Joy Spreader Group Inc. - M&A Activity 2006

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or otherwise transferred all your shares in MegaInfo Holdings Limited, you should at once hand this document and the accompanying Form of Acceptance to the purchaser(s) or transferee(s) or to the bank, a licensed securities dealer or registered institution in securities 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 accompanying Form of Acceptance, the contents of which form part of the terms of the Offer contained herein.

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

MAXPROFIT GLOBAL INC

(Incorporated in the British Virgin Islands with limited liability)

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(Incorporated in Bermuda with limited liability) (Stock code: 8279)

COMPOSITE OFFER AND RESPONSE DOCUMENT RELATING TO THE UNCONDITIONAL MANDATORY CASH OFFER BY

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ON BEHALF OF MAXPROFIT GLOBAL INC TO ACQUIRE ALL THE ISSUED SHARES OF HK$0.01 EACH IN THE SHARE CAPITAL OF MEGAINFO HOLDINGS LIMITED (OTHER THAN THOSE SHARES ALREADY OWNED OR AGREED TO BE ACQUIRED BY THE OFFEROR AND PARTIES ACTING IN CONCERT WITH IT)

Financial Adviser to MAXPROFIT GLOBAL INC

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Independent Financial Adviser to the Independent Board Committee of MegaInfo Holdings Limited

A letter from the Board is set out on pages 16 to 21 of this document. A letter from Partners Capital is set out on pages 5 to 15 of this document. A letter from the Independent Board Committee containing its recommendation to Independent Shareholders on the Offer is set out on pages 22 to 23 of this document and a letter from Tai Fook Capital, the independent financial adviser to the Independent Board Committee, containing its advice in respect of the Offer is set out on pages 24 to 37 of this document.

The procedures for acceptance and settlement of the Offer are set out on pages 38 to 40 in Appendix I to this document and in the accompanying Form of Acceptance. Acceptances of the Offer should be received by the Registrar, Abacus Share Registrars Limited at 26/F, Tesbury Centre, 28 Queen’s Road East, Hong Kong, by no later than 4:00 p.m. on Tuesday, 18 July 2006 (or such later time and/or date as the Offeror may decide and announce in accordance with the Takeovers Code).

This Composite Offer Document will remain on the GEM website at www.hkgem.com on the “Latest Company Announcements” page for at least 7 days from the date of its posting.

* For identification purposes only

27 June 2006

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 trading on the Main Board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities trading 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 at www.hkgem.com in order to obtain up-to-date information on GEM-listed issuers.

	Page
Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from Partners Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Letter from Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Letter from Tai Fook Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Appendix I – Further Terms of the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . .	38
Appendix II – Financial Information of the Group. . . . . . . . . . . . . . . . . . . . . .	43
Appendix III – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	81
Accompanying Document:
– Form of Acceptance

– i –

EXPECTED TIMETABLE

2006

Offer commences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 27 June

Latest time for acceptance of the Offer . . . . . . . . . . . . . . . . . 4:00 p.m. on Tuesday, 18 July

Closing Date (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 18 July

Teletext announcement of the results of the Offer through the Stock Exchange (Note 1) . . . . . . . . . . . . . . . . 7:00 p.m. on Tuesday, 18 July

Announcement of the result of the Offer

to be published on the GEM website (Note 2) . . . . . . . . . . . . . . . . . . Wednesday, 19 July

Latest date for despatch of remittances for the amounts

due in respect of valid acceptances received under the Offer (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 28 July

Notes:

The Offer, which is unconditional, will close on Tuesday, 18 July 2006 unless the Offeror revises or extends the Offer in accordance with the Takeovers Code. The Offeror reserves the right to extend the Offer until such date as it may determine pursuant to the Takeovers Code. The Offeror will issue a teletext announcement through the Stock Exchange by 7:00 p.m. on the Closing Date to state whether the Offer has expired, revised or extended. In the event that the Offeror decides to extend the Offer, at least 14 days’ notice in writing will be given, before the Offer is closed, to those Independent Shareholders who have not accepted the Offer.
An announcement on the result of the Offer will be published on the GEM website on Wednesday, 19 July 2006 or in the event of an extension of the Offer, on the next Business Day after the closing date of the extended Offer.
Pursuant to the Takeovers Code, consideration payable for the Shares tendered under the Offer will be paid as soon as possible but in any event within 10 days of the date of the receipt by the Registrar of all the valid requisite documents.
Acceptances of the Offer shall be irrevocable and not capable of being withdrawn, except as permitted under the Takeovers Code.

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

– ii –

DEFINITIONS

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

“associate(s)”	as defined in the GEM Listing Rules
“Board”	the board of Directors
“Business Day”	a day (other than a Saturday and days on which a tropical
	cyclone warning signal no. 8 or above or a black
	rainstorm warning signal is hoisted in Hong Kong at any
	time between 9:00 a.m. and 5:00 p.m.) on which licensed
	banks in Hong Kong are generally open for business
	throughout their normal business hours
“CCASS”	the Central Clearing and Settlement System established
	and operated by HKSCC
“Closing Date”	18 July 2006 or if the Offer is revised or extended, the
	closing date of the Offer as revised or extended in
	accordance with the Takeovers Code
“Companies Act”	the Companies Act 1981 of Bermuda (as amended)
“Companies Ordinance”	the Companies Ordinance (Chapter 32 of the Laws of
	Hong Kong)
“Company”	MegaInfo Holdings Limited, a company incorporated in
	Bermuda with limited liability, the issued Shares of
	which are listed on the GEM of the Stock Exchange
“Completion”	completion of the S&P Agreement, which took place on
	13 June 2006
“Composite Offer Document”	this document jointly issued by and on behalf of the
	Offeror and the Company to all Shareholders in
	accordance with the Takeovers Code containing, inter
	alia, terms and conditions of the Offer, the Form of
	Acceptance, the letter of advice of the independent
	financial adviser to the Independent Board Committee in
	respect of the Offer and the letter of advice of the
	Independent Board Committee to the Independent
	Shareholders in relation to the Offer
“Directors”	the director(s) of the Company

– 1 –

DEFINITIONS

“Executive”	the Executive Director of the Corporate Finance Division
	of the SFC or any delegate of the Executive Director
“Form(s) of Acceptance”	the accompanying form(s) of acceptance and transfer in
	respect of the Offer
“GEM”	Growth Enterprise Market
“GEM Listing Rules”	the Rules Governing the Listing of Securities on the
	GEM of the Stock Exchange
“Gofull”	Gofull Investments Limited, a company incorporated in
	the British Virgin Islands with limited liability and a
	wholly-owned subsidiary of eForce Holdings Limited,
	the issued shares of which are listed on the Main Board
	of the Stock Exchange
“Group”	the Company and its subsidiaries
“HKSCC”	Hong Kong Securities Clearing Company Limited
“Hong Kong”	the Hong Kong Special Administrative Region of the
	PRC
“Independent Board Committee”	an independent board committee of the Board established
	for the purpose of advising the Independent Shareholders
	in relation to the Offer
“Independent Shareholders”	Shareholders other than the Offeror and parties acting in
	concert with it
“Joint Announcement”	the announcement dated 6 June 2006 made jointly by the
	Offeror and the Company regarding, among other things,
	details of the Offer
“Latest Practicable Date”	23 June 2006, being the latest practicable date prior to the
	printing of this document for the purposes of ascertaining
	certain information contained herein
“Long Stop Date”	29 July 2006, being the date falling 60 days after the date
	of the S&P Agreement or such other date as both the
	Purchaser and the Vendor may agree for the satisfaction
	and/or waiver of the conditions specified in the S&P
	Agreement

– 2 –

DEFINITIONS

“Macao”	Macao Special Administrative Region of the PRC
“MOP”	Patacas, the lawful currency of Macao
“Mr. Kot”	Mr. Kot Wai Ming
“Mr. Sun”	Mr. Sun Ho, the sole director and the sole beneficial
	shareholder of the Offeror
“Offer”	the unconditional mandatory cash offer made by Partners
	Capital on behalf of the Offeror to acquire all the issued
	Shares not already owned or agreed to be acquired by the
	Offeror and parties acting in concert with it and, unless
	otherwise stated, including any extension or revision
	thereof
“Offeror” or “Purchaser”	MAXPROFIT GLOBAL INC, a company incorporated in
	the British Virgin Islands with limited liability and
	wholly-owned by Mr. Sun
“parties acting in concert”	has the meaning ascribed thereto in the Takeovers Code
“Partners Capital”	Partners Capital International Limited, a licensed
	corporation to carry on types 1 and 6 regulated activities
	(dealing in securities and advising on corporate finance)
	under the SFO and the financial adviser to the Offeror in
	respect of the Offer
“PRC”	the People’s Republic of China which, for the purpose of
	this document, excludes Hong Kong, Macao and Taiwan
“Purchaser’s Warrantor”	Mr. Sun
“Registrar”	Abacus Share Registrars Limited at 26/F, Tesbury Centre,
	28 Queen’s Road East, Hong Kong, being the Company’s
	branch share registrar in Hong Kong
“Relevant Period”	the period commencing from six calendar months
	immediately prior to 6 June 2006, the date of the Joint
	Announcement up to and including the Latest Practicable
	Date
RMB	Renminbi, the lawful currency of PRC

– 3 –

DEFINITIONS

“S&P Agreement”	the conditional sale and purchase agreement dated 30
	May 2006 entered into between the Offeror, the Vendor,
	the Purchaser’s Warrantor and the Vendor’s Warrantor in
	respect of the acquisition of the Sale Shares by the
	Offeror from the Vendor
“Sale Shares”	the 326,617,500 Shares beneficially owned by the
	Vendor, representing approximately 61.05% of the issued
	share capital of the Company as at the Latest Practicable
	Date
“SFC”	Securities and Futures Commission
“SFO”	Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong)
“Share(s)”	the ordinary share(s) of HK$0.01 each in the issued share
	capital of the Company
“Shareholder(s)”	holder(s) of the Shares
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Tai Fook Capital”	Tai Fook Capital Limited, a licensed corporation to carry
	on Type 6 regulated activity (advising on corporate
	finance) under the SFO and the independent financial
	adviser to the Independent Board Committee in respect of
	the Offer
“Takeovers Code”	The Hong Kong Code on Takeovers and Mergers
“Vendor”	VHL
“Vendor’s Warrantor”	VNHL
“VHL”	Vodatel Holdings Limited, a company incorporated in the
	British Virgin Islands with limited liability and a wholly-
	owned subsidiary of VNHL
“VNHL”	Vodatel Networks Holdings Limited, the issued shares of
	which are listed on the GEM of the Stock Exchange
“HK$”	Hong Kong Dollars, the lawful currency of Hong Kong
“%”	per cent.

– 4 –

LETTER FROM PARTNERS CAPITAL

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Partners Capital International Limited Room 1305, 13th Floor 9 Queen’s Road Central Hong Kong

27 June 2006

To the Independent Shareholders

Dear Sir or Madam,

UNCONDITIONAL MANDATORY CASH OFFER BY PARTNERS CAPITAL INTERNATIONAL LIMITED ON BEHALF OF MAXPROFIT GLOBAL INC TO ACQUIRE ALL THE ISSUED SHARES OF HK$0.01 EACH IN THE SHARE CAPITAL OF MEGAINFO HOLDINGS LIMITED (OTHER THAN THOSE SHARES ALREADY OWNED OR AGREED TO BE ACQUIRED BY THE OFFEROR AND PARTIES ACTING IN CONCERT WITH IT)

INTRODUCTION

Terms and expressions used herein shall have the same meanings as defined in this Composite Offer Document, unless stated otherwise.

On 30 May 2006, the S&P Agreement was entered into between VHL as vendor, the Offeror as purchaser, VNHL as vendor’s warrantor and Mr. Sun as purchaser’s warrantor for the sale and purchase of the Sale Shares for a cash consideration of HK$10,378,500 (equivalent to approximately HK$0.0318 per Sale Share). On 13 June 2006, the Offeror and the Company jointly announced that all the conditions of the S&P Agreement have been fulfilled and Completion took place on the same date. As a result of the Completion, the Offeror and parties acting in concert with it own an aggregate of 326,617,500 Shares, representing approximately 61.05% of the entire issued share capital of the Company as at the Latest Practicable Date. Under Rule 26.1 of the Takeovers Code, the Offeror is required to make an unconditional mandatory cash offer for all the issued Shares not already owned or agreed to be acquired by the Offeror and parties acting in concert with it. The Offer is unconditional in all respects.

This letter sets out details of the S&P Agreement, the terms of the Offer, together with the information on the Offeror and the intention of the Offeror regarding the future of the Group. Further details of the terms of the Offer are set out under the section headed “Acceptance and settlement” below, in Appendix I to this Composite Offer Document and in the accompanying Form of Acceptance.

– 5 –

LETTER FROM PARTNERS CAPITAL

Independent Shareholders are strongly advised to consider carefully the information contained in the letter from the Board set out on pages 16 to 21, the letter from the Independent Board Committee set out on pages 22 to 23 and the letter from Tai Fook Capital, the independent financial adviser to the Independent Board Committee in relation to the Offer set out on pages 24 to 37 of this Composite Offer Document of which this letter forms part.

S&P AGREEMENT

On 30 May 2006, the S&P Agreement was entered into between the following parties for the sale and purchase of the Sale Shares:

Vendor: VHL Purchaser: the Offeror, a company incorporated in the British Virgin Islands with limited liability and is beneficially whollyowned by Mr. Sun Vendor’s Warrantor: VNHL Purchaser’s Warrantor: Mr. Sun

The Offeror, Mr. Sun and their respective associates are not “connected persons” of the Company within the meaning of the GEM Listing Rules.

Set out below are the principal terms of the S&P Agreement:

Sale Shares: An aggregate of 326,617,500 Shares, representing approximately 61.05% of the entire issued share capital of the Company as at the Latest Practicable Date. Consideration: HK$10,378,500 (equivalent to approximately HK$0.0318 per Sale Share), which was negotiated and determined on an arm’s length basis between the Offeror and the Vendor and was paid by the Offeror to the Vendor at Completion.

The price of HK$0.0318 per Share represents (a) a discount of approximately 54.57% to the closing price of HK$0.070 per Share as quoted on the Stock Exchange on 30 May 2006, being the last trading day prior to the suspension of trading in the Shares on 1 June 2006; (b) a discount of approximately 43.72% to the average closing price of HK$0.0565 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days prior to the suspension of the trading in the Shares on 1 June 2006; and (c) a discount of approximately 74.56% to the closing price of HK$0.125 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

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LETTER FROM PARTNERS CAPITAL

Conditions:

Completion of the S&P Agreement is conditional upon the following conditions being fulfilled:

(i) the Shares remaining listed and traded on the GEM at all times from the date of the S&P Agreement up to (and including) the Completion Date, save for any temporary suspension not exceeding ten consecutive Business Days for the purposes of clearing any announcement and circular in relation to the sale and purchase of the Sale Shares and/or the Offer by the regulatory authorities;
(ii) trading in the Shares on the GEM not being revoked or withdrawn at any time prior to the Completion Date;
(iii) there being no indication from the Stock Exchange or the SFC prior to the Completion Date that listing of the Shares will be suspended, revoked or withdrawn at any time after Completion, whether in connection with any of the transactions contemplated by the S&P Agreement or otherwise;
(iv) all necessary shareholders’ approval as may be required by the Vendor’s Warrantor in respect of the sale of the Sale Shares and the transactions contemplated under the S&P Agreement and under the GEM Listing Rules;
(v) the warranties given by the Purchaser and the Purchaser’s Warrantor under the S&P Agreement remaining true and accurate in all material respects;
(vi) the warranties given by the Vendor and the Vendor’s Warrantor under the S&P Agreement remaining true and accurate in all material respects; and
(vii) the publication of the joint announcement in relation to the S&P Agreement by or on behalf of the Company and the Purchaser which has been cleared by the Stock Exchange and the SFC.

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LETTER FROM PARTNERS CAPITAL

The Purchaser may at any time by notice in writing to the Vendor waive any of the conditions (i), (ii), (iii), (vi) and (vii) set out above and such waiver may be made subject to such terms and conditions as are determined by the Purchaser. The Vendor may at any time by notice in writing to the Purchaser waive the condition (v) set out above and such waiver may be made subject to such terms and conditions as are determined by the Vendor. The condition (iv) set out above cannot be waived by either the Vendor or the Purchaser. If any of the conditions set out above has not been satisfied and/or waived at or before 12:00 noon on the Long Stop Date, the S&P Agreement shall cease and determine and none of the parties thereto shall have any obligations and liabilities thereunder save for any antecedent breaches of the terms thereof.

Completion:

Completion took place on 13 June 2006.

THE OFFER

Partners Capital, on behalf of the Offeror, makes the Offer to acquire all the issued Shares not already owned or agreed to be acquired by the Offeror and parties acting in concert with it on the following basis:

For each Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.0318 in cash

As at the Latest Practicable Date, the Company has 535,000,000 Shares in issue and there are no outstanding warrants, options, derivatives or securities convertible into Shares.

There is no arrangement (whether by way of option, indemnity or otherwise) in relation to the shares of the Offeror or the Company which might be material to the Offer.

The Offer is unconditional in all respects and, unless extended, will remain open for acceptance until 4:00 p.m. on Tuesday, 18 July 2006. Acceptances of the Offer shall be irrevocable and once given cannot be withdrawn except in the circumstances set out in Rule 19.2 of the Takeovers Code. The Executive may require that acceptors be granted a right of withdrawal, on terms acceptable to the Executive until the requirements under Rule 19 of the Takeovers Code can be met.

The procedure for acceptance and further terms of the Offer are set out in Appendix I to this document.

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LETTER FROM PARTNERS CAPITAL

Comparisons of value

The Offer price of HK$0.0318 per Share is equal to the consideration paid by the Offeror for each Sale Share and represents:

(a) a discount of approximately 54.57% to the closing price of HK$0.070 per Share as quoted on the Stock Exchange on 30 May 2006, being the last trading day prior to the suspension of trading of the Shares on 1 June 2006;
(b) a discount of approximately 43.72% to the average closing price of HK$0.0565 per Share over the 10 trading days up to and including 30 May 2006;
(c) a discount of approximately 40.11% to the average closing price of approximately HK$0.0531 per Share over the 30 trading days up to and including 30 May 2006;
(d) a premium of approximately 117.81% over the unaudited consolidated net tangible asset value per Share of approximately HK$0.0146 as at 31 December 2005 (based on the unaudited consolidated net tangible assets of the Group of approximately HK$7,802,414 and 535,000,000 Shares in issue as stated in the last published interim report of the Company for the six months ended 31 December 2005);
(e) a discount of approximately 74.56% to the closing price of HK$0.125 per Share as quoted on the Stock Exchange on 23 June 2006, being the Latest Practicable Date; and
(f) a discount of approximately 75.02% to the average closing price of HK$0.1273 per Share over the 10 trading days up to and including 23 June 2006, being the Latest Practicable Date.

Please refer to the paragraph headed “Market prices” in Appendix III to this Composite Offer Document for further information on the market prices of the Shares.

Dealings in the Shares and other securities by the Offeror during the Relevant Period

Save for the acquisition of the Sale Shares under the S&P Agreement, none of the Offeror and parties acting in concert with the Offeror had dealt in or owned any Shares or any other securities of the Company convertible into Shares, including options, warrants, derivatives or subscription rights, during the Relevant Period.

Highest and lowest prices

The highest and lowest closing prices of the Shares as quoted on the Stock Exchange during the six-month period preceding the last trading day prior to the date of the Joint Announcement were HK$0.070 per Share during the period from 29 to 30 May 2006 and HK$0.040 per Share during the period from 24 to 26 January 2006 respectively.

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LETTER FROM PARTNERS CAPITAL

Total consideration

As at the Latest Practicable Date, there are 535,000,000 Shares in issue. At the Offer price of HK$0.0318 per Share, the entire issued share capital of the Company was valued at approximately HK$17 million. Based on 208,382,500 Shares subject to the Offer, the Offer would be valued at approximately HK$6.63 million.

The Offeror will finance the Offer by its own cash deposit in bank. Partners Capital is satisfied that sufficient financial resources are available to the Offeror to satisfy full acceptance of the Offer.

Effects of accepting the Offer

By accepting the Offer, Shareholders will sell their Shares to the Offeror free from all liens, claims and encumbrances and with all rights attached to them as at the date of the Joint Announcement, including the right to receive all dividends and distributions declared, paid or made, if any, on or after the date of the Joint Announcement.

Stamp duty

Seller’s ad valorem stamp duty arising in connection with acceptance of the Offer at a rate of HK$1.00 for every HK$1,000 (or part thereof) of the consideration payable in respect of acceptance by accepting Shareholders, or the market value of the Shares (rounded up to nearest HK$1), whichever is greater, will be deducted from the amount payable to such Independent Shareholders who accept the Offer. The Offeror will arrange for payment of the stamp duty in connection with the acceptance of the Offer and the transfer of the Shares.

Payment

Payment in cash in respect of acceptances of the Offer will be made within ten days of the date on which the relevant documents of title are received by the Registrar to render each such acceptance complete and valid.

Compulsory acquisition

The Offeror and parties acting in concert with it do not intend, but reserve the right, to exercise any right which may be available under the provision of the Companies Act to acquire compulsorily any outstanding issued Shares not acquired under the Offer after it is closed.

INFORMATION ON THE COMPANY

Headquartered in Macao, the Company is a company incorporated in Bermuda whose issued Shares are listed on the GEM of the Stock Exchange and the Group is principally engaged in the provision of enterprise solutions for targeted customers in Macao and the PRC. The Group specialises in the research and development of innovative and quality value-added

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LETTER FROM PARTNERS CAPITAL

applications that aim to increase operating effectiveness and efficiencies of enterprises. The Group offers an array of enterprise solutions including MegaImage (document imaging application), MegaMax (surveillance solution), MegaDMS (document management system) and MegaERP (enterprise resource planning application), and a range of services including installation, testing and commissioning, after-sales support and scanning services. Targeted customers of the Group include mobile service bureaus, telecommunications service providers, governmental authorities, hospitals and enterprises in Macao and the PRC.

				Nine
			Six months	months
			ended	ended
	Year ended 30 June		31 December	31 March
	2004	2005	2005	2006
	HK$	HK$	HK$	HK$
Turnover	10,465,492	14,289,721	41,458,051	47,935,229
Profit/(loss) before taxation	(6,588,899)	(22,621,634)	9,676	(2,495,324)
Profit/(loss) after taxation	(6,588,899)	(22,621,634)	9,676	(2,495,324)
Net tangible assets	19,100,354	7,750,972	7,802,414	(Note)

Note: The Company has not published the Group’s unaudited consolidated net tangible assets figure for the nine months ended 31 March 2006.

Detailed financial information of the Group is set out in Appendix II to this document.

INFORMATION ON THE OFFEROR

The Offeror is an investment holding company incorporated in the British Virgin Islands with limited liability and is wholly-owned by Mr. Sun. Save for the entering into of the S&P Agreement, the Offeror has not conducted any business since its incorporation and has no material assets and liabilities other than the amounts required to finance the acquisition of the Sale Shares and the Offer. Mr. Sun is the sole director of the Offeror.

Prior to the entering into of the S&P Agreement, neither the Offeror, its beneficial owner nor the parties acting in concert with any of them owned any Shares. Save for the entering into of the S&P Agreement, none of the Offeror, its beneficial owner and parties acting in concert with any of them has dealt in any Shares or any other securities of the Company convertible into Shares, including options, warrants, derivatives or subscription rights during the Relevant Period.

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LETTER FROM PARTNERS CAPITAL

INTENTION OF THE OFFEROR REGARDING THE GROUP

The Offeror intends that the Group will continue its existing businesses and will maintain the listing status of the Company on the GEM of the Stock Exchange following the close of the Offer. The Offeror has no intention to dispose of or re-deploy the assets of the Group other than in the ordinary course of its business, or to inject its assets into the Group. Following completion of the S&P Agreement and following the close of the Offer, the Offeror will conduct a review on the business operations and financial position of the Group for the purpose of formulating business plans and strategies for the future business development of the Group. Subject to the result of such review and should suitable investment or business opportunities arise, the Offeror may consider diversifying the business of the Group with an objective to broaden its income source. Save for the proposed change of the composition of the Board set forth below, the Offeror intends that the existing management and employees of the Group will continue their present roles in the existing businesses of the Group following the close of the Offer to ensure a smooth transition.

According to the third quarterly report of the Company, the turnover of the Group for the nine months ended 31 March 2006 amounted to approximately HK$47.9 million, representing approximately 4.2 times increase over the corresponding period during 2005. The Group has secured a number of variation orders from the existing gaming and hotel operators in Macao such that orders on hand as at 31 March 2006 have reached approximately HK$33 million. Based on the above, the Offeror is optimistic about the future prospects of the Group and the software industry in Macao and believes that the financial and general management experience and business network of Mr. Kot and Mr. Sun will be able to enhance the efficiency of the overall operation of the Group and bring more business opportunities to the Group respectively.

PROPOSED CHANGE OF BOARD COMPOSITION OF THE COMPANY

The existing executive Directors, namely Mr. Jose´ Manuel dos Santos, Mr. Mok Chi Va and Mr. Kuok Cheong Ian; non-executive Directors, namely Mr. Yim Hong and Mr. Kuan Kin Man; and independent non-executive Directors, namely, Mr. Chui Sai Cheong, Mr. Tsui Wai Kwan and Mr. Tam Pak Yip, will resign on the calendar date of the close of the Offer and such resignations will take effect on the calendar day immediately following the close of the Offer.

The Offeror intends to nominate Mr. Kot and Mr. Sun as executive Directors and such appointment will take effect on the calendar day immediately following the close of the Offer. In addition, the Offeror intends to nominate Mr. Wang Ronghua, Mr. Hua Fengmao and Mr. Kwok Wing Leung Andy as independent non-executive Directors and such appointment will take effect on the calendar day immediately following the close of the Offer.

Set out below are the biographical details of the proposed Directors to be nominated by the Offeror:

Mr. Kot Wai Ming, aged 42, is currently an executive director of China Gate International Limited, which is principally engaged in the trading of agricultural commodities. Mr. Kot holds a bachelor degree in Economics from the Shanghai Institute of Foreign Trade. Prior to working with China Gate International Limited, Mr. Kot held various positions as trader and trading manager with XCAN Asia Limited and its parent company, XCAN Grain Pool Ltd., in Canada. Mr. Kot did not hold any directorships in any listed companies in the past three years. Mr. Kot is the brother-in-law of Mr. Sun.

– 12 –

LETTER FROM PARTNERS CAPITAL

Mr. Sun Ho, aged 37, has extensive experience in the financial management of enterprises. Mr. Sun holds a bachelor degree in Economics from the University of Sydney in Australia and a master degree in Corporate Finance from the Hong Kong Polytechnic University. Mr. Sun is a member of CPA Australia and the Hong Kong Institute of Certified Public Accountants. Mr. Sun is currently the chief executive officer and deputy chairman of China LotSynergy Holdings Limited, the issued shares of which are listed on the GEM of the Stock Exchange. Mr. Sun was previously an executive director of Burwill Holdings Limited, the issued shares of which are listed on the Main Board of the Stock Exchange and had worked for KPMG, an international accounting firm, where he was involved in the auditing and due diligence activities for clients. Mr. Sun is the brother-in-law of Mr. Kot.

Mr. Wang Ronghua, aged 61, is a representative in Shanghai of Treasury Holdings China Limited. Mr. Wang graduated from the Beijing Institute of Foreign Trade. Prior to the appointment as independent non-executive Director, Mr. Wang held various positions in the PRC Government. Mr. Wang was the General Manager of Beijing Personnel Service Corporation for Diplomatic Missions, the General Manager of China Jiaoyuan Corporation for International Economic and Technical Cooperation, the First Deputy Director General of Beijing Service Bureau for Diplomatic Missions and an Ambassador of the PRC to the Republic of Iceland. Thereafter, Mr. Wang joined Shanghai Institute of International Finance as Vice President and was Chief Operating Officer of Shanghai Sinoman Industrial (Group) Ltd.

Mr. Hua Fengmao, aged 37, is the founding partner and managing director of China Finance Strategies Limited. Mr. Hua obtained a bachelor degree and a master degree in English Language & Literature from the Shanghai International Studies University, Shanghai, the PRC. Mr. Hua obtained a Master of Business Administration degree from the International University of Japan, Niigata, Japan. Prior to founding China Finance Strategies Limited, Mr. Hua held various positions in various investment banks. Mr. Hua was the Managing Director of Investment Banking of CLSA Equity Capital Markets Limited, the General Manager of Cazenove Asia Limited, Manager of ICEA Capital Limited and Associate Investment Banking Officer of Bank of America NT&SA.

Mr. Kwok Wing Leung Andy, aged 32, has over 10 years of local and overseas financial and general management experience and has experience in the trading business in the PRC. Mr. Kwok holds a master degree in Business Administration from Tsinghua University, the PRC and a bachelor degree in Economics from the University of Sydney in Australia. Mr. Kwok is a member of the Hong Kong Institute of Certified Public Accountants and a member of CPA Australia. Mr. Kwok is the chairman of Nubrands Group Holdings Limited, the issued shares of which are listed on the Main Board of the Stock Exchange.

– 13 –

LETTER FROM PARTNERS CAPITAL

MAINTAINING THE LISTING STATUS OF THE COMPANY

The Offeror intends to maintain the listing of the Shares on the GEM of the Stock Exchange. The Company and the new Directors to be nominated by the Offeror will undertake to the Stock Exchange to take appropriate steps as soon as possible following the close of the Offer to ensure that not less than 25% of the Shares will be held by the public.

The Stock Exchange has stated that if, upon the close of the Offer, less than 25% of the Shares are held by the public or if the Stock Exchange believes that (i) a false market exists or may exist in the trading of the Shares; or (ii) there are insufficient Shares in public hands to maintain an orderly market, it will consider exercising its discretion to suspend trading in the Shares until a level of sufficient public float is attained.

So long as the Company remains a listed company, the Stock Exchange will also closely monitor all future acquisitions or disposals of assets of the Company. Any acquisitions or disposals of assets by the Group will be subject to the provisions of the GEM Listing Rules. Pursuant to the GEM Listing Rules, the Stock Exchange has the discretion to require the Company to issue an announcement and 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 Stock Exchange also has the power to aggregate a series of acquisitions or disposals of the Company and any such transactions may result in the Company being treated as if it were a new listing applicant and subject to the requirements for new listing applicants as set out in the GEM Listing Rules.

TAXATION

You are recommended to consult your own professional advisers if you are in any doubt as to the taxation implications of accepting the Offer. It is emphasised that none of the Offeror, the parties acting in concert with it and Partners Capital and any of their respective directors and any other parties involved in the Offer accepts responsibility for any taxation effects on, or liabilities of, any persons as a result of their acceptance of the Offer.

ACCEPTANCE AND SETTLEMENT

(a) Procedures for acceptance of the Offer

To accept the Offer, you should complete the accompanying Form of Acceptance in accordance with the instructions printed thereon, which instructions form part of the terms of the Offer.

The completed Form of Acceptance 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 Offer by post or by hand to the Registrar, Abacus Share Registrars Limited at 26/F, Tesbury Centre, 28 Queen’s Road East, Hong Kong marked “MegaInfo Offer” on the envelope, as soon as practicable after receipt of this document and in any event so as to reach the Registrar by no later than 4:00 p.m. on Tuesday, 18 July 2006 or such later time and/or date as the Offeror may determine and announce.

– 14 –

LETTER FROM PARTNERS CAPITAL

Further terms of the Offer, including procedures for acceptance and the acceptance period, are set out in Appendix I to this document and the Form of Acceptance.

(b) Settlement of the Offer

Provided that the relevant Form(s) of Acceptance, 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 Tuesday, 18 July 2006, a cheque for the amount representing the cash consideration (after deducting the relevant seller’s ad valorem stamp duty payable by the accepting Shareholders) due to the accepting Shareholders in respect of the Shares tendered by the accepting Shareholders under the Offer will be despatched to the accepting Shareholders by ordinary post at their own risk within 10 days after the date on which all the relevant documents which render such acceptance complete and valid are received by the Registrar.

GENERAL

To ensure equality of the treatment of all Shareholders, those registered 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 the beneficial owners of the Shares whose investments are registered in nominee names to accept the Offer, it is essential that they provide instructions to their nominees of their intentions with regard to the Offer.

All documents and remittances will be sent to the Independent Shareholders through ordinary post at their own risk. These documents and remittances will be sent to them at their respective addresses as they appear in the register of members or, in the case of joint Shareholders, to the Independent Shareholder whose name appears first in the said register of members, unless otherwise specified in the relevant Forms of Acceptance completed and returned by the Independent Shareholders. None of the Company, the Offeror and the parties acting in concert with it, Partners Capital and the Registrar or any of their respective directors will be responsible for any loss or delay in transmission of such documents and remittances or any other liabilities that may arise as a result thereof.

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

Yours faithfully, For and on behalf of Partners Capital International Limited Alan Fung Harry Yu Managing Director Executive Director

– 15 –

LETTER FROM THE BOARD

==> picture [174 x 87] intentionally omitted <==

(Incorporated in Bermuda with limited liability)

(Stock code: 8279)

Executive Directors: Mr. Jose´ Manuel dos Santos (Chairman) Mr. Mok Chi Va Mr. Kuok Cheong Ian

Non-executive Directors Mr. Yim Hong Mr. Kuan Kin Man

Independent non-executive Directors Mr. Chui Sai Cheong Mr. Tsui Wai Kwan Mr. Tam Pak Yip

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

Head office and principal place of business: 1st Floor Edf. Vodatel 74 Rua da Felicidade Taipa, Macao

Principal place of business in Hong Kong: Room 713B, 7/F, Block B Seaview Estate 2-8 Watson Road North Point Hong Kong

27 June 2006

To the Independent Shareholders

Dear Sirs,

INTRODUCTION

* For identification purposes only

– 16 –

LETTER FROM THE BOARD

Upon Completion, the Offeror and parties acting in concert with it own an aggregate of 326,617,500 Shares, representing approximately 61.05% of the entire issued share capital of the Company as at the Latest Practicable Date. As at the Latest Practicable Date, there are 535,000,000 Shares in issue. Under Rule 26.1 of the Takeovers Code, the Offeror is required to make a mandatory unconditional cash offer for all the issued Shares not already owned or agreed to be acquired by the Offeror and parties acting in concert with it. Accordingly, Partners Capital is, on behalf of the Offeror, making the Offer for all the issued Shares not already owned or agreed to be acquired by the Offeror and parties acting in concert with it at HK$0.0318 per Share. The terms of the Offer are set out in the letter from Partners Capital as well as in Appendix I to this document, of which this letter forms part, and in the accompanying Form of Acceptance.

In accordance with Rule 2.1 of the Takeovers Code, the Independent Board Committee was formed, comprising Mr. Tsui Wai Kwan and Mr. Tam Pak Yip, who are all independent non-executive Directors, to advise the Independent Shareholders in respect of the Offer. Mr. Yim Hong and Mr. Kuan Kin Man, being non-executive Directors, and Mr. Chui Sai Cheong, being an independent non-executive Director, are not sitting as members of the Independent Board Committee due to their connection with the Vendor and the Vendor’s Warrantor. Mr. Yim Hong and Mr. Kuan Kin Man are executive directors and Mr. Chui Sai Cheong is an independent non-executive director of the Vendor’s Warrantor respectively. Tai Fook Capital has been appointed as independent financial adviser to the Independent Board Committee in respect of the Offer and its appointment has been approved by the Independent Board Committee. Mr. Tam Pak Yip, an independent non-executive Director and a member of the Independent Board Committee, maintains a stock brokerage account with Tai Fook Securities Company Limited, a fellow subsidiary of Tai Fook Capital. Tai Fook Securities Company Limited also held 6,000 shares in VNHL and 131 Shares as at the Latest Practicable Date. The Independent Board Committee considers that the aforesaid should not affect the independence of Tai Fook Capital as the independent financial adviser to the Independent Board Committee in respect of the Offer.

In addition to setting out the letter from Partners Capital contained herein, the purpose of this document is also to provide you with, among other things, information relating to the Group and the Offer and to set out the letter from the Independent Board Committee containing its advice to the Independent Shareholders on the terms of the Offer and the letter from Tai Fook Capital containing its advice to the Independent Board Committee in respect of the Offer.

THE OFFER

As set out in the letter from Partners Capital, Partners Capital, on behalf of the Offeror, is making the Offer to acquire all the issued Shares not already owned by the Offeror and parties acting in concert with it on the following basis:

For each Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.0318 in cash

– 17 –

LETTER FROM THE BOARD

The Offer price of HK$0.0318 per Share is equal to the consideration paid by the Offeror for each Sale Share and represents:

(a) a discount of approximately 54.57% to the closing price of HK$0.070 per Share as quoted on the Stock Exchange on 30 May 2006, being the last trading day prior to the suspension of trading of the Shares on 1 June 2006;
(b) a discount of approximately 43.72% to the average closing price of HK$0.0565 per Share over the 10 trading days up to and including 30 May 2006;
(c) a discount of approximately 40.11% to the average closing price of approximately HK$0.0531 per Share over the 30 trading days up to and including 30 May 2006;
(d) a premium of approximately 117.81% over the unaudited consolidated net tangible asset value per Share of approximately HK$0.0146 as at 31 December 2005 (based on the unaudited consolidated net tangible assets of the Group of approximately HK$7,802,414 and 535,000,000 Shares in issue as stated in the last published interim report of the Company for the six months ended 31 December 2005);
(e) a discount of approximately 74.56% to the closing price of HK$0.125 per Share as quoted on the Stock Exchange on 23 June 2006, being the Latest Practicable Date; and
(f) a discount of approximately 75.02% to the average closing price of HK$0.1273 per Share over the 10 trading days up to and including 23 June 2006, being the Latest Practicable Date.

Further details of the Offer

Further details of the Offer including, among other things, the terms and conditions and the procedures for acceptance are set out in Appendix I to this document on pages 38 to 40 and the accompanying Form of Acceptance.

INFORMATION ON THE COMPANY

Headquartered in Macao, the Company is a company incorporated in Bermuda whose issued Shares are listed on the GEM and the Group is principally engaged in the provision of enterprise solutions for targeted customers in Macao and the PRC. The Group specialises in the research and development of innovative and quality value-added applications that aim to increase operating effectiveness and efficiencies of enterprises. The Group offers an array of

– 18 –

LETTER FROM THE BOARD

enterprise solutions including MegaImage (document imaging application), MegaMax (surveillance solution), MegaDMS (document management system) and MegaERP (enterprise resource planning application), and a range of services including installation, testing and commissioning, after-sales support and scanning services. Targeted customers of the Group include mobile service bureaus, telecommunications service providers, governmental authorities, hospitals and enterprises in Macao and the PRC.

The following table is a summary of the audited financials of the Group for the two years ended 30 June 2005 and the unaudited financials of the Group for the six months ended 31 December 2005 and for the nine months ended 31 March 2006 (which were extracted from the relevant annual reports, interim report and third quarterly report of the Company published pursuant to the GEM Listing Rules):

				Nine
			Six months	months
			ended	ended
	Year ended 30 June		31 December	31 March
	2004	2005	2005	2006
	HK$	HK$	HK$	HK$
Turnover	10,465,492	14,289,721	41,458,051	47,935,229
Profit/(loss) before taxation	(6,588,899)	(22,621,634)	9,676	(2,495,324)
Profit/(loss) after taxation	(6,588,899)	(22,621,634)	9,676	(2,495,324)
Net tangible assets	19,100,354	7,750,972	7,802,414	(Note)

Note: The Company has not published the Group’s unaudited consolidated net tangible assets figure for the nine months ended 31 March 2006.

Macao remained the major revenue contributor of the Group, with approximately 79% and 94% of its total turnover derived from business opportunities in Macao for the year ended 30 June 2005 and six months ended 31 December 2005 respectively. The Group recorded loss for the year ended 30 June 2005 of approximately HK$22.6 million which was attributable primarily to the write-off of the perpetual licences for the Tianxin software of approximately HK$9.9 million and an increase of headcount and related administrative expenses to support the various projects secured in Macao and the research and development activities. However, during the six months ended 31 December 2005, the Group reported consolidated turnover of approximately HK$41.5 million, with turnover surging 5.3 times over the corresponding period for the six months ended 31 December 2004 of approximately HK$7.8 million. Improved consolidated turnover for the Group was attributed primarily to projects completed for the East Asian Games, including the automatic vehicle clearance system, the automatic passenger clearance system, various systems and applications for the East Asian Games and the Government of Macao. As a result, the Group achieved a break-even level for the six months ended 31 December 2005. Although there was slight improvement to gross profit, as only approximately HK$6.5 million turnover were registered effectuating gross profit of HK$1.1 million during the three months ended 31 March 2006, therefore during the nine months ended 31 March 2006, the Group reported net loss of approximately HK$2.5 million. Further detailed financial information of the Group is set out in Appendix II to this document.

– 19 –

LETTER FROM THE BOARD

INTENTION OF THE OFFEROR REGARDING THE GROUP

Based on the information provided in the letter from Partners Capital, the Offeror intends that the Group will continue its existing businesses and will maintain the listing status of the Company on the GEM of the Stock Exchange following the close of the Offer. Please refer to the section headed “Intention of the Offeror regarding the Group” for further information on the Offeror’s intention regarding the Group.

BOARD COMPOSITION OF THE COMPANY

Pursuant to the terms of the S&P Agreement, all the existing executive and non-executive Directors will resign on the calendar date of the close of the Offer and such resignations will take effect on the calendar day immediately following the close of the Offer. It is expected that such persons as may be nominated by the Offeror will be appointed as new Directors to the Board on the calendar day immediately following the close of the Offer.

Please refer to the section headed “Proposed Change of Board Composition of the Company” in the letter from Partners Capital for information on the proposed Directors to be nominated by the Offeror.

RECOMMENDATIONS

Your attention is drawn to the letters from the Independent Board Committee and Tai Fook Capital which set out their recommendations in relation to the Offer and the principal factors considered by them in arriving at their recommendations. The letter from the Independent Board Committee is set out on pages 22 to 23 of this document and the letter from Tai Fook Capital is set out from pages 24 to 37 of this document. You are also advised to read this document and the Form of Acceptance in respect of the acceptance and standard procedures of the Offer.

MAINTAINING THE LISTING STATUS OF THE COMPANY

The Stock Exchange has stated that if, upon the close of the Offer, less than 25% of the Shares are held by the public or if the Stock Exchange believes that (i) a false market exists or may exist in the trading of the Shares; or (ii) there are insufficient Shares in public hands to maintain an orderly market, then it will consider exercising its discretion to suspend trading in the Shares until a level of sufficient public float is attained.

– 20 –

LETTER FROM THE BOARD

The Stock Exchange also has the power to aggregate a series of acquisitions or disposals of the Company and any such transactions may result in the Company being treated as if it were a new listing applicant and subject to the requirements for new listing applicants as set out in the GEM Listing Rules.

ADDITIONAL INFORMATION

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

Your attention is also drawn to the additional information contained in Appendices I to III to this document.

Yours faithfully, For and on behalf of the Board of MegaInfo Holdings Limited Jose´ Manuel dos Santos Chairman

– 21 –

LETTER FROM INDEPENDENT BOARD COMMITTEE

==> picture [174 x 87] intentionally omitted <==

(Incorporated in Bermuda with limited liability) (Stock code: 8279)

27 June 2006

To the Independent Shareholders

Dear Sirs,

INTRODUCTION

We refer to the Composite Offer Document dated 27 June 2006 jointly issued by the Company and the Offeror of which this letter forms part. Terms defined in the Composite Offer Document shall have the same meanings in this letter unless the context otherwise requires.

As Directors who are independent of the parties to the Offer, we have been appointed by the Board to form the Independent Board Committee to consider the terms of the Offer and to advise as to whether, in our opinion, the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned. Tai Fook Capital has been appointed as the independent financial adviser to advise the Independent Board Committee in respect of the terms of the Offer. Details of its advice and the principal factors taken into consideration in arriving at its recommendation are set out in the letter from Tai Fook Capital on pages 24 to 37 of the Composite Offer Document.

We also wish to draw your attention to (i) the letter from the Board; (ii) the letter from Partners Capital; (iii) the letter from Tai Fook Capital; and (iv) the additional information set out in the appendices to the Composite Offer Document.

* For identification purposes only

– 22 –

LETTER FROM INDEPENDENT BOARD COMMITTEE

RECOMMENDATION

Having considered the terms of the Offer and the advice of Tai Fook Capital, we consider that the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned and, accordingly, recommend the Independent Shareholders to accept the Offer.

Yours faithfully, On behalf of the Independent Board Committee of MegaInfo Holdings Limited Tsui Wai Kwan Tam Pak Yip Independent Independent non-executive Director non-executive Director

– 23 –

LETTER FROM TAI FOOK CAPITAL

The following is the text of a letter of advice from Tai Fook Capital, the independent financial adviser to the Independent Board Committee, which has been prepared for the purpose of inclusion in this document, setting out its advice to the Independent Board Committee in connection with the Offer.

25th Floor New World Tower 16-18 Queen’s Road Central Hong Kong

27 June 2006

To the Independent Board Committee

MegaInfo Holdings Limited

Dear Sirs,

UNCONDITIONAL MANDATORY CASH OFFER BY PARNTERS CAPITAL INTERNATIONAL LIMITED ON BEHALF OF MAXPROFIT GLOBAL INC TO ACQUIRE ALL THE ISSUED SHARES OF HK$0.01 EACH IN THE SHARE CAPITAL OF MEGAINFO HOLDINGS LIMITED (OTHER THAN THOSE SHARES ALREADY OWNED OR AGREED TO BE ACQUIRED BY THE OFFEROR AND PARTIES ACTING IN CONCERT WITH IT)

We refer to our appointment as the independent financial adviser to the Independent Board Committee in respect of the terms of the Offer, details of which are set out in the “Letter from the Board” (the “Letter”) contained in the Composite Offer Document to the Independent Shareholders dated 27 June 2006, of which this letter forms part. Terms used in this letter shall have the same respective meanings as defined in the Composite Offer Document unless the context otherwise requires.

As referred to in the Letter, the Offeror entered into the S&P Agreement with, amongst others, the Vendor on 30 May 2006 for the acquisition of an aggregate of 326,617,500 Shares, representing approximately 61.05% of the entire issued share capital of the Company as at the Latest Practicable Date for an aggregate cash consideration of HK$10,378,500 or equivalent to approximately HK$0.0318 per Sale Share. Completion took place on 13 June 2006 and accordingly, the Offeror is obliged to make the Offer under Rule 26.1 of the Takeovers Code at the Offer Price of HK$0.0318 per Share.

In our capacity as the independent financial adviser to the Independent Board Committee, our role is to provide you with an independent opinion and recommendations as to whether the terms of the Offer are fair and reasonable and are in the interests of the Independent Shareholders as a whole, and our advice to you as to whether or not you should recommend the Independent Shareholders to accept the Offer. The Independent Board Committee would advise the Independent Shareholders in respect of the terms of the Offer.

– 24 –

LETTER FROM TAI FOOK CAPITAL

The Board comprises eight Directors of whom three are executive Directors, two are non-executive Directors and three are independent non-executive Directors. The three executive Directors are Mr. Jose´ Manuel dos Santos, Mr. Mok Chi Va and Mr. Kuok Cheong Ian, the two non-executive Directors are Mr. Yim Hong and Mr. Kuan Kin Man while the three independent non-executive Directors are Mr. Chui Sai Cheong, Mr. Tsui Wai Kwan and Mr. Tam Pak Yip. The Independent Board Committee comprises Mr. Tsui Wai Kwan and Mr. Tam Pak Yip, who are independent non-executive Directors. Each of Mr. Yim Hong and Mr. Kuan Kin Man, who are non-executive Directors, and Mr. Chui Sai Cheong, who is an independent non-executive Director, is not considered independent as Mr. Yim Hong and Mr. Kuan Kin Man are the executive directors and Mr. Chui Sai Cheong is the independent non-executive director of VNHL which is the Vendor’s warrantor for the S&P Agreement.

Mr. Tam Pak Yip, an independent non-executive Director and a member of the Independent Board Committee, has maintained a stock brokerage account in Tai Fook Securities Company Limited (“Tai Fook Securities”), our fellow subsidiary. Tai Fook Securities also held 6,000 shares in VNHL and 131 Shares as at the Latest Practicable Date. We consider that the above matters will not affect our independency in giving advice to the Independent Board Committee in relation to the Offer given that (i) the provision of stock brokerage service to Mr. Tam Pak Yip by Tai Fook Securities is in its ordinary and usual course of business; and (ii) the total value of the shares in VNHL and the Shares held by Tai Fook Securities is insignificant to Tai Fook Securities.

BASES AND ASSUMPTIONS

In formulating our recommendations, we have relied on the information and facts supplied and representations expressed by the Directors and/or the management of the Group. We have been advised by the Directors and/or the management of the Group that no material facts have been omitted from the information supplied and representations expressed to us and we are not aware of any facts or circumstances which would render such information and representations untrue, inaccurate or misleading. We have assumed that the information contained and representations made or referred to in the Composite Offer Document were complete, true and accurate at the time they were made and continue to be so at the date of despatch of the Composite Offer Document. We consider that we have reviewed sufficient information to reach an informed view and have no reason to doubt the completeness, truth or accuracy of the information and facts provided and representations made to us. We have not, however, conducted an independent investigation into the business and affairs of the Group.

We have not considered the tax implications on the Independent Shareholders of their acceptances or non-acceptances of the Offer since this is particular to their own individual circumstances. In particular, the Independent Shareholders who are resident outside Hong Kong or subject to overseas taxes or Hong Kong taxation on securities dealings should consider their own tax positions with regard to the Offer and, if in any doubt, should consult their own professional advisers.

– 25 –

LETTER FROM TAI FOOK CAPITAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion, we have considered the following principal factors and reasons:

1. Background of and reasons for the Offer

1.1 Background of the Offer

On 30 May 2006, the Offeror entered into the S&P Agreement with, amongst others, the Vendor for the acquisition of the Sale Shares for an aggregate cash consideration of HK$10,378,500. The Vendor is a wholly-owned subsidiary of a company listed on the GEM of the Stock Exchange, namely VNHL (Stock code: 8033). VNHL and its subsidiaries are principally engaged in the provision of network and system infrastructure, enterprise solutions and multimedia value-added services.

There were no outstanding warrants, options, derivatives or securities convertible into the Shares as at the Latest Practicable Date.

1.2 Reasons for the Offer

Completion took place on 13 June 2006. Accordingly, the Offeror and parties acting in concert with it has owned approximately 61.05% of the voting rights of the Company. As such, the Offeror is obliged to make an unconditional mandatory cash offer for all the Shares not already owned or agreed to be acquired by the Offeror and parties acting in concert with it pursuant to Rule 26.1 of the Takeovers Code.

2. Information about the Group

2.1 Principal business of the Group

The Group is principally engaged in the provision of enterprise solutions for targeted customers in Macao and the PRC. The Group offers an array of enterprise solutions including MegaImage (document imaging application), MegaMax (surveillance solution), MegaDMS (document management system) and MegaERP (enterprise resource planning application). Customers of the Group include mobile service bureaus, telecommunications service providers, governmental authorities, gaming and hotel operators, hospitals and enterprises in Macao and the PRC.

As advised by the Directors, the enterprise solutions of the Group are mainly provided on project basis and accordingly, the gross profit margin of different projects may vary for the following two reasons:

based on the nature of the projects and customers’ specifications, different projects may have different mix of software and hardware elements and in general, gross profit margin for sales of software is higher than that of hardware; and

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LETTER FROM TAI FOOK CAPITAL

depending on the sufficiency of human resources and expertise of the Group, the Group may subcontract some of its projects to third parties which will generally result in the gross profit margin of such projects lower than those undertaken by the Group without being subcontracted.

2.2 Financial performance of the Group

Historical financial performance

Set out below is a summary of (i) the Group’s audited consolidated/combined financial results for the three financial years ended 30 June 2005; and (ii) the Group’s unaudited consolidated financial results for the nine months ended 31 March 2005 and 2006 (together, the “Track Record Periods”), as extracted from the Company’s prospectus dated 31 December 2003 as well as the Company’s annual reports and quarterly reports for the corresponding years or periods:

Nine months

	ended 31	March	Year	ended 30	June
	2006	2005	2005	2004	2003
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Turnover	47,935	9,236	14,290	10,465	3,747
Gross profit	8,092	2,185	2,164	2,906	1,904
Gross profit margin	16.9%	23.7%	15.1%	27.8%	50.8%
Selling and administrative
expenses	(10,693)	(10,268)	(14,432)	(9,497)	(1,125)
(Loss)/Profit from operations	(2,495)	(8,057)	(12,722)	(6,589)	779
Write-off of software licence	–	(9,900)	(9,900)	–	–
Net (loss)/profit	(2,495)	(17,957)	(22,622)	(6,589)	779

During the three years ended 30 June 2005, the Group’s turnover increased from approximately HK$3.7 million for the year ended 31 March 2003 to approximately HK$10.5 million for the year ended 31 March 2004 and further to approximately HK$14.3 million for the year ended 31 March 2005. The gross profit margins during the same period, however, were on a decreasing trend from approximately 50.8% to approximately 15.1%, which, as advised by the Directors, was primarily due to competition and higher mix of hardware in projects. Although the Group recorded a net profit of approximately HK$779,000 for the year ended 30 June 2003, it turned to a net loss position for the year ended 30 June 2004 mainly due to, among others, a substantial increase in selling and administrative expenses

– 27 –

LETTER FROM TAI FOOK CAPITAL

as a result of business expansion. The net loss of the Group for the year ended 31 March 2005 further increased to approximately HK$22.6 million mainly as a result of, among others, the write-off of a software licence of HK$9.9 million. The aforesaid write-off was made as the Directors considered that future economic benefit attributable to the software licence was uncertain because of intensive competition from similar software in the PRC market.

The Group’s turnover increased significantly from approximately HK$9.2 million for the nine months ended 31 March 2005 to approximately HK$47.9 million for the nine months ended 31 March 2006, which was mainly due to the completion of a one-off project amounted to approximately HK$19.7 million for the East Asia Games hosted in Macao. However, the gross profit margin for the nine months ended 31 March 2006 reduced to approximately 16.9% from approximately 23.7% during the corresponding period in 2005. We were given to understand from the Directors that a major part of the project for the East Asia Games was subcontracted to third parties due to limited resources within the Group, which resulted in the aforesaid reduction of gross profit margin. Accordingly, notwithstanding the significant increase in turnover for the nine months ended 31 March 2006 as compared with that for the corresponding period in 2005, the Group still recorded a net loss of approximately HK$2.5 million for the nine months ended 31 March 2006.

Outlook of the Group’s business environment

Macao

The Group’s existing customers mainly include, amongst others, governmental authorities, gaming and hotel operators in Macao.

According to the Government of Macao Special Administrative Region Statistics and Census Service, in the first quarter of 2006, the gaming and tourism sector continued to perform well. Gross gaming receipts (excluding gratuities) went up approximately 14.9% and total visitor spending (excluding gaming expenses) rose approximately 19.9% in the first quarter of 2006 as a result of increases in the number of arrivals and per-capital spending of visitors. Together with the rapid growth in the construction sector and export of goods, gross domestic product of Macao recorded a real growth of 18.8% in the first quarter of 2006. According to the Government of Macao Special Administrative Region Statistics and Census Service, in 2005, total government expenditure (excluding autonomous agencies) increased by approximately 19.5% to MOP15.75 billion when compared with that in 2004.

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LETTER FROM TAI FOOK CAPITAL

Given the above-mentioned increases in the gross gaming receipts, visitor spending, gross domestic products and government expenditure in Macao, we concur with the Directors’ view that the operating environment for business in Macao is expected to remain promising in the near future and the Group will be able to capitalise on the strong momentum of current market condition in Macao. However, the robust market will also drive new players into Macao such that market in Macao will become more competitive. This will create pressure on the availability of human resources, thus driving up wages and other operating costs which will create pressure on both the Group’s gross profit and net profit margins.

PRC

The Directors are of the view that the PRC market will continue to be challenging due to intensive competition from local software players. The Directors also consider that the PRC market has yet to become a major market from which the Group generated its revenue. Since the listing of the Company in January 2004, the Group’s sales generated from the PRC market was less than HK$3 million in each financial year.

Our further analysis

In assessing whether the Group’s financial performance may improve in 2006, we have taken into account the following factors:

it was noted that, primarily due to the decrease in gross profit margins during the Track Record Periods, the significant increase in turnover during the Track Record Periods has not turned the Group to become profitable. In particular, we noted that although the turnover of the Group for the nine months ended 31 March 2006 of approximately HK$47.9 million was approximately five times of that for the corresponding period in 2005 and was a record high since the listing of the Company in January 2004, the Group was still unable to achieve a profitable result. Accordingly, we consider that, unless the Group is able to improve its gross profit margin and/or further increase its turnover to a much higher level than that for the nine months ended 31 March 2006, the Group may not be able to improve its financial performance in 2006. However, as set out in points 2 and 3 below, we are of the view that the Group may not be able to improve its gross profit margin and turnover in 2006 to the extent that the Group’s financial performance can turnaround;
based on the financial results of the Group during the Track Record Periods, it was noted that the gross profit margins of the Group were on a decreasing trend. In addition, we were given to understand from the Directors that all revenue related to the East Asia Games projects were recorded during the six months ended 31 December 2005. In order to

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LETTER FROM TAI FOOK CAPITAL

assess the gross profit margin of the Group without taking into account the impact of the East Asia Games project which was of one-off nature, we have reviewed the latest published unaudited financial results of the Group for the three months ended 31 March 2006 and noted that the gross profit margin for the period was approximately 17.3%, which was similar to that for the nine months ended 31 March 2006 of approximately 16.9%. Based on the above, we consider that the Group may not be able to improve its gross profit margin in 2006 to the extent that the Group’s financial performance can turnaround; and

as the Group’s services are mainly on project basis, the revenue of the Group is not of recurring nature and may not be sustainable in the future if the Group cannot obtain new projects on an ongoing basis. According to the third quarterly report of the Company for the nine months ended 31 March 2006, it was noted that the Group had secured orders on hand as at 31 March 2006 amounting to approximately HK$33 million. However, as compared with the secured orders on hand as at 30 June 2005 amounting to approximately HK$46 million according to the annual report of the Company for the year ended 30 June 2005, the total amount of the Group’s secured orders on hand as at 31 March 2006 was relatively lower. Based on the above, we consider that the Group may not be able to increase its turnover in 2006 to the extent that the Group’s financial performance can turnaround.

After considering the above factors, we are of the view that, notwithstanding that the operating environment for business in Macao is expected to remain promising in the near future, there is no certainty that the Group’s financial performance will have any improvement in 2006 to the extent that the Group can turnaround.

3. Terms of the Offer

For each Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.0318 in cash

As stated in the “Letter from Partners Capital” contained in the Composite Offer Document, the Offer Price of HK$0.0318 per Share was determined by the Offeror with reference to the consideration paid by the Offeror for each Sale Share which is equal to HK$0.0318 per Share.

4. Background of the Offeror

The Offeror is a company incorporated in the British Virgin Islands with limited liability and is wholly-owned by Mr. Sun. Mr. Sun is the sole director of the Offeror. As stated in the “Letter from Partners Capital” contained in the Composite Offer Document, Mr. Sun has extensive experience in the financial management of enterprises and was involved in the

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LETTER FROM TAI FOOK CAPITAL

auditing and due diligence activities for clients. Mr. Sun is currently the chief executive officer and deputy chairman of China LotSynergy Holdings Limited (Stock code: 8161), the issued shares of which are listed on the GEM of the Stock Exchange and was previously an executive director of Burwill Holdings Limited (Stock code: 24), the issued shares of which are listed on the Main Board of the Stock Exchange.

4.1 Intention of the Offeror

As stated in the “Letter from Partners Capital” contained in the Composite Offer Document, it is the intention of the Offeror that the Group will continue its existing businesses and will maintain the listing status of the Company on the GEM of the Stock Exchange following the close of the Offer. The Offeror has no intention to dispose of or re-deploy the assets of the Group other than in the ordinary course of its business, or to inject its assets into the Group. Following the close of the Offer, the Offeror will conduct a review on the business operation and financial position of the Group for the purpose of formulating business plans and strategies for the future business development of the Group. Subject to the result of such review and should suitable investment or business opportunities arise, the Offeror may consider diversifying the business of the Group with an objective to broaden its income source. Save for the proposed change of the composition of the Board mentioned below, the Offeror intends that the existing management and employees of the Group will continue their present roles in the existing businesses of the Group following the close of the Offer to ensure a smooth transition.

The existing executive Directors, non-executive Directors and independent nonexecutive Directors will resign on the calendar date of the close of the Offer and such resignations will take effect on the calendar day immediately following the close of the Offer. The Offeror intends to nominate Mr. Kot and Mr. Sun as executive Directors, and Mr. Wang Ronghua, Mr. Hua Fengmao and Mr. Kwok Wing Leung Andy as independent non-executive Directors. The aforesaid appointments will take effect on the calendar day immediately following the close of the Offer. Biographical details of the proposed executive Directors and independent non-executive Directors are set out in the section headed “Proposed change of board composition of the Company” in the “Letter from Partners Capital” contained in the Composite Offer Document. Based on the biographical details of Mr. Kot and Mr. Sun, we noted that they have limited experience directly related to the Group’s principal business and market.

Given the loss-making history of the Group during the two years ended 30 June 2005 and the nine months ended 31 March 2006 and the uncertainties as to the Group’s ability to improve its financial results with its existing businesses in 2006 as discussed above, we consider that, without any immediate new investment or business opportunities that can generate better returns, there is no certainty that the Group’s financial performance will have any improvement in 2006 to the extent that the Group can turnaround. It will also take time for any implementation of new business plan and the results of which may or may not be able to fully reflect in the share price of the Company.

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LETTER FROM TAI FOOK CAPITAL

5. Other factors considered in evaluation of the Offer Price

In the following sub-sections, we have compared the Offer Price of HK$0.0318 per Share with reference to the (i) historical trading pattern and market prices of the Shares; and (ii) other parameters.

5.1 Trading volume

The following table sets out the (i) total number of Shares traded per month; and (ii) respective percentages of monthly trading volume compared with the total number of issued share capital of the Company and Shares held by the public Shareholders from 3 January 2005 up to and including the Latest Practicable Date (the “Review Period”):

		Monthly trading	Monthly trading
		volume as a	volume as a
		percentage of the	percentage of the
		number of the	number of the
	Number of	issued share	Shares held by
	Shares traded	capital of the	the public
Month/period	per month/period	Company	Shareholders
		(Note)	(Note)
2005
January	172,108	0.03%	0.13%
February	4,444	0%	0%
March	9,307	0%	0.01%
April	8,000	0%	0.01%
May	0	0%	0%
June	16,043	0%	0.01%
July	0	0%	0%
August	5,230	0%	0%
September	87	0%	0%
October	48,000	0.01%	0.04%
November	40,000	0.01%	0.03%
December	871	0%	0%
2006
January	183,051	0.03%	0.14%
February	187,050	0.03%	0.14%
March	46,249	0.01%	0.03%
April	51,268	0.01%	0.04%
May	3,260	0%	0%
1 June and up to
the Latest
Practicable Date	375,470	0.07%	0.28%

Source: Bloomberg

Note: Calculated based on the Company’s total number of issued share capital of 535,000,000 Shares and the number of 133,750,000 Shares in public hand during the corresponding period. There has been no change in the Company’s total number of issued share capital since 3 January 2005.

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LETTER FROM TAI FOOK CAPITAL

During the period from 3 January 2005 to 30 May 2006, the monthly trading volume of the Shares on the Stock Exchange ranged from 0 Share to approximately 187,050 Shares, representing approximately 0% to 0.14% of the total number of issued Shares held by public Shareholders. Subsequent to the publication of the Joint Announcement dated 6 June 2006 and up to the Latest Practicable Date, the total trading volume of the Shares was approximately 375,470 Shares, representing approximately 0.28% of the total number of issued Shares held by public Shareholders.

Based on the above, we consider that the liquidity of the Shares was very low. We consider that such low level of liquidity could not enable the Shareholders to realise their shareholdings in the Company easily even if they wish to do so.

5.2 Share price

The following chart sets out the daily historical closing price of the Shares traded on the Stock Exchange during the Review Period:

==> picture [302 x 103] intentionally omitted <==

Source: Bloomberg

The Offer Price of HK$0.0318 per Share represents:

(i) a discount of approximately 54.57% to the closing price of HK$0.070 per Share as quoted on the Stock Exchange on 30 May 2006, being the last trading day prior to the suspension of trading of the Shares on 1 June 2006;
(ii) a discount of approximately 43.72% to the average closing price of HK$0.0565 per Share over the 10 consecutive trading days up to and including 30 May 2006;
(iii) a discount of approximately 40.11% to the average closing price of HK$0.0531 per Share over the 30 consecutive trading days up to and including 30 May 2006;
(iv) a discount of approximately 74.56% to the closing price of HK$0.125 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and

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LETTER FROM TAI FOOK CAPITAL

(v) a discount of approximately 75.02% to the average closing price of HK$0.1273 per Share over 10 conservative trading days up to and including the Latest Practicable Date.

We noted that the closing prices of the Shares were above the Offer Price during the entire Review Period. In addition, the trading prices of the Shares have increased significantly after the publication of the Joint Announcement which, we believe, was due to the market speculation on the Group’s future business prospects as a result of the change of the controlling Shareholder and any possible business diversification of the Group that may be considered by the Offeror should suitable opportunities arise. As the liquidity of the Shares was kept at a very low level, we consider that such level of share price may not be sustainable.

As mentioned in the paragraph 2.2 headed “Financial performance of the Group”, we noted that the Group reported audited or unaudited consolidated losses attributable to Shareholders of approximately HK$6.6 million, HK$22.6 million and HK$2.5 million for the year ended 30 June 2004, the year ended 30 June 2005 and the nine months ended 31 March 2006 respectively. Furthermore, we noted that there was no dividend paid or declared during the same period. Having reviewed all the announcements published by the Company during the Review Period and given the historical financial results of the Group and the inactive trading of the Shares, we are not aware of any conclusive reason that could be attributable to the historical market prices of the Shares being traded at a substantial premium over its underlying net assets value per Share. In addition, we consider that the historical market prices of the Shares under the inactive trading of the Shares during the Review Period may be substantially different if the trading of the Shares becomes active. Accordingly, we consider that the historical trading prices of the Shares may not be an appropriate basis to assess the fairness and reasonableness of the Offer Price.

5.3 Net assets value

Based on the unaudited consolidated net assets of the Group of approximately HK$7.8 million and the 535,000,000 Shares in issue as at 31 December 2005 as disclosed in the Company’s second quarterly report for the six months ended 31 December 2005, the unaudited consolidated net assets value per Share was approximately HK$0.0146 as at 31 December 2005. Accordingly, the Offer Price of HK$0.0318 per Share represents a premium of approximately 117.8% over the unaudited consolidated net assets value per Share as at 31 December 2005.

We consider that the comparisons between the net assets values of the Group and other companies which are comparables with the Group are relevant for assessing the fairness and reasonableness of the Offer Price since the net assets value can be used to assess the net realisable value of a company, in particular after taking into account the fact that the Group has continuously recorded losses for the nine months ended 31 March 2006 and the two years ended 30 June 2005. As such, in order to assess whether the

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LETTER FROM TAI FOOK CAPITAL

above-mentioned premium is fair and reasonable, we have identified all comparable companies listed on the GEM of the Stock Exchange (the “Comparables”) using Bloomberg which satisfied the following selection criteria:

principal business is information technology related;
market capitalisation is within the range of HK$20 million and HK$80 million, which was the approximate range of market capitalisation of the Company calculated based on its lowest and highest share prices in the past one year;
loss making company according to the latest published annual reports and quarterly reports;
positive net assets value was reported in the latest published annual reports and quarterly reports;
turnover of not less than HK$10 million based on the latest published annual report, given that the Group recorded turnover of more than approximately HK$10 million during each of the two years ended 30 June 2005 and of approximately HK$47.9 million for the nine months ended 31 March 2006; and
no qualified auditors’ opinion in the latest published audited financial statements.

							Premium/
							(discount) of
				Market		Latest	closing price
				capitalisation		published net	over/(to)
				as at the	Closing price	assets/	latest
		Net loss for	Net loss after	Latest	on the Latest	liabilities	published net
		the latest	the latest	Practicable	Practicable	value per	assets value
Comparables	Principal businesses	financial year	financial year	Date	Date	share	per share
		HK$	HK$	HK$	HK$	HK$
Cardlink Technology	Manufacture and sale of	2.0 million	1.9 million	48.0 million	0.15	0.151	(0.7%)
Group Limited	smart cards and plastic		(three months
(Stock code: 8066)	cards		ended 31
			March 2006)
Sino Haijing	Provision of intelligent	8.7 million	0.2 million	31.5 million	0.056	0.037	51.4%
Holdings Limited	building system		(three months
(Stock code: 8065)	solutions and sales of		ended 31
	electronic equipment		March 2006)
Armitage Technologies	Research and	3.4 million	N/A	24.8 million	0.033	0.046	(28.3%)
Holding Limited	development of
(Stock code: 8213)	information technology
	solution and provision of
	information solutions
	and sales of application
	software
Golding Soft Limited	Provision of original	30.4 million	17.2 million	20 million	0.02	0.027	(25.9%)
(Stock code: 8190)	design manufacturing		(nine months
	software, proprietary		ended 31
	packaged softwares and		March 2006)
	system solutions
The Company				66.9 million	0.0318	0.0146	117.8%
					(Note)

Sources: Bloomberg and the latest annual reports and the quarterly reports of the Comparables

Note: Offer Price of HK$0.0318

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LETTER FROM TAI FOOK CAPITAL

All the Comparables did not distribute any dividend in their respective latest financial years according to their respective annual reports.

As shown in the above table, based on the closing price per share of the Comparables as at the Latest Practicable Date, the shares of the Comparables were traded at a range between a discount of approximately 0.7% and a premium of approximately 51.4% to/over their respective latest net assets value per share.

After taking into account that the premium of the Offer Price over the unaudited consolidated net assets value per Share as at 31 December 2005 is approximately 117.8% which is more favourable than the discounts or premium of the shares prices of the Comparables as at the Latest Practicable Date to or over their respective latest net assets value per share, we consider that the Offer Price is fair and reasonable for the Independent Shareholders.

5.4 Price earnings multiples

One of the most commonly adopted valuation basis of a listed company is the price earnings multiple. However, as the Group has made losses for the two consecutive financial years ended 30 June 2005, the price earnings multiple of the Company cannot be derived from the Group’s latest audited financial statements for the year ended 30 June 2005. As such, it is not applicable to evaluate the Offer Price on the basis of the price earnings multiples during the Review Period.

5.5 Dividends

The Group has not declared any dividend since the date of its listing in January 2004. Given the Group’s historical financial performance, it is not certain as to whether the Group will be able to pay dividend in the near term.

RECOMMENDATION

Having considered the above principal factors and reasons, in particular the following factors:

(i) the Offer Price represents a premium of approximately 117.8% over the Group’s unaudited consolidated net assets value per share of approximately HK$0.0146 as at 31 December 2005 which is more favourable than the discounts or premium of the share prices of the Comparables as at the Latest Practicable Date to or over their respective latest net assets value per share;
(ii) the trading of the Shares was very thin based on historical records which implies that it is difficult for the Shareholders to dispose of their Shares in the market without exerting downward pressure on the prices of the Shares;
(iii) there is no conclusive reason that could be attributable to the market prices of the Shares being traded at a substantial premium over its underlying net assets value per Share as discussed in paragraph 5.2 above;

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LETTER FROM TAI FOOK CAPITAL

(iv) the existing businesses of the Group have been making losses for the past two years ended 30 June 2005 and the nine months ended 31 March 2006 and the Group may not be able to improve its financial performance in 2006 to the extent that the Group can turnaround;
(v) no dividend has been declared by the Company to the Shareholders since the listing of the Shares on the GEM of the Stock Exchange in January 2004 and there is no certainty when the Group will be able to declare dividend given its historical financial performance; and
(vi) there is no concrete plan to change the Group’s existing business and no specific targets have been identified for investment,

we consider that the terms of the Offer are fair and reasonable and are in the interests of the Independent Shareholders and therefore recommend the Independent Board Committee to advise the Independent Shareholders to accept the Offer.

The Independent Shareholders should consider realising their shareholdings in the Company during the offer period through acceptance of the Offer. However, in the event that the market price of the Shares exceeds the Offer Price during the period for which the Offer remains open for acceptance and the net sale proceeds from on-market sales would exceed the amounts receivable under the Offer, the Independent Shareholders should seek to sell their Shares in the market. If the Independent Shareholders cannot sell their Shares before the close of the Offer, they should accept the Offer. The Independent Shareholders should note that they may or may not be able to dispose of their Shares in the market without adversely affecting the trading price of the Shares and for those Independent Shareholders with significant holdings of the Shares should note that the Offer does provide them with an opportunity to realise their shareholdings in the Company in their entirety which opportunity may not be readily available otherwise.

Yours faithfully, For and on behalf of Tai Fook Capital Limited Derek C. O. Chan Marcus Ho Managing Director Executive Director

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FURTHER TERMS OF THE OFFER

APPENDIX I

1. FURTHER PROCEDURES FOR ACCEPTANCE

The 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 Shares is/are in your name(s), and you wish to accept the Offer, you must send the accompanying Form of Acceptance duly completed 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.
(b) 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 Shares is/are in the name of a nominee company or a name other than your own, and you wish to accept the Offer in respect of your Shares, 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, with instructions authorizing it to accept the Offer on your behalf and requesting it to deliver the Form of Acceptance duly completed 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 Shares to be registered in your name by the Company through the Registrar, and send the Form of Acceptance duly completed together with the relevant share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnify or indemnities required in respect thereof) to the Registrar; or
(iii) if your Shares have been lodged with your licensed securities dealer/custodian bank through CCASS, instruct your licensed securities dealer (or other registered dealer in securities)/custodian bank to authorise HKSCC Nominees Limited to accept the Offer on your behalf on or before the deadline set out by HKSCC Nominees Limited. In order to meet the deadline set by HKSCC Nominees Limited, you should check with your licensed securities dealer (or other registered dealer in securities)/custodian bank for the timing on the processing of your instruction, and submit your instruction to your licensed securities dealer/custodian bank as required by them; or
(iv) if your Shares have been lodged with your Investor Participant Account with CCASS, authorise your instruction via the CCASS Phone System or CCASS Internet System on or before the deadline set out by HKSCC Nominees Limited (i.e. 17 July 2006).

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FURTHER TERMS OF THE OFFER

APPENDIX I

(c) If the 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) in respect of your Shares is/are not readily available and/or is/are lost and you wish to accept the Offer in respect of your Shares, the Form of Acceptance should nevertheless be completed and delivered to the Registrar together with a letter stating that you have lost one or more of your share certificate(s) and/or transfer receipts 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) 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.
(d) If you have lodged transfer(s) of any of your Shares for registration in your name and have not yet received your share certificate(s), and you wish to accept the Offer in respect of your Shares, you should nevertheless complete the Form of Acceptance and deliver it to the Registrar together with the transfer receipt(s) duly signed by yourself. Such action will be deemed to be an authority to Partners Capital and/or the Offeror 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 as if it was/they were delivered to the Registrar with the Form of Acceptance.
(e) Acceptance of the Offer will be treated as valid only if the completed Form of Acceptance is received by the Registrar by not later than 4:00 p.m. on 18 July 2006 or such later time and/or date as the Offeror may determine in compliance with the requirements of the Takeovers Code and announce, and is:
(i) accompanied by the relevant 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) and, if those Share certificate(s) is/are not in your name, such other documents in order to establish your right to become the registered holder of the relevant Shares; or
(ii) from a registered shareholder of Shares or his personal representative (but only up to the amount of the registered holding and only to the extent that the acceptance relates to Shares which are not taken into account under another sub-paragraph of this paragraph (e)); or
(iii) certified by the Registrar or the Stock Exchange.

If the Form of Acceptance is executed by a person other than the registered holder of Shares, appropriate documentary evidence of authority to the satisfaction of the Registrar must be produced.

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FURTHER TERMS OF THE OFFER

APPENDIX I

(f) No acknowledgement of receipt of any Form(s) of Acceptance, 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.
(g) The address of the Registrar is at 26/F, Tesbury Centre, 28 Queen’s Road East, Hong Kong.

2. ACCEPTANCE PERIOD AND REVISIONS

The Offer will remain open for acceptance until 4:00 p.m. on 18 July 2006, unless extended or revised in accordance with the Takeovers Code. The Offeror reserves the right to revise or extend the Offer in accordance with the Takeovers Code.

The Offer may be revised at any time up to the Closing Date. If the Offer is revised, such revised Offer will remain open for acceptance for a period of at least 14 days from the date of posting of the written notification of the revision to the Shareholders. In any case where the Offer is revised, and the consideration offered under the revised Offer does not represent on such date a reduction in the value of the Offer in their original or any previously revised form(s), the benefit of such revised Offer will be made available as set out herein to acceptors of the Offer in their original or any previously revised form(s) (hereinafter called “previous acceptor(s)”). The execution by, or on behalf of, a previous acceptor of any Form of Acceptance shall be deemed to constitute acceptance of the Offer as so revised.

3. ANNOUNCEMENTS

(a) By 6:00 p.m. (or such later time and/or date as the Executive agrees) on 18 July 2006 which is the Closing Date, the Offeror must inform the Executive and the Stock Exchange of its intention in relation to the revision, extension or expiry of the Offer. The Offeror must publish an announcement on the Stock Exchange’s website by 7:00 p.m. on the Closing Date stating whether the Offer has been revised, extended or has expired. Such announcement must be republished in accordance with the requirements set out below on the next business day.

The announcement must state the following:

(i) the total number of all issued Shares and rights over shares for which acceptances of the Offer have been received;
(ii) the total number of Shares and rights over shares held, controlled or directed by the Offeror or parties acting in concert with it before the Offer period; and
(iii) the total number of Shares and rights over shares acquired or agreed to be acquired during the Offer period by the Offeror or parties acting in concert with it.

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

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FURTHER TERMS OF THE OFFER

APPENDIX I

(b) Acceptances not complete in all respects and purchases must only be included in the totals in an announcement under Rule 19 of the Takeovers Code where they could be counted towards fulfilling an acceptance condition under Note 1 to Rule 30.2 of the Takeovers Code.
(c) As required under the Takeovers Code and the GEM Listing Rules, any announcement in relation to the Offer, in respect of which the Executive and the Stock Exchange have confirmed that they have no further comments thereon, must be published on the GEM website.

4. RIGHT OF WITHDRAWAL

Acceptances of the Offer tendered by the Independent Shareholders 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 for making announcements under Rule 19 of the Takeovers Code relating to the Offer), the Executive may require that Shareholders who tendered acceptances of the Offer be granted a right of withdrawal, on terms acceptable to the Executive until such requirements can be met. A further announcement will be made by the Offeror if any such right of withdrawal (as described in this paragraph) is available to the Independent Shareholders.

5. GENERAL

(a) All communications, notices, Forms of Acceptance, share certificates, transfer receipts, other documents of title (and/or any satisfactory indemnity or indemnities required in respect thereof) and remittances to be delivered by or sent to or from the Independent Shareholders will be delivered by or sent to or from them, or their designated agents, at their own risk, and neither the Company, the Offeror, Partners Capital, and any of their respective agents nor the Registrar accepts any liability for any loss in postage or any other liabilities that may arise as a result.
(b) The provisions set out in the accompanying Form of Acceptance forms part of the terms of the Offer.
(c) The accidental omission to despatch this document and/or the Form(s) of Acceptance or any of them to any person to whom the Offer is made will not invalidate the Offer in any way.
(d) The Offer and all acceptances will be governed by and construed in accordance with the laws of Hong Kong.
(e) Due execution of the Form of Acceptance will constitute an authority to any director of the Offeror, Partners Capital or such person or persons as any of them may direct to complete and execute any document on behalf of the person accepting the Offer and to do any other act that may be necessary or expedient for the purposes of vesting in the Offeror or such person or persons as it may direct the Shares, in respect of which such person has accepted the Offer.

– 41 –

FURTHER TERMS OF THE OFFER

APPENDIX I

(f) Acceptance of the Offer by any person or persons will be deemed to constitute a warranty by such person or persons to the Offeror that the Shares acquired under the Offer is sold by any such person or persons free from all liens, claims and encumbrances and together with all rights attaching thereto including the right to receive all future dividends or other distributions, if any, declared, paid or made on the Shares on or after the date of the Joint Announcement.
(g) The settlement of the consideration to which any Shareholder is entitled under the Offer will be implemented in full in accordance with the terms of the Offer 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.
(h) Seller’s ad valorem stamp duty at the rate of HK$1.00 for every HK$1,000 or part thereof of the greater of (i) the consideration payable; and (ii) the market value of the Shares (rounded up to the nearest HK$1) arising in connection with acceptance of the Offer, is payable by accepting Independent Shareholders and will be deducted from the consideration payable to the Independent Shareholders accepting the Offer and will be settled by the Offeror on behalf of such accepting Independent Shareholders.
(i) The Offeror does not intend to exercise any right which may be available to it under the provisions of Section 102 or 103 of the Companies Act to acquire compulsorily any Shares not acquired under the Offer after the Offer has closed but reserves the right to do so.
(j) References to the Offer in this document and in the Form(s) of Acceptance shall include any extension and/or revision thereof.
(k) The making of the Offer to persons with a registered address in jurisdictions outside Hong Kong may be affected by the laws of the relevant jurisdictions. Shareholders 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 persons who wish to accept the Offer to satisfy themselves 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.
(l) The English text of this document and the Form of Acceptance shall prevail over their respective Chinese texts for the purpose of interpretation.

– 42 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

1. SUMMARY OF PUBLISHED FINANCIAL RESULTS AND POSITION FOR THE THREE YEARS ENDED 30 JUNE 2005

CONSOLIDATED PROFIT AND LOSS ACCOUNT

2005 HK$ 14,289,721 (12,125,708)	2004 HK$ 10,465,492 (7,559,171)	For the period from 10 December 2002 to 30 June 2003 HK$ – –
2,164,013 35,523 (9,900,000) (482,693) (186,543) (14,245,763) (22,615,463) (6,171) (22,621,634) –	2,906,321 3,130 – – (97,971) (9,398,765) (6,587,285) (1,614) (6,588,899) –	– – – – – –
		– –
		– –
(22,621,634)	(6,588,899)	–

–	–	–
4.23 cents	1.41 cents	–

Notes:

There were no extraordinary items, exceptional items nor minority interest for each of the three years ended 30 June 2005.
None of the audited financial statements of the Company were qualified by the auditors of the Company for each of the three years ended 30 June 2005.
The Group had not been in existence until the completion of the corporate reorganisation on 23 December 2003.

– 43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

2. AUDITED FINANCIAL INFORMATION FOR THE TWO YEARS ENDED 30 JUNE 2005

CONSOLIDATED INCOME STATEMENT

For the year ended 30 June 2005

Notes Turnover 4 Cost of sales Gross profit Bank interest income Impairment loss recognised in respect of software licences Impairment loss recognised in respect of goodwill Selling expenses Administrative expenses Loss from operations 6 Finance costs 7 Loss before taxation Income tax 10 Net loss for the year Basic loss per share 11	2005 HK$ 14,289,721 (12,125,708)	2004 HK$ 10,465,492 (7,559,171) 2,906,321 3,130 – – (97,971) (9,398,765) (6,587,285) (1,614) (6,588,899) – (6,588,899) 1.41 cents
	2,164,013 35,523 (9,900,000) (482,693) (186,543) (14,245,763) (22,615,463) (6,171) (22,621,634) –	2,906,321 3,130 – – (97,971 (9,398,765
		(6,587,285 (1,614
		(6,588,899 –
	(22,621,634) 4.23 cents

– 44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED BALANCE SHEET

At 30 June 2005

Notes Non-current assets Property, plant and equipment 12 Software licences 13 Goodwill 14 Investment in an associate 16 Current assets Inventories 17 Trade receivables 18 Amount due from a customer for contract work 19 Other receivables, deposits and prepayments 20 Bank balances and cash 21 Current liabilities Trade payables 22 Other payables, accruals and deposits received 23 Deferred revenue Bank overdrafts Net current assets Capital and reserves Share capital 24 Reserves	2005 HK$ 1,604,617 – – 14,272	2004 HK$ 1,499,380 10,761,527 541,201 –
	1,618,889 3,917,964 3,559,012 754,694 10,873,397 11,329,719 30,434,786 659,279 23,419,374 224,050 – 24,302,703 6,132,083	12,802,108
		3,993,514 4,100,080 – 1,422,501 16,015,256
		25,531,351
		1,088,687 4,473,801 224,050 2,143,839
		7,930,377
		17,600,974
	7,750,972	30,403,082

	5,350,000 2,400,972	5,350,000 25,053,082
	7,750,972	30,403,082

– 45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

BALANCE SHEET

At 30 June 2005

Notes Non-current asset Investments in subsidiaries 15 Current assets Deposits and prepayments Bank balances and cash Current liabilities Other payables and accruals Bank overdrafts Net current assets Capital and reserves Share capital 24 Reserves 25	2005 HK$ 6,886,475	2004 HK$ 28,564,824
	91,700 529,038 620,738 485,340 – 485,340 135,398	22,500 6,378,405
		6,400,905
		465,000 230,923
		695,923
		5,704,982
	7,021,873	34,269,806

	5,350,000 1,671,873	5,350,000 28,919,806
	7,021,873	34,269,806

– 46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2005

At 1 July 2003 Issue of shares in a subsidiary for purchase of software licences Issue of shares arising from the Reorganisation (note 24(a)(ii)) Issue of shares in a subsidiary for acquisition of a business Capitalisation issue (note 24(b)) Issue of shares by placing and public offer (note 24(c)) Share issuance costs Exchange differences on translation of the financial statements of foreign subsidiaries not recognised in income statement Wavier of amount due to immediate holding company Net loss for the year At 30 June 2004 Exchange differences on translation of the financial statements of foreign subsidiaries not recognised in income statement Net loss for the year At 30 June 2005	Share capital HK$ 100,000 – 30,000 – 4,016,250 1,203,750 – – – –	Share premium HK$ 5,400,000 – – – (4,016,250) 28,890,000 (9,697,190) – – –	Exchange reserve Contributed surplus Accumulated losses HK$ HK$ HK$ – (5,523,620) – – 11,000,000 – – – – – 132,019 – – – – – – – – – – (42,978) – – – 5,500,000 – – – (6,588,899)	Exchange reserve Contributed surplus Accumulated losses HK$ HK$ HK$ – (5,523,620) – – 11,000,000 – – – – – 132,019 – – – – – – – – – – (42,978) – – – 5,500,000 – – – (6,588,899)	Exchange reserve Contributed surplus Accumulated losses HK$ HK$ HK$ – (5,523,620) – – 11,000,000 – – – – – 132,019 – – – – – – – – – – (42,978) – – – 5,500,000 – – – (6,588,899)	Total HK$ (23,620) 11,000,000 30,000 132,019 – 30,093,750 (9,697,190) (42,978) 5,500,000 (6,588,899) 30,403,082 (30,476) (22,621,634) 7,750,972
	5,350,000 – –	20,576,560 – –	(42,978) (30,476) –	11,108,399 – –	(6,588,899) – (22,621,634)	30,403,082 (30,476 (22,621,634
	5,350,000	20,576,560	(73,454)	11,108,399	(29,210,533)

The contributed surplus of the Group represents (1) the difference between (a) the nominal value of the share capital and the existing balances on the share premium account of a subsidiary acquired; and (b) the nominal value of the shares issued by the Company and the release and waiver of the amount owed by the then holding company of the subsidiary to the Company in exchange thereof; and (2) the release and waiver of the amount owed by the Company to its immediate holding company.

– 47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 30 June 2005

Notes OPERATING ACTIVITIES Loss from operations Adjustments for: Impairment loss recognised in respect of software licences Impairment loss recognised in respect of goodwill Depreciation of property, plant and equipment Amortisation of software licences Amortisation of goodwill Interest income Operating cash flows before movements in working capital Decrease (increase) in inventories Decrease (increase) in trade receivables Increase in amount due from a customer for contract work Increase in other receivables, deposits and prepayments Decrease in amount due from immediate holding company (Decrease) increase in trade payables Increase in other payables, accruals and deposits received Cash used in operations Interest received Interest paid NET CASH USED IN OPERATING ACTIVITIES	2005 HK$ (22,615,463) 9,900,000 482,693 503,113 861,527 58,508 (35,523)	2004 HK$ (6,587,285) – – 382,630 705,763 43,881 (3,130) (5,458,141) (3,993,514) (1,900,240) – (1,363,199) 5,506,380 1,062,236 4,467,006 (1,679,472) 3,130 (1,614) (1,677,956)
	(10,845,145) 75,550 541,068 (754,694) (9,450,896) – (429,408) 18,945,573 (1,917,952) 35,523 (6,171) (1,888,600)	(5,458,141 (3,993,514 (1,900,240 – (1,363,199 5,506,380 1,062,236 4,467,006
		(1,679,472 3,130 (1,614
		(1,677,956

– 48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Notes INVESTING ACTIVITIES Purchase of property, plant and equipment Purchase of software licences Acquisition of the Business 26 Acquisition of subsidiaries 27 Investment in an associate CASH USED IN INVESTING ACTIVITIES FINANCING ACTIVITIES Proceeds on issue of shares New bank loans raised Shares issuing expenses Repayment of bank loans NET CASH FROM FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR EFFECT OF FOREIGN EXCHANGE RATE CHANGES CASH AND CASH EQUIVALENTS AT END OF THE YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Bank balances and cash Bank overdrafts	2005 HK$ (608,350) – – – (14,272)	2004 HK$ (1,780,651) (467,290) (1,840,164) (716,104) – (4,804,209) 30,093,750 194,175 (9,697,190) (194,175) 20,396,560 13,914,395 – (42,978) 13,871,417 16,015,256 (2,143,839) 13,871,417
	(622,622) – – – – – (2,511,222) 13,871,417 (30,476)	(4,804,209
		30,093,750 194,175 (9,697,190 (194,175
		20,396,560
		13,914,395 – (42,978
	11,329,719
	11,329,719 –	16,015,256 (2,143,839
	11,329,719

– 49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO FINANCIAL STATEMENTS

For the year ended 30 June 2005

1. COMPANY REORGANISATION AND BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The Company was incorporated in Bermuda on 22 January 2003 as an exempted company under the Companies Act 1981 of Bermuda (as amended) and its shares have been listed on the GEM on 19 January 2004.

Pursuant to a group reorganisation (“Reorganisation”) in preparation for the listing of the shares of the Company on the GEM, the Company became the holding company of the companies now comprising the Group on 23 December 2003. VHL and Gofull then had 82% and 18% equity interests in the Group respectively and the equity interests in the Group owned by VHL and Gofull remained the same immediately before and after the Reorganisation. The Reorganisation involved companies under common control and the Company and its subsidiaries resulting from the Reorganisation are regarded as a continuing group. Details of the Reorganisation are set out in the Prospectus of the Company dated 31 December 2003.

Accordingly, the Reorganisation had been accounted for on the basis of merger accounting, under which the consolidated financial statements have been prepared as if the Company had been the holding company of the companies comprising the Group throughout the accounting year ended 30 June 2004 presented.

The Directors regard Vodatel Networks Holdings Limited (“VNHL”), a company incorporated in Bermuda, as the ultimate holding company of the Company.

The principal activity of the Company is investment holding. Details of the principal activities of the Company’s subsidiaries and an associate are set out in notes 15 and 16 respectively.

2. POTENTIAL IMPACT ARISING FROM THE RECENTLY ISSUED ACCOUNTING STANDARDS

During the year, the Hong Kong Institute of Certified Public Accountants issued a number of new or revised Hong Kong Accounting Standards and Hong Kong Financial Reporting Standards (“HKFRSs”) (hereinafter collectively referred to as “new HKFRSs”) which are effective for accounting periods beginning on or after 1 January 2005 except for HKFRS 3 “Business Combinations”. The Group has not early adopted these new HKFRSs in the financial statements for the year ended 30 June 2005.

HKFRS 3 is applicable to business combinations for which the agreement date is on or after 1 January 2005. The Group has not entered into any business combination for which the agreement date is on or after 1 January 2005. Therefore, HKFRS 3 did not have any impact on the Group for the year ended 30 June 2005.

The Group has considered these new HKFRSs but does not expect that the issuance of these HKFRSs will have a material impact on how its results of operations and financial position are prepared and presented.

3. SIGNIFICANT ACCOUNTING POLICIES

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

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 30 June each year.

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

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair values of the identifiable assets and liabilities of a subsidiary at the date of acquisition.

Goodwill arising on acquisition is capitalised and amortised on a straight-line basis over its estimated useful life, and will be charged to the income statement at such time as the goodwill is determined to be impaired.

– 50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Investments in subsidiaries

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

Investment in an associate

The consolidated income statement includes the Group’s share of the post-acquisition results of its associate for the year. In the consolidated balance sheet, investment in an associate is stated at the Group’s share of net assets of the associate.

Revenue recognition

Revenue from the “one-stop project” entered into with a Macao government authority for the provision of digital image processing management solutions is recognised when the outcome of the contract can be estimated reliably and the stage of completion at the balance sheet date can be measured reliably. Revenue from this fixed priced “one-stop project” is recognised on the percentage of completion method, measured by reference to the proportion that costs incurred to date bear to estimated total costs for the contract.

Revenue from other projects for the provision of computer software products and digital image processing management solutions is recognised upon the transfer of risks and rewards of ownership, which generally coincides with the time when goods are delivered to the customers and title has passed.

Revenue from separately priced product maintenance contracts, which is received or receivable from customers, is deferred and amortised on a straight-line basis over the contracted period.

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

Property, plant and equipment

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

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

Leasehold improvements	20%
Computer equipment	50%
Demonstration equipment	331⁄3%
Furniture, fixtures and equipment	20%

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

Software licences

The expenditure for acquisition of software licences is measured initially at cost and amortised on a straight-line basis over their estimated useful lives or licensing period, whichever is shorter.

Research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development expenditure is recognised only if it is anticipated that the development costs incurred on a clearly-defined project will be recovered through future commercial activity. The resultant asset is amortised on a straight-line basis over its useful life.

Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.

– 51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Impairment

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

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

Foreign currencies

Transactions in foreign currencies are initially recorded at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are re-translated at the rates prevailing on the balance sheet date. Profits and losses arising on exchange are included in the net profit or loss for the year.

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

Taxation

Taxation represents the sum of the tax currently payable and deferred tax.

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

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

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

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

Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised. Deferred tax is charged or credited to the income statement.

Construction contracts

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

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

– 52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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

When a contract covers a number of assets, the construction of each asset is treated as a separate contract when separate proposals have been submitted for each asset, each asset has been separately negotiated and the costs and revenue of each asset can be separately identified. A group of contracts, performed concurrently or in a continuous sequence, is treated as a single construction contract when the contracts were negotiated as a single package and they are so closely inter-related that they constitute a single project with an overall profit margin.

Where contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is shown as an amount due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date plus recognised profits less recognised losses, the surplus is shown as an amount due to customers for contract work. Amounts received before the related work is performed are included in the balance sheet, as a liability, as advances received. Amounts billed for work performed but not yet paid by the customer are included in the balance sheet under trade receivables.

Inventories

Inventories, including any materials for the construction contracts, are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out method. Net realised value represents the estimated selling price in the ordinary course of business less estimated costs to completion and the estimated costs necessary to make the sale.

Operating leases

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

Retirement benefits costs

Payments to defined contribution retirement plans/Mandatory Provident Fund scheme and statemanaged retirement benefit schemes are charged as expenses as they fall due.

4. TURNOVER

Turnover represents the net amounts received and receivable from sale of computer software products and provision of digital image processing management solutions and maintenance services by the Group to outsider customers for the year, and is analysed as follows:

Provision of digital image processing management solutions for “one-stop project” under construction contracts Sale of computer software products and related services	2005 HK$ 8,787,212 5,502,509 14,289,721	2004 HK$ 2,260,137 8,205,355
		10,465,492

– 53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

5. SEGMENT INFORMATION

The Group is principally engaged in the provision of digital image processing management solutions in Macao and the PRC.

The Directors present the geographical segment as the Group’s primary segment information.

There are no sales between the geographical segment.

– Geographical segment Primary reporting segment

The following table provides an analysis of the Group’s sales by geographical markets:

Income statement

The PRC 2005 2004 HK$ HK$ 2,967,051 105,543 (1,534,516) (1,975,087) 3,397,172 3,554,088 168,568 367,716	Consolidated 2005 2004 HK$ HK$ 14,289,721 10,465,492 (8,606,005) (4,668,789) – 1,530 (14,009,458) (1,920,026) (22,615,463) (6,587,285) (6,171) (1,614) (22,621,634) (6,588,899) – – (22,621,634) (6,588,899) 31,418,664 21,171,027 14,272 – 620,739 17,162,432 32,053,675 38,333,459 23,817,363 7,234,454 485,340 695,923 24,302,703 7,930,377	Consolidated 2005 2004 HK$ HK$ 14,289,721 10,465,492 (8,606,005) (4,668,789) – 1,530 (14,009,458) (1,920,026) (22,615,463) (6,587,285) (6,171) (1,614) (22,621,634) (6,588,899) – – (22,621,634) (6,588,899) 31,418,664 21,171,027 14,272 – 620,739 17,162,432 32,053,675 38,333,459 23,817,363 7,234,454 485,340 695,923 24,302,703 7,930,377
	– (14,009,458) (22,615,463) (6,171) (22,621,634) –	1,530 (1,920,026
		(6,587,285 (1,614
		(6,588,899 –
3,554,088 367,716	(22,621,634)
	31,418,664 14,272 620,739	21,171,027 – 17,162,432
	32,053,675
	23,817,363 485,340	7,234,454 695,923
	24,302,703

– 54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Other information

	Macao		The PRC		Consolidated	Consolidated
	2005	2004	2005	2004	2005	2004
	HK$	HK$	HK$	HK$	HK$	HK$
Capital expenditures
– allocated	478,369	1,774,062	129,981	29,433	608,350	1,803,495
– unallocated	–	–	–	–	–	11,467,290
Depreciation	476,502	371,075	26,611	11,555	503,113	382,630
Amortisation charge
– allocated	–	–	58,508	43,881	58,508	43,881
– unallocated	–	–	–	–	861,527	705,763
Impairment loss recognised
in respect of software
licences
– unallocated	–	–	–	–	9,900,000	–
Impairment loss in respect
of goodwill	–	–	482,693	–	482,693	–

Business segment – Secondary reporting segment

No business segment analysis is presented as the Group has been operating in a single business segment, which is the provision of digital image processing management solutions for both years.

6. LOSS FROM OPERATIONS

Loss from operations has been arrived at after charging: Auditors’ remuneration Cost of inventories recognised as expenses Depreciation of property, plant and equipment Amortisation charge (included in administrative expenses) – software licences – goodwill Operating lease rentals in respect of – land and buildings – equipment Net foreign exchange loss Software development fees Staff costs, including Directors’ remunerations (Note 8) Fees, salaries, discretionary bonus and other benefits Social security cost Retirement benefits scheme contributions	THE GROUP 2005 2004 HK$ HK$ 480,000 465,000 11,475,638 5,489,487 503,113 382,630 861,527 705,763 58,508 43,881 920,035 749,644 511,626 428,990 – 21,000 511,626 449,990 26,772 25,221 – 480,000 7,490,305 4,768,942 250,466 142,280 21,352 9,000 7,762,123 4,920,222
	861,527 58,508
	920,035
	511,626 –
	511,626 26,772 –
	7,490,305 250,466 21,352
	7,762,123

The staff costs included staff costs incurred on research and development which amounted to HK$1,749,456 (2004: HK$664,720).

– 55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

7. FINANCE COSTS

The amount represents interest on bank loans and overdrafts wholly repayable within five years.

8. DIRECTORS’ REMUNERATION

For the year ended 30 June 2005

Fees Other emoluments Salaries and other benefits Social security costs Total emoluments	Executive Directors Mr. Jose´ Manuel dos Santos Mr. Mok Chi Va Mr. Kuok Cheong Ian HK$ HK$ HK$ 130,000 130,000 130,000 520,000 325,000 325,000 – 393 393 650,000 455,393 455,393	Non-executive Directors Mr. Yim Hong Mr. Kuan Kin Man HK$ HK$ 60,000 60,000 – – – – 60,000 60,000	Independent non-executive Directors Mr. Chui Sai Cheong Mr. Tsui Wai Kwan Mr. Tam Pak Yip HK$ HK$ HK$ 92,667 120,000 120,000 – – – – – – 92,667 120,000 120,000	Total 2005 HK$ 842,667 1,170,000 786
				2,013,453

For the year ended 30 June 2004

Fees Other emoluments Salaries and other benefits Discretionary bonus Social security costs Total emoluments	Executive Directors Mr. Jose´ Manuel dos Santos Mr. Mok Chi Va Mr. Kuok Cheong Ian HK$ HK$ HK$ 65,000 65,000 65,000 260,000 214,750 151,855 – 130,000 – – 525 524 325,000 410,275 217,379	Non-executive Directors Mr. Yim Hong Mr. Kuan Kin Man HK$ HK$ 32,500 32,500 – – – – – – 32,500 32,500	Independent non-executive Directors Mr. Chui Sai Cheong Mr. Tsui Wai Kwan Mr. Tam Pak Yip HK$ HK$ HK$ – 65,000 65,000 – – – – – – – – – – 65,000 65,000	Total 2004 HK$ 390,000 626,605 130,000 1,049
				1,147,654

During the year, no emoluments were paid by the Group to any of the Directors as an inducement to join or upon joining the Group or as compensation for loss of office. None of the Directors has waived any emoluments during the year.

– 56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

9. EMPLOYEES’ EMOLUMENTS

Of the five individuals with the highest emoluments in the Group, three (2004: two) were Directors whose emoluments are included in note 8 above. The emoluments of the remaining two (2004: three) highest paid individuals were as follows:

Salaries and other benefits Discretionary bonus Social security cost Retirement benefits scheme contributions	2005 HK$ 778,817 47,328 393 12,000 838,538	2004 HK$ 801,581 150,600 1,048 9,000
		962,229

The aggregate emoluments of each of their emoluments for both years were within the emoluments band ranging from nil to HK$1,000,000.

During both years, no emoluments were paid by the Group to any of the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office.

10. INCOME TAX

No provision for profits tax has been made in the financial statements as the Group has no assessable profits in the jurisdictions in which the Group operates for both years.

The taxation for the year can be reconciled to the loss before taxation per the consolidated income statement as follows:

Loss before taxation Tax at the Macao Complementary Tax rate of 15.75% Tax effect of income not taxable for tax purpose Tax effect of expenses not deductible for tax purpose Effect of tax exemptions granted Effect of different tax rates of subsidiaries operating in other jurisdictions Tax effect of tax losses not recognised Taxation for the year	2005 HK$ (22,621,634)	2004 HK$ (6,588,899

	(3,562,907) (164,463) 346,521 (141,536) 36,829 3,485,556	(1,037,752 – 10,867 – (44,517 1,071,402
	–	–

Pursuant to the relevant laws and regulations in the PRC, the Group’s PRC subsidiaries are exempted from the PRC income tax either for two years or two years starting from their first profit-making year, followed by a 50% reduction for the next three years. No provision for the PRC income tax has been made in the financial statements as all of the PRC subsidiaries were exempted from the PRC income tax during the year.

On 7 July 2005, the Macao tax authority announced the change of Macao Complementary Tax rate from 15.75% to 12% and the change of the tax rate was effective for the accounting periods beginning on or after 1 January 2004.

At the balance sheet date, the Group has estimated tax losses of approximately HK$28,310,000 (2004: HK$6,508,000), out of which the estimated unused tax losses of HK$7,594,000 (2004: HK$3,275,000) are available for offset against future profits. No deferred tax asset has been recognised in respect of such estimated tax losses due to unpredictability of future profit streams. Included in unrecognised estimated unused tax losses are losses of HK$2,925,000 (2004: HK$2,062,000) that will expire within 5 years. Other estimated unused tax losses of HK$4,669,000 (2004: HK$1,213,000) may be carried forward indefinitely.

– 57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

11. BASIC LOSS PER SHARE

The calculation of loss per share is based on the Group’s loss for the year of HK$22,621,634 (2004: HK$6,588,899) and 535,000,000 (2004: weighted average of 468,381,507) shares in issue during the year.

12. PROPERTY, PLANT AND EQUIPMENT

Leasehold improvements HK$ THE GROUP COST At 1 July 2004 1,447,087 Additions 102,563 At 30 June 2005 1,549,650 DEPRECIATION At 1 July 2004 285,117 Provided for the year 292,337 At 30 June 2005 577,454 NET BOOK VALUES At 30 June 2005 972,196 At 30 June 2004 1,161,970 SOFTWARE LICENCES THE GROUP COST At 1 July 2004 and 30 June 2005 AMORTISATION AND IMPAIRMENT At 1 July 2004 Amortisation for the year Impairment loss recognised in the income st At 30 June 2005 NET BOOK VALUES At 30 June 2005 At 30 June 2004	Computer equipment Demonstration equipment HK$ HK$ 193,056 209,600 494,234 –	Computer equipment Demonstration equipment HK$ HK$ 193,056 209,600 494,234 –	Furniture, fixtures and equipment HK$ 37,144 11,553	Total HK$ 1,886,887 608,350
1,549,650 285,117 292,337 577,454	687,290 46,767 129,465 176,232	209,600 38,370 69,860 108,230	48,697 17,253 11,451 28,704	2,495,237
				387,507 503,113
				890,620
	511,058 146,289 atement	101,370 171,230	19,993 19,891	1,604,617

				1,499,380

				HK$ 11,467,290
				705,763 861,527 9,900,000
				11,467,290
				–

				10,761,527

13. SOFTWARE LICENCES

The amount represents the expenditure for acquiring the software licences which are amortised on a straight-line basis over the estimated useful life of 10 years, or the licensing period of 1 year, whichever is shorter.

An impairment loss of HK$9,900,000 (2004: nil) in respect of the software licences has been recognised for the year with reference to the recoverable amount since the Directors are of the opinion that the future economic benefits attributable to the software licenses are uncertain.

– 58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

14. GOODWILL

THE GROUP COST At 1 July 2004 and at 30 June 2005 AMORTISATION AND IMPAIRMENT At 1 July 2004 Charged for the year Impairment loss recognised At 30 June 2005 NET BOOK VALUES At 30 June 2005 At 30 June 2004	HK$ 585,082
	43,881 58,508 482,693
	585,082
	–

	541,201

The goodwill is amortised on a straight-line basis over the estimated useful life of 10 years.

An impairment loss of HK$482,693 (2004: nil) in respect of the goodwill arising from acquisition of a subsidiary in prior years has been recognised in the current year since the subsidiary continued to incur significant losses.

15. INVESTMENTS IN SUBSIDIARIES

Unlisted shares, at cost Less: impairment loss recognised Amounts due from subsidiaries	THE COMPANY 2005 2004 HK$ HK$ 9,585,979 9,585,979 (4,000,000) –	THE COMPANY 2005 2004 HK$ HK$ 9,585,979 9,585,979 (4,000,000) –
	5,585,979 1,300,496	9,585,979 18,978,845
	6,886,475	28,564,824

The amounts due from subsidiaries are unsecured, interest-free and in the opinion of the Directors, the amounts will not be repaid within the next twelve months from the balance sheet date and accordingly, the amounts are shown as non-current.

– 59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Details of the Company’s subsidiaries at 30 June 2005 are set out as follows:

==> picture [425 x 522] intentionally omitted <==

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

|||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|Proportion|
|Issued|and|of|nominal|
|fully|paid|value|of|issued|
|Form|of|Place|of|Principal|share|capital/|capital/registered|
|Name|of|Class|of|business|incorporation|place|of|registered|capital|held|
|subsidiary|share|held|structure|or|registration|operation|capital|by|the|Company|Principal|activities|
|Directly|Indirectly|
|%|%|
|MegaInfo|Limited|Ordinary|Incorporated|British|Virgin|Macao|2,000|shares|of|100|–|Investment|holding|
|Islands|US$1|each|and|provision|of|
|digital|image|
|processing|
|management|
|solutions|
|MegaInfo|China|Ordinary|Incorporated|British|Virgin|The|PRC|1,000|shares|of|–|100|Investment|holding|
|Holdings|Limited|Islands|US$1|each|
|MegaInfo|Software|Ordinary|Incorporated|British|Virgin|Macao|1,000|shares|of|–|100|Owner|of|intellectual|
|Limited|Islands|US$1|each|property|rights|
|MegaInfo|Solutions|Ordinary|Incorporated|British|Virgin|The|PRC|1,000|shares|of|–|100|Owner|of|intellectual|
|Holdings|Limited|Islands|US$1|each|property|rights|
|MegaInfo|(Hong|Ordinary|Incorporated|Hong|Kong|Hong|1,000|ordinary|–|100|Investment|holding|
|Kong)|Limited|Kong|shares|of|
|HK$0.10|
|each|
|MegaInfo|Ordinary|Incorporated|Hong|Kong|Hong|1,000|ordinary|–|100|Investment|holding|
|Technology|Kong|shares|of|
|Limited|HK$1|each|
|PE|Research|and|Ordinary|Incorporated|Macao|The|PRC|2|quotas|of|–|100|Investment|holding|
|Development|MOP12,500|
|Limited|each|
|Zhuhai|MegaSoft|Capital|Wholly-|The|PRC|The|PRC|Registered|–|100|Provision|of|computer|
|Software|contribution|foreign|capital|of|software|products,|
|Development|Co.,|owned|HK$3.2|computer|network|
|Ltd.|enterprise|million|system|engineering,|
|research|and|
|development|and|
|selling|and|
|providing|related|
|services|and|
|maintenance|
|Megainfo|Capital|Wholly-|The|PRC|The|PRC|Registered|–|100|Provision|of|computer|
|(Guangzhou)|contribution|foreign|capital|of|software|products,|
|Technology|owned|HK$1.6|computer|network|
|Company|Limited|enterprise|million|system|engineering,|
|research|and|
|development|and|
|selling|and|
|providing|related|
|services|and|
|maintenance|

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

None of the subsidiaries had issued any debt securities during the year and at the balance sheet date.

– 60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

16. INVESTMENT IN AN ASSOCIATE

				THE
				2005	2004
				HK$	HK$
Share	of	net	assets	14,272	–

As at 30 June 2005, the Group had an interest in the following associate:

				Proportion of
	Form of	Place of		issued share
	business	incorporation/	Class of	capital held by
Name of entity	structure	operation	share held	the Group	Nature of	business
				%
CTM-Mega	Incorporated	Macao	Ordinary	49	Not yet commenced
Technology					business
Limited
INVENTORIES
					THE GROUP
					2005		2004
					HK$		HK$
At cost:
Networking and	image processing equipment			3,917,964		3,993,514

17. INVENTORIES

18. TRADE RECEIVABLES

At 30 June 2005, the aged analysis of the Group’s trade receivables is as follows:

Less than 30 days 31 to 60 days 91 to 120 days 121 to 365 days Over 365 days	THE GROUP 2005 2004 HK$ HK$ 72,905 18,948 146 2,260,135 1,020,346 – 1,054,547 – 1,411,068 1,820,997 3,559,012 4,100,080	THE GROUP 2005 2004 HK$ HK$ 72,905 18,948 146 2,260,135 1,020,346 – 1,054,547 – 1,411,068 1,820,997 3,559,012 4,100,080
		4,100,080

The credit terms granted to customers vary and are generally the result of negotiations between the individual customers of the Group. As at 30 June 2005, among the outstanding receivable balances over 365 days was the amount of HK$166,350 (2004: HK$1,820,997) due from a fellow subsidiary, Guangzhou Vodatel Development Limited.

– 61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

19. AMOUNT DUE FROM A CUSTOMER FOR CONTRACT WORK

Contracts in progress at the balance sheet date Contracts costs incurred less recognised losses Less: progress billings Represented by: Due from a customer included in current assets OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS Deposits paid to vendors for contracts Prepayments Utility and guarantee deposits Other receivables	THE GROUP 2005 2004 HK$ HK$ 11,047,350 2,260,137 (10,292,656) (2,260,137) 754,694 – 754,694 – 2005 2004 HK$ HK$ 9,980,037 90,467 692,173 1,092,000 166,148 240,034 35,039 – 10,873,397 1,422,501	THE GROUP 2005 2004 HK$ HK$ 11,047,350 2,260,137 (10,292,656) (2,260,137) 754,694 – 754,694 – 2005 2004 HK$ HK$ 9,980,037 90,467 692,173 1,092,000 166,148 240,034 35,039 – 10,873,397 1,422,501
		–

		–

		2004 HK$ 90,467 1,092,000 240,034 –
		1,422,501

20. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

21. BANK BALANCES AND CASH

THE GROUP

At 30 June 2005, there were bank balances and cash denominated in Renminbi (“RMB”) amounting to HK$2,055,993 (2004: HK$128,394) respectively. RMB is not freely convertible into other currencies.

22. TRADE PAYABLES

At 30 June 2005, the aged analysis of the Group’s trade payables is as follows:

Less than 30 days 121 to 365 days	THE GROUP 2005 2004 HK$ HK$ 252,128 1,088,687 407,151 – 659,279 1,088,687	THE GROUP 2005 2004 HK$ HK$ 252,128 1,088,687 407,151 – 659,279 1,088,687
		1,088,687

– 62 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

23. OTHER PAYABLES, ACCRUALS AND DEPOSITS RECEIVED

Deposits received from customers for contracts Accrued charges Other payables SHARE CAPITAL Authorised: At 1 July 2003, HK$0.10 each Subdivision of shares of HK$0.10 each into ten shares of HK$0.01 each (Note (a)(i)) Increase in authorised ordinary share capital of HK$0.01 each (Note (a)(i)) At 30 June 2004 and 30 June 2005, HK$0.01 each Issued and fully paid: At 1 July 2003, HK$0.10 each Subdivision of each ordinary shares of HK$0.10 each into ten shares of HK$0.01 each (Note (a)(i)) Issue of shares arising from the Reorganisation, HK$0.01 each (Note (a)(ii)) Capitalisation issue, HK$0.01 each (Note (b)) Issue of shares by placing and public offer, HK$0.01 each (Note (c)) At 30 June 2004 and 30 June 2005, HK$0.01 each Notes:	2005 HK$ 21,792,592 854,408 772,374 23,419,374 No. of ordinary shares 1,000,000 9,000,000 990,000,000 1,000,000,000	2005 HK$ 21,792,592 854,408 772,374 23,419,374 No. of ordinary shares 1,000,000 9,000,000 990,000,000 1,000,000,000	2004 HK$ 3,504,854 957,744 11,203
			4,473,801

			HK$ 100,000 – 9,900,000
			10,000,000

	1,000,000 9,000,000 3,000,000 401,625,000 120,375,000		100,000 – 30,000 4,016,250 1,203,750
	535,000,000		5,350,000

24. SHARE CAPITAL

(a) Pursuant to the written resolutions of the then sole shareholder of the Company dated 23 December 2003:

(i) every issued and unissued share of HK$0.10 in the share capital of the Company was subdivided into 10 shares and the authorised share capital of the Company was increased from HK$100,000 to HK$10,000,000 by the creation of an additional 990,000,000 shares. All shares ranked pari passu in all respects with shares then in issue; and

(ii) the Directors were authorised to allot and issue 660,000 shares and 2,340,000 shares, credited as fully paid, to VHL and Gofull respectively as part of the consideration for the acquisition by the Company of the entire issued share capital of MegaInfo Limited from VHL and Gofull respectively.

(b) On 19 January 2004, 401,625,000 shares of HK$0.01 each were issued at par as fully paid to the shareholders whose names appeared on the register of members of the Company on 30 December 2003 by debiting an amount of HK$4,016,250 of the share premium account of the Company arising from the new issue.

– 63 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(c) On 19 January 2004, the Company issued 120,375,000 shares of HK$0.01 each by way of placing HK$0.25 per share for a total cash consideration of HK$30,093,750 in relation to the listing of the Company’s shares on the GEM. Accordingly, HK$28,890,000 was credited to the share premium account of the Company. The shares of the Company were listed on the GEM on 19 January 2004.

There was no movement in the Company’s share capital for the current year.

25. RESERVES

At 1 July 2003 Contributed surplus arising from the Reorganisation Capitalisation issue (note 24(b)) Issue of shares (note 24(c)) Share issuance costs Waiver of amount due to the immediate holding company Net loss for the year At 30 June 2004 Net loss for the year At 30 June 2005	Share premium HK$ 5,400,000 – (4,016,250) 28,890,000 (9,697,190) – –	THE COMPANY Contributed surplus Accumulated losses HK$ HK$ (Note a) – – 4,055,979 – – – – – – – 5,500,000 – – (1,212,733)	THE COMPANY Contributed surplus Accumulated losses HK$ HK$ (Note a) – – 4,055,979 – – – – – – – 5,500,000 – – (1,212,733)	Total HK$ 5,400,000 4,055,979 (4,016,250) 28,890,000 (9,697,190) 5,500,000 (1,212,733) 28,919,806 (27,247,933) 1,671,873
	20,576,560 –	9,555,979 –	(1,212,733) (27,247,933)	28,919,806 (27,247,933
	20,576,560	9,555,979	(28,460,666)

(a) The contributed surplus of the Company represents (1) the difference between (a) the consolidated shareholders’ funds of the subsidiaries and (b) the nominal value of the Company’s shares issued and the release and waiver of the amount owed by the then immediate holding company of the subsidiaries to the Company for the acquisition at the time of the Reorganisation; and (2) the release and waiver of the amount owed by the Company to its immediate holding company. Under the Companies Act 1981 of Bermuda, contributed surplus is distributable to shareholders, subject to the condition that the Company cannot declare or pay a dividend, or make a distribution out of contributed surplus if (i) it is, or would after the payment be, unable to pay its liabilities as they become due, or (ii) the realisable value of its assets would thereby be less than the aggregate of its liabilities and its issued share capital and share premium account.
(b) As at 30 June 2005, the Company has no reserves available for distribution to shareholders (2004: HK$8,343,246).

– 64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

26. ACQUISITION OF THE BUSINESS

Net assets acquired Property, plant and equipment Trade receivables Trade payables Deferred revenue Satisfied by Allotment of shares in a subsidiary (Note) Cash	2005 HK$ – – – – –	2004 HK$ 22,844 2,199,840 (26,451) (224,050) 1,972,183 132,019 1,840,164 1,972,183
	– –	132,019 1,840,164
	–

Note: On 23 December 2003, an aggregate of 820 shares of US$1.00 each in MegaInfo Limited were allotted and issued, credited as fully paid, to VHL as part of the consideration for VHL to effect the inter-group transfers with effect from 1 July 2003. Accordingly, HK$6,380 and HK$125,639 have been credited as share capital and share premium of MegaInfo Limited respectively.

Analysis of the net cash outflow in respect of the acquisition of the Business:

Cash consideration Bank balances and cash on hand acquired Net cash outflow in respect of the acquisition of the Business ACQUISITION OF SUBSIDIARIES Net assets acquired Property, plant and equipment Other receivables, deposits and prepayments Bank balances and cash Other payables and accruals Amount due to a related company Goodwill Satisfied by Cash	2005 HK$ – – – 2005 HK$ – – – – –	2004 HK$ (1,840,164) – (1,840,164) 2004 HK$ 78,516 59,302 283,896 (879) (5,917) 414,918 585,082 1,000,000 1,000,000
	– –	414,918 585,082
	– –

27. ACQUISITION OF SUBSIDIARIES

– 65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The subsidiaries acquired in 2004 incurred HK$1,807,194 as part of the Group’s net operating cash outflows and paid HK$280,374 in respect of investing activities.

Analysis of the net cash outflow in respect of the acquisition of subsidiaries:

Cash consideration Bank balances and cash on hand acquired Net cash outflow in respect of the acquisition of subsidiaries	2005 HK$ – – –	2004 HK$ (1,000,000) 283,896 (716,104)

28. MAJOR NON-CASH TRANSACTIONS

(i) In the year ended 30 June 2004, the share capital arising from the transactions as described in note 24(a) was deemed to have been in issue throughout the accounting year presented in the financial statements in accordance with the Company Reorganisation and basis of preparation as set out in note 1.
(ii) In the year ended 30 June 2004, prior to listing of shares of the Company on 19 January 2004, VHL agreed to waive HK$5,500,000 owed by the Company to VHL as a capital contribution.
(iii) On 23 December 2003, MegaInfo Limited allotted and issued an aggregate of 360 shares of US$1.00 each to Gofull as a consideration of HK$11,000,000 for the purchase of Tianxin Software Licences. Accordingly, HK$2,800 and HK$10,997,200 had been credited as share capital and share premium of MegaInfo Limited respectively.
(iv) On 19 January 2004, 401,625,000 shares of HK$0.01 each were issued at par as fully paid to the shareholders whose names appeared on the register of members of the Company on 30 December 2003 by debiting an amount of HK$4,016,250 of the share premium account of the Company arising from the new issue.

29. RETIREMENT BENEFITS SCHEMES

The Group participates in employee social security plans as required by the regulations in the PRC and Macao. The Group also participates in Mandatory Provident Fund scheme which are available to all qualified employees of the Group in Hong Kong. The assets of the retirement benefits schemes are held separately from those of the Group, in funds under the control of the trustees. The employees of the subsidiaries in the PRC are members of social insurance schemes operated by the relevant local government authorities. The pensions plans are funded by payments from employees and by the relevant group companies. The amounts charged to the income statement represent contributions payable by the Group at the rates specified according to respective rules of the plans.

30. SHARE OPTION SCHEME

The Company’s share option scheme (“Scheme”) was adopted pursuant to a resolution passed on 18 November 2004 for the primary purpose of providing incentives to the Directors and eligible participants (as defined in the Scheme), and will be expired 10 years commencing on the adoption of the Scheme.

Under the Scheme, the Board may at their discretion grant options to eligible employees, including the Directors and its subsidiaries, and certain consultants, suppliers or customers of the Group, to subscribe for shares in the Company from time to time. The maximum number of shares, which may be granted under the Scheme, shall not exceed 10% of the shares of the Company in issue at any point in time, without prior approval from the Company’s shareholders. The number of shares in respect of which options may be granted under the Scheme to any individual in any one year is not permitted to exceed 1% of shares of the Company in issue at any point in time, without prior approval from the Company’s shareholders.

– 66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Options granted to a Director, the chief executive or substantial shareholder of the Company or any of their associates (as defined in the GEM Listing Rules) requires the approval of independent non-executive Directors (excluding an independent non-executive Director who is the prospective grantee in question). Options granted to substantial shareholders or independent non-executive Directors or their respective associates in excess of 0.1% of the Company’s share capital or with a value in excess of HK$5 million must be approved in advance by the Company’s shareholders.

Options granted must be taken up within 28 days of the date of grant, upon payment of HK$1 per option. Options may be exercised at any time from the date of grant of the share option to a period to be notified by the Board to each grantee at the time of making such offer, which shall not expire later than 10 years from the date of grant.

The subscription price of the share option is determined by the Board and the amount will not be less than the higher of (a) the closing price of the Company’s shares on the Exchange on the date of grant; (b) the average closing price of the Company’s shares as stated in the daily quotation sheets issued by the Exchange for the 5 business days immediately preceding the date of grant; and (c) the nominal value of a share of the Company on the date of grant.

No option has been granted under the share option scheme since its adoption.

31. OPERATING LEASE COMMITMENTS

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

Within one year In the second to fifth year inclusive	THE GROUP 2005 2004 HK$ HK$ 106,024 268,719 24,182 – 130,206 268,719	THE GROUP 2005 2004 HK$ HK$ 106,024 268,719 24,182 – 130,206 268,719
		268,719

Operating lease payments represent rentals payable by the Group for certain of its office properties. Leases are negotiated for a term of one to four years and rentals are fixed over the lease period.

32. CONTINGENT LIABILITIES

At 30 June 2005, the Company has given guarantee to a bank in respect of general banking facilities granted to its subsidiary amounting to HK$1,100,000. No facilities were utilised by the subsidiary as at 30 June 2005.

At 30 June 2004, neither the Group nor the Company have significant contingent liabilities.

– 67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

33. RELATED PARTY TRANSACTIONS

During the year, the Group entered into the following transactions with related parties:

	2005	2004
	HK$	HK$
Sales to Mega Datatech Limited (“MDL”) (Note a)	284,363	–
Purchases from Zetronic Communications (Macau) Limited (Note b)	150,273	16,398
Purchases from VHL (Note c)	20,026	–
Rental expenses payable to Mr. Jose´ Manuel dos Santos (Note d)	180,000	–
Software development fees payable to MET Electronic Technology
Company, Limited (“MET”) (Note e)	–	480,000
Rental expenses payable to Vodatel Services and Consultant Limited
(“VSCL”) for the use of office premises (Note f)	–	–

Notes:

(a) During the year, the Group sold goods to MDL, a wholly-owned subsidiary of VNHL in which Mr. Jose´ Manuel dos Santos has a beneficial interest.
(b) During the year, there were sales transactions conducted between a subsidiary of the Company and Zetronic Communications (Macau) Limited, a company incorporated in Macao, the interest of which was held as to 99% by Mr. Jose´ Manuel dos Santos and 1% by his spouse.
(c) During the year, the Group purchased goods from VHL, a wholly-owned subsidiary of VNHL in which Mr. Jose´ Manuel dos Santos has a beneficial interest.
(d) For the period from 1 January 2005 to 30 June 2005, the Company leased an office premises in Hong Kong from Mr. Jose´ Manuel dos Santos for a monthly rental of HK$30,000.
(e) In 2004, software development fees had been paid to MET, the beneficial interest of which was held by Mr. Kuok Cheong Ian. There were no transactions between MET and the Group after the appointment of Mr. Kuok Cheong Ian as the Company’s Director since 16 December 2003.
(f) During both years, VSCL, in which Mr. Jose´ Manuel dos Santos has a 90% beneficial interest, permits the Group to use its Macao office premises. VSCL has waived rental payment by the Group with effect from 1 July 2003.

The Directors are of the opinion that the transactions as described in Notes (a) to (e) above have been entered into and carried out in the ordinary and usual course of business of the Group, on normal commercial terms, are fair and reasonable and in the interest of the shareholders of the Company as a whole.

The Directors are also of the opinion that the transaction as described in Note (f) was on terms better than normal commercial terms to the Group and is fair and reasonable and in the interest so far as of the shareholders of the Company as a whole.

34. POST BALANCE SHEET EVENTS

The Directors have taken various active steps to improve the profitability and liquidity of the Group. Up to the date of the financial statements, the Group has confirmed orders on hand with aggregate contract sum of approximately HK$46,000,000 and revenue for these contracts will be recognised in the coming years. In addition, the Directors are currently taking active steps in pursuing other new contracts.

– 68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

3. UNAUDITED FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 31 DECEMBER 2005

CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)

For the three and six months ended 31 December 2005

Note Turnover 2 Cost of sales Gross profit Bank interest income Selling and administrative expenses Profit (Loss) attributable to shareholders 4 Basic earning (loss) per share 7	Three months ended 31 December 2005 2004 HK$ HK$ 36,287,936 2,847,378 (30,204,260) (1,853,670)	Three months ended 31 December 2005 2004 HK$ HK$ 36,287,936 2,847,378 (30,204,260) (1,853,670)	Six months ended 31 December 2005 2004 HK$ HK$ 41,458,051 7,757,077 (34,483,987) (5,660,830) 6,974,064 2,096,247 48,550 15,019 (7,012,938) (7,091,471) 9,676 (4,980,205) 0.002 cents (0.931 cents)	Six months ended 31 December 2005 2004 HK$ HK$ 41,458,051 7,757,077 (34,483,987) (5,660,830) 6,974,064 2,096,247 48,550 15,019 (7,012,938) (7,091,471) 9,676 (4,980,205) 0.002 cents (0.931 cents)
	6,083,676 13,993 (3,776,018)	993,708 13,315 (4,512,605)	6,974,064 48,550 (7,012,938)	2,096,247 15,019 (7,091,471
	2,321,651 0.434 cents	(3,505,582) (0.655 cents)	9,676 0.002 cents

Note: For each of the six months ended 31 December 2004 and 2005, there is no extraordinary or exceptional items noted.

– 69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONDENSED CONSOLIDATED BALANCE SHEET

At 31 December 2005

Note Non-current assets Property, plant and equipment Intangible assets Investment in an associate 8 Current assets Inventories Trade receivables 9 Amount due from a customer for contract work Other receivables, deposits and prepayments Bank balances and cash Current liabilities Trade payables 10 Other payables, accruals and deposits received Deferred revenue Net current assets Capital and reserves Share capital 11 Reserves 11	As at 31 December 2005 (unaudited) HK$ 1,333,599 8,800 14,272 2,081,301 16,601,195 – 1,507,454 6,915,766	As at 30 June 2005 (audited) HK$ 1,604,617 – 14,272 3,917,964 3,559,012 754,694 10,873,397 11,329,719
	27,105,716 16,708,496 3,811,977 130,700 20,651,173 6,454,543	30,434,786
		659,279 23,419,374 224,050
		24,302,703
		6,132,083
	7,811,214	7,750,972

	5,350,000 2,461,214	5,350,000 2,400,972
	7,811,214	7,750,972

– 70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

For the Six-Month Period

Total equity at the beginning of the period Profit (Loss) for the period Exchange differences arising on translation of the financial statements of foreign subsidiaries not recognized in profit and loss account Total equity at the end of the period	Six months ended 31 December 2005 2004 HK$ HK$ 7,750,972 30,403,082 9,676 (4,980,205) 50,566 (23,382) 7,811,214 25,399,495

– 71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONDENSED CONSOLIDATED CASHFLOW STATEMENT (UNAUDITED)

For the Six-Month Period

Net cash used in operating activities Net cash used in investing activities Net cash from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of the period Effect of foreign exchange rate changes Cash and cash equivalents at end of the period Analysis of balances of cash and cash equivalents Bank balances and cash	Six months ended 31 December 2005 2004 HK$ HK$ (2,079,180) (4,852,843) (14,043) (36,769) – – (2,093,223) (4,889,612) 8,958,423 13,871,417 50,566 (23,382) 6,915,766 8,958,423 6,915,766 8,958,423

– 72 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Notes:

(1) Basis of preparation of the accounts

The unaudited condensed consolidated accounts have been prepared in accordance with the requirements of the GEM Listing Rules, including compliance with the Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

The condensed consolidated accounts have not been audited by the Company’s auditors, but have been reviewed by the Company’s audit committee.

The HKICPA has issued a number of new and revised Hong Kong Financial Reporting Standard (“HKFRS”) and HKAS herein collectively referred to as HKFRSs which are generally effective for the accounting periods beginning on or after 1 January 2005. The adoption of the new HKFRS has no material effect on the Group’s financial statements.

(2) Turnover

Provision of digital image processing management solutions for “one-stop” project under construction contracts Sale of computer software products and related services	Three months ended 31 December 2005 2004 (unaudited) (unaudited) HK$ HK$ 265,651 – 36,022,285 2,847,378 36,287,936 2,847,378	Six months ended 31 December 2005 2004 (unaudited) (unaudited) HK$ HK$ 265,651 3,507,318 41,192,400 4,249,759 41,458,051 7,757,077	Six months ended 31 December 2005 2004 (unaudited) (unaudited) HK$ HK$ 265,651 3,507,318 41,192,400 4,249,759 41,458,051 7,757,077
			7,757,077

– 73 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(3) Segment information

The Group is principally engaged in the provision of digital image processing management solutions in the People’s Republic of China (“PRC”), excluding the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”), the Macao Special Administrative Region of the People’s Republic of China (“Macao”) and Taiwan.

There are no sales between the geographical segment.

Turnover PRC Macao Segment results PRC Macao Unallocated costs Operating profit (loss) Segment assets PRC Macao Investment in an associate Unallocated assets Total assets Segment liabilities PRC Macao Unallocated liabilities Total liabilities Capital expenditures Macao Unallocated Amortization charge PRC Unallocated Depreciation PRC Macao	Six months ended 31 December 2005 2004 (unaudited) (unaudited) HK$ HK$ 2,408,576 2,580,623 39,049,475 5,176,454 41,458,051 7,757,077 (324,161) 374,350 1,716,772 (3,608,020) 1,392,611 (3,233,670) (1,382,935) (1,746,535) 9,676 (4,980,205) 1,575,629 5,128,471 26,155,663 21,628,488 14,272 – 716,823 3,528,592 28,462,387 30,285,551 575,168 320,178 19,894,005 4,562,078 182,000 3,800 20,651,173 4,886,056 5,243 22,497 – – – 275,000 – 131,450 20,797 10,580 303,199 218,880 323,996 229,460	Six months ended 31 December 2005 2004 (unaudited) (unaudited) HK$ HK$ 2,408,576 2,580,623 39,049,475 5,176,454 41,458,051 7,757,077 (324,161) 374,350 1,716,772 (3,608,020) 1,392,611 (3,233,670) (1,382,935) (1,746,535) 9,676 (4,980,205) 1,575,629 5,128,471 26,155,663 21,628,488 14,272 – 716,823 3,528,592 28,462,387 30,285,551 575,168 320,178 19,894,005 4,562,078 182,000 3,800 20,651,173 4,886,056 5,243 22,497 – – – 275,000 – 131,450 20,797 10,580 303,199 218,880 323,996 229,460
	(324,161) 1,716,772 1,392,611 (1,382,935)	374,350 (3,608,020
		(3,233,670 (1,746,535
	9,676
	1,575,629 26,155,663 14,272 716,823	5,128,471 21,628,488 – 3,528,592
	28,462,387
	575,168 19,894,005 182,000	320,178 4,562,078 3,800
	20,651,173
	5,243 – – – 20,797 303,199	22,497 – 275,000 131,450 10,580 218,880
	323,996

– 74 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(4) Profit (Loss) attributable to shareholders

Profit (Loss) attributable to shareholders has been arrived at after crediting (charging):

	Three months ended	Three months ended	Six months	ended
	31 December		31 December
	2005	2004	2005	2004
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
	HK$	HK$	HK$	HK$
Cost of inventories recognized as expenses	30,204,260	1,853,670	34,483,987	5,660,830
Depreciation of property, plant and
equipment	160,489	115,946	323,996	229,460
Amortization charge
– goodwill	–	275,000	–	550,000
– software licences	–	131,450	–	262,899
Staff cost (including directors’
remunerations)	2,354,246	2,522,595	4,357,103	3,729,835

(5) Taxation

No provision for profits tax has been made in the financial statements as the Group either incurred tax losses for the periods or its estimated assessable profit was wholly absorbed by the estimated tax losses brought forward in the jurisdiction in which the Group operates.

(6) Dividend

The Board does not recommend the payment of an interim dividend for the Six-Month Period (2004: Nil).

(7) Basic earning (loss) per share

The calculation of basic earning (loss) per share for the Three-Month Period and the Six-Month Period is based on the unaudited net profit of HK$2,321,651 and HK$9,676 respectively (three months and six months ended 31 December 2004: net loss of HK$3,505,582 and HK$4,980,205 respectively) and 535,000,000 ordinary shares in issue (2004: 535,000,000) during the periods.

(8) Investment in an associate

				December 2005	30 June 2005
				(unaudited)	(audited)
				HK$	HK$
Share	of	net	assets	14,272	14,272

The Group holds a 49% interest in the issued share capital in CTM-Mega Technology Limited, a company incorporated in Macao, which has not commenced business yet.

– 75 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(9) Trade receivables

At 31 December 2005, the aged analysis of the Group’s trade receivables is as follows:

Less than 30 days 31 to 60 days 91 to 120 days 121 to 365 days Over 365 days	31 December 2005 (unaudited) HK$ 15,119,654 44,137 380,394 1,020,346 36,664 16,601,195	30 June 2005 (audited) HK$ 72,905 146 1,020,346 1,054,547 1,411,068
		3,559,012

(10) Trade payables

At 31 December 2005, the aged analysis of the Group’s trade payables is as follows:

Less than 30 days 31 to 60 days 61 to 90 days 91 to 120 days 121 to 365 days	31 December 2005 (unaudited) HK$ 13,366,338 5,446 401,610 2,875,713 59,389 16,708,496	30 June 2005 (audited) HK$ 252,128 – – – 407,151
		659,279

(11) Share capital and reserves

Share capital HK$ 5,350,000 – – 5,350,000	Share premium HK$ 20,576,560 – – 20,576,560	Exchange reserve HK$ (73,454) 50,566 – (22,888)	Contributed surplus HK$ 11,108,399 – – 11,108,399	Accumulated losses HK$ (29,210,533) – 9,676 (29,200,857)	Total HK$ 7,750,972 50,566 9,676
					7,811,214

5,350,000 – –	20,576,560 – –	(42,978) (23,382) –	11,108,399 – –	(6,588,899) – (4,980,205)	30,403,082 (23,382 (4,980,205
5,350,000	20,576,560	(66,360)	11,108,399	(11,569,104)	25,399,495

– 76 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(12) Related party transaction

Significant related party transactions, which were carried out in the normal course of the Group’s business are as follows:

	Six months ended	Six months ended
	31	December
	2005	2004
	(unaudited)	(unaudited)
	HK$	HK$
Purchases from Mega Datatech Limited (“MDL”) (Note a)	528,919	–
Purchase from Vodatel Holdings Limited (“VHL”) (Note b)	74,688	–
Rental expenses payable to Mr. Jose´ Manuel dos Santos (Note c)	180,000	–

Notes:

(a) During the period, the Group purchased goods from MDL, a wholly-owned subsidiary of Vodatel Networks Holdings Limited (“VNHL”) in which Mr. Jose´ Manuel dos Santos has a beneficial interest.
(b) During the period, the Group purchased goods from VHL, a wholly-owned subsidiary of VNHL in which Mr. Jose´ Manuel dos Santos has a beneficial interest.
(c) For the Six-Month Period, the Company leased an office premise in Hong Kong from Mr. Jose´ Manuel dos Santos for a monthly rental of HK$30,000.

– 77 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

4. UNAUDITED FINANCIAL INFORMATION FOR THE NINE MONTHS ENDED 31 MARCH 2006

CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)

For the three and nine months ended 31 March 2006

Three months ended 31 March 2006 2005 HK$ HK$ 6,477,178 1,479,264 (5,359,724) (1,390,967)	Three months ended 31 March 2006 2005 HK$ HK$ 6,477,178 1,479,264 (5,359,724) (1,390,967)	Nine months ended 31 March 2006 2005 HK$ HK$ 47,935,229 9,236,341 (39,843,711) (7,051,797) 8,091,518 2,184,544 106,337 26,348 (10,693,179) (10,267,594) (2,495,324) (8,056,702) – (9,900,000) (2,495,324) (17,956,702) 0.466 cents 3.356 cents	Nine months ended 31 March 2006 2005 HK$ HK$ 47,935,229 9,236,341 (39,843,711) (7,051,797) 8,091,518 2,184,544 106,337 26,348 (10,693,179) (10,267,594) (2,495,324) (8,056,702) – (9,900,000) (2,495,324) (17,956,702) 0.466 cents 3.356 cents
1,117,454 57,787 (3,680,241) (2,505,000) –	88,297 11,329 (3,176,123) (3,076,497) (9,900,000)	8,091,518 106,337 (10,693,179) (2,495,324) –	2,184,544 26,348 (10,267,594
			(8,056,702 (9,900,000
(2,505,000) 0.468 cents	(12,976,497) 2.426 cents	(2,495,324) 0.466 cents

Notes:

(1) Basis of preparation of the accounts

The unaudited condensed consolidated accounts have been prepared in accordance with the Statement of Standard Accounting Practice issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and the disclosure requirements set out in Chapter 18 of the GEM Listing Rules.

The condensed consolidated accounts have not been audited by the Company’s auditors, but have been reviewed by the Company’s audit committee.

The HKICPA has issued a number of new and revised Hong Kong Financial Reporting Standard (“HKFRS”) and Hong Kong Accounting Standards (“HKAS”) herein collectively referred to as HKFRSs which are generally effective for the accounting periods beginning on or after 1 January 2005. The adoption of the new HKFRS has no material effect on the Group’s financial statements.

– 78 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(2) Turnover

Turnover represents the net amounts received and receivable from sales of computer software products and provision of digital image processing management solutions and maintenance services by the Group in the Macao Special Administrative Region of PRC (“Macao”) and the People’s Republic of China, other than the region of Hong Kong Special Administrative Region of the PRC (“Hong Kong”), Macao and Taiwan (“PRC”).

(3) Taxation

No provision for profits tax has been made in the financial statements as the Group has no estimated assessable profit in the jurisdictions in which the Group operates for both periods ended 31 March 2005 and 2006.

(4) Dividend

The Board does not recommend the payment of an interim dividend for the Nine-Month Period (2005: Nil).

(5) Basic loss per share

The calculation of loss per share for the Three-Month Period and the Nine-Month Period is based on the unaudited net loss of HK$2,505,000 and HK$2,495,324 respectively (three months and nine months ended 31 March 2005: net loss of HK$12,976,497 and HK$17,956,702 respectively) and 535,000,000 ordinary shares in issue (2005: 535,000,000) during the periods.

(6) Share capital and reserves

At 1 July 2005 (audited) Exchange differences on translation of the financial statements of foreign subsidiaries not recognized in the profit and loss account Loss for the period At 31 March 2006 At 1 July 2004 (audited) Exchange differences on translation of the financial statements of foreign subsidiaries not recognized in the profit and loss account Loss for the period At 31 March 2005	Share capital HK$ 5,350,000 – – 5,350,000	Share premium HK$ 20,576,560 – – 20,576,560	Exchange reserve HK$ (73,454) 50,566 – (22,888)	Contributed surplus HK$ 11,108,399 – – 11,108,399	Accumulated losses HK$ (29,210,533) – (2,495,324) (31,705,857)	Total HK$ 7,750,972 50,566 (2,495,324) 5,306,214 30,403,082 (23,382) (17,956,702) 12,422,998
	5,350,000 – –	20,576,560 – –	(42,978) (23,382) –	11,108,399 – –	(6,588,899) – (17,956,702)	30,403,082 (23,382 (17,956,702
	5,350,000	20,576,560	(66,360)	11,108,399	(24,545,601)

– 79 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

5. INDEBTEDNESS STATEMENT

At the close of business on 30 April 2006, a wholly-owned subsidiary of the Company had contingent liabilities of approximately HK$1.7 million in respect of import letter of credit, and of approximately MOP4.2 million (which is equivalent to approximately HK$4.1 million) in respect of performance and tender bonds issued by a bank.

At 30 April 2006, the Group had commitments to pay approximately HK$240,000 and RMB75,000 in respect of the future minimum lease payments under operating leases of offices in Hong Kong and the PRC respectively.

At 30 April 2006, the Company had provided a corporate guarantee in favour of a wholly-owned subsidiary for an amount not exceeding HK$1.1 million. On 7 June 2006, the Company had requested the bank in writing for the release of all obligations under the aforesaid corporate guarantee.

Save as disclosed above and apart from intra-group liabilities, as at 30 April 2006, the Group did not have any outstanding bank overdrafts, loans or other similar indebtedness, mortgages, charges, debentures or any guarantees or any litigation (which may give rise to contingent liabilities) or other material contingent liabilities. As at the Latest Practicable Date, the Directors were not aware of any events that may give rise to any material contingent liabilities.

6. MATERIAL CHANGE

Save for the increase in turnover of the Group since 30 June 2005, as mentioned in the section headed “Information on the Company” in the Letter from the Board, there has not been any material change in the financial or trading position or outlook of the Group subsequent to 30 June 2005, being the date to which the last audited financial statements of the Group were made up, and up to the Latest Practicable Date.

– 80 –

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

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

The sole director of the Offeror accepts full responsibility for the accuracy of the information contained in this Composite Offer Document (other than that relating to the Group and the Vendor) and confirms, having made all reasonable enquiries, that to the best of his knowledge, the opinions expressed in this Composite Offer Document (other than those relating to the Group and the Vendor) have been arrived at after due and careful consideration and there are no other facts not contained in this Composite Offer Document (other than those relating to the Group and the Vendor), the omission of which would make any statement contained in this Composite Offer Document misleading.

2. CORPORATE INFORMATION OF THE COMPANY

The Company was incorporated in Bermuda under the Companies Act. Its registered office is at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda and its head office and principal place of business in Hong Kong is at Room 713B, 7/F, Block B, Seaview Estate, 2-8 Watson Road, North Point, Hong Kong. The company secretary of the Company is Mr. Wong Chit Lung Philip.

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:

Shares		HK$
Authorised:
1,000,000,000	Authorised share capital of	10,000,000.00
	HK$10,000,000.00 divided into
	1,000,000,000 Shares
_Issued and fully _	paid or credited as fully paid:
535,000,000	Paid up share capital of HK$5,350,000	5,350,000.00
	divided into 535,000,000 Shares

– 81 –

GENERAL INFORMATION

APPENDIX III

Up to the Latest Practicable Date, no new Shares have been issued by the Company since 30 June 2005 (being the date to which its latest published audited accounts were prepared). All of the Shares currently in issue rank pari passu in all respects with each other, including, in particular, as to dividends, voting rights and capital.

As at the Latest Practicable Date, the Company did not have any outstanding warrants or share options or derivatives or other securities carrying rights of conversion into or exchange or subscription for Shares.

(b) Listing

The Shares are listed and traded on GEM. No part of the issued share capital of the Company is listed or dealt in, nor is any listing of or permission to deal in the Shares being or proposed to be sought on, any other stock exchange.

4. MARKET PRICES

The table below shows the closing prices of the Shares quoted on the Stock Exchange on (i) the last trading day for each of the six calendar months immediately preceding the date of Joint Announcement and (ii) the Latest Practicable Date:

	Closing price
Date	per Share
	HK$
30 November 2005	0.060
30 December 2005	0.060
27 January 2006	0.042
28 February 2006	0.053
31 March 2006	0.045
28 April 2006	0.050
30 May 2006, also being the last business day immediately
preceding the date of the Joint Announcement	0.070
Latest Practicable Date	0.125

The highest and lowest closing prices per Share recorded on the Stock Exchange during the Relevant Period were HK$0.145 per Share on 8 June 2006 and HK$0.040 per Share during the period from 24 to 26 January 2006 respectively. There are no other securities of the Company which are listed on the Stock Exchange.

– 82 –

GENERAL INFORMATION

APPENDIX III

5. DISCLOSURE OF INTERESTS

(a) Directors’ and Chief Executives’ Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company or any Associated Companies

As at the Latest Practicable Date, none of the Directors or the chief executive or their respective associates of the Company had other interests or short positions in the Shares, underlying Shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 or Part XV of the SFO (including interests or short positions which he is taken or deemed to have under such provisions of the SFO) or were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein or were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by Directors to be notified to the Company and the Stock Exchange or were required to be disclosed in this document pursuant to the requirements of the Takeovers Code.

(b) Substantial Shareholders’ Interests in Shares and Underlying Shares

As at the Latest Practicable Date, the following substantial Shareholders (within the meaning of the GEM Listing Rules) had interests or short positions in the Shares or underlying Shares as recorded in the register to be kept under section 336 of the SFO:

Long positions in the Shares:

			Percentage
			of issued
		Number of	share
		issued	capital of
		ordinary	the
Name of shareholder	Capacity	Shares held	Company
The Offeror	Beneficial owner	326,617,500	61.05%
Mr. Sun	Held by controlled	326,617,500	61.05%
	corporation (Note 1)
Gofull	Beneficial owner (Note 2)	74,632,500	13.95%
eForce Holdings	Held by controlled	74,632,500	13.95%
Limited (“eForce”)	corporation (Note 2)
Tees Corporation	Held by controlled	74,632,500	13.95%
(“Tees”)	corporation (Note 2)
Mr. Leung Chung	Held by controlled	74,632,500	13.95%
Shan	corporation (Note 2)

Notes:

(1) The Offeror is wholly owned by Mr. Sun.

(2) eForce was deemed to be interested in 74,632,500 Shares by virtue of its interest in Gofull. Tees owned more than one third of the issued share capital of eForce. Mr. Leung Chung Shan owned the entire issued share capital of Tees. 74,632,500 Shares were beneficially owned by Gofull.

– 83 –

GENERAL INFORMATION

APPENDIX III

Save as disclosed above, as at the Latest Practicable Date, no other substantial Shareholders had any interest or short position in the Shares or underlying Shares which are recorded in the register of the Company to be kept under section 336 of the SFO.

(c) Other Persons Having Interests or Short Positions in the Shares and Underlying Shares

As at the Latest Practicable Date, no other persons (other than those interests of Directors, the chief executive and substantial Shareholders disclosed above and interests of persons as recorded in the register to be kept under section 336 of the SFO pursuant to Division 6 of Part XV of the SFO) had any interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

(d) Other interests in the Company and in the Offeror

As at the Latest Practicable Date,

(i) the Offeror, its beneficial owner and parties acting in concert with any of them owned an aggregate of 326,617,500 Shares, representing approximately 61.05% of the issued share capital of the Company and did not own any other securities of the Company;
(ii) Mr. Sun, the sole director of the Offeror, did not have any beneficial interest in any securities of the Company (save for the holding of 326,617,500 Shares by the Offeror);
(iii) Partners Capital or Tai Fook Capital or any adviser to the Company as specified in class (2) of the definition of “associate” in the Takeovers Code did not have any beneficial interest in any securities of the Company, save that Tai Fook Securities Company Limited, a fellow subsidiary of Tai Fook Capital, held 6,000 shares in VNHL and 131 Shares respectively as at the Latest Practicable Date. Mr. Tam Pak Yip, an independent non-executive Director and a member of the Independent Board Committee, maintains a stock brokerage account with Tai Fook Securities Company Limited.
(iv) there are no arrangements of the kind referred to in the third paragraph of Note 8 to Rule 22 of the Takeovers Code which exist between the Offeror, or any person acting in concert with the Offeror, and any other person; and
(v) save as disclosed in the section headed “Disclosure of interests” in this appendix, neither the Company nor any of the Directors had any interest in the securities, convertible securities, warrants, options and derivatives of the Offeror or the Company.

– 84 –

GENERAL INFORMATION

APPENDIX III

6. DEALINGS IN SECURITIES

During the Relevant Period,

(a) save for the acquisition of the Sale Shares pursuant to the S&P Agreement which was completed on 13 June 2006, none of the Offeror nor parties acting in concert with it had dealt in any securities, convertible securities, warrants, options and derivatives of the Company;
(b) the sole director of the Offeror had not dealt in any securities, convertible securities, warrants, options and derivatives of the Company;
(c) no subsidiary of the Company, nor any pension fund of the Company or any of its subsidiaries, nor any of the professional advisers named under the section headed “Consent and Qualification” in this Appendix nor any adviser to the Company as specified in class (2) of the definition of “associate” in the Takeovers Code had dealt in any securities, convertible securities, warrants, options and derivatives in the Company;
(d) 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 person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of “associate” in the Takeovers Code had dealt in any securities, convertible securities, warrants, options and derivatives in the Company, the Offeror, or any parties acting in concert with the Offeror;
(e) neither the Company nor any of the Directors dealt in securities, convertible securities, warrants, options and derivatives of the Offeror or the Company; and
(f) no fund managers (other than exempted fund managers) who managed funds on a discretionary basis or connected with the Company had dealt in any securities, convertible securities, warrants, options and derivatives in the Company.

7. SERVICE CONTRACTS

As at the Latest Practicable Date, there are no service contracts with the Company or any of its subsidiaries or associated companies in force for the Directors which

(i) have been entered into or amended within 6 months before the commencement of the offer period in relation to the Offer;
(ii) are continuous contracts with a notice period of more than 12 months; or
(iii) which are fixed term contracts with more than 12 months to run irrespective of the notice period.

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GENERAL INFORMATION

APPENDIX III

8. 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 is no litigation or claim of material importance known to the Directors to be pending or threatened by or against any member of the Group.

9. MATERIAL CONTRACTS

No contract was entered into by the Company or its subsidiaries which was not in the ordinary course of business carried on or intended to be carried on by the Company and are or may be material in the two years immediately preceding the date of the Joint Announcement and up to the Latest Practicable Date.

10. CONSENT AND QUALIFICATION

The following is the qualification of the professional advisers contained in this document:

Name Qualification

Partners Capital

A licensed corporation to carry on Types 1 and 6 regulated activities under the SFO

Tai Fook Capital A licensed corporation to carry on Type 6 regulated activity under the SFO

Each of Partners Capital and Tai Fook Capital has given and has not withdrawn their respective written consents to the issue of this document with the inclusion herein of their letters and references to their name in the form and context in which they appear.

11. GENERAL

(a) As at the Latest Practicable Date, no benefit (other than statutory compensation) would be given to any Director as compensation for loss of office or otherwise in connection with the Offer.
(b) As at the Latest Practicable Date, there was no agreement, arrangement or understanding (including any compensation arrangement) between the Offeror or any person acting in concert with it and any Directors, recent Directors, Shareholders or recent Shareholders having any connection with or was dependent upon the outcome of the Offer or otherwise connected therewith.
(c) As at the Latest Practicable Date, there was no agreement or arrangement between any of the Directors and any other person which is conditional on or dependent upon the outcome of the Offer or otherwise connected with the Offer.
(d) As at the Latest Practicable Date, no person who owned or controlled Shares has irrevocably committed to accepting or rejecting the Offer.

– 86 –

GENERAL INFORMATION

APPENDIX III

(e) As at the Latest Practicable Date, there was no material contract to which the Offeror is a party in which any Director has a material personal interest save for the S&P Agreement.
(f) The Offeror has no intention to transfer, charge or pledge the Shares acquired in pursuance with the Offer to any other persons.
(g) The registered office of the Offeror is situated at Palm Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands. The address of Mr. Sun is at Room 1004, Progress Commercial Building, 9 Irving Street, Causeway Bay, Hong Kong.
(h) The address of Partners Capital is at Room 1305, 13th Floor, 9 Queen’s Road Central, Hong Kong.
(i) The address of Tai Fook Capital is at 25th Floor, New World Tower, 16-18 Queen’s Road Central, Hong Kong.
(j) The English text of this document and the accompanying Form of Acceptance shall prevail over their respective Chinese texts.

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at (i) the head office and principal place of business of the Company in Hong Kong at Room 713B, 7/F., Block B, Seaview Estate, 2-8 Watson Road, North Point, Hong Kong; (ii) the website of the SFC (www.sfc.hk); and (iii) the website of the Company (www.megainfo.com.cn) from the date of this Composite Offer Document up to and including the closing date of the Offer:

(a) the memorandum of association and bye-laws of the Company and the memorandum and articles of association of the Offeror;
(b) the annual reports of the Company for the two years ended 30 June 2005;
(c) the interim report of the Company for the six months ended 31 December 2005;
(d) the third quarterly report of the Company for the nine months ended 31 March 2006;
(e) a copy of the letter from Partners Capital containing details of the Offer, the full text of which is set out on pages 5 to 15 of this document;
(f) a copy of the letter from Tai Fook Capital as set out on pages 24 to 37 of this document;
(g) letter from the Independent Board Committee; and
(h) the written consents referred to in the paragraph headed “Consent and qualification” in this appendix.

Forms of Acceptance will be available for collection from the Registrar and the Company.

– 87 –

AI assistant

Joy Spreader Group Inc. — M&A Activity 2006

51106_rns_2006-06-27_e7c44889-e7ba-4101-b9db-af4d0b63d259.pdf

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

MAXPROFIT GLOBAL INC

Independent Financial Adviser to the Independent Board Committee of MegaInfo Holdings Limited

CONTENTS

Latest date for despatch of remittances for the amounts

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

DEFINITIONS

DEFINITIONS

DEFINITIONS

INTRODUCTION

LETTER FROM PARTNERS CAPITAL

S&P AGREEMENT

Conditions:

LETTER FROM PARTNERS CAPITAL

Completion:

THE OFFER

Comparisons of value

Dealings in the Shares and other securities by the Offeror during the Relevant Period

Highest and lowest prices

Total consideration

Effects of accepting the Offer

Stamp duty

Payment

Compulsory acquisition

INFORMATION ON THE COMPANY

LETTER FROM PARTNERS CAPITAL

INFORMATION ON THE OFFEROR

INTENTION OF THE OFFEROR REGARDING THE GROUP

PROPOSED CHANGE OF BOARD COMPOSITION OF THE COMPANY

LETTER FROM PARTNERS CAPITAL

MAINTAINING THE LISTING STATUS OF THE COMPANY

TAXATION

ACCEPTANCE AND SETTLEMENT

(a) Procedures for acceptance of the Offer

(b) Settlement of the Offer

GENERAL

(Stock code: 8279)

INTRODUCTION

LETTER FROM THE BOARD

THE OFFER

Further details of the Offer

INFORMATION ON THE COMPANY

LETTER FROM THE BOARD

INTENTION OF THE OFFEROR REGARDING THE GROUP

BOARD COMPOSITION OF THE COMPANY

RECOMMENDATIONS

MAINTAINING THE LISTING STATUS OF THE COMPANY

ADDITIONAL INFORMATION

INTRODUCTION

RECOMMENDATION

To the Independent Board Committee

LETTER FROM TAI FOOK CAPITAL

BASES AND ASSUMPTIONS

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background of and reasons for the Offer

1.1 Background of the Offer

1.2 Reasons for the Offer

2. Information about the Group

2.1 Principal business of the Group

2.2 Financial performance of the Group

Nine months

LETTER FROM TAI FOOK CAPITAL

Outlook of the Group’s business environment

Macao

PRC

Our further analysis

LETTER FROM TAI FOOK CAPITAL

3. Terms of the Offer

4. Background of the Offeror

4.1 Intention of the Offeror

5. Other factors considered in evaluation of the Offer Price

5.1 Trading volume

5.2 Share price

5.3 Net assets value

5.4 Price earnings multiples

5.5 Dividends

RECOMMENDATION

Joy Spreader Group Inc. M&A Activity 2006