 0.02 13th June 2008 – 6,600,000 – 1,200,000 29th November 2000 14th June 2001 to 0.2 13th June 2006 – 1,200,000 29th November 2000 14th June 2002 to 0.2 13th June 2007 – 800,000 29th November 2000 14th June 2002 to 0.02 13th June 2007 – 1,200,000 29th November 2000 14th June 2003 to 0.2 13th June 2008 – 1,200,000 29th November 2000 14th June 2003 to 0.02 13th June 2008 – 5,600,000 – 400,000 29th November 2000 14th June 2001 to 0.2 13th June 2006 – 400,000 29th November 2000 14th June 2002 to 0.2 13th June 2007 – 800,000 – 13,000,000
	At 1 April 2003 1,400,000 1,400,000 1,000,000 1,400,000 1,400,000 6,600,000 1,200,000 1,200,000 800,000 1,200,000 1,200,000 5,600,000 400,000 400,000 800,000 13,000,000	Cancelled during the period – – – – – – – – – – – – – – – –

Save as disclosed above, as at 30 September 2003, none of the Directors, chief executives of the Company and their associates had any personal, family, corporate or other interest or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which would have 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 were 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

13. DIRECTORS’ RIGHT TO ACQUIRE SHARES

Apart from as disclosed under the heading “Directors’ and chief executives’ interests or short positions in the shares and underlying shares”, at no time during the period were rights to acquire benefits by means of the acquisition of shares in or debentures of the Company or other body corporate granted to any director or their respective spouse or children under 18 years of age, or were any such rights exercised by them; or was the Company, its holding company, or any of its subsidiaries a party to any arrangement to enable the directors, their respective spouse or children under 18 years of age to acquire such rights in any other body corporate.

14. SUBSTANTIAL SHAREHOLDERS

Other than interests disclosed in the paragraph headed “Directors’ and chief executives’ interests or short positions in the shares and underlying shares” above, as at 30 September 2003, according to the register of interests kept by the Company under Section 336 of the SFO, the following person and entity have interests or short positions in the shares of the Company which fall to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO.

	Number of	Percentage of
Name	shares held	issued shares
WYP Holdings Limited_(Note)_	632,400,000	79.05
Mr. Pong Wai Yan	636,400,000	79.55

Note: These shares are held by WYP Holdings Limited, the entire issued share capital of which is registered in the name of and is beneficially owned by Mr. Pong Wai Yan.

Save as disclosed above, as at 30 September 2003, the Directors are not aware of any other persons who has interests or short positions in the shares, underlying shares or debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which would fall to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO.

15. SHARE OPTION SCHEME

Details of the Pre-IPO Share Options granted to Directors are set out in the sub-section headed “Interests in underlying shares” under the section headed “Directors’ and chief executives’ interests or short positions in the shares and underlying shares”. Details of the pre-IPO share options granted to senior management and other employees as at 30 September 2003 were as follows:

Numb Name or category At 1 April of participant 2003 Senior Management and other employees In aggregate 1,000,000 800,000 1,800,000	Numb	er of share options Cancelled At 30 during the September Date of grant of Exercise period Exercise price period 2003 share options of share options of share options HK$ (200,000) 800,000 29th November 2000 14th June 2001 to 0.2 13th June 2006 – 800,000 29th November 2000 14th June 2002 to 0.2 13th June 2007 (200,000) 1,600,000
		Cancelled during the period (200,000) – (200,000)

– 78 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

16. COMPETITION AND CONFLICT OF INTERESTS

None of the directors, the management shareholders or the substantial shareholders of the Company, or any of their respective associates, has engaged in any business that competes or may compete with the business of the Group or has any other conflict of interest with the Group.

17. BOARD PRACTICES AND PROCEDURES

Throughout the period under review, the Company was in compliance with Board Practices and Procedures as set out in Rules 5.28 to 5.39 of the GEM Listing Rules.

18. AUDIT COMMITTEE

The Company set up an audit committee (the “Committee”) on 29 November 2000 with written terms of reference in compliance with the GEM Listing Rules for the purpose of reviewing and providing supervision over the financial reporting process and internal controls of the Group. The Committee comprises two independent non-executive directors, Ms. Yu Yuk Ying, Vivian and Mr. Leung Wai Man, Raymond.

19. PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES

Neither the Company, nor any of its subsidiaries purchased, redeemed or sold any of the Company’s listed securities during the period.

4. STATEMENT OF INDEBTEDNESS

As at 30th September, 2003, being the balance sheet date for the last published unaudited accounts of the Group prior to the printing of this document, the Group had accounts payable and receipts in advance of approximately HK$0.6 million and a loan advance of approximately HK$0.9 million (which was fully repaid in October 2003) from an executive Director. As at 30th September, 2003, bank deposit of HK$1 million was pledged to a bank as security for banking facilities.

Save as aforesaid and apart from intra-group liabilities, the Group did not have any outstanding mortgages, charges, debentures, or other loan capital or bank overdrafts, loans or other similar indebtedness or acceptance credits or hire purchase commitments or any guarantees or other material contingent liabilities as at 30th September, 2003.

5. MATERIAL CHANGES

Except for the outbreak of the Severe Acute Respiratory Syndrome earlier in the year 2003 which had significant impact on the financial performance of the Group during the period from 1st April, 2003 to 30th September, 2003 as disclosed in the interim report of the Company and repayment of approximately HK$0.9 million loan advance from an executive Director in October 2003 pursuant to agreements between Mr. Pong and LPLA as disclosed in the paragraph headed “material contracts” in appendix III to this document, the Directors are not aware of any material change in the financial or trading position or prospects of the Group since 31st March, 2003, the date to which the latest audited consolidated financial statements of the Group were made up.

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GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

The information in this document relating to the Group has been supplied by the Company. All Directors jointly and severally accept full responsibility for the accuracy of information contained in this document (other than information relating to the Offeror, the terms and conditions of the Offers and the Offeror’s intention regarding the Group), and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this document (other than those expressed by the Offeror) have been arrived at after due and careful consideration and there are no other facts not contained in this document (other than those relating to the Offeror), the omission of which would make any statement in this document misleading.

The information in this document relating to the Offeror, the terms and conditions of the Offers and the Offeror’s intention regarding the Group have been supplied by the Offeror. The sole director of the Offeror accepts full responsibility for the accuracy of information contained in this document (other than that relating to the Group) and confirms, having made all reasonable inquiries, that to the best of his knowledge, opinions expressed in this document (other than those expressed by the Company) have been arrived at after due and careful consideration and that there are no other facts not contained in this document (other than those relating to the Group), the omission of which would make any statement in this document misleading.

2. CORPORATE INFORMATION OF THE COMPANY

The Company was incorporated in Cayman Islands under the Companies Law on 11th July, 2000. Its registered office is at Century Yard, Cricket Square, Hutchins Drive, P.O. Box 2681GT, George Town, Grand Cayman, British West Indies, and its head office and principal place of business in Hong Kong is 12/F., Club Lusitano Building, 16 Ice House Street, Central, Hong Kong.

– 80 –

GENERAL INFORMATION

APPENDIX III

3. SHARE CAPITAL OF THE COMPANY

(a) Authorised and issued share capital

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

HK$

Authorised:

6,000,000,000 ordinary shares of HK$0.02 each Issued and fully paid: 800,000,000 ordinary shares of HK$0.02 each	120,000,000

	16,000,000

No Shares have been issued since 31st March, 2003, being the date to which the latest audited consolidated financial statements of the Group are made up, and up to the Latest Practicable Date. All the issued Shares rank pari passu with each other in all respects including the right as to dividends, voting rights and right to return on capital.

(b) Share option scheme

The Company has adopted a share option scheme for employees of the Group. As at the Latest Practicable Date, there were 13,800,000 outstanding Options entitling the Optionholders to subscribe for an aggregate of 13,800,000 Shares at an exercise price of between HK$0.02 to HK$0.2 per Share, with exercise periods expiring on various dates up to and including 13th June, 2008.

Save as disclosed above, there were no outstanding warrants or share options or equity derivatives which are convertible or exercisable into shares in the Company as at the Latest Practicable Date.

4. DISCLOSURE OF INTERESTS

(a) Directors’ interests and short positions in the securities of the Company and its associated corporations

As at the Latest Practicable Date, the following Director(s) had interests and/or short positions in the securities of the Company and its associated corporations, within the meaning of Part XV of the Securities and Futures Ordinance, which were required (i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8

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GENERAL INFORMATION

APPENDIX III

of Part XV of the Securities and Futures Ordinance, including interests and short positions which they were deemed or taken to have under such provisions of the Securities and Futures Ordinance, or (ii) pursuant to Section 352 of the Securities and Futures Ordinance, to be entered in the register referred to therein, or (iii) pursuant to Rules 5.40 to 5.58 of the GEM Listing Rules relating to securities transactions by directors to be notified to the Company and the Stock Exchange; or (iv) to be disclosed in this Composite Document pursuant to the requirements of the Takeovers Code:

			Approximate
	Nature of	Number of	percentage of
Name of Director	interests	Shares held	Shareholding
			(%)
Mr. Kan Siu Lun	Personal	3,600,000	0.45
	Number and		Number of
	description of	Nature of	underlying
Name of Director	equity derivatives	interests	Shares
Mr. Pong	6,600,000_(Note)_	Beneficial	6,600,000
Mr. Kan Siu Lun	5,600,000_(Note)_	Beneficial	5,600,000
Mr. Yu Yan Chun	800,000_(Note)_	Beneficial	800,000

Note : These equity derivatives are the Options under the Share Option Scheme as described in section 3(b) above.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors had any interests or short positions in the securities of the Company and its associated corporations, within the meaning of Part XV of the Securities and Futures Ordinance, which were required (i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the Securities and Futures Ordinance, including interests and short positions which they were deemed or taken to have under such provisions of the Securities and Futures Ordinance, or (ii) pursuant to Section 352 of the Securities and Futures Ordinance, to be entered in the register referred to therein, or (iii) pursuant to Rules 5.40 to 5.58 of the GEM Listing Rules relating to securities transactions by directors to be notified to the Company and the Stock Exchange; or (iv) to be disclosed in this Composite Document pursuant to the requirements of the Takeovers Code.

(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the Securities and Futures Ordinance

As at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, the following person(s) had, or was deemed or taken to have, an interest or short position in the securities of the Company which would fall to

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GENERAL INFORMATION

APPENDIX III

be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the Securities and Futures Ordinance:

Long position in the Shares:

			Approximate
Name of	Nature of	Number of	percentage of
Shareholder	interests	Shares held	Shareholding
			(%)
The Offeror	Beneficial	636,400,000	79.55
Huge Profit	Beneficial	636,400,000	79.55
Mr. Liu	Corporate_(note)_	636,400,000	79.55

Note: Link Wise Investments Limited, an investment company incorporated in the British Virgin Islands with limited liability, the entire issued share capital of which is beneficially owned by Huge Profit, which is an investment company incorporated in the British Virgin Islands with limited liability, the entire issued share capital of which is ultimately and beneficially owned by Mr. Liu.

Save as disclosed above, the Directors and the chief executive of the Company were not aware of any person who has an interest or short position in the securities of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the Securities and Futures Ordinance:

(c) Interests of the Offeror in the Company

At the Latest Practicable Date, the Offeror held 636,400,000 Shares representing 79.55% of the issued share capital of the Company. Save for the Shares held by the Offeror, none of the Offeror, director of the Offeror or their respective concert parties had any interest in the issued share capital, warrants, options, derivatives or conversion rights affecting the shares in the Company.

As at the Latest Practicable Date, there was no agreement, arrangement or understanding between the Offeror and any other person for the transfer of the beneficial interests in Shares acquired in pursuance of the Share Offer.

(d) Interests in the Offeror

As at the Latest Practicable Date,

(i) neither the Company nor any Directors owned or controlled any shares, warrants, options, derivatives or conversion rights affecting the shares in the Offeror;

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GENERAL INFORMATION

APPENDIX III

(ii) neither the Company nor any Directors had dealt for value in the shares, warrants, options, derivatives or conversion rights affecting the shares in the Offeror during the Relevant Period;
(iii) no subsidiary or associates (as defined in the Takeovers Code) of the Company, or any pension fund of the Group, owned or controlled any shares, warrants, options, derivatives or conversion rights affecting the shares in the Offeror;
(iv) no subsidiary or associates (as defined in the Takeovers Code) of the Company, or any pension fund of the Group, had dealt for value in the shares, warrants, options, derivatives or conversion rights affecting the shares in the Offeror during the Relevant Period; and
(v) neither Sun Hung Kai, Somerley nor any other advisers to the Company owned or controlled any shares, warrants, options, derivatives or conversion rights affecting the shares in the Offeror.

(e) Other interests

As at the Latest Practicable Date,

(i) no subsidiary or associate of the Company, or any pension fund of the Group owned or controlled any shares, warrants, options, derivatives or conversion rights affecting the shares in the Company;
(ii) none of the professional advisers named under the section headed “Qualification” in this appendix owned or controlled any shares, warrants, options, derivatives or conversion rights affecting the shares in the Company;
(iii) no person who had an arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Offeror, Mr. Liu or their respective concert parties had any interest in any shares, warrants, options, derivatives or conversion rights affecting the shares in the Company;
(iv) no person who had an arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or with any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of associate had any interest in any shares, warrants, options, derivatives or conversion rights affecting the shares in the Company;
(v) none of the Directors had indicated to the Offeror nor any person acting in concert with it any irrevocable commitment to accept or reject the Offers;
(vi) no shares, warrants, options, derivatives or conversion rights affecting the shares in the Company were managed on discretionary basis by fund managers (other than exempt fund managers) who are connected with the Company; and

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GENERAL INFORMATION

APPENDIX III

(vii) there was no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code between the Offeror, Mr. Liu or an associate of the Offeror or Mr. Liu or any party acting in concert with the Offeror or Mr. Liu and any other person, or between the Company or any person who is an associate of the Company by virtue of classes (1), (2), (3) or (4) of the definition of associates and any other person.

5. DEALINGS IN SECURITIES

During the Relevant Period,

(i) save for the Sale Shares acquired pursuant to the Sale and Purchase Agreement which was completed on 27th November, 2003, none of the Offeror, its sole director and its ultimate beneficial owner, or any parties acting in concert with the Offeror or Mr. Liu had dealt for value in any shares, warrants, options, derivatives or conversion rights affecting the shares in the Company;
(ii) none of the subsidiaries of the Company, any pension funds of the Company or any of its subsidiaries, nor any of the professional advisers named under the section headed “Qualifications” in this appendix had dealt for value in any shares, warrants, options, derivatives or conversion rights affecting the shares in the Company;
(iii) no persons who had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or with any persons who is an associate of the Company by virtue of classes (1), (2), (3) or (4) of the definition of associate had dealt for value in any shares, warrants, options, derivatives or conversion rights affecting the shares in the Company;
(iv) no persons who had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Offeror, Mr. Liu or their respective concert parties had dealt for value in any shares, warrants, options, derivatives or conversion rights affecting the shares in the Company; and
(v) no fund managers (other than exempted fund managers) who are connected with the Company had dealt for value in any shares, warrants, options, derivatives or conversion rights affecting the shares in the Company.

6. MARKET PRICES

(a) During the Relevant Period, the highest and lowest closing prices of the Shares on the Stock Exchange were HK$0.055 per Share as quoted on 17th November, 2003 and 18th November, 2003 and HK$0.012 per Share as quoted on 25 different trading days between 5th May, 2003 and 10th June, 2003, respectively.

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GENERAL INFORMATION

APPENDIX III

(b) The table below sets out the closing prices of the Shares on the Stock Exchange on the last business day of each of the six calendar months immediately preceding the issue of the Joint Announcement of the Offers on which trading of the Shares took place:

	Closing price
	(HK$)
30th May, 2003	0.012
30th June, 2003	0.018
31st July, 2003	0.018
29th August, 2003	0.032
30th September, 2003	0.030
31st October, 2003	0.030

(c) The closing price of the Shares as quoted on the Stock Exchange on 24th October, 2003, being the last trading day prior to the suspension of trading in the Shares pending the release of the Joint Announcement, was HK$0.03.
(d) The closing price of the Shares on the Stock Exchange on the Latest Practicable Date was HK$0.051.

7. LITIGATION

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

8. MATERIAL CONTRACTS

As at the Latest Practicable Date, the following contracts (not being contracts entered into in the ordinary course of business) were entered into by a member of the Group after the date of two years before the issue of the Joint Announcement on 3rd November, 2003 up to the Latest Practicable Date which is or may be material.

On 1st January, 2002, Mr. Pong entered into an agreement with LPLA, a wholly owned subsidiary of the Company, pursuant to which Mr. Pong agreed to advance to the Group a principal sum of approximately HK$0.5 million and to make monthly advances to the Group of HK$165,667 for 3 months commencing from 1st January, 2002. On 1st April, 2002, Mr. Pong further entered into an agreement (together with the previous agreement dated 1st January, 2002, collectively referred as the “Advance Agreements”) with LPLA for providing an advance of HK$165,667 each month to the Group for 12 months commencing from 1st April, 2002. The advances were unsecured, bore interest

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APPENDIX III

GENERAL INFORMATION

at 6.5% per annum calculated on a monthly basis on the accrued advance balance, and were repayable on 1st July, 2003, subject to renewal. Pursuant to the terms of the Advance Agreements, Mr. Pong was entitled to request repayment of the advances in whole or in part (the “Early Repayment”) prior to 1st July, 2003. If requested by Mr. Pong, the Group may make the Early Repayment to Mr. Pong if the Directors are of the opinion that the Group will have adequate funds to meet its financial obligations as they fall due for the foreseeable future following the Early Repayment.

During the period from April 2002 to June 2002, Mr. Pong advanced HK$165,667 each month to LPLA. On 30th June, 2002, Mr. Pong and LPLA agreed to terminate the Advance Agreements and accordingly the monthly advance of HK$165,667 from Mr. Pong was stopped with effect from 1st July, 2002. At the same time, Mr. Pong also requested, subject to the Company’s agreement, early repayment of all advances made under the Advance Agreements. The Company agreed to settle the advances gradually. As at 30th September, 2003, Mr. Pong had made total advances of approximately HK$1.5 million of which approximately HK$0.6 million was repaid during the period from July 2002 to September 2003, with the remaining HK$0.9 million fully repaid in October 2003.

9. CONSENTS

Each of Sun Hung Kai and Somerley has given and has not withdrawn its written consent to the issue of this document with the inclusion herein of its letter and/or references to its name, in the form and context in which it appears.

10. SERVICE CONTRACTS

Save as disclosed below, none of the Directors had any service contract in force with the Company or any of its subsidiaries or associated companies which have more than 12 months to run from the Latest Practicable Date, and no service contract with any Director has been entered into or amended within six months before the commencement of the Offers.

(a) Each of Messrs. Pong Wai Yan and Kan Siu Lun has entered into a service contract with the Company with an initial fixed term of two years commencing from 1st December, 2000. The contracts shall continue thereafter until terminated by not less than two months’ notice in writing served by either party on the other. Under the service contracts, Mr. Pong received a monthly salary of HK$166,667 (which was subsequently changed to a monthly salary of HK$106,667, housing allowance of HK$40,000 per month, and holiday allowance of HK$50,000 per annum with effect from 1st November, 2003 pursuant to the supplementary contract dated 15th October, 2003), while Mr. Kan received a monthly salary of HK$150,000 (which was subsequently changed to commission basis with effect from 1st October, 2002 pursuant to the supplementary contract dated 4th October, 2002) respectively. Mr. Pong agreed to waive his remuneration for the period from 1st July, 2002 to 31st October, 2003.

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GENERAL INFORMATION

APPENDIX III

(b) Mr. Yu Yan Chun, an executive Director has entered into a service contract with the Company with an initial fixed term of one year commencing from 1st June, 2000. The contract shall continue thereafter until terminated by not less than one month’s notice in writing served by either party on the other, which shall not expire until after completion of the fixed term. Under the service contract, Mr. Yu received a monthly salary of RMB12,000 (which was subsequently changed to RMB13,800 with effect from 1st December, 2000 pursuant to the supplementary contract dated 1st December, 2000).

Pursuant to the Sale and Purchase Agreement, except for Mr. Pong, all Directors will resign from their positions in the Company, such resignation will take effect not earlier than any date as permitted under the Takeovers Code, the GEM Listing Rules or other laws applicable to the Company. The remuneration of Mr. Pong, thereafter will not be on more favourable terms than those on which he has been previously employed by the Company.

11. ARRANGEMENTS REGARDING EMPLOYEES AND DIRECTORS OF THE GROUP

It is the intention of the Offeror that there will be no material change in the existing management and employees of the Group, other than the Board, by reason only of the Offers.

12. ARRANGEMENTS AFFECTING DIRECTORS OF THE COMPANY

As at the Latest Practicable Date,

(a) there was no benefit (other than statutory compensation) to be given to any Director as compensation for loss of office or otherwise in connection with the Offers;
(b) there was no agreement, arrangement or understanding between any Directors and any other persons, which is conditional on or dependent upon the outcome of the Offers or is otherwise connected with the Offers;
(c) save for the Sale and Purchase Agreement, there was no material contract entered into by the Offeror in which any past or current Directors had a material personal interest; and
(d) there was no agreement, arrangement or understanding (including any compensation arrangement) between the Offeror, Mr. Liu or any of their respective concert parties and any of the Directors, recent Directors, Shareholders or recent Shareholders having any connection with or dependence upon the Offers.

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GENERAL INFORMATION

APPENDIX III

13. QUALIFICATIONS

The following are the respective qualifications of the experts who have been named in this document or have given their opinions, letters or advice which are contained in this document:

Name

Qualification

Sun Hung Kai

a corporation licensed to undertake type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the Securities and Futures Ordinance and being the financial adviser to the Offeror in relation to the Offers

Somerley

a corporation licensed to undertake type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the Securities and Futures Ordinance and being the independent financial adviser to the Independent Board Committee in relation to the Offers

14. GENERAL

(a) The registered office of the Company is situated at Century Yard, Cricket Square, Hutchins Drive, P.O. Box 2681GT, George Town, Grand Cayman, British West Indies, and its head office and principal place of business in Hong Kong is 12/F., Club Lusitano Building, 16 Ice House Street, Central, Hong Kong.
(b) The registered office of the Offeror is situated at Drake Chambers, P.O. Box 3321, Road Town, Tortola, British Virgin Islands.
(c) The address of Mr. Liu and Huge Profit is at 24th Floor, Euro Trade Centre, 13– 14 Connaught Road Central, Hong Kong.
(d) The address of Sun Hung Kai, the financial adviser to the Offeror, is at Level 12, One Pacific Place, 88 Queensway, Hong Kong.
(e) The address of Somerley, the independent financial adviser to the Independent Board Committee, is at Suite 3108 One Exchange Square, 8 Connaught Place, Central, Hong Kong.
(f) The English text of this document shall prevail over the Chinese text.

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GENERAL INFORMATION

APPENDIX III

15. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the office of the Company at 12/F., Club Lusitano Building, 16 Ice House Street, Central, Hong Kong while the Offers remain open:

(a) the memorandum and articles of association of the Company and the Offeror;
(b) the annual reports of the Company for the two years ended 31st March, 2003 and the interim report of the Company for the six months ended 30th September, 2003;
(c) the letter from Sun Hung Kai, the text of which is set out on pages 15 to 23 of this document;
(d) the letter from the Independent Board Committee, the text of which is set out on pages 24 to 25 of this document;
(e) the letter from Somerley, the text of which is set out on pages 26 to 40 of this document;
(f) the letters of consent from Sun Hung Kai and Somerley referred to in the section headed “Consents” in this appendix; and
(g) the material contracts referred to in the paragraph headed “Material Contracts” in this appendix.

– 90 –

AI assistant

Imperium Financial Group Limited — M&A Activity 2003

51224_rns_2003-12-01_ad260883-3b28-493a-993f-661881fb4702.pdf

Link Wise Investments Limited

L. P. Lammas International Limited 豐裕興業國際有限公司

SOMERLEY LIMITED

CONTENTS

All time references contained in this document refer to Hong Kong time.

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

Link Wise Investments Limited

L. P. Lammas International Limited 豐裕興業國際有限公司

MANDATORY UNCONDITIONAL CASH OFFERS BY

INTRODUCTION

LETTER FROM THE BOARD

THE SALE AND PURCHASE AGREEMENT

Sale Shares

Consideration

Basis of determination of the Consideration

Payment terms

Conditions of the Sale and Purchase Agreement

Completion

THE OFFERS

INFORMATION ABOUT THE GROUP

Business

Shareholding structure

LETTER FROM THE BOARD

Financial information

Further information

INFORMATION ON THE OFFEROR AND INTENTION OF THE OFFEROR REGARDING THE FUTURE OF THE GROUP

LISTING STATUS OF THE COMPANY

RECOMMENDATIONS

ADDITIONAL INFORMATION

MANDATORY UNCONDITIONAL CASH OFFERS BY

INTRODUCTION

LETTER FROM SUN HUNG KAI

THE OFFERS

Acceptance of the Offers shall be unconditional and once given cannot be withdrawn subject to compliance by the Offeror with Rule 19 of the Takeovers Code.

The Share Offer

The Option Offer

Effects of accepting the Offers

Sufficiency of financial resources

Highest and lowest prices

Dealing in the Shares by the Offeror during the Relevant Period

Compulsory acquisition

Stamp duty

INFORMATION ABOUT THE OFFEROR

INTENTION OF THE OFFEROR REGARDING THE FUTURE OF THE GROUP

LETTER FROM SUN HUNG KAI

PROPOSED CHANGE OF THE COMPOSITION OF THE BOARD

Mr. Liu

TAXATION

ACCEPTANCE AND SETTLEMENT

(a) Procedures for acceptance of the Offers

(ii) The Option Offer

(b) Settlement of the Offers

(i) Share Offer

(ii) Option Offer

LETTER FROM SUN HUNG KAI

GENERAL

ADDITIONAL INFORMATION

L. P. Lammas International Limited 豐裕興業國際有限公司

RECOMMENDATION

Share Offer

Option Offer

Independent Board Committee

LETTER FROM SOMERLEY

Somerley Limited

MANDATORY UNCONDITIONAL CASH OFFERS TO ACQUIRE ALL THE ISSUED SHARES IN L. P. LAMMAS INTERNATIONAL LIMITED AND FOR CANCELLATION OF ALL OUTSTANDING OPTIONS

LETTER FROM SOMERLEY

PRINCIPAL FACTORS AND REASONS CONSIDERED

The Share Offer

1. Historical results and trading prospects

LETTER FROM SOMERLEY

LETTER FROM SOMERLEY

LETTER FROM SOMERLEY

2. Net asset value

Imperium Financial Group Limited M&A Activity 2003