THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Applied International Holdings Limited, you should at once hand this circular to the purchaser or transferee or the bank, licensed securities dealer or other agent through whom the sale was effected for transmission to the purchaser or transferee.

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

==> picture [52 x 58] intentionally omitted <==

APPLIED INTERNATIONAL HOLDINGS LIMITED 實力國際集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 519)

MAJOR TRANSACTION

DISPOSAL OF PRC PROPERTY

A notice convening a special general meeting of Applied International Holdings Limited to be held at 2:00 p.m. on Friday, 26 November 2004 at The Oregon Room, The American Club, 47th Floor, Two Exchange Square, No. 8 Connaught Place, Central, Hong Kong is set out on pages 73 to 74 of this circular. Whether or not you are able to attend the special general meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon and return it to the principal place of business of Applied International Holdings Limited at Unit 3402, 34th Floor, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the special general meeting, or any adjournment thereof, should you so wish.

* For identification only

29 October 2004

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Appendix I – Financial Information on the Group . . . . . . . . . . . . . . . . . . . . . . . . .	10
Appendix II – Valuation Report on the Sheung Ping Property . . . . . . . . . . . . . . .	59
Appendix III – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	65
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	73

– i –

DEFINITIONS

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

“Board”	the board of Directors of the Company;
“Company”	Applied International Holdings Limited, a company
	incorporated in Bermuda and the shares of which are
	listed on the Stock Exchange;
“Consideration”	RMB22,200,000 (approximately HK$20,923,657), being
	the total amount payable by Sheung Ping Committee for
	the purchase of whatever rights and interests (if any)
	Dongguan Incar and Dongguan Man Lee may have in
	the Sheung Ping Property pursuant to the Sale and
	Purchase Agreement;
“Directors”	the directors of the Company (including the independent
	non-executive directors of the Company);
“Dongguan Incar”	Dongguan Incar Electronics Co., Ltd., a company
	established in the PRC and an indirectly wholly-owned
	subsidiary of the Company;
“Dongguan Man Lee”	Dongguan Man Lee Plastic Products Co., Ltd., a company
	established in the PRC and an indirectly wholly-owned
	subsidiary of the Company;
“Group”	the Company and its subsidiaries;
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong;
“Hong Kong”	The Hong Kong Special Administrative Region of the
	People’s Republic of China;
“Independent Third Party”	a person who, to the best of the Directors’ knowledge,
	information and belief, having made all reasonable
	enquiries, is independent of the Company and its
	subsidiaries, their directors, chief executives and
	substantial shareholders or their respective associates (as
	that term is defined in the Listing Rules) and who is not
	a connected person (as that term is defined in the Listing
	Rules) of the Company;

– 1 –

DEFINITIONS

“Latest Practicable Date”	28 October 2004, being the latest practicable date prior
	to the printing of this circular for ascertaining certain
	information for inclusion in this circular;
“Listing Rules”	The Rules Governing the Listing of Securities on the
	Stock Exchange;
“PRC”	the People’s Republic of China, which for the purposes
	of this circular, excludes Hong Kong, Macau and Taiwan;
“RJP”	RJP International Limited, a company incorporated in
	Hong Kong with limited liability and an indirectly
	wholly-owned subsidiary of the Company;
“RMB”	Renminbi, the lawful currency of the PRC;
“Sale”	the sale or the procurement of sale by RJP of whatever
	rights and interests (if any) Dongguan Incar and
	Dongguan Man Lee may have in the Sheung Ping
	Property to Sheung Ping Committee pursuant to the terms
	of the Sale and Purchase Agreement;
“Sale and Purchase Agreement”	the sale and purchase agreement dated 23 September
	2004 entered into between RJP and Sheung Ping
	Committee pursuant to which, inter alia, RJP agreed to
	sell, or procure the sale of, and Sheung Ping Committee
	agreed to purchase whatever rights and interests (if any)
	Dongguan Incar and Dongguan Man Lee may have in
	the Sheung Ping Property;
“SFO”	the Securities and Futures Ordinance (cap. 571 of the
	laws of Hong Kong);
“SGM”	the special general meeting of the Company to be held
	at 2:00 p.m. on Friday, 26 November 2004 for the
	purpose of considering and, if thought fit, approving the
	Sale and Purchase Agreement and the transactions
	contemplated thereunder;
“Share(s)”	ordinary share(s) of HK$0.01 each in the share capital
	of the Company;
“Shareholder(s)”	holder(s) of the Shares;

– 2 –

DEFINITIONS

“Sheung Ping Committee”

東莞市常平鎮土塘村委會 (The Commitee of the Tutang Village, Sheung Ping Town, Dongguan*), a governmental organisation established in Sheung Ping, PRC;

“Sheung Ping Property”

a piece of land of approximately 46,254 square metres situated at Tutang District, Sheung Ping Town, Dongguan, PRC together with twelve two-to-four-storeys factory buildings of 33,811 square metres in total and nine one-to-six-storeys staff quarters of 16,890 square metres in total constructed thereon and which is actually owned and used by Dongguan Incar and Dongguan Man Lee despite land grant procedures in relation thereto not having been completed; and

“Stock Exchange” The Stock Exchange of Hong Kong Limited.

Unless otherwise specified in this circular, translations of RMB into HK$ are made in this circular, for illustration only, at the rate of RMB1.061 to HK$1.00. No representation is made that any amounts in RMB or HK$ could have been or could be converted at that rate or at any other rate.

* For identification only

– 3 –

LETTER FROM THE BOARD

==> picture [52 x 57] intentionally omitted <==

APPLIED INTERNATIONAL HOLDINGS LIMITED 實力國際集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 519)

Executive Directors:

Mr. Hung Kin Sang Raymond (Chairman) Ms. Hung Wong Kar Gee, Mimi Mr. Fang Chin Ping

Registered office: Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Independent Non-executive Directors:

Mr. Soo Hung Leung, Lincoln Mr. Lo Yun Tai Mr. Lun Tsan Kau

Principal place of business: Unit 3402, 34th Floor China Merchants Tower Shun Tak Centre 168-200 Connaught Road Central Hong Kong

29 October 2004

To the Shareholders

Dear Sir/Madam,

MAJOR TRANSACTION

DISPOSAL OF PRC PROPERTY

INTRODUCTION

On 23 September 2004, RJP and Sheung Ping Committee entered into the Sale and Purchase Agreement pursuant to which, inter alia, RJP agreed to sell, or procure the sale of, and Sheung Ping Committee agreed to purchase, whatever rights and interests (if any) Dongguan Incar and Dongguan Man Lee may have in the Sheung Ping Property.

The Sale constitutes a major transaction of the Company pursuant to Rule 14.06(3) of the Listing Rules and will be subject to approval of the Shareholders at the SGM.

* For identification only

– 4 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with further information in relation to the Sale and the Group, a valuation report on the Sheung Ping Property and financial information on the Group, and to give you notice of the SGM convened for the purpose of considering and, if thought fit, approving the Sale and Purchase Agreement and the transactions contemplated thereunder.

THE SALE AND PURCHASE AGREEMENT

Date

23 September 2004

Parties

RJP as vendor; and
Sheung Ping Committee as purchaser. Sheung Ping Committee is an Independent Third Party.

The Sale

Pursuant to the Sale and Purchase Agreement, inter alia, RJP agreed to sell, or procure the sale of, and Sheung Ping Committee agreed to purchase, whatever rights and interests (if any) Dongguan Incar and Dongguan Man Lee may have in the Sheung Ping Property, including the facilities thereon such as water and electricity supply, road, fence, greenery, doors and windows.

Consideration

The Consideration payable by Sheung Ping Committee pursuant to the Sale and Purchase Agreement is RMB22,200,000 (approximately HK$20,923,657).

Payment Terms

Sheung Ping Committee paid RJP RMB5,000,000 (approximately HK$4,712,535) upon signing the Sale and Purchase Agreement. RMB10,000,000 (approximately HK$9,425,071) is payable before 31 December 2004 and the remaining RMB7,200,000 (approximately HK$6,786,051) is payable before 30 June 2005.

Condition Precedent

Completion of the Sale is conditional on approval of the Sale and Purchase Agreement and the transactions contemplated thereunder by shareholders of the Company in a general meeting.

– 5 –

LETTER FROM THE BOARD

Completion

Completion is to take place on 1 January 2005 when RJP shall deliver, or procure the delivery of, the Sheung Ping Property to Sheung Ping Committee in the existing condition without modification or subject to tenancy (as the case may be). RJP shall also provide all information in relation to the relevant tenancy agreements (if any). According to a valuation report issued by RHL Appraisal Limited dated 8 October 2004, as at 31 August 2004, certain portions of the Sheung Ping Property were subject to various tenancies at an aggregate monthly rental of RMB195,981 (approximately HK$184,713). Pursuant to the Sale and Purchase Agreement, RJP will be entitled to rental income from the Sheung Ping Property prior to 31 December 2004 and Sheung Ping Committee will be responsible for all matters relating to the lease of the Sheung Ping Property and will be entitled to rental income therefrom after 1 January 2005.

Information regarding the Sheung Ping Property

In the early 1990s, Dongguan Incar and Dongguan Man Lee agreed to purchase the north and south portions of the Sheung Ping Property respectively from Sheung Ping Committee for a consideration of approximately HK$19,800,000. According to a valuation report dated 8 October 2004 issued by RHL Appraisal Limited, an independent valuer, as at 31 August 2004, the Sheung Ping Property had no commercial value as the land grant procedures, including land premium payment in relation thereto, had not been completed. According to information supplied to the Company by Sheung Ping Committee, the land premium payable before the land grant procedures for the Sheung Ping Property can be completed is approximately RMB8,350,000 (approximately HK$7,869,934).

According to the legal opinion issued by Hills & Co, the PRC legal advisers to the Company, as the land grant procedures in respect of the Sheung Ping Property had not been completed, legal title to the Sheung Ping Property is not vested in Dongguan Incar and Dongguan Man Lee. Hence, Dongguan Incar and Dongguan Man Lee do not have the right to dispose of the Sheung Ping Property. The PRC legal advisers cannot opine on the legal validity and enforceability of the Sale and Purchase Agreement and the transactions contemplated thereunder nor can they opine on whether any disputes will arise as a result of the parties’ rights being adversely affected due to the requisite land grant procedures not having been completed. Nevertheless,, as a result of negotiations with Sheung Ping Committee and taking into account previous dealings between RJP and Sheung Ping Committee, it was agreed that RJP would enter into the Sale and Purchase Agreement with the Sheung Ping Committee to procure the Sale. As no action has been taken against the Group for land grant procedures not having been completed since the acquisition of the Sheung Ping Property in the 1990s, and as Dongguan Incar and Dongguan Man Lee are merely selling whatever rights and interests they may have (if any) in the Sheung Ping Property back to Sheung Ping Committee, the Directors are of the view that it is very unlikely for any action to be taken by Sheung Ping Committee itself or other PRC authorities for such irregularity upon sale of Dongguan Incar and Dongguan Man Lee’s rights and interests (if any) in the Sheung Ping

– 6 –

LETTER FROM THE BOARD

Property. Further, the Directors are of the view that it is unlikely that Dongguan Incar and Dongguan Man Lee will fail to deliver, or RJP will fail to procure delivery of, the Sheung Ping Property to Sheung Ping Committee. However, investors should be aware that action may be taken by Sheung Ping Committee and other PRC authorities against the Group as the Sale and Purchase Agreement and the transactions contemplated thereunder may not be valid and enforceable in accordance with PRC laws and regulations. Shareholders and potential investors should exercise caution when dealing in the Shares.

The audited net loss (before and after taxation and extraordinary items) attributable to the Sheung Ping Property for the financial year ended 30 June 2003 was HK$385,427 and the audited net profit (before and after taxation and extraordinary items) for the financial year ended 30 June 2002 was HK$1,362,121.

As at 31 August 2004, the depreciated replacement cost of the land improvement works in the Sheung Ping Property amounted to HK$6,600,000. The unaudited net book value of the Sheung Ping Property as at 30 June 2004 was HK$6,600,000 and the excess of the Consideration over the net book value of the Sheung Ping Property as at 30 June 2004 amounts to HK$14,323,657. No significant impairment had been noted by the Directors. As a result of the Sale, after deducting expenses in relation thereto in the amount of approximately HK$1,501,657, the Group is expected to recognise a net gain on disposal of approximately HK$12,822,000 in its next audited accounts. Hence, the earnings of the Group and the net asset value of the Group will be increased by approximately HK$12,822,000 respectively. The Sale does not have any effect on the liabilities of the Group.

Net Proceeds from the Sale

According to a valuation report issued by RHL Appraisal Limited dated 29 October 2004, as at 31 August 2004, the Sheung Ping Property had no commercial value as the land grant procedures, including land premium payment in relation thereto, have not been completed. The Consideration was determined after arms’ length negotiations between the parties to the Sale and Purchase Agreement, after taking into account the investment prospects in the Sheung Ping property market and shortage of land in the Sheung Ping area.

The proceeds from the Sale will be used for general working capital of the Company.

REASONS FOR THE SALE AND BENEFITS TO THE COMPANY

The Company is principally engaged in the business of design, manufacture, marketing and distribution of consumer electronic products and property investment and development.

RJP is principally engaged in investment holding. The Sheung Ping Committee is a government organization in the PRC responsible for the administration and management of the Sheung Ping municipal.

– 7 –

LETTER FROM THE BOARD

As stated in the section headed “Information regarding the Sheung Ping Property” above, according to the legal opinion issued by Hills & Co, the PRC legal advisers to the Company, as the land grant procedures in respect of the Sheung Ping Property had not been completed, the PRC legal advisers cannot opine on the legal validity and enforceability of the Sale and Purchase Agreement and the transactions contemplated thereunder nor can they opine on whether any dispute will arise as a result of the parties’ rights being adversely affected due to the requisite land grant procedures not having been completed. Nevertheless, as a result of negotiations with Sheung Ping Committee and taking into account previous dealings between RJP and Sheung Ping Committee, Sheung Ping Committee agreed to purchase whatever rights and interests (if any) Dongguan Incar and Dongguan Man Lee may have in the Sheung Ping Property and entered into the Sale and Purchase Agreement.

The Directors are of the view that the Consideration is fair and reasonable in light of the current market conditions in the PRC and, in particular, investment prospects in the Sheung Ping property market and shortage of land in the Sheung Ping area. The Sale is on normal commercial terms and in the best interests of the Company and its shareholders as a whole as the cash raised from the Sale will improve the Company’s liquidity and increase the funds available for general working capital. The Directors are not aware of any arrangement or matter regarding the Sale that were material and which have not been disclosed in the Circular. However, investors should be aware that action may be taken by Sheung Ping Committee and other PRC authorities against the Group as the Sale and Purchase Agreement and the transactions contemplated thereunder may not be valid and enforceable in accordance with PRC laws and regulations. Shareholders and potential investors should exercise caution when dealing in the Shares.

GENERAL

The Sale constitutes a major transaction of the Company under Rule 14.06(3) of the Listing Rules.

A notice convening the SGM to be held at 2:00 p.m. on Friday, 26 November 2004 at The Oregon Room, The American Club, 47th Floor, Two Exchange Square, No. 8 Connaught Place, Central, Hong Kong is set out on pages 73 to 74 of this circular for the purpose of considering and, if thought fit, approving the Sale and Purchase Agreement and the transactions contemplated thereunder. To the best knowledge of the Directors, no Shareholders are required to abstain from voting at the SGM.

You will find enclosed a form of proxy for use at the SGM. Whether or not you are able to attend the SGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the Company’s principal place of business at Unit 3402, 34th Floor, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for holding the SGM. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM, or any adjournment thereof, should you so wish.

– 8 –

LETTER FROM THE BOARD

Pursuant to Bye-Law 76 of the bye-laws of the Company, a resolution put to the vote of a meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) demanded by: (i) the chairman; or (ii) at least three members present in person or by proxy or by representative for the time being entitled to vote at the meeting; or (iii) a member or members present in person or by proxy or by representative and representing not less than one-tenth of the total voting rights of all members having the right to vote at the meeting; or (iv) by a member or members present in person or by proxy or by representative and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all shares conferring that right.

By Order of the Board Applied International Holdings Limited Fang Chin Ping Executive Director

– 9 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION

The following is a summary of the audited consolidated results of the Group for each of the three financial years ended 30 June 2003:

Results

Turnover Loss before taxation Taxation Loss before minority interests Minority interests Net loss attributable to shareholders Loss per share Basic	For the year ended 2003 2002 HK$’000 HK$’000 125,866 191,895 (220,803) (39,948) 2,863 (182) (217,940) (40,130) (50,554) (12,213) (167,386) (27,917) (17.8) cents (3.0) cents	30 June 2001 HK$’000 210,800 (37,255) (272) (37,527) (14,032) (23,495) (2.5) cents

– 10 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

2. FINANCIAL INFORMATION

The following financial report is extracted from the audited consolidated financial statements of the Group for the year ended 30 June 2003:

Consolidated Income Statement

For the year ended 30 June 2003

Notes Turnover 5 Cost of sales Gross profit Other operating income Investment income 7 Interest income Distribution costs Administrative expenses Allowance for trade and other receivables Allowance for short-term loans receivable Allowance for long-term receivable Deficit on revaluation of investment properties Impairment loss recognised in respect of other investments Impairment loss recognised in respect of property, plant and equipment Impairment loss recognised in respect of other securities Loss on disposal of investment properties Loss from operations 8 Finance costs 9 Loss on disposal of subsidiaries Loss before taxation Taxation 11 Loss before minority interests Minority interests Net loss for the year Loss per Share 12 Basic	2003 HK$’000 125,866 (94,624) 31,242 8,684 3,176 3,348 (2,917) (77,758) (17,613) (23,990) (1,180) (78,012) (38,968) (18,986) – – (212,974) (7,829) – (220,803) 2,863 (217,940) (50,554) (167,386) (17.8) cents	2002 HK$’000 191,895 (152,603) 39,292 5,536 351 1,553 (4,373) (59,423) – (3,065) – – – (4,100) (619) (9,823) (34,671) (5,259) (18) (39,948) (182) (40,130) (12,213) (27,917) (3.0) cents

– 11 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Balance Sheet

At 30 June 2003

Notes Non-current assets Investment properties 13 Property, plant and equipment 14 Long-term receivable 15 Other investments 17 Other securities 18 Goodwill 19 Negative goodwill 20 Current assets Inventories 21 Trade and other receivables 22 Short-term loans receivable 23 Tax recoverable Pledged bank deposits Other time deposits Bank balances and cash Current liabilities Trade and other payables 24 Amount due to a director 25 Tax payable Bank and other borrowings – due within one year 26 Obligations under finance leases – due within one year 27 Net current (liabilities) assets	2003 HK$’000 107,680 293,567 – 25,351 7,144 770 (43,793) 390,719 10,331 41,124 7,246 124 3,219 38,338 6,589 106,971 44,462 2,214 3,559 127,074 5,709 183,018 (76,047) 314,672	2002 HK$’000 202,780 319,577 1,420 66,659 8,784 990 (46,119) 554,091 8,725 60,706 22,197 124 4,702 38,011 40,664 175,129 48,169 – 6,159 116,400 3,743 174,471 658 554,749

– 12 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes Capital and reserves Share capital 28 Treasury shares 29 Reserves Minority interests Non-current liabilities Amount due to a minority shareholder of a subsidiary 31 Bank and other borrowings – due after one year 26 Deferred taxation 32 Obligations under finance leases – due after one year 27 Convertible note 33	2003 HK$’000 188,216 (12,546) (4,054) 171,616 105,348 1,073 31,630 384 3,841 780 37,708 314,672	2002 HK$’000 188,216 (12,546) 175,469 351,139 162,905 1,073 36,656 647 2,329 – 40,705 554,749

– 13 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Balance Sheet

At 30 June 2003

Notes Non-current assets Interests in subsidiaries 16 Other securities 18 Current assets Trade and other receivables Bank balances and cash Current liabilities Trade and other payables Bank and other borrowings 26 Net current liabilities Capital and reserves Share capital 28 Reserves 30 Non-current liability Amounts due to subsidiaries 16	2003 HK$’000 286,327 969 287,296 527 13 540 1,626 29,560 31,186 (30,646) 256,650 188,216 (18,273) 169,943 86,707 256,650	2002 HK$’000 314,903 1,239 316,142 1,604 166 1,770 805 18,024 18,829 (17,059) 299,083 188,216 29,314 217,530 81,553 299,083

– 14 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

For the year ended 30 June 2003

Share capital HK$’000 188,216	Treasury shares HK$’000 (12,546)	Share premium account HK$’000 3	Investment revaluation reserve HK$’000 (12,201)	Investment property revaluation reserve HK$’000 21,238	Capital redemption reserve HK$’000 10,892	Capital reserve HK$’000 220,414	Distri- butable reserve HK$’000 93,961	Translation reserve HK$’000 (2,975)	Accu- mulated losses HK$’000 (114,571)	Total HK$’000 392,431
– – –	– – –	– – –	– (2,709) –	(7,043) – –	– – –	– – –	– – –	– – (118)	– – –	(7,043) (2,709) (118)
–	–	–	(2,709)	(7,043)	–	–	–	(118)	–	(9,870)
– – – –	– – – –	– – – –	– (52) 364 –	(3,817) – – –	– – – –	– – – –	– – – –	– – – –	– – – (27,917)	(3,817) (52) 364 (27,917)
188,216	(12,546)	3	(14,598)	10,378	10,892	220,414	93,961	(3,093)	(142,488)	351,139
– – –	– – –	– – –	– (1,612) –	(10,378) – –	– – –	– – –	– – –	– – (229)	– – –	(10,378) (1,612) (229)
–	–	–	(1,612)	(10,378)	–	–	–	(229)	–	(12,219)
– –	– –	– –	82 –	– –	– –	– –	– –	– –	– (167,386)	82 (167,386)
188,216	(12,546)	3	(16,128)	–	10,892	220,414	93,961	(3,322)	(309,874)	171,616

The capital reserve includes HK15,536,000 (2002: HK$15,536,000) in respect of goodwill and HK$31,340,000 (2002: HK$31,340,000) in respect of negative goodwill.

– 15 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 30 June 2003

OPERATING ACTIVITIES Loss before taxation Adjustments for: Interest income Finance costs Dividend income Deficit on revaluation of investment properties Depreciation and amortisation of property, plant and equipment Loss on disposal of subsidiaries (Gain) loss on disposal of other investments Loss (gain) on disposal of other securities Amortisation of goodwill Release of negative goodwill to income Allowance for trade and other receivables Allowance for short-term loans receivable Allowance for long-term receivable Impairment loss recognised in respect of other investments Impairment loss recognised in respect of property, plant and equipment Impairment loss recognised in respect of other securities Loss (gain) on disposal of property, plant and equipment Loss on disposal of investment properties Operating cash flows before movements in working capital (Increase) decrease in inventories Decrease in trade and other receivables Decrease in trade and other payables Cash used in operations Hong Kong Profits Tax paid NET CASH USED IN OPERATING ACTIVITIES	2003 HK$’000 (220,803) (3,348) 7,829 (17) 78,012 9,069 – (3,159) 85 220 (2,326) 17,613 23,990 1,180 38,968 18,986 – 8 – (33,693) (1,606) 1,969 (3,936) (37,266) – (37,266)	2002 HK$’000 (39,948) (1,553) 5,259 (21) – 11,534 18 51 (330) 110 (400) – 3,065 – – 4,100 619 (939) 9,823 (8,612) 2,782 1,654 (6,631) (10,807) (381) (11,188)

– 16 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Note INVESTING ACTIVITIES Proceeds from disposal of property, plant and equipment Repayment of short-term loans receivable Proceeds from disposal of other investments Interest received Decrease in pledged bank deposits Rebate from a vendor in respect of purchase of property, plant and equipment Repayment of long-term receivable Proceeds from disposal of other securities Dividends received Advance of short-term loans receivable Purchase of property, plant and equipment Proceeds from disposal of investment properties Purchase of investment properties Acquisition of additional interest in a subsidiary Purchase of other securities Purchase of other investments Disposal of subsidiaries (net of cash and cash equivalents disposed of) 38 NET CASH FROM (USED IN) INVESTING ACTIVITIES FINANCING ACTIVITIES Repayment of bank loans Repayment of obligations under finance leases Interest paid Repayment of other loans Finance charges paid in respect of obligations under finance leases New bank loans raised New other loans raised Advance from a minority shareholder of a subsidiary Advance from a director Proceeds on issuance of a convertible note Additional capital from minority shareholders NET CASH (USED IN) FROM FINANCING ACTIVITIES	2003 HK$’000 10,548 5,598 5,499 1,806 1,483 284 240 25 17 (13,095) (2,496) – – – – – – 9,909 (30,760) (7,204) (6,962) (5,815) (867) 21,049 11,598 5,198 2,214 780 – (10,769)	2002 HK$’000 290 35,294 88 1,553 430 – – 873 21 (52,431) (5,362) 67,436 (61,822) (1,882) (512) (85) (18) (16,127) (31,788) (3,506) (4,796) (32,598) (463) 75,916 85,388 – – – 2,331 90,484

– 17 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT END OF THE YEAR ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS Cash and cash equivalents as previously reported Effect of reclassification of import loans Cash and cash equivalents as restated Being: Other time deposits Bank balances and cash Bank overdrafts	2003 HK$’000 (38,126) 74,477 36,351 38,338 6,589 (8,576) 36,351	2002 HK$’000 63,169 11,308 74,477 60,941 13,536 74,477 38,011 40,664 (4,198) 74,477

– 18 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes to Financial Statements

For the year ended 30 June 2003

1. GENERAL

The Company is incorporated in Bermuda as an exempted company with limited liability. Its shares and warrants are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The Company acts as an investment holding company. The Group is principally engaged in the design, manufacture, marketing and distribution of consumer electronic products, manufacture and distribution of health care products, property and investment holding and property development.

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

In preparing the financial statements, the directors of the Company have given careful consideration to the future liquidity of the Group in light of its net current liabilities of approximately HK$76,047,000 at 30 June 2003. The directors are satisfied that the Group has sufficient funding and facilities to be able to meet in full its liabilities as they fall due for the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis.

3. ADOPTION OF NEW AND REVISED STATEMENTS OF STANDARD ACCOUNTING PRACTICE

In the current year, the Group adopted, for the first time, a number of new and revised Statements of Standard Accounting Practice (“SSAP(s)”) issued by the Hong Kong Society of Accountants. The adoption of these SSAPs has no significant effect on the results for the current or prior accounting periods. Accordingly, no prior year adjustment has been required.

Presentation of financial statements

In the current year, the Group adopted SSAP 1 (Revised) “Presentation of financial statements”, which results in the inclusion of the consolidated statement of changes in equity in the financial statements. The changes in equity were previously presented as a note to the financial statements by the Group.

Foreign currencies

The revisions to SSAP 11 “Foreign currency translation” have eliminated the choice of translating the income statements of subsidiaries outside Hong Kong at the closing rate for the year, the policy previously followed by the Group. They are now required to be translated at an average rate. This change in accounting policy has not had any material effect on the results for the current or prior accounting periods.

Cash flow statements

In the current year, the Group adopted SSAP 15 (Revised) “Cash flow statements”. Under SSAP 15 (Revised), cash flows are classified under three headings – operating, investing and financing, rather than the previous five headings. Interest paid, interest received and dividends received, which were previously presented under a separate heading, are classified as investing or financing cash flows. Cash flows arising from taxes on income are classified as operating activities, unless they can be separately identified with investing or financing activities. Cash flows of the operations outside Hong Kong have been re-translated at the rates prevailing at the dates of the cash flows rather than the rate of exchange ruling on the balance sheet date. The re-definition of cash and cash equivalents has resulted in a restatement of the comparative amounts shown in the cash flow statement.

Employee benefits

In the current year, the Group adopted SSAP 34 “Employee benefits”, which introduces measurement rules for employee benefits, including retirement benefits plans. Because the Group participates only in defined contribution retirement benefits schemes, the adoption of SSAP 34 has not had any significant impact on the financial statements.

– 19 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

4. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared under the historical cost convention, as modified for the revaluation of investment properties and investments in securities, and in accordance with accounting principles generally accepted in Hong Kong. The principal accounting policies adopted are as follows:

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 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.

All significant intercompany transactions and balances within the Group are eliminated on consolidation.

Goodwill

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

Goodwill arising on acquisitions prior to 1 July 2001 continues to be held in reserves, and will be charged to the income statement at the time of disposal of the relevant subsidiary, or at such time as the goodwill is determined to be impaired.

Goodwill arising on acquisitions since 1 July 2001 is capitalised and amortised on a straight-line basis over its useful economic life and is presented separately in the balance sheet. On the disposal of a subsidiary, the attributable amount of unamortised goodwill is included in the determination of the profit and loss on disposal.

Negative goodwill

Negative goodwill represents the excess of the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition over the cost of acquisition.

Negative goodwill arising on acquisitions prior to 1 July 2001 continues to be held in reserves and will be credited to income at the time of disposal of the relevant subsidiary.

Negative goodwill arising on acquisitions since 1 July 2001 is presented as a deduction from assets and will be released to income based on an analysis of the circumstances from which the balance resulted.

To the extent that the negative goodwill is attributable to losses or expenses anticipated at the date of acquisition, it is released to income in the period in which those losses or expenses arise. The remaining negative goodwill is recognised as income on a straight line basis over the remaining average useful life of the identifiable acquired depreciable assets. To the extent that such negative goodwill exceeds the aggregate fair value of the acquired identifiable non-monetary assets, it is recognised in income immediately.

Investments in subsidiaries

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

Revenue recognition

Sales of goods are recognised when goods are delivered and title has passed.

Sales of investments in securities are recognised on a trade date basis.

– 20 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Rental income, including rental invoiced in advance from property under operating leases, is recognised on a straight line basis over the terms of the relevant lease.

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

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

Investment properties

Investment properties are completed properties which are held for their investment potential, any rental income being negotiated at arm’s length.

Investment properties are stated at their open market values based on independent professional valuations at the balance sheet. Any surplus or deficit arising on the revaluation of investment properties is credited or charged to the investment property revaluation reserve unless the balance of this reserve is insufficient to cover a deficit, in which case the excess of the deficit over the balance on the investment property revaluation reserve is charged to the income statement. Where a deficit has previously been charged to the income statement and a surplus subsequently arises, this surplus is credited to the income statement to the extent of the deficit previously charged.

On disposal of an investment property, the balance on the investment property revaluation reserve attributable to that property is transferred to the income statement.

No depreciation is provided on investment properties except where the unexpired term of the relevant lease is 20 years or less.

Property, plant and equipment

Property, plant and equipment, other than properties held for development, are stated at cost less depreciation or amortisation and accumulated impairment losses.

The cost of leasehold land is amortised over the period of the relevant leases using the straight line method.

The cost of buildings is depreciated using the straight line method over their estimated useful lives of fifty years or, where shorter, the period of the relevant leases.

Properties held for development are carried at cost, less any identified impairment losses. Cost includes land cost, construction and other incidental costs. Depreciation of these properties, on the same basis as other properties, commences when the assets are put into use.

Depreciation is provided to write off the cost of items of property, plant and equipment, other than properties held for development, over their estimated useful lives, using the straight line method, at the following rates per annum:

Freehold land	Nil
Leasehold improvements	Over the term of the lease
Plant and machinery	10% to 25%
Furniture, fixtures and equipment	10% to 50%
Motor vehicles	10% to 331/3%
Motor boats	10% to 20%

The gain or loss arising from 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.

Assets held under finance leases are depreciated over their estimated useful lives on the same basis as owned assets or, where shorter, the period of the relevant lease.

– 21 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

Other investments

Other investments are antiques held for long-term purposes and are stated at cost less any identified impairment losses.

Investments in securities

Investments in securities are recognised on a trade-date basis and are initially measured at cost. All securities other than held-to-maturity debt securities are measured at subsequent reporting dates at fair value.

Where securities are held for trading purposes, unrealised gains and losses are included in net profit or loss for the period. For other securities, unrealised gains and losses are dealt with in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss is included in the net profit or loss for the period.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the firstin, first-out method.

Assets held under finance leases

Assets are classified as being held under finance leases when the terms of the lease transfer substantially all the risks and rewards of ownership of the assets concerned to the Group. Assets held under finance leases are capitalised at their fair values at the date of acquisition. The corresponding liability to the lessor, net of interest charges, is included in the balance sheet as obligations under finance leases. Finance charges, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are charged to the income statement over the years of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

All other leases are classified as operating leases and the annual rentals are charged to the income statement on a straight line basis over the relevant lease terms.

Treasury shares

Treasury shares are ordinary shares of the Company held by a subsidiary which acquired these shares before it became a subsidiary of the Company. Treasury shares are recorded using the cost method and are separately disclosed and regarded as a deduction of the Group’s equity.

– 22 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Taxation

The charge for taxation is based on the results for the year as adjusted for items which are nonassessable or disallowed. Timing differences arise from the recognition for tax purposes of certain items of income and expense in a different accounting period from that in which they are recognised in the financial statements. The tax effect of timing differences, computed using the liability method, is recognised as deferred taxation in the financial statements to the extent that it is probable that a liability or an asset will crystallise in the foreseeable future.

Foreign currencies

Transactions in currencies other than Hong Kong dollar are initially recorded at the approximate rates ruling on the dates of the transactions. Monetary assets and liabilities denominated in such currencies are re-translated into Hong Kong dollar at the rates ruling on the balance sheet date. Profits and losses arising on exchange are dealt with in the income statement.

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

Retirement benefits scheme

The retirement benefit costs charged in the income statement represent the contributions payable in respect of the current year to the Group’s defined contribution retirement benefits scheme and mandatory provident fund scheme.

5. TURNOVER

Sales of goods Rental income	2003 HK$’000 115,274 10,592 125,866	2002 HK$’000 180,820 11,075
		191,895

– 23 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

6. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

For management purposes, the Group is currently organised into four (2002: three) operating divisions – manufacture and distribution of electronic products, property and investment holding, property development and manufacture and distribution of health care products. These divisions are the basis on which the Group reports its primary segment information.

Business segment information for the year ended 30 June 2003 is presented below:

Manufacture and distribution of electronic products HK$’000 Turnover 109,263 Results Segment results (2,406) Unallocated corporate expenses Loss from operations Finance costs Loss before taxation Taxation Loss before minority interests Minority interests Net loss for the year	Property and investment holding HK$’000 10,592 (122,823)	Manufacture and distribution Property of health care development products HK$’000 HK$’000 – 6,011 (14,982) (15,832)	Total HK$’000 125,866

			(156,043) (56,931)
			(212,974) (7,829)
			(220,803) 2,863
			(217,940) (50,554)
			(167,386)

Manufacture Manufacture and and distribution Property and distribution of electronic investment Property of health care products holding development products Corporate HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Assets Segment assets 61,128 142,772 239,603 10,006 – Unallocated corporate assets 44,181 Consolidated total assets Liabilities Segment liabilities 19,603 23,854 32 2,992 – Unallocated corporate liabilities 174,245 Consolidated total liabilities Other information Capital expenditure 3,615 – 113 1,800 7,366 Depreciation and amortisation of property, plant and equipment 6,132 2,119 63 266 489 Deficit on revaluation of investment properties 1,193 76,819 – – – Impairment losses in respect of: Other investments – 38,968 – – – Property, plant and equipment – 17,487 – – 1,499 Allowance for trade and other receivables – 2,613 15,000 – – Allowance for short-term loans receivable – – – – 23,990 Allowance for long-term receivable 1,180 – – – – Inventories written off 170 – – – –	Total HK$’000 453,509 44,181
	497,690

	46,481 174,245
	220,726

	12,894 9,069 78,012 38,968 18,986 17,613 23,990 1,180 170

– 24 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Business segment information for the year ended 30 June 2002 is presented below:

Manufacture and distribution Property and of electronic investment Property products holding development HK$’000 HK$’000 HK$’000 Turnover 180,820 11,075 – Results Segment results 2,427 (16,042) – Unallocated corporate expenses Loss from operations Finance costs Loss on disposal of subsidiaries Loss before taxation Taxation Loss before minority interests Minority interests Net loss for the year	Total HK$’000 191,895

	(13,615) (21,056)
	(34,671) (5,259) (18)
	(39,948) (182)
	(40,130) (12,213)
	(27,917)

Manufacture and distribution Property and of electronic investment Property products holding development Corporate HK$’000 HK$’000 HK$’000 HK$’000 Assets Segment assets 73,991 333,761 252,284 – Unallocated corporate assets 69,184 Consolidated total assets Liabilities Segment liabilities 26,776 21,196 – – Unallocated corporate liabilities 167,204 Consolidated total liabilities Other information Capital expenditure 6,708 64,593 2,430 230 Depreciation and amortisation of property, plant and equipment 7,102 2,212 – 2,220 Impairment losses in respect of: Property, plant and equipment 2,001 2,099 – – Other securities – 619 – – Allowance for short-term loans receivable – 3,065 – – Inventories written off 1,200 – – –	Total HK$’000 660,036 69,184
	729,220

	47,972 167,204
	215,176

	73,961 11,534 4,100 619 3,065 1,200

– 25 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Geographical segments

The Group’s operations are principally located in Hong Kong, United States of America and The People’s Republic of China, other than Hong Kong (the “PRC”). The Group’s administrative and manufacturing function is carried out in Hong Kong and the PRC.

The following table provides an analysis of the Group’s turnover by geographical market, irrespective of the origin of the goods:

Hong Kong PRC Other Asian countries Europe United States of America British Virgin Islands Australia Others	Sales revenue by geographical market 2003 2002 HK$’000 HK$’000 79,774 144,249 9,795 8,206 8,222 2,480 742 9,682 24,654 26,333 1,013 824 1,664 – 2 121 125,866 191,895	Sales revenue by geographical market 2003 2002 HK$’000 HK$’000 79,774 144,249 9,795 8,206 8,222 2,480 742 9,682 24,654 26,333 1,013 824 1,664 – 2 121 125,866 191,895
		191,895

The following is an analysis of the carrying amount of segment assets and additions to property, plant and equipment analysed by the geographical area in which the assets are located:

Hong Kong PRC Other Asian countries Europe United States of America British Virgin Island Australia Others	Carrying amount of segment assets 2003 2002 HK$’000 HK$’000 148,123 340,063 229,568 250,271 2,722 551 136 383 24,231 48,000 92,173 89,809 613 – – 19 497,566 729,096	Additions to property, plant and equipment 2003 2002 HK$’000 HK$’000 10,321 62,194 2,015 9,337 – – – – 142 – 95 2,430 321 – – – 12,894 73,961	Additions to property, plant and equipment 2003 2002 HK$’000 HK$’000 10,321 62,194 2,015 9,337 – – – – 142 – 95 2,430 321 – – – 12,894 73,961
			73,961

7. INVESTMENT INCOME

Dividend income from listed securities Gain on disposal of other investments Gain on disposal of other securities	2003 HK$’000 17 3,159 – 3,176	2002 HK$’000 21 – 330
		351

– 26 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

8. LOSS FROM OPERATIONS

9.

Loss from operations has been arrived at after charging: Staff costs, including directors’ remuneration: Basic salaries and allowances Retirement benefits scheme contributions, no forfeited contributions (2002: net of forfeited contributions of HK$352,000) Total staff costs Amortisation of goodwill included in administrative expenses Auditors’ remuneration: Current year Underprovision in prior years Depreciation and amortisation: Owned assets Assets held under finance leases Loss on disposal of other investments Loss on disposal of other securities Loss on disposal of property, plant and equipment and after crediting: Release of negative goodwill included in other operating income Rental income from investment properties, net of outgoings of HK$893,000 (2002: HK$1,009,000) Gain on disposal of property, plant and equipment FINANCE COSTS Interest expense on: bank and other borrowings wholly repayable within five years bank and other borrowings not wholly repayable within five years Finance charges on obligations under finance leases	2003 HK$’000 44,596 643 45,239 220 1,497 280 5,179 3,890 – 85 8 2,326 9,699 – 2003 HK$’000 6,060 902 867 7,829	2002 HK$’000 31,926 477
		32,403
		110 1,363 68 7,768 3,766 51 – – 400 10,066 939

		2002 HK$’000 2,968 1,828 463
		5,259

– 27 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

10. DIRECTORS’ AND EMPLOYEES’ REMUNERATION

(a) Directors’ remuneration

Fees: Executive Non-executive Independent non-executive Other emoluments: Executive Salaries and other benefits Performance related incentive payments Retirement benefits scheme contributions The directors’ remuneration was within the following bands:	2003 HK$’000 – 100 400 7,402 9,076 24 17,002	2002 HK$’000 – 50 200 9,058 – 24
		9,332

	Number of directors	Number of directors
	2003	2002
Nil to HK$1,000,000	4	4
HK$3,500,001 to HK$4,000,000	–	1
HK$4,500,001 to HK$5,000,000	–	1
HK$7,000,001 to HK$7,500,000	1	–
HK$8,500,001 to HK$9,000,000	1	–

(b) Employees’ remuneration

The five highest paid individuals included three (2002: two) directors, details of whose remuneration are set out above. The remuneration of the remaining two (2002: three) individuals is as follows:

Salaries and other benefits Retirement benefits scheme contributions	2003 HK$’000 2,213 121 2,334	2002 HK$’000 2,886 133
		3,019

Their remuneration is within the following bands:

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

During the years ended 30 June 2003 and 2002, no emoluments were paid by the Group to the five highest paid individuals, including directors, as an inducement to join or upon joining the Group or as compensation for loss of office. During the years ended 30 June 2003 and 2002, no directors waived any emoluments.

– 28 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

11. TAXATION

The charge comprises: Hong Kong Profits Tax Current year (Over)underprovision in prior year Deferred taxation_(Note 32)_ Credit for the year Effect of change in tax rate	2003 HK$’000 250 (2,850) (2,600) (324) 61 (263) (2,863)	2002 HK$’000 196 3 199 (17) – (17) 182

Hong Kong Profits Tax is calculated at 17.5% (2002: 16%) of the estimated assessable profit for the current year.

Details of deferred taxation are set out in note 32.

12. LOSS PER SHARE

The calculation of the basic loss per share is based on the net loss for the year of HK$167,386,000 (2002: loss of HK$27,917,000) and on 941,080,745 (2002: 941,080,745) ordinary shares of the Company in issue during the year.

No diluted loss per share has been presented as the exercise prices of the Company’s outstanding share options and warrants were higher than the average market price of the shares of the Company for both years and the conversion of the Group’s outstanding convertible note is anti-dilutive for the year.

13. INVESTMENT PROPERTIES

	THE GROUP
	HK$’000
VALUATION
At 1 July 2002	202,780
Transfer from property, plant and equipment_(Note 14)_	293
Deficit on revaluation	(95,393)
At 30 June 2003	107,680

The investment properties were revalued at 30 June 2003 on an open market value basis by RHL Appraisal Ltd., an independent firm of professional property valuers in Hong Kong.

The deficit arising on revaluation of investment properties amounted to HK$95,393,000. After eliminating minority shareholders’ share of deficit of HK$7,003,000, HK$10,378,000 has been charged to the investment property revaluation reserve. The remaining balance of HK$78,012,000, being the excess of the deficit over the balance on the investment property revaluation reserve is charged to the consolidated income statement.

– 29 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The value of investment properties held by the Group comprises:

Held in Hong Kong: Long leases Medium-term leases Held outside Hong Kong: Medium-term leases Freehold	2003 HK$’000 71,600 2,920 29,300 3,860 107,680	2002 HK$’000 131,300 3,820 63,800 3,860
		202,780

14. PROPERTY, PLANT AND EQUIPMENT

Properties held for development HK$’000 THE GROUP COST At 1 July 2002 258,618 Additions 95 Transfer to investment properties_(Note 13) – Disposals – At 30 June 2003 258,713 DEPRECIATION AND IMPAIRMENT At 1 July 2002 6,334 Provided for the year – Transfer to investment properties(Note 13)_ – Eliminated on disposals – Impairment loss 1,106 At 30 June 2003 7,440 NET BOOK VALUES At 30 June 2003 251,273 At 30 June 2002 252,284	Land and Leasehold buildings improvements HK$’000 HK$’000 50,510 2,652 14 111 (341) – (10,451) – 39,732 2,763 2,995 77 835 63 (48) – – – 15,386 1,276 19,168 1,416 20,564 1,347 47,515 2,575	Furniture, Plant and fixtures and machinery equipment HK$’000 HK$’000 79,127 74,695 1,851 9,717 – – – (695) 80,978 83,717 68,905 68,870 4,151 3,306 – – – (695) – 1,218 73,056 72,699 7,922 11,018 10,222 5,825	Motor vehicles HK$’000 12,357 1,106 – (376) 13,087 11,204 713 – (271) – 11,646 1,441 1,153	Motor boats HK$’000 16,298 – – – 16,298 16,295 1 – – – 16,296 2 3	Total HK$’000 494,257 12,894 (341 (11,522
					495,288
					174,680 9,069 (48 (966 18,986
					201,721
					293,567

					319,577

The net book values of land and buildings held by the Group comprises:

Leasehold properties held in Hong Kong under medium-term leases Leasehold properties held in Hong Kong under long leases Held in the PRC under medium-term land use rights Held in the PRC under long-term land use rights Freehold properties held in the United States of America	2003 HK$’000 1,087 17,200 318 1,959 – 20,564	2002 HK$’000 1,450 29,510 3,264 2,840 10,451
		47,515

– 30 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The properties held for development of the Group comprise:

Freehold property held in the British Virgin Islands Freehold properties held in the United States of America Properties held in the PRC – Medium-term land use rights – Long-term land use rights	2003 HK$’000 89,490 11,700 2,949 147,134 251,273	2002 HK$’000 89,395 12,806 2,949 147,134
		252,284

The net book values of property, plant and equipment of the Group includes an aggregate amount of HK$14,407,000 (2002: HK$8,644,000) in respect of assets held under finance leases.

The directors reviewed the carrying amount of property, plant and equipment of the Group at the balance sheet date and identified that:

(a) as certain of its subsidiaries ceased their operations, an impairment loss on certain leasehold properties, leasehold improvements and furniture and fixtures with an aggregate amount of HK$6,202,000 (2002: HK$4,100,000), representing the difference between the recoverable amounts and the carrying amounts of these assets, has been identified and recognised in the consolidated income statement.

In addition, the directors of the Company have reviewed the recoverable amount of the remaining leasehold properties at 30 June 2003. An impairment loss of HK$11,678,000 (2002: Nil) has been recognised and charged to the consolidated income statement for the year ended 30 June 2003.

(b) the recoverable amounts of the freehold properties held for development in the United States of America were lower than their carrying amounts by reference to their disposal values contracted subsequent to the balance sheet date. An impairment loss of HK$1,106,000 (2002: Nil) has been charged to the consolidated income statement.

15. LONG-TERM RECEIVABLE

Long-term receivable of the Group was unsecured, interest free and was fully provided for during the year.

16. INTERESTS IN SUBSIDIARIES

Unlisted investments, at cost Amounts due from subsidiaries _Less:_Impairment loss recognised Amounts due to subsidiaries	THE COMPANY 2003 2002 HK$’000 HK$’000 67,716 67,716 882,511 871,087 950,227 938,803 (663,900) (623,900) 286,327 314,903 (86,707) (81,553)	THE COMPANY 2003 2002 HK$’000 HK$’000 67,716 67,716 882,511 871,087 950,227 938,803 (663,900) (623,900) 286,327 314,903 (86,707) (81,553)
		938,803 (623,900)
		314,903

		(81,553)

The amounts due from (to) subsidiaries are unsecured, interest free and have no fixed terms of repayment. The Company and the subsidiaries agreed not to request repayment within twelve months from the balance sheet date and the amounts are therefore shown as non-current.

– 31 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Particulars of the principal subsidiaries at 30 June 2003 are as follows:

			Proportion of
	Place of	Nominal value of	issued share
	incorporation or	issued and paid up	capital/registered
	registration/	share capital/	capital held by
Name of subsidiary	operation	registered capital	the Company	Principal activities
			(Note a)
AEL (Bahamas) Limited	Bahamas/PRC	Ordinary US$5,000	100%	Property holding
		Redeemable preference
		US$300
Applied (China) Limited (“ACL”)	Bermuda	Ordinary HK$11,492,000	74.99%	Investment holding
Applied Action (BVI)	British Virgin	Ordinary US$100	100%	Investment holding
Limited	Islands/PRC
Applied Electronics	Hong Kong	Ordinary HK$86,000,000	100%	Investment holding
Limited
Applied Electronics	Bahamas	Ordinary US$5,000	100%	Investment holding
(Bahamas) Limited		Redeemable preference
		US$300
Applied International	Hong Kong	Ordinary HK$1,000,000	100%	Property, plant and
Limited				equipment holding
Applied Properties	Republic of	Ordinary US$200	100%	Property holding in
(Huang Jiang) Limited S.A.	Panama/PRC			the PRC
Applied Properties (HuiYang)	Republic of	Ordinary US$200	100%	Property holding in
Limited S.A.	Panama/PRC			the PRC
Applied Properties (Jiang Men)	Republic of	Ordinary US$200	100%	Property holding in
Limited S.A.	Panama/PRC			the PRC
Applied Properties Limited	Hong Kong	Ordinary HK$10,000	100%	Property holding
江門實力發展（地產）有限公司	PRC	Registered capital	100%	Property development
(Applied Properties (Jiangmen)		US$11,720,000
Limited)(Note b)
Batimate Limited	British Virgin	Ordinary US$2	100%	Investment holding
	Islands
Elite Industries Limited	British Virgin	Ordinary US$1	100%	Investment holding
	Islands
惠陽縣淡水新陽城建設	PRC	Registered capital	60%	Property development
有限公司 (Note b)		HK$50,000,000
Incar Electronics Limited	Hong Kong	Ordinary HK$7,545,000	74.99%	Property investment
iQuorum Cybernet Limited	Hong Kong	Ordinary HK$574,630,911	74.99%	Investment holding
(“iQuorum”)

– 32 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

			Proportion of
	Place of	Nominal value of	issued share
	incorporation or	issued and paid up	capital/registered
	registration/	share capital/	capital held by
Name of subsidiary	operation	registered capital	the Company	Principal activities
			(Note a)
Jardine Arizona Limited	United States	Ordinary US$1,000	100%	Property development
	of America
Quorum Bio-tech Limited	Hong Kong	Ordinary HK$10,000,000	66.74%	Investment holding
盈聯多科技企業（深圳）	PRC	Registered capital	100%	Property, plant and
有限公司		HK$10,000,000		equipment holding
(Quorum Electronics
(Shenzhen) Co., Ltd.)(Note c)
Quorum Global Limited	Hong Kong	Ordinary HK$100	100%	Investment holding
Quorum Global (AU)	Australia	Ordinary AUD200,000	100%	Trading of Chinese
Pty Ltd.				medical herbs and nano
				products
Quorum Global (NA) Inc.	United States	Ordinary US$0.01	100%	Trading of Chinese
	of America			medical herbs and nano
				products
Quorum Island (BVI)	British Virgin	Ordinary US$10,000	100%	Property holding
Limited	Islands
Quorum Venture Canada Inc.	Canada	Ordinary C$1	100%	Property holding
Renima, Inc.	California	Ordinary US$100,000	100%	Property holding
RJP Finance Limited	Hong Kong	Ordinary HK$200,000	74.99%	Provision of financial
				services
RJP International Limited	Hong Kong	Ordinary HK$500,000	74.99%	Provision of management
				services
Sharp Win Industrial Limited	Hong Kong	Ordinary HK$2,500,000	30%	Manufacturing and trading
				of electronic products
Starwin Investments Limited	Hong Kong	Ordinary HK$10,000	74.99%	Property investment
Sound Collection Limited	Hong Kong	Ordinary HK$2	100%	Property, plant and
				equipment holding
Tronicwatch Limited	Hong Kong	Ordinary HK$10,000	74.99%	Property investment
Wideland Electronics Limited	Hong Kong	Ordinary HK$200,000	51%	Manufacturing and trading
				of electronic products
天健生物（深圳）有限公司	PRC	Ordinary HK$10,000,000	66.74%	Manufacturing and trading
(Note b)				of Chinese medicinal
				herbs

– 33 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes:

(a) The above principal subsidiaries are owned indirectly by the Company, with the exception of Applied Electronics Limited and Batimate Limited.
(b) These PRC subsidiaries are sino-foreign joint ventures established in the PRC.
(c) The PRC subsidiary is wholly foreign owned enterprises established in the PRC.

None of the subsidiaries had any debt securities subsisting at the balance sheet date or at any time during the year, except for Quorum Global (NA) Inc. which has issued a convertible note of HK$780,000, in which the Group has no interest (Note 33).

The above list includes the subsidiaries of the Company which, in the opinion of the directors, principally affected the results of the year or assets and liabilities of the Group. To give details of all other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

17. OTHER INVESTMENTS

Other investments of the Group represent antiques held for long-term investment purpose. At 30 June 2003, the carrying amount of other investments is reduced to their recoverable amounts which is determined by reference to the market selling price of similar antiques. Accordingly, an impairment loss of HK$38,968,000 (2002: Nil) has been recognised and charged to the consolidated income statement.

18. OTHER SECURITIES

Hong Kong listed securities, at cost Overseas listed securities, at cost Unlisted investments, at cost Less: Unrealised loss on revaluation Impairment loss recognised At fair value Market value of listed securities	THE GROUP 2003 2002 HK$’000 HK$’000 22,686 22,686 449 558 619 3,119 23,754 26,363 (15,991) (14,460) (619) (3,119) 7,144 8,784 7,144 8,784	THE COMPANY 2003 2002 HK$’000 HK$’000 2,756 2,756 – – – – 2,756 2,756 (1,787) (1,517) – – 969 1,239 969 1,239

– 34 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

19. GOODWILL

	THE GROUP
	HK$’000
COST
At 1 July 2002 and 30 June 2003	1,100
AMORTISATION
At 1 July 2002	110
Provided for the year	220
At 30 June 2003	330
NET BOOK VALUES
At 30 June 2003	770
At 30 June 2002	990
Goodwill is amortised on a straight line basis over a period of 5 years.

20. NEGATIVE GOODWILL

	THE GROUP
	HK$’000
GROSS AMOUNT
At 1 July 2002 and 30 June 2003	46,519
RELEASED TO INCOME
At 1 July 2002	(400)
Released in the year	(2,326)
At 30 June 2003	(2,726)
CARRYING AMOUNTS
At 30 June 2003	43,793
At 30 June 2002	46,119

The negative goodwill is released to income on a straight line basis of 20 years.

21. INVENTORIES

Raw materials Work in progress Finished goods	THE GROUP 2003 2002 HK$’000 HK$’000 6,490 6,802 736 776 3,105 1,147 10,331 8,725	THE GROUP 2003 2002 HK$’000 HK$’000 6,490 6,802 736 776 3,105 1,147 10,331 8,725
		8,725

The above inventories are stated at cost.

– 35 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

22. TRADE AND OTHER RECEIVABLES

The Group allows an average credit period from 30 to 90 days to its trade customers other than major customers.

Included in trade and other receivables of the Group are trade debtors of HK$23,870,000 (2002: HK$30,799,000) and their aging analysis is as follows:

Within 90 days More than 90 days and within 180 days	THE GROUP 2003 2002 HK$’000 HK$’000 15,887 24,246 7,983 6,553 23,870 30,799	THE GROUP 2003 2002 HK$’000 HK$’000 15,887 24,246 7,983 6,553 23,870 30,799
		30,799

23. SHORT-TERM LOANS RECEIVABLE

The short-term loans receivable of the Group are unsecured and carry interest based on commercial rates.

24. TRADE AND OTHER PAYABLES

Included in trade and other payables of the Group are trade payables of HK$14,295,000 (2002: HK$19,249,000) and their aging analysis is as follows:

Within 90 days More than 90 days and within 180 days More than 180 days	THE GROUP 2003 2002 HK$’000 HK$’000 10,496 13,966 2,499 3,961 1,300 1,322 14,295 19,249	THE GROUP 2003 2002 HK$’000 HK$’000 10,496 13,966 2,499 3,961 1,300 1,322 14,295 19,249
		19,249

25. AMOUNT DUE TO A DIRECTOR

The amount of the Group is unsecured, non-interest bearing and has no fixed terms of repayment.

– 36 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

26. BANK AND OTHER BORROWINGS

THE GROUP
2003
2002
HK$’000
HK$’000
The bank and other borrowings comprise:
Bank loans
73,154
80,007
Import loans
10,678
13,536
Bank overdrafts
8,576
4,198
Other loans
61,098
55,315
Loan from a minority shareholder
of a subsidiary
5,198
–
158,704
153,056
Secured
91,498
95,877
Unsecured
67,206
57,179
158,704
153,056
The above bank and other borrowings are repayable as follows:
THE GROUP
2003
2002
HK$’000
HK$’000
Within 1 year
127,074
116,400
Between 1 to 2 years
2,592
3,297
Between 2 to 5 years
7,659
9,411
Over 5 years
21,379
23,948
158,704
153,056
_Less:_Amount due within one year
shown under current liabilities
(127,074)
(116,400)
Amount due after one year
31,630
36,656

THE COMPANY
2003
2002
HK$’000
HK$’000
–
–
–
–
264
–
24,098
18,024
5,198
–
29,560
18,024
–
–
29,560
18,024
29,560
18,024
THE COMPANY
2003
2002
HK$’000
HK$’000
29,560
18,024
–
–
–
–
–
–
29,560
18,024
(29,560)
(18,024)
–
–

The loan from a minority shareholder of a subsidiary is unsecured, interest-bearing at 12% and will be repayable within one year.

– 37 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

27. OBLIGATIONS UNDER FINANCE LEASES

The maturity of obligations under finance leases is as follows: Within 1 year Between 1 to 2 years Between 2 to 5 years _Less:_Finance charges relating to future periods Present value of lease obligations _Less:_Amount due within one year shown under current liabilities Amount due after one year	THE GROUP Minimum Present value of lease payments minimum lease payments 2003 2002 2003 2002 HK$’000 HK$’000 HK$’000 HK$’000 6,029 4,130 5,709 3,743 3,429 1,921 3,321 1,800 462 556 520 529 9,920 6,607 9,550 6,072 (370) (535) – – 9,550 6,072 9,550 6,072 (5,709) (3,743) 3,841 2,329	THE GROUP Minimum Present value of lease payments minimum lease payments 2003 2002 2003 2002 HK$’000 HK$’000 HK$’000 HK$’000 6,029 4,130 5,709 3,743 3,429 1,921 3,321 1,800 462 556 520 529 9,920 6,607 9,550 6,072 (370) (535) – – 9,550 6,072 9,550 6,072 (5,709) (3,743) 3,841 2,329
		6,072 –
		6,072 (3,743)
		2,329

The average lease term is two years. For the year ended 30 June 2003, the average effective borrowing rate was 8.56% (2002: 11.36%). Interest rates were fixed at the contract date. All leases are on a fixed repayment basis and no arrangement have been entered into for contingent rental payment.

28. SHARE CAPITAL

Number of ordinary shares of HK$0.20 each Authorised: Balance at 1 July 2001, 1 July 2002 and 30 June 2003 2,000,000,000 Issued and fully paid: Balance at 1 July 2001, 1 July 2002 and 30 June 2003 941,080,745	Amount HK$’000 400,000

	188,216

WARRANTS

On 2 May 2000, the Company made a bonus issue of warrants on the basis of one warrant for every five shares. These warrants entitle the holders to subscribe in cash for new shares of the Company of HK$0.20 each at subscription price of HK$0.48 per share, subject to adjustment, at any time from 4 May 2000 up to and including 30 April 2004. At 30 June 2003, the Company had outstanding warrants of HK$90,880,000 (2002: HK$90,880,000). Exercise in full of such warrants would result in the issue of approximately 189,334,000 (2002: 189,334,000) shares at a subscription price of HK$0.48 per share, subject to adjustment.

– 38 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

SHARE OPTION SCHEMES

The directors and employees of the Company and its subsidiaries are entitled to participate in the share option schemes operated by the Company and ACL. Details of these schemes are as follows:

(a) Share options of the Company

1997 Scheme

The Company’s share option scheme adopted on 28 May 1997 (the “1997 Scheme”) for the primary purpose of providing incentives to directors and eligible employees and was terminated on 16 September 2002.

Under the 1997 Scheme, the board of directors of the Company may grant options to eligible employees, including directors of the Company and its subsidiaries, to subscribe for shares in the Company for a consideration of HK$1 for each lot of share options granted. Options granted should be accepted within 30 days from the date of grant.

The exercise price is determined by the directors of the Company, and is the higher of the nominal value of the Company’s shares and an amount which is not less than 80% of the average closing price of the shares for the five trading days immediately preceding the option is granted.

The total number of shares in respect of which options may be granted under the 1997 Scheme is not permitted to exceed 10% of the shares of the Company in issue at any point in time.

Options granted under the 1997 Scheme are exercisable within a period of five years from the date the options are granted.

Details of share options granted under the 1997 Scheme to the directors of the Company are as follows:

				Number of shares to be issued	Number of shares to be issued	Number of shares to be issued
				upon exercise of the share		options
				Options
				outstanding	Lapsed	Options
		Exercisable	Exercise	at 1.7.2001	during	outstanding
	Date of grant	period	price	and 1.7.2002	the year	at 30.6.2003
			HK$
Directors	3 July 1997	3.7.1997 to 2.7.2002	0.36	15,400,000	(15,400,000)	–

Other than the share options disclosed above, no share options were held by the employees of the Group.

2002 Scheme

On 16 September 2002, the Company adopted a new share option scheme (the “2002 Scheme”) for the primary purpose of providing incentives to directors and eligible employees. The 2002 Scheme will expire on 15 September 2012. Under the 2002 Scheme, the board of directors of the Company may grant options to any employee, including executive directors, or consultants of the Company and/or its subsidiaries, to subscribe for shares in the Company.

The total number of shares in respect of which options may be granted under the 2002 Scheme is not permitted to exceed the higher of 10% of the shares of the Company in issue at the date of adoption of the 2002 Scheme. The number of shares in respect of which options may be granted to any individual is not permitted to exceed the higher of 1% of the number of shares issued and issuable under the 2002 Scheme or any other limit as may be permitted under the Rules Governing the Listing of Securities on the Stock Exchange.

– 39 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Options granted must be taken up within 30 days of the date of grant, upon payment of HK$1 per grant. Options may be exercised at any time from the date of grant to the 10th anniversary of the date of grant. In each grant of options, the board of directors may at their discretion determine the specific exercise period. The exercise price is determined by the directors of the Company, and will be less than the higher of (i) the closing price of the Company’s share on the date of grant; (ii) the average closing price of the Company’s shares for the five business days immediately preceding the date of grant, and (iii) the nominal value of the Company’s shares.

No option has been granted under the 2002 Scheme since its adoption.

(b) Share options of ACL

ACL 2002 Scheme

On 16 September 2002, ACL adopted a share option scheme (the “ACL 2002 Scheme”). The details of the ACL 2002 Scheme are the same as the 2002 Scheme of the Company.

No option has been granted under the ACL 2002 Scheme since its adoption.

29. TREASURY SHARES

											Number of
											treasury shares	Amount
												HK$’000
Balance at	1	July	2001,	1	July	2002	and	30	June	2003	48,329,000	12,546

Treasury shares represent ordinary shares of the Company held by iQuorum before iQuorum is a subsidiary of the Company. There has been no movement of the treasury shares since iQuorum became a subsidiary of the Company.

In the opinion of the directors, these treasury shares are held for long-term and will be disposed of at an appropriate time.

30. RESERVES

THE COMPANY At 1 July 2001 Deficit on revaluation of other securities Net loss for the year At 30 June 2002 Deficit on revaluation of other securities Net loss for the year At 30 June 2003	Shares premium account HK$’000 3 – – 3 – – 3	Investment revaluation reserve HK$’000 (1,193) (323) – (1,516) (270) – (1,786)	Capital redemption Contributed Accumulated reserve surplus losses HK$’000 HK$’000 HK$’000 10,892 204,610 (180,820) – – – – – (3,855) 10,892 204,610 (184,675) – – – – – (47,317) 10,892 204,610 (231,992)	Total HK$’000 33,492 (323) (3,855)
				29,314 (270) (47,317)
				(18,273)

– 40 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Under the Companies Act 1981 of Bermuda (as amended), the contributed surplus account of the Company is available for distribution. However, the Company cannot declare or pay a dividend, or make a distribution out of contributed surplus, if:

(a) it is, or would after the payment be, unable to pay its liabilities as they become due; or
(b) 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.

At 30 June 2003, the Company has no reserve available for distribution to the shareholders (2002: profit available for distribution of HK$19,935,000).

31. AMOUNT DUE TO A MINORITY SHAREHOLDER OF A SUBSIDIARY

The amount due to a minority shareholder of a subsidiary of the Group is unsecured and non-interest bearing. The minority shareholder agreed not to request repayment within twelve months from the balance sheet date and the amount is therefore shown as non-current.

32. DEFERRED TAXATION

The movements of deferred taxation during the year are as follows:

At beginning of the year Movement for the year_(Note 11)_ At end of the year	THE GROUP 2003 2002 HK$’000 HK$’000 647 664 (263) (17) 384 647	THE COMPANY 2003 2002 HK$’000 HK$’000 – – – – – –	THE COMPANY 2003 2002 HK$’000 HK$’000 – – – – – –
			–

At the balance sheet date, the major components of the deferred tax (assets) liabilities, recognised and unrecognised, were as follows:

THE GROUP Tax effect of timing differences attributable to: Difference of tax allowances and depreciation charged in the financial statements Tax losses THE COMPANY Tax effect of timing differences attributable to: Tax losses	Recognised 2003 2002 HK$’000 HK$’000 561 647 (177) – 384 647 – –	Unrecognised 2003 2002 HK$’000 HK$’000 451 1,646 (76,149) (62,014) (75,698) (60,368) (5,026) (4,553)	Unrecognised 2003 2002 HK$’000 HK$’000 451 1,646 (76,149) (62,014) (75,698) (60,368) (5,026) (4,553)
			(60,368)

			(4,553)

Deferred tax asset has not been recognised in the financial statements in respect of tax losses available to offset future profits as it is not certain that the tax losses will be utilised in the foreseeable future.

– 41 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Deferred tax (credit) charge for the year, which has not been recognised in the income statement, are as follows:

THE GROUP Tax effect of timing differences attributable to: Difference of tax allowances and depreciation charged in the financial statements Taxation losses arising Effect of change in tax rate THE COMPANY Tax effect of timing differences attributable to: Taxation losses (arising) utilised Effect of change in tax rate	2003 HK$’000 (1,349) (8,321) (5,660) (15,330) (46) (427) (473)	2002 HK$’000 (33) (2,507) –
		(2,540)

		53 –
		53

33. CONVERTIBLE NOTE

The convertible note of the Group (the “Note”) which issued on 6 June 2003, is unsecured, held by an independent third party and interest-bearing at 12% per annum. The Note, which is transferable in whole or in part, confers rights on the holder to convert into shares in Quorum Global (NA) Inc., a subsidiary of the Company, at an initial conversion price per share of Quorum Global (NA) Inc. which equal to the first round offering price with no dilution on the shares of Quorum Global (NA) Inc.. Unless otherwise converted, the principal amount of the Note will be repayable by Quorum Global (NA) Inc. on 6 June 2005.

The Note has not been converted since its issue.

34. CONTINGENT LIABILITIES

At 30 June 2003, the Company issued guarantees of HK$37,000,000 (2002: HK$37,000,000) in respect of other loans granted to a subsidiary.

35. OPERATING LEASE COMMITMENTS

	THE	GROUP
	2003	2002
	HK$’000	HK$’000
Minimum lease payments paid in respect of properties
under operating leases	6,952	1,863

– 42 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

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

Within one year In the second to fifth year inclusive Over five years	THE GROUP 2003 2002 HK$’000 HK$’000 5,739 4,832 5,157 6,018 – 568 10,896 11,418	THE GROUP 2003 2002 HK$’000 HK$’000 5,739 4,832 5,157 6,018 – 568 10,896 11,418
		11,418

Operating lease payments represent rentals payable by the Group for certain of its offices and warehouse properties. The average lease term is 3 to 5 years. Rentals are fixed and no arrangements has been entered into for contingent rental payments.

The Company had no operating lease commitments at the balance sheet date.

36. OPERATING LEASE ARRANGEMENTS

At the balance sheet date, the Group had contracted with tenants for future minimum lease payments, which represent rentals receivable by the Group for its investment properties, under non-cancellable operating leases which fall due as follows:

Within one year In the second to fifth year inclusive	2003 HK$’000 7,782 4,375 12,157	2002 HK$’000 7,619 3,954
		11,573

The properties are expected to generate rental yields of 7.2% on an ongoing basis. Investment properties held with a carrying value of HK$61,820,000 have committed tenants for the next year.

37. CAPITAL COMMITMENTS

At the balance sheet date, the Group had capital expenditure committed as follows:

	2003	2002
	HK$’000	HK$’000
Capital expenditure contracted for but not provided
in the financial statements in respect of acquisition
of property, plant and equipment	3,693	10,838

The Company had no capital commitments at the balance sheet date.

– 43 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

38. DISPOSAL OF SUBSIDIARIES

Net assets disposed of: Bank balances and cash Loss on disposal of subsidiaries Satisfied by: Cash	2003 HK$’000 – – – –	2002 HK$’000 18 (18) – –

Analysis of net outflow of cash and cash equivalents in respect of the disposal of subsidiaries:

Cash consideration received Bank balances and cash disposed of	2003 HK$’000 – – –	2002 HK$’000 – (18) (18)

The cash flows contributed or utilised by the subsidiaries disposed of during year ended 30 June 2002 were not significant.

39. MAJOR NON-CASH TRANSACTION

During the year, the Group entered into a finance lease arrangement in respect of the acquisition of assets with a total capital value at the inception of the lease of HK$10,398,000 (2002: HK$5,127,000).

40. PLEDGE OF ASSETS

At 30 June 2003, the Group pledged its bank deposits, investment properties and property, plant and equipment amounting to HK$3,219,000 (2002: HK$4,702,000), HK$73,920,000 (2002: HK$135,120,000) and HK$18,287,000 (2002: HK$41,410,000), respectively, to secure general banking facilities granted to the Group.

41. POST BALANCE SHEET EVENTS

Subsequent to 30 June 2003, the following significant events of the Group occurred:

(a) The Group disposed of certain investment properties at an aggregate consideration of HK$9,545,000.
(b) On 16 October 2003, the Group entered into an agreement to dispose of its 59% equity interest in a subsidiary at a consideration of HK$61 million.

42. RELATED PARTIES TRANSACTION

At 30 June 2003, two directors of the Company, had outstanding joint and several guarantees, issued in favour of a bank in respect of credit facilities granted by the bank to a subsidiary amounting to approximately HK$24,373,000 (2002: HK$25,900,000).

– 44 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

43. RETIREMENT BENEFITS SCHEME

The Group operates a defined contribution retirement scheme (the “Defined Contribution Scheme”) for certain qualifying employees. The assets of the Defined Contribution Scheme are held separately from those of the Group in funds under the control of trustees.

The retirement benefits cost of the Defined Contribution Scheme charged to the income statement represents contributions payable to the fund by the Group at rates specified in the rules of the scheme. Where there are employees who leave the scheme prior to vesting fully in the contribution, the contributions payable by the Group are reduced by the amount of forfeited contributions.

At the balance sheet date, there was no significant forfeited contributions which arose upon employees leaving the Defined Contribution Scheme and which was available to reduce the contributions payable in future years.

With effective from 1 December 2000, the Group has joined a mandatory provident fund scheme (the “MPF Scheme”) for all other qualifying employees. The MPF Scheme is registered with the Mandatory Provident Fund Scheme Authority under the Mandatory Provident Fund Schemes Ordinance. The assets of the MPF Scheme are held separately from those of the Group in funds under the control of an independent trustee. Under the rules of the MPF Scheme, the employer and its employees are each required to make contributions to the MPF Scheme at rates specified in the rules. The only obligation of the Group with respect to the MPF Scheme is to make the required contributions under the scheme. No forfeited contribution is available to reduce the contributions payable in future years.

The retirement benefits cost of the MPF Scheme charged to the income statement represents contributions payable to the fund by the Group at rates specified in the rules of the MPF Scheme.

– 45 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

PARTICULARS OF MAJOR PROPERTIES

Particulars of investment properties held by the Group at 30 June 2003 are as follows:

			Effective
Name/location	Lease expiry	Type	% held
Hong Kong
Units 4101-2 on 41st Floor	2055	C	74.99
and Units 4203-4 on
42nd Floor,
Far East Finance Centre,
16 Harcourt Road,
Admiralty,
Hong Kong
Room 1206-7,	2047	C	51
Leader Industrial Centre,
57 - 59 Au Pui Wan St.,
Fo Tan, Shatin,
New Territories
House No. 45, 5th Street,	2047	R	51
Section M,
Fairview Park,
Yuen Long,
New Territories
Flat A on 1st Floor,	2070	C	100
Flat B on 1st Floor, 2nd Floor,
3rd Floor, the roof and carpark
Nos. 1, 2, 3, 4, 5 and 7, Severn	Villa,
No. 3, Severn Road, The Peak,
Hong Kong

– 46 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

			Effective
Name/location	Lease expiry	Type	% held
The People’s Republic of China
(excluding Hong Kong)
Level 1 & 2 No. 42,	2042	C	100
Zhan Qian Road,
Zi Pian B Qu,
Guangdong Province
South Portion of	2044	R/C	74.99
Starmate Industrial Park,
Tutang District,
Changping Town,
Dongguan,
Guangdong Province
North Portion of	2044	R/C	74.99
Starmate Industrial Park,
Tutang District,
Changping Town,
Dongguan,
Guangdong Province
Unit No. 4 on 72nd Floor	2044	C	74.99
Office Tower,
CITIC Plaza
No. 233 Tianhe Road
Tianhe District,
Guangzhou,
Guangdong Province
Canada
1898 West 61st Avenue,	Freehold	R	100
Vancouver,
British Columbia

– 47 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Particulars of properties held for development by the Group at 30 June 2003 are as follows:

		Lease			Effective	Stage of	Anticipated
Name/location		expiry	Type	Gross area	% held	completion	completion
The British Virgin Islands
Block #3840A Parcel #4,8		Freehold	R/C	682 acres*	100	Pending for	N/A
Block #3838A Parcel #1,7						development
Block #3640A Parcel #9
Beef Island,
Bellamy Cay and Little Cay
The People’s Republic of	China
(excluding Hong Kong)
A site at Ping Hu Town,		2041	R/C	46,280 sq.m.*	100	Pending for	N/A
Baoan County, Shenzhen,						development
Guangdong Province
A site at Song Bai Keng,		2063	R/C	91,550 sq.m.*	100	Pending for	N/A
Lang Wan,						development
Jiangmen City,
Guangdong Province
Sun Young City,		2043	R/C1,049,791 sq.m.*		60	Pending for	N/A
Guangdong Province		to				development
		2063
United States of America
Lot 2, One Columbus Plaza,		Freehold	C	18,273 sq.m.*	100	Pending for	N/A
Maricopa County, Phoenix,						development
Arizona
Type of properties:	R – residential
	C – commercial

Areas for properties represent site areas

– 48 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The following is a summary of the unaudited condensed consolidated interim financial statements of the Group for the six months ended 31 December 2003 and the accompanying notes thereto as extracted from the Company’s 2003/2004 interim report:

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 31 December 2003

Notes Turnover 3 Cost of sales Gross profit Other revenue Distribution costs Administrative expenses Interest income Investment income Impairment loss recognised in respect of properties under development Impairment loss recognised in respect of investment properties Loss on disposal of other securities Gain on disposal of investment properties Loss on disposal of plant and equipment Impairment loss recognised in respect of other investment Allowance on trade and other receivables Allowance on inventory Loss from operations Finance costs Loss before taxation 4 Taxation 5 Loss before minority interests Minority interests Loss for the period Loss per share 6 – Basic	Six months 31/12/03 (Unaudited) HK$’000 72,931 (54,588) 18,343 1,048 (1,795) (26,347) 583 10 (24,482) – (6,176) 1,496 (835) – (1,920) (2,200) (42,275) (4,146) (46,421) – (46,421) 1,215 (45,206) (4.80 cents)	ended 31/12/02 (Unaudited) HK$’000 65,649 (54,125) 11,524 282 (1,793) (27,175) 1,107 9 – (48,292) – – – (28,000) (7,100) (2,000) (101,438) (3,862) (105,300) – (105,300) 24,407 (80,893) (8.60 cents)

– 49 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED BALANCE SHEET

At 31 December 2003

Notes Non-current Assets Investment properties 7 Property, plant and equipment Other securities Other investments Goodwill Negative goodwill Current Assets Inventory Trade and other receivables 8 Short-term loans receivable Pledged bank deposits Other time deposits Bank balances and cash Less:_Current Liabilities Trade and other payables _9 Tax payable Bank borrowings – due within one year Other borrowings – secured Obligations under finance leases – due within one year Net Current Liabilities	31/12/03 (Unaudited) HK$’000 99,820 259,788 3,694 22,170 660 (42,630) 343,502 9,776 48,103 2,188 3,229 38,011 19,186 120,493 56,063 3,400 101,172 20,093 10,099 190,827 (70,334) 273,168	31/12/02 (Unaudited) HK$’000 147,787 298,423 6,158 38,145 880 (46,119) 445,274 8,145 71,264 28,046 3,207 38,011 13,353 162,026 48,842 6,000 108,724 1,930 1,711 167,207 (5,181) 440,093

– 50 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Note Capital and Reserves Share capital 10 Treasury shares Reserves Minority interests Non-current Liabilities Amount due to a minority shareholder Bank borrowings – due after one year Deferred taxation Obligations under finance leases – due after one year	31/12/03 (Unaudited) HK$’000 188,216 (12,546) (40,228) 135,442 105,024 1,083 28,923 383 2,313 32,702 273,168	31/12/02 (Unaudited) HK$’000 188,216 (12,546) 84,889 260,559 120,824 1,073 49,950 647 7,040 58,710 440,093

– 51 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited)

For the six months ended 31 December 2003

Share capital HK$’000 188,216 - - -	Treasury shares HK$’000 (12,546) - - -	Share premium account HK$’000 3 - - -	Investment revaluation reserve HK$’000 (14,598) - - -	Investment property revaluation reserve HK$’000 10,378 - (11,071) -	Capital redemption reserve HK$’000 10,892 - - -	Capital reserve HK$’000 220,414 - - -	Distri- butable reserve HK$’000 93,961 - - -	Translation reserve HK$’000 (3,093) 1,384 - -	Deficit HK$’000 (142,488) - - (80,893)	Total HK$’000 351,139 1,384 (11,071) (80,893)
188,216	(12,546)	3	(14,598)	(693)	10,892	220,414	93,961	(1,709)	(223,381)	260,559

188,216 - - -	(12,546) - - -	3 - - -	(16,128) 8,598 - -	- - - -	10,892 - - -	220,414 - - -	93,961 - - -	(3,322) - 434 -	(309,874) - - (45,206)	171,616 8,598 434 (45,206)
188,216	(12,546)	3	(7,530)	-	10,892	220,414	93,961	(2,888)	(355,080)	135,442

– 52 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 31 December 2003

Net cash outflow from operating activities Net cash outflow from returns on investments and servicing of finance Net cash inflow/(outflow) from investing activities Net cash inflow/(outflow) before financing Net cash inflow from financing Increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period	31/12/03 HK$’000 (10,579) (3,563) 30,421 16,279 3,800 20,079 36,351 56,430	31/12/02 HK$’000 (18,511) (2,747) (10,727) (31,985) 4,307 (27,678) 60,941 33,263

– 53 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 31 December 2003

1. BASIS OF PREPARATION

The unaudited condensed consolidated interim accounts (“interim accounts”) are prepared in accordance with Statement of Standard Accounting Practice (“SSAP”) 25, “Interim Financial Reporting”, issued by the Hong Kong Society of Accountants (“HKSA”) and Appendix 16 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Listing Rules”).

2. PRINCIPAL ACCOUNTING POLICIES

In the current period, the Group has adopted SSAP 12 (Revised) “Income Taxes” issued by the HKSA, which is effective for the accounting period commencing on or after 1 January 2003. The SSAP 12 (Revised) principally prescribes the accounting treatment and disclosure for deferred tax. In prior years, deferred tax was accounted for at the current tax rate in respect of timing differences between profit as computed for taxation purposes and profit as stated in the accounts to the extent that a liability or an asset was expected to be payable or recoverable in the foreseeable future. The SSAP 12 (Revised) requires that deferred tax be provided in full, using the liabilities method, on temporary differences arising between the tax bases of assets and liabilties and their carrying amounts in the accounts. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred taxation is provided for temporary differences arising from investments in subsidiaries and associated companies, except where the timing of reversal of the temporary differences can be controlled and it is probable that the temporary difference will not reverse in the forseeable future. The adoption of SSAP 12 (Revised) had no material effect on the results for the current or prior accounting periods. Accordingly, no adjustments for prior accounting periods are required.

3. SEGMENT INFORMATION

Turnover represents the net amounts received and receivable for goods sold to outside customers and rental income from properties under operating leases during the year.

(a) Business segments

For management purposes, the Group is currently organised into three operating divisions - manufacture and distribution of electronic products, property and investment holding and manufacture and marketing of nano and herbal products. These divisions are the basis on which the Group reports its primary segment information.

– 54 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Business segment information for the six months ended 31 December 2003:

Manufacture and distribution of electronics products HK$’000 (Unaudited) Turnover 55,251 Results Segment results 705 Unallocated corporate income Unallocated corporate expenses Loss from operations Finance costs Loss before taxation Taxation Loss before minority interests	Manufacture Property and and marketing investment of nano and holding herbal products HK$’000 HK$’000 (Unaudited) (Unaudited) 6,097 11,583 (13,860) (3,632)	Property development HK$’000 (Unaudited) – (26,732)	Period ended 31 December 2003 Total HK$’000 (Unaudited) 72,931

			(43,519) 2,079 (835)
			(42,275) (4,146)
			(46,421) –
			(46,421)

Business segment information for the six months ended 31 December 2002:

Manufacture and distribution of electronics products HK$’000 (Unaudited) Turnover 60,259 Results Segment results (1,668) Unallocated corporate income Unallocated corporate expenses Loss from operations Finance costs Loss before taxation Taxation Loss before minority interests	Manufacture Property and and marketing investment of nano and holding herbal products HK$’000 HK$’000 (Unaudited) (Unaudited) 5,327 63 (60,992) (1,175)	Property development HK$’000 (Unaudited) – (7,491)	Period ended 31 December 2002 Total HK$’000 (Unaudited) 65,649

			(71,326) 1,398 (31,510)
			(101,438) (3,862)
			(105,300) –
			(105,300)

(b) Geographical segments

The Group’s operations are located in Hong Kong, United States of America, Europe, the People’s Republic of China other than Hong Kong (the “PRC”) and other Asian countries.

– 55 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

The following table provides an analysis of the Group’s sales by geographical markets irrespective of the origin of the goods or services:

Hong Kong United States of America Europe PRC Other Asian countries	Turnover For the six months ended 31 December 2003 2002 HK$’000 HK$’000 (Unaudited) (Unaudited) 41,416 47,703 14,765 11,409 54 408 7,673 3,199 9,023 2,930 72,931 65,649	Turnover For the six months ended 31 December 2003 2002 HK$’000 HK$’000 (Unaudited) (Unaudited) 41,416 47,703 14,765 11,409 54 408 7,673 3,199 9,023 2,930 72,931 65,649
		65,649

4. LOSS BEFORE TAXATION

	For the	six months
	ended 31 December
	2003	2002
	HK$’000	HK$’000
	(Unaudited)	(Unaudited)
Loss before taxation has been arrived at after charging:
Amortisation of goodwill (included in administrative expenses)	110	110
Depreciation and amortisation on
– Assets owned by the Group	917	2,008
– Assets held under finance leases	724	225
and after crediting:
Dividend income from listed securities	(10) (9)
Gain on disposal of investment properties	(1,496) –
Amortisation of negative goodwill	(1,163) –

5. TAXATION

Hong Kong profits tax is calculated at the rate of 17.5% (2002: 16%) on the estimated assessable profits for the period.

No provision for Hong Kong profits tax was made for the period ended 31 December 2003 (2002: Nil) as the Company and its subsidiaries had no assessable profit for that period.

No provision for deferred tax has been made in respect of accelerated capital allowances as the Directors consider that no liability is expected to crystallise in the foreseeable future (2002: Nil).

6. LOSS PER SHARE

The calculation of the basic loss per share is based on the loss attributable to shareholders of HK$45,206,000 (2002: HK$80,893,000) and on the weighted average of 941,080,745 (2002: 941,080,745) shares in issue during the period.

No diluted loss per share has been presented as the exercise price of the Company’s outstanding warrants was higher than the average market price of the shares of the Company during both periods.

– 56 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

7. INVESTMENT PROPERTIES

VALUATION At 1 July 2003 Disposals At 31 December 2003 NET BOOK VALUES At 31 December 2003 At 30 June 2003 The value of investment properties held by the Group comprises: Held in Hong Kong: Long-term leases Medium-term leases Held outside Hong Kong: Medium-term leases	2003 (Unaudited) HK$’000 107,680 (7,860)
	99,820

	99,820

	107,680

	2003 (Unaudited) HK$’000 71,600 2,920 25,300
	99,820

8. TRADE AND OTHER RECEIVABLES

The following is an aged analysis of accounts receivables at the reporting date:

Within due date Overdue under 30 days Overdue 31-60 days Overdue over 60 days	31/12/03 (Unaudited) HK$’000 14,531 13,142 10,694 9,736 48,103	31/12/02 (Unaudited) HK$’000 20,076 25,541 18,166 7,481
		71,264

– 57 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

9. TRADE AND OTHER PAYABLES

The following is an aged analysis of accounts payables at the reporting date:

Within due date Overdue under 30 days Overdue 31-60 days Overdue over 60 days	31/12/03 HK$’000 (Unaudited) 15,545 17,922 11,300 11,296 56,063	31/12/02 HK$’000 (Unaudited) 12,258 11,597 12,015 12,972
		48,842

10. SHARE CAPITAL

Number of Ordinary shares Ordinary shares of HK$0.20 each Authorised: At 31 December 2002 and 31 December 2003 2,000,000,000 Issued and fully paid: At 31 December 2002 and 31 December 2003 941,080,745	Amount HK$’000 400,000

	188,216

11. WARRANTS

On 2 May 2000, the Company made a bonus issue of warrants on the basis of one warrant for every five shares. These warrants entitle the holders to subscribe in cash for new shares of the Company of HK$0.20 each at subscription price of HK$0.48 per share, subject to adjustment, at any time from 4 May 2000 up to and including 30 April 2004. At 31 December 2003, the Company had outstanding warrants of HK$90,880,000. Exercise in full of such warrants would result in the issue of approximately 189,334,000 shares at a subscription price of HK$0.48 per share, subject to adjustment.

12. COMPARATIVE FIGURES

Certain comparative figures have be reclassified to confirm with current period’s presentation.

– 58 –

APPENDIX II VALUATION REPORT ON THE SHEUNG PING PROPERTY

The following is the text of the letter, summary of valuation and valuation certificates received from RHL Appraisal Limited, an independent valuer, prepared for the purpose of inclusion in this circular.

==> picture [369 x 50] intentionally omitted <==

29 October 2004

The Directors

Applied International Holdings Limited

Unit 3402, 34th Floor China Merchants Tower Shun Tak Centre 168-200 Connaught Road Central Hong Kong

Dear Sirs,

RE: VALUATION OF TWO PROPERTIES IN THE PEOPLE’S REPUBLIC OF CHINA (THE “PRC”)

1. INSTRUCTION

In accordance with the instructions from Applied International Holdings Limited (referred to as the “Company”), we have valued the captioned properties (referred to as the “Properties”) situated in the PRC held by the Company or its subsidiaries (the Company and its subsidiaries are altogether referred to as the “Group”). We confirm that we have carried out property inspection, made relevant enquires and obtained such further information as we consider necessary for the purpose of providing our opinion of the open market value of the Properties as at 31 August 2004 (referred to as the “valuation date”).

This letter, which forms part of our valuation report explains the basis and methodology of valuation and set out assumptions made and other qualifications.

2. BASIS OF VALUATION

Our valuation is our opinion of the open market value which we would define as intended to mean “the best price at which the sale of an interest in property would have been completed unconditionally for cash consideration on the date of valuation assuming:

(i) a willing seller;

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VALUATION REPORT ON THE SHEUNG PING PROPERTY

APPENDIX II

(ii) that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of price and terms and for the completion of the sale;
(iii) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation;
(iv) that no account is taken of any additional bid by a purchaser with a special interest; and
(v) that both parties to the transaction had acted knowledgeably, prudently and without compulsion”.

3. VALUATION METHODOLOGY

The Properties have no commercial value due to the fact that the land grant procedures including land premium payment for the Properties have not yet been completed as at the valuation date.

The depreciated replacement costs of the Properties as at the valuation date as disclosed in the footnotes to the valuation certificate were arrived at based on the new replacement cost of the buildings thereon and other site works from which deductions are then made to allow for age, conditions, functional obsolescence, etc. Our opinion of the depreciated replacement costs is subject to the assumption that prospective earnings would provide a reasonable return on the Properties plus adequate net working capital and the value of any assets not included in this valuation.

4. ASSUMPTIONS

We have assumed that the owner of the Properties has free and uninterrupted rights to use the Properties for the whole of the unexpired terms subject to payment of annual land use fees and all requisite land premium/purchase consideration payable has been fully settled.

Other special assumptions in relation to each property, if any, have been set out in the footnotes of the valuation certificates for each corresponding property.

5. TITLE INVESTIGATION

In our valuation of the Properties, we have also relied upon the legal opinion provided by the PRC legal adviser, Hills & Co (廣東君道律師事務所), to the Company on the relevant laws and regulations in the PRC and on the Group’s land use rights in the Properties as at the valuation date.

– 60 –

APPENDIX II VALUATION REPORT ON THE SHEUNG PING PROPERTY

6. LIMITING CONDITIONS

We have inspected the exterior and the interior of the Properties but no structural survey has been made. In the course of our inspection, we did not note any serious defects. We are not, however, able to report that the Properties are free from rot, infestation or any other structural defects. No tests were carried out on any of the building services. All dimensions, measurements and areas are approximate.

We have relied to a considerable extent on the information provided by the Company and have accepted advice given to us by the Company on such matters as statutory notices, easements, tenure, occupation, site and floor areas and in the identification of the Properties in which the Company has a valid interest.

We have no reason to doubt the truth and accuracy of the information provided to us by the Company. We have relied on the Company’s confirmation that no material facts have been omitted from the information supplied.

According to the information provided by the Company, the potential tax liability which would arise on the disposal of the Properties situated in the PRC are business tax, PRC land capital gain tax and PRC corporate tax. In the course of our valuation, we have neither verified nor taken into account such tax liability. As advised by the Company, no tax liability would arise if the Properties were to be sold at the amount of valuation.

Our valuations have been prepared in accordance with the Guidance Notes on the Valuation of Property Assets (2nd Edition) published by the Hong Kong Institute of Surveyors and comply with all the requirements contained in Chapter 5 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and the Practice Notes 12 issued by The Stock Exchange of Hong Kong Limited.

We enclosed herewith the summary of valuation and the valuation certificates.

Yours faithfully, For and on behalf of RHL Appraisal Ltd. Wayne W. K. Lee Tse Wai Leung MRICS MHKIS RPS (GP) BSc MRICS MHKIS RPS(GP) Director Director

Note: Both Wayne W.K. Lee and Tse Wai Leung are members of the Royal Institution of Chartered Surveyors, the Hong Kong Institute of Surveyors and Registered Professional Surveyors in General Practice. Tse Wai Leung is also a qualified real estate appraiser in the PRC. Both of them have over ten years’ experience in valuation of properties in Hong Kong, Macau and the PRC.

Encl.

– 61 –

APPENDIX II VALUATION REPORT ON THE SHEUNG PING PROPERTY

SUMMARY OF VALUATION

Properties held for investment

Properties held for investment
Property 1. North Portion of Starmate Industrial Park, Tutang District, Changping Town, Dongguan, Guangdong Province, the PRC. 2. South Portion of Starmate Industrial Park, Tutang District, Changping Town, Dongguan, Guangdong Province, the PRC. Grand total:	Open market value Interest as at attributable 31 August 2004 to the Company No commercial value 100% No commercial value 100% No commercial value	Value of property interest attributable to the Company as at 31 August 2004 No commercial value No commercial value
		No commercial value

– 62 –

VALUATION REPORT ON THE SHEUNG PING PROPERTY

APPENDIX II

VALUATION CERTIFICATE

Properties held for investment

Property Description 1. North Portion of The property comprises a site Starmate Industrial with an area of approximately Park, 28,886.3 square metres. Tutang District, Changping Town, As at the valuation date, the Dongguan, property was erected with Guangdong various 2 to 4-storey industrial Province, buildings and staff quarters the PRC. providing a total gross floor area of approximately 20,315 square metres. The aforesaid buildings were completed in the 1990s.

Particulars of occupancy

Open market value as at 31 August 2004

As at the date of our No commercial value valuation, the property (Please see note 3) was subject to various tenancies with the latest tenancy expiring on 30 June 2006 at a total current monthly rent of RMB130,181.

Notes:

As stipulated in an Investment Certificate (投資證明書 ) dated 3 May 1994, the property is held by Dongguan Incar Electronics Co., Ltd. (東莞欣佳電子有限公司 ) which is a wholly-owned subsidiary of the Company.
The status of title and grant of major approvals and licences relating to the property in accordance with information provided by the Company are as follows:

Land Use Right Contract	No
Land Use Right Certificate	No
Red-line Drawing	No
Permit for Overseas Sales	No
Business Licence	Yes
Investment Certificate	Yes

The property has no commercial value due to the fact that the land grant procedures including land premium payment for the property have not yet been completed. As at the valuation date, the depreciated replacement cost of the land improvement works in the property is HK$2,900,000.
The legal opinion from Hills & Co., the PRC legal advisers to the Company, on the property is summarized as follows:
4.1 As Dongguan Incar Electronics Co., Ltd. have not yet completed the land grant procedures for the property, the legal title to the property is not vested in Dongguan Incar Electronics Co., Ltd.;
4.2 With the approval from the relevant government authority of Dongguan, Dongguan Incar Electronics Co., Ltd. shall be able to complete land grant procedures in order to secure valid legal interest in the property. Upon obtaining valid legal interest, Dongguan Incar Electronics Co., Ltd. shall have the right to dispose of the property;
4.3 Pursuant to a sale and purchase agreement dated 23 September 2004 entered into between RJP International Limited (“RJP”) and 東莞常平鎮土塘村委會 (“Sheung Ping Committee”), RJP agreed to transfer the land and buildings of the property to Sheung Ping Committee;
4.4 As the land grant procedures for the property have not yet been completed, the enforceability of the aforesaid sale and purchase agreement cannot be ascertained.
As confirmed by the Company, the total land premium of approximately RMB4,540,000 to be incurred for completing land grant procedures for the property shall be payable by the owner of the property. There are no other outstanding costs payable.

– 63 –

VALUATION REPORT ON THE SHEUNG PING PROPERTY

APPENDIX II

			Particulars of	Open market value
	Property	Description	occupancy	as at 31 August 2004
2.	South Portion of	The property comprises a site	As at the date of our	No commercial value
	Starmate Industrial	with an area of approximately	valuation, portion of the	(Please see note 3)
	Park,	19,639.9 square metres.	property with a total
	Tutang District,		gross floor area of
	Changping Town,	As at the valuation date, the	11,202.04 square metres
	Dongguan,	property was erected with	were subject to various
	Guangdong	various 2 to 4-storey industrial	tenancies with the latest
	Province,	buildings and staff quarters	tenancy expiring on 31
	the PRC.	providing a total gross floor	January 2009 at a total
		area of approximately 26,288.5	current monthly rent of
		square metres. The aforesaid	RMB65,800 whilst the
		buildings were completed in	remaining portion of the
		the 1990s.	property was vacant.

Notes:

As stipulated in an Investment Certificate (投資證明書 ) dated 3 May 1994, the property is held by Dongguan Man Lee Plastic Products Co., Ltd. (東莞萬利塑膠製品有限公司 ) which is a whollyowned subsidiary of the Company.
The status of title and grant of major approvals and licences relating to the property in accordance with information provided by the Company are as follows:

Land Use Right Contract	No
Land Use Right Certificate	No
Red-line Drawing	No
Permit for Overseas Sales	No
Business Licence	Yes
Investment Certificate	Yes

The property has no commercial value due to the fact that the land grant procedures including land premium payment for the property have not yet been completed. As at the valuation date, the depreciated replacement cost of the land improvement works in the property is HK$3,700,000.
The legal opinion from Hills & Co., the PRC legal advisers to the Company, on the property is summarized as follows:
4.1 As Dongguan Man Lee Plastic Products Co., Ltd. have not yet completed the land grant procedures for the property, the legal title to the property is not vested in Dongguan Man Lee Plastic Products Co., Ltd.;
4.2 With the approval from the relevant government authority of Dongguan Man Lee Plastic Products Co., Ltd. shall be able to complete land grant procedures in order to secure valid legal interest in the property. Upon obtaining valid legal interest, Dongguan Man Lee Plastic Products Co., Ltd. shall have the right to dispose of the property;
4.3 Pursuant to a sale and purchase agreement dated 23 September 2004 entered into between RJP International Limited (“RJP”) and 東莞常平鎮土塘村委會 (“Sheung Ping Committee”), RJP agreed to transfer the land and buildings of the property to Sheung Ping Committee;
4.4 As the land grant procedures for the property have not yet been completed, the enforceability of the aforesaid sale and purchase agreement cannot be ascertained.
As confirmed by the Company, the total premium of approximately RMB3,810,000 to be incurred for completing land grant procedures for the property shall be payable by the owner of the property. There are no other outstanding costs payable.

– 64 –

GENERAL INFORMATION

APPENDIX III

RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts not contained herein the omission of which would make any statement contained in this circular misleading.

DISCLOSURE OF INTERESTS

(a) Interests of Directors

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executives of the Company in the Shares, underlying Shares and debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO) or the Model Code for Securities Transactions by Directors of Listed Companies and which were required to be entered into the register required to be kept under section 352 of the SFO were as follows:

(i) Long positions in Shares

	Number of Shares/capacity	Number of Shares/capacity	Number of Shares/capacity
		Founder of a
		discretionary
		trust and		Total	Approximate
		discretionary		number	%
Name	Beneficial	object	Corporate	of Shares	shareholding
Hung Kin Sang,	3,280,000	405,655,584	48,329,000	457,264,584	48.59%
Raymond		(Note 1)	(Note 2)
Hung Wong Kar	8,870,056	405,655,584	48,329,000	462,854,640	49.18%
Gee, Mimi		(Note 1)	(Note 2)
Fang Chin Ping	100,000	–	–	100,000	0.01%
Soo Hung Leung,	1,100,000	–	–	1,100,000	0.12%
Lincoln

– 65 –

GENERAL INFORMATION

APPENDIX III

(ii) Long position in shares of associated corporations

	Number of shares/capacity	Number of shares/capacity	Number of shares/capacity	Total	Approximate
			Name of associated	number	%
Name	Beneficial	Other	corporation	of shares	shareholding
Fang Chin Ping	199,999	1	Quorum Bio-Tech	200,000	2%
		(Note 3)	Limited_(Note 3)_

Notes:

(1) These Shares are held by the following companies:

	Number of Shares
Malcolm Trading Inc.	43,992,883
Primore Co. Inc.	2,509,266
Capita Company Inc.	359,153,435
iQuorum Cybernet Limited	48,329,000
	453,984,584

Malcolm Trading Inc., Primore Co. Inc. and Capita Company Inc. are wholly-owned by the Marami Foundation as trustee for the Raymond Hung/Mimi Hung & Family Trust, a discretionary trust the discretionary objects of which include the family members of Hung Kin Sang, Raymond and Hung Wong Kar Gee, Mimi (husband and wife).

(2) These Shares are held by iQuorum Cybernet Limited which is a wholly-owned subsidiary of the Company. As Capita Company Inc. owns more than one-third of the issued Shares and Capita Company Inc. is in turn a wholly-owned subsidiary of the Marami Foundation, the trustee of the Raymond Hung/Mimi Hung & Family Trust the discretionary objects of which include the family members of Hung Kin Sang, Raymond and Hung Wong Kar Gee, Mimi (husband and wife), both Hung Kin Sang, Raymond and Hung Wong Kar Gee, Mimi are deemed to be interested in such long positions.
(3) Fang Chin Ping is the registered holder of 200,000 shares of Quorum Bio-Tech Limited, an 89% owned subsidiary of iQuorum, of which he holds 1 share on trust for iQuorum.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executives of the Company had any interests and short positions in the Shares, underlying Shares and debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO) or the Model Code for Securities Transactions by Directors of Listed Companies and which were required to be entered into the register required to be kept under section 352 of the SFO.

– 66 –

GENERAL INFORMATION

APPENDIX III

As at the Latest Practicable Date:

(i) none of the Directors, RHL Appraisal Limited and Hills & Co. had any direct or indirect interest in any assets which have since 30 June 2003 (being the date to which the latest published audited accounts of the Group were made up) been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group; and
(ii) none of the Directors was materially interested in any contract or arrangement subsisting at the date of this circular which is significant in relation to the business of the Group.

(b) Interests of Shareholders

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

Name	Capacity	Number of Shares	% shareholding
Capita Company Inc.	Beneficial	359,153,435	38.16%
Marami Foundation	Corporate	453,984,584	48.24%
		(Note 1 above)
iQuorum Cybernet Limited	Beneficial	48,329,000	5.13%

(c) Substantial shareholding in other members of the Group

As at the Latest Practicable Date, so far as is known to the Directors and the chief executive of the Company, the following persons (other than a Director or chief executive of the Company) are directly or indirectly interested in 10 per cent. or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any other member of the Group:

Name of subsidiary	Name of Shareholder	% shareholding
Wideland Electronics Limited	Fan Shek Yui	30%
Wideland Electronics Limited	Ma Yi Fat	19%

– 67 –

GENERAL INFORMATION

APPENDIX III

Save as disclosed above, the Directors and the chief executives of the Company are not aware that there is any person (other than a Director or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in the Shares and underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly, interested in 10 per cent. or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at a general meeting of any other member of the Group.

SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors has entered into any service agreement with any member of the Group nor are there any other service agreements proposed which will not expire or be determinable by the Company within one year without payment of compensation (other than statutory compensation).

LITIGATION

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

COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or any of his/her associates (as such term is defined in the Listing Rules) had an interest in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group other than those businesses to which the Directors were appointed to represent the interests of the Company and/or the Group.

MATERIAL CONTRACTS

The following contracts are all the contracts (not being contracts in the ordinary course of business) entered into by the Company or its subsidiaries during the two year period ending on the Latest Practicable Date which are or may be material:

(a) the Sale and Purchase Agreement;
(b) a share transfer agreement dated 9 September 2004 (the “Share Transfer Agreement”) entered into between, among others, the Company, Applied China Properties Limited (“Applied Properties”) (a wholly-owned subsidiary of the Company) and Mr. Lai Kwok Wah (“Mr. Lai”) pursuant to which, inter alia, Applied Properties conditionally agreed to sell to Mr. Lai 2 shares of US$100 each in Applied Properties (Jiang Men) Ltd. S.A. (“Applied Jiangmen”),

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GENERAL INFORMATION

APPENDIX III

representing the entire issued share capital of Applied Jiangmen (the “Jiangmen Shares”). Applied Jiangmen held a piece of land situated in Jiangmen, PRC through its interest in 江門實力發展（地產）有限公司 (Applied Properties (Jiangmen) Limited). Pursuant to the Share Transfer Agreement, Applied Properties also agreed to assign to Mr. Lai its entire legal and beneficial interest in loans which it extended to Applied Jiangmen which amounted to an outstanding aggregate sum of HK$24,411,291 as at 8 September 2004, which is unsecured, non-interest bearing and repayable on demand (the “Shareholder’s Loan”). The consideration payable by Mr. Lai pursuant to the Share Transfer Agreement is RMB15,000,000 (approximately HK$14,136,940) (adopting an exchange rate of RMB1.061 to HK$1.00) of which RMB14,998,400 (approximately HK$14,135,432) is attributable to the assignment of the Shareholder’s Loan and RMB1,600 (approximately HK$1,508) is attributable to the sale of the Jiangmen Shares. Further details of the above sale and loan assignment are set out in the Company’s announcement dated 13 September 2004;

(c) a sale and purchase deed dated 1 December 2003 entered into between MACROLINK International Investment Co, Ltd., the Company and Mr. Hung Kin Sang, Raymond pursuant to which, inter alia, the Company sold 861,887,920 shares in the issued capital of Applied China Limited to MACRO-LINK International Investment Co, Ltd. for an aggregate consideration of HK$123 million, further details of which are set out in the Company’s announcement dated 5 December 2003;
(d) a disposal agreement dated 1 December 2003 entered into between Applied China Limited and the Company pursuant to which, inter alia, Applied China sold to the Company its interest in the entire issued share capital of iQuorum Cybernet Limited for a consideration of HK$51,405,065 and procured the assignment of certain accounts receivables to the Company for a consideration of HK$1,881,677, further details of which are set out in the Company’s announcement dated 5 December 2003; and
(e) a sale and purchase agreement dated 20 October 2003 (as supplemented by two supplemental agreements thereto both dated 20 October 2003) entered into between Applied Properties (Hui Yang) Limited S.A., (a wholly-owned subsidiary of the Company) and Zhejiang Se Fu Real Estate Development Co. Ltd. in connection with the sale by Applied Properties (Hui Yang) Limited S.A. of its 59% interest in Sun City Development (Danshui) Ltd. (an equity joint venture established in the PRC, which was owned as to 60% by Applied Properties (Hui Yang) Limited S.A. and 40% by the joint venture partner, and which was established for purposes of developing a site in Dan Shui in the PRC) for an aggregate consideration of approximately RMB 65 million (approximately HK$61,320,755) (at the rate of RMB 1.06 to HK$1.00)), further details of which are set out in the Company’s announcement dated 27 October 2003.

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GENERAL INFORMATION

APPENDIX III

INDEBTEDNESS

At the close of business on 31 August 2004 (being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular), the Group had outstanding bank borrowings of approximately HK$60.4 million which was secured by certain of the Group’s bank deposits, investment properties and property, plant and equipment amounting to approximately HK$3.0 million, HK$89.2 million and HK$2.5 million, respectively. In addition, the Group had outstanding at that date unsecured other loans of approximately HK$17.5 million and obligations under finance leases of approximately HK$4.5 million.

Save as aforesaid and apart from intra-group liabilities, the Group did not have any outstanding mortgage, charge, debenture, loan capital and overdraft or other similar indebtedness, finance lease or hire purchase commitment, liabilities under acceptance or acceptance credit or any guarantee or other material contingent liability as at the close of business on 31 August 2004.

For the purpose of the above indebtedness statement, foreign currency amounts have been translated into Hong Kong dollars at the approximate exchange rates prevailing at the close of business on 31 August 2004.

The Directors have confirmed that there has been no material change in the indebtedness or contingent liabilities of the Group since 31 August 2004.

FINANCIAL AND TRADING PROSPECTS

As disclosed in the Company’s 2003/2004 interim report, the Group’s unaudited turnover for the period ended 31 December 2003, was approximately HK$73 million, which represented an increase of 11% as compared to the period ended 31 December 2002. The administrative expenses for the period ended 31 December 2003 were approximately HK$26 million, which represented a decrease of 3% as compared to the expenses incurred for the period ended 31 December 2002.

The unaudited consolidated loss for the period ended 31 December 2003 was approximately HK$45 million (as compared to an unaudited consolidated loss of HK$81 million for the period ended 31 December 2002). This included an impairment loss recognised in respect of properties held for development of approximately HK$24.5 million, allowance on trade and other receivables of approximately HK$1.9 million and allowance on inventory of approximately HK$2.2 million. Other losses incurred during the same period were mainly due to the marketing costs spent in diversification of the Group’s business into conducting and promoting network marketing business in Australia and the United States of America.

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GENERAL INFORMATION

APPENDIX III

During the period ended 31 December 2003, the Group’s OEM (original equipment manufacturing) business has generated a steady income stream and was able to maintain its market share despite competitive market conditions. Following the Sale, the Group will continue to focus on reallocating its resources to higher-growth products and consolidating the operations of its core businesses while at the same time seeking ways to integrate them more effectively to enhance greater returns to the Company and the Shareholders.

WORKING CAPITAL

The Directors are of the opinion that, taking into account the financial resources available to the Group including internally generated funds and credit facilities currently available to the Group, and in the absence of unforeseen circumstances, the Group has sufficient working capital to meet its present requirements.

COMPETING INTERESTS

EXPERT

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

Name Qualification Hills & Co. PRC legal advisers to the Company RHL Appraisal Limited professional property valuation firm

RHL Appraisal Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and report and references to its name in the form and context in which they respectively appear. It does not have any interest in any Shares or shares in any member of the Group nor does it have any right or option (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for shares in any member of the Group.

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GENERAL INFORMATION

APPENDIX III

GENERAL

(i) The secretary of the Company is Lee Wai Fun, Betty, associate member of The Institute of Chartered Secretaries and Administrators and associate member of The Hong Kong Institute of Company Secretaries.
(ii) The qualified accountant of the Company is Cheng Kong Lung, Certified Public Accountant of the Hong Kong Institute of Certified Public Accountants and fellow member of the Association of Chartered Certified Accountants in the United Kingdom.
(iii) The share registrar and transfer office of the Company in Hong Kong is located at Computershare Hong Kong Investor Services Limited of 46th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(iv) The English version of this circular shall prevail over the Chinese text.
(v) The following documents are available for inspection at the Company’s principal place of business in Hong Kong at Unit 3402, 34th Floor, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong during normal business hours for a period of up to 14 days after the date of this circular:
(a) the memorandum and bye-laws of the Company;
(b) the material contracts as disclosed in this circular;
(c) the valuation report on the Sheung Ping Property prepared by RHL Appraisal Limited, the text of which is set out in Appendix II to this circular;
(d) all reports, letters or other documents, balance sheets, valuations and statements by any expert any part of which is extracted or referred to in this circular;
(e) the consolidated audited accounts of the Group for each of the two financial years ended 30 June 2003 together with all notes, certificates or information required by the Companies Ordinance; and
(f) a copy of each circular issued since 30 June 2003, being the date to which the Group’s latest published audited consolidated financial statements were made up.

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NOTICE OF SGM

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APPLIED INTERNATIONAL HOLDINGS LIMITED 實力國際集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 519)

NOTICE IS HEREBY GIVEN THAT a special general meeting of Applied International Holdings Limited will be held at 2:00 p.m. on Friday, 26 November 2004 at The Oregon Room, The American Club, 47th Floor, Two Exchange Square, No.8 Connaught Place, Central, Hong Kong for the purpose of considering and, if thought fit, passing the following resolution, with or without amendments, as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT the agreement dated 23 September 2004 entered into between RJP International Limited and 東莞市常平鎮土塘村委會 (the “Sale and Purchase Agreement”) (a copy of which has been produced to the meeting marked “A” and initialled by the Chairman for the purpose of identification) and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified and the directors be and are hereby authorised to do all things and acts and sign all documents which they consider necessary, desirable or expedient in connection with the transactions contemplated under the Sale and Purchase Agreement.”

By order of the Board Applied International Holdings Limited Fang Chin Ping Director

Hong Kong, 29 October 2004

Registered office: Principal place of business: Canon’s Court Unit 3402, 34th Floor 22 Victoria Street China Merchants Tower Hamilton HM 12 Shun Tak Centre Bermuda 168-200 Connaught Road Central Hong Kong

* For identification only

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NOTICE OF SGM

Notes:

Any member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint another person as his proxy to attend and vote instead of him. On a poll, votes may be given either personally or by proxy. A proxy need not be a member of the Company. A member may appoint more than one proxy to attend on the same occasion.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney authorised in writing, or if the appointer is a corporation, either under seal or under the hand of an officer or attorney duly authorised.
A form of proxy for use at the meeting is enclosed.
The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof shall be deposited at the principal place of business of the Company at Unit 3402, 34th Floor, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong not less than 48 hours before the time for holding the meeting or adjourned meeting or poll (as the case may be) at which the person named in such instrument proposes to vote and in default the instrument of proxy shall not be treated as valid.
No instrument appointing a proxy shall be valid after expiration of twelve months from the date of its execution, except at an adjourned meeting or on a poll demanded at a meeting or an adjourned meeting in cases where the meeting was originally held within twelve months from such date.
Delivery of an instrument appointing a proxy shall not preclude a member from attending and voting in person at the meeting or poll.

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AI assistant

Novautek Technologies Group Limited — Proxy Solicitation & Information Statement 2004

49267_rns_2004-10-29_7e354a64-b382-424f-ba02-2d43b9553ad0.pdf

APPLIED INTERNATIONAL HOLDINGS LIMITED 實力國際集團有限公司[*]

MAJOR TRANSACTION

DISPOSAL OF PRC PROPERTY

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

APPLIED INTERNATIONAL HOLDINGS LIMITED 實力國際集團有限公司[*]

MAJOR TRANSACTION

DISPOSAL OF PRC PROPERTY

INTRODUCTION

LETTER FROM THE BOARD

THE SALE AND PURCHASE AGREEMENT

Date

Parties

The Sale

Consideration

Payment Terms

Condition Precedent

LETTER FROM THE BOARD

Completion

Information regarding the Sheung Ping Property

LETTER FROM THE BOARD

Net Proceeds from the Sale

REASONS FOR THE SALE AND BENEFITS TO THE COMPANY

LETTER FROM THE BOARD

GENERAL

LETTER FROM THE BOARD

1. FINANCIAL INFORMATION

Results

2. FINANCIAL INFORMATION

Consolidated Income Statement

Consolidated Balance Sheet

Balance Sheet

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

Notes to Financial Statements

1. GENERAL

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

3. ADOPTION OF NEW AND REVISED STATEMENTS OF STANDARD ACCOUNTING PRACTICE

Presentation of financial statements

Foreign currencies

Cash flow statements

Employee benefits

4. SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

Goodwill

Negative goodwill

Investments in subsidiaries

Revenue recognition

Investment properties

Property, plant and equipment

Impairment

Other investments

Investments in securities

Inventories

Assets held under finance leases

Treasury shares

Taxation

Foreign currencies

Retirement benefits scheme

5.

TURNOVER

6. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

Geographical segments

7. INVESTMENT INCOME

8. LOSS FROM OPERATIONS

9.

10. DIRECTORS’ AND EMPLOYEES’ REMUNERATION

(a) Directors’ remuneration

(b) Employees’ remuneration

11. TAXATION

12. LOSS PER SHARE

13. INVESTMENT PROPERTIES

14. PROPERTY, PLANT AND EQUIPMENT

15. LONG-TERM RECEIVABLE

Novautek Technologies Group Limited Proxy Solicitation & Information Statement 2004