Sinopharm Tech Holdings Limited - Proxy Solicitation & Information Statement 2004

IMPORTANT

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 the Company, you should at once hand this circular to the purchaser or the transferee or to the bank, licenced securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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

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B & B NATURAL PRODUCTS LIMITED APTUS HOLDINGS LIMITED ( )[*] ( )

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8156)

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8212)

MAJOR AND CONNECTED TRANSACTIONS

(1) POSSIBLE ACQUISITION OF 75% EQUITY INTERESTS IN TOP ENTREPRENEUR PROFITS LIMITED FROM A SUBSIDIARY OF B & B NATURAL PRODUCTS LIMITED; (2) SUBSCRIPTION OF NEW APTUS SHARES BY A SUBSIDIARY OF B & B NATURAL PRODUCTS LIMITED;

(3) RELATED APPLICATION FOR WHITEWASH WAIVER

Independent financial adviser to the Independent Board Committee of Aptus Holdings Limited

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A letter from the Independent Board Committee is set out on page 25 of this circular. A letter from Tai Fook Capital Limited containing its advice to the Independent Board Committee is set out on pages 26 to 48 of this circular.

A notice convening an extraordinary general meeting of the Company to be held at 20/F., Alexandra House, 16-20 Chater Road, Central, Hong Kong at 10:30 a.m. on 26 July, 2004 is set out on pages 133 to 135 of this circular. Whether or not you are able to attend the extraordinary general meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the Registrar at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the extraordinary general meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the extraordinary general meeting or any adjournment thereof should you so wish.

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

for identification purposes only

9 July, 2004

CHARACTERISTICS OF GEM

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

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the main board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM. The principal means of information dissemination on GEM is publication on the internet website operated by the Stock Exchange. Listed companies are not generally required to issue paid announcements in gazetted newspapers. Accordingly, prospective investors should note that they need to have access to the GEM website in order to obtain up-to-date information on GEM-listed issuers.

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		Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the	Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the	Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Letter from Tai	Fook Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Appendix I	− Financial information on the Aptus Group . . . . . . . . . . . .	49
Appendix II	− Accountants’ report of Hsing Long . . . . . . . . . . . . . . . . . .	96
Appendix IIIA	– Accountants’ report of Target . . . . . . . . . . . . . . . . . . . . . .	111
Appendix IIIB	– Accountants’ report of B & B Natural . . . . . . . . . . . . . . .	112
Appendix IIIC	– Accountants’ report of Rapid . . . . . . . . . . . . . . . . . . . . . . .	113
Appendix IV	− Financial information on the Enlarged Group . . . . . . . . .	114
Appendix V	− General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	119
Notice of the EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		133

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DEFINITIONS

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

“Acquisition” the proposed acquisition of a 75% equity interest in the Target by Aptus pursuant to the Sale and Purchase Agreement;
“Acquisition Consideration 190,476,190 new Aptus Shares to be allotted and issued Shares” to the Vendor, credited as fully paid, as consideration for the Acquisition;
“Announcement” the joint announcement dated 23 April, 2004 made by Aptus and B & B in relation to, amongst other things, the Whitewash Waiver and the Transactions;

“Aptus” or “Company”	Aptus Holdings Limited, a company incorporated in the
	Cayman Islands with limited liability, whose issued
	Aptus Shares are listed on GEM;
“Aptus Group”	Aptus and its subsidiaries;
“Aptus Shares”	ordinary shares of HK$0.01 each in the ordinary share
	capital of Aptus;
“associates”	has the meaning ascribed to it in the GEM Listing Rules;
“B & B”	B & B Natural Products Limited, a company incorporated
	in the Cayman Islands with limited liability whose issued
	B & B Shares are listed on GEM;
“B & B Group”	B & B and its subsidiaries;
“B & B Natural”	B & B Natural Products (BVI) Limited, a company
	incorporated in the British Virgin Islands with limited
	liability;
“B & B Shares”	ordinary shares of HK$0.01 each in the ordinary share
	capital of B & B;
“Board”	the board of Directors from time to time;
“Completion”	completion of the the Acquisition and the Subscription in
	accordance with the terms and conditions of the Sale and
	Purchase Agreement and Subscription Agreement
	respectively;
“Consideration Shares”	an aggregate of 928,571,428 new Aptus Shares to be
	allotted and issued by Aptus to the Vendor as
	consideration for the Acquisition and the Subscription;

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DEFINITIONS

“Director(s)”	directors of Aptus;
“EGM”	the extraordinary general meeting of Aptus to be
	convened on 26 July, 2004 for the purpose of approving,
	among other matters, the Whitewash Waiver and other
	transactions contemplated under the Subscription
	Agreement and the Sale and Purchase Agreement;
“Employee Options”	the options to subscribe for an aggregate of 55,950,000
	Aptus Shares granted pursuant to the employee share
	option schemes of Aptus and outstanding as at the Latest
	Practicable Date;
“Enlarged Group”	means the Aptus Group as enlarged by the Transactions
	immediately after Completion;
“Executive”	the executive director of the Corporate Finance Division
	of the SFC from time to time and any delegate of such
	executive director;
“Existing Business”	the existing business of Aptus Group include the trading
	of pharmaceutical products and commercialisation
	services which target at international and PRC
	pharmaceutical and healthcare companies;
“GEM”	the Growth Enterprise Market of the Stock Exchange;
“GEM Listing Rules”	the Rules Governing the Listing of Securities on GEM in
	force immediately prior to 31 March, 2004;
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong;
“Hsing Long” or “Edible Oil	Hsing Long Trading Co. Pte Ltd, a company incorporated
Group”	in Singapore and a non-wholly owned subsidiary of B &
	B Natural Products (BVI) Limited (an indirect non-
	wholly owned subsidiary of B & B), held as to
	approximately 70.31% by B & B;
“Independent Board Committee”	an independent committee of the Board comprising Mr.
	Ma Ching Nam and Dr. Yau Yat Yin, which has been
	established to advise the Independent Shareholders on the
	terms of the Sale and Purchase Agreement, the
	Subscription Agreement and the Whitewash Waiver;
“Independent Shareholders”	Shareholders who are not interested or involved in the
	Acquisition, Subscription and Whitewash Waiver, being
	the Shareholders other than the Vendor, B & B, their
	associates and their respective concert parties if and to
	the extent they hold shares in Aptus, Directors, being Mr.
	Chen Vee Li, Felix, Mr. Wong Kok Sun, Mr. Lee Chan
	Wah, Mr. Ma Wai Hung, Vincent, Mr. Chen Si Te, Frank
	and Dr. Wong Kwok Yiu, Chris and their associates if
	they hold Aptus Shares;

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DEFINITIONS

“Independent Third Parties”	Mr. Wong Kim Ket, Ms. Hyasinta Atmaja, Mr. Lim King
	Hui and Pentagon Agents Limited. Pentagon Agents
	Limited and Wong Kim Ket, each of them holds a 12.5%
	equity interest in Target and Hsing Long, respectively.
	Pentagon Agents Ltd is a company incorporated in the
	British Virgin Islands with limited liability and is 50%
	held by Hyasinta Atmaja and 50% held by Mr. Lim King
	Hui. All of them are independent third parties and not
	connected persons (as defined under the GEM Listing
	Rules) of Aptus;
“Issue Price”	HK$0.021 per Acquisition Consideration Share;
“Last Dealing Date”	19 March, 2004, being the last full trading day for the
	Aptus Shares prior to the suspension of dealings of Aptus
	Shares and the B & B Shares on 22 March, 2004 in
	connection with the Transactions;
“Latest Practicable Date”	8 July, 2004, being the latest practicable date prior to the
	printing of this circular for the purpose of ascertaining
	certain information contained in this circular;
“Parties”	the parties to the Sale and Purchase Agreement or, as
	appropriate, the Subscription Agreement and a “party”
	means any one of them;
“PRC”	the People’s Republic of China and for the purpose of this
	circular excludes Hong Kong, Taiwan and Macau Special
	Administrative Region of the PRC;
“Purchase Price”	HK$4,000,000;
“Rapid”	Rapid Progress Profits Limited, a company incorporated
	in the British Virgin Islands with limited liability;
“Registrar”	Tengis Limited;
“S$”	Singapore dollars, the lawful currency of Singapore;
“Sale and Purchase Agreement”	the agreement dated 23 March, 2004 entered into between
	Aptus, the Vendor and the Warrantors in relation to, inter
	alia, the Acquisition;
“SFC”	the Securities and Futures Commission of Hong Kong;
“SFO”	the Securities and Future Ordinance (Chapter 571 of the
	Laws of Hong Kong);
“Shareholder(s)”	holder(s) of the Aptus Shares;

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DEFINITIONS

“Stock Exchange”

The Stock Exchange of Hong Kong Limited;

“Subscription”

subscription by the Vendor of the Subscription Shares pursuant to the Subscription Agreement;

“Subscription Agreement” the subscription agreement dated 23 March, 2004 entered into between the Vendor and Aptus in relation to the subscription of the Subscription Shares at the Subscription Price;

“Subscription Price” HK$0.021 per Aptus Shares;
“Subscription Shares” 738,095,238 new Aptus Shares;

“Tai Fook Capital” or Tai Fook Capital Limited, a licensed corporation under “Independent Financial the transitional arrangement to carry on Type 6 (advising Adviser” on corporate finance) regulated activities for the purposes of the SFO;

“Takeovers Code”

the Hong Kong Code on Takeovers and Mergers;

“Target”

Top Entrepreneur Profits Limited, a non-wholly owned indirect subsidiary of B & B, legally and beneficially owned by the Vendor as to 75% of its issued share capital as at the date of the Sale and Purchase Agreement;

“Transactions” collectively the transactions contemplated under the Sale and Purchase Agreement and the Subscription Agreement;
“Vendor” or “Subscriber” Precise Result Profits Limited, a company incorporated in the British Virgin Islands and a wholly owned indirect subsidiary of B & B;
“Warrantors” collectively Mr. Ma Wai Hung, Vincent and Mr. Wong Kok Sun, a non-executive director and an executive Director respectively; and
“Whitewash Waiver” a waiver from the Executive pursuant to Note 1 on Dispensations from Rule 26 of the Takeovers Code in respect of the obligations of the Vendor and parties acting in concert with it to make a mandatory general offer for all the Aptus Shares (other than the Consideration Shares) as a result of the Subscription and the Acquisition.

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LETTER FROM THE BOARD

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APTUS HOLDINGS LIMITED ( )

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8212)

Executive Directors: Mr. Chen Vee Li, Felix (Chairman) Mr. Wong Kok Sun Mr. Lee Chan Wah

Non-executive Directors:

Mr. Ma Wai Hung, Vincent Mr. Chen Si Te, Frank Dr. Wong Kwok Yiu, Chris Independent non-executive Directors: Mr. Ma Ching Nam Dr. Yau Yat Yin

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

Principal place of business in Hong Kong: 30th Floor Sunshine Plaza 353 Lockhart Road Hong Kong

9 July, 2004

To the Shareholders and, for information only, holders of share options of Aptus

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTIONS

INTRODUCTION

It was announced on 7 April, 2004 and 23 April, 2004 that Aptus entered into the Sale and Purchase Agreement with the Vendor on 23 March, 2004 pursuant to which Aptus conditionally agreed to acquire from the Vendor a 75% equity interest in the Target at a price of HK$4,000,000. The Purchase Price is to be satisfied by the allotment and issue of the Acquisition Consideration Shares at HK$0.021 per Aptus Share.

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LETTER FROM THE BOARD

It was also announced on 7 April, 2004 and 23 April, 2004 that Aptus entered into the Subscription Agreement with the Vendor and that the Vendor conditionally agreed on 23 March, 2004 to subscribe for 738,095,238 new Aptus Shares at approximately HK$0.021 per Aptus Share.

As the consideration ratio for the Transactions has exceeded 50% and the Vendor will become the controlling shareholder of Aptus upon the Completion, the Transactions constitute major and connected transactions for Aptus pursuant to Rule 19.06(3) and Rule 20.12(1)(b) of the GEM Listing Rules respectively.

Upon Completion, the Vendor and its concert parties will be interested in 928,571,428 new Aptus Shares, representing approximately 60.02% of the entire issued share capital of the Company as enlarged by the allotment and issue of the Acquisition Consideration Shares and the allotment and issue of the Subscription Shares. The Vendor and its concert parties will, thereafter hold more than 50% of the voting rights of the Company and the Vendor and its concert parties may increase its shareholding in Aptus without incurring any further obligation under Rule 26 of the Takeovers Code to make a general offer.

Under Rule 26 of the Takeovers Code, upon Completion, the Vendor and its concert parties will be required to make an unconditional mandatory general offer for all the issued Aptus Shares not already owned or agreed to be acquired by the Vendor or its concert parties. An application has been made by the Vendor to the Executive for the Whitewash Waiver. The Executive has indicated that the Whitewash Waiver will be granted, subject to the approval of the Independent Shareholders’ vote taken by way of a poll at the EGM. If the Whitewash Waiver is not approved, the Subscription Agreement may lapse, and the Subscriber may not proceed with the Subscription.

The Board comprises altogether eight Directors, being (i) three executive Directors, namely Mr. Chen Vee Li, Felix, Mr. Wong Kok Sun, Mr. Lee Chan Wah; (ii) three non-executive Directors, namely Mr. Ma Wai Hung, Vincent, Mr. Chen Si Te, Frank and Dr. Wong Kwok Yiu Chris; and (iii) two independent non-executive Directors, namely Mr. Ma Ching Nam and Dr. Yau Yat Yin. Pursuant to Rules 17.47 (6)(a) of the GEM Listing Rules, the independent board committee shall consist only of independent non-executive directors. Accordingly, Mr. Ma Ching Nam and Dr. Yau Yat Tin, being the independent non-executive Directors, have been appointed to set up an independent board committee and give advice and recommendations to the Independent Shareholders regarding the Transactions and the Whitewash Waiver. Despite each of them has 400,000 outstanding share options of Aptus, none of them have a material interest in the Transactions. In connection therewith, the Independent Financial Adviser has been appointed to give an independent opinion to the Independent Board Committee.

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LETTER FROM THE BOARD

The purpose of this circular is (i) to provide you with, among other things, further information relating to the Acquisition, the Subscription and the Whitewash Waiver; (ii) to set out the recommendation of the Independent Board Committee and the advice of the Independent Financial Adviser in relation to the Acquisition, the Subscription and the Whitewash Waiver; and (iii) to give you notice of the EGM at which resolutions approving the Sale and Purchase Agreement, the Subscription Agreement and the Whitewash Waiver.

SUMMARY OF THE TRANSACTIONS

On 23 March, 2004, Aptus entered into the Sale and Purchase Agreement with the Vendor and the Warrantors in relation to the Acquisition. The consideration for the Acquisition shall be satisfied by the allotment and issue of the Acquisition Consideration Shares. On the same day, Aptus has also entered into the Subscription Agreement with the Vendor in relation to the issue of the Subscription Shares for an amount of HK$15.5 million. To the best of the knowledge of the Directors, information and belief having made all reasonable enquiries, B & B and the Vendor are third parties independent of Aptus and not connected persons (as defined under the GEM Listing Rules) of Aptus before entering into the Sale and Purchase Agreement and the Subscription Agreement. The Sale and Purchase Agreement and the Subscription Agreement are not inter-conditional. In the event that either one of the Subscription Agreement or the Sale and Purchase Agreement does not become unconditional, the Directors have been informed by B & B that it is their intention as at the Latest Practicable Date to proceed with the Sale and Purchase Agreement or the Subscription Agreement, as the case may be. Further details of the Sale and Purchase Agreement and the Subscription Agreement are set out below.

The following diagrams illustrate the shareholding structure of Aptus, B & B and the Target immediately before and after Completion:

Before Completion

Shareholding structure of Aptus

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

Byron Bay HoldingsLimited E-SourceLimited HoldingsLimitedJingle Wong KwokYiu, Chris ShareholdersPublic
(note 1) (note 2) (note 4)
(note 3)
16.93% 21.45% 1.94% 0.78% 58.90%
Aptus
Existing Business
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LETTER FROM THE BOARD

Shareholding structure of B & B

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

B & B
100% Ms. Hyasinta Mr. Lim
China Success (note 6) Atmaja King Hui (note 6)
Enterprises
Limited 50% 50%
100%
Mr. Wong Pentagon
Vendor Kim Ket Agents Ltd.
(note 6) (note 6)
75% 12.5% 12.5%
Ms. Hyasinta Mr. Lim
Atmaja King Hui
(note 6) (note 6)
Target
50% 50%
100%
B & B Natural Mr. Wong Pentagon
Products (BVI) Kim Ket Agents Ltd.
Limited (note 6) (note 6)
75% 12.5% 12.5%
75% Rapid Progress
Profits Limited
25%
Hsing Long
----- End of picture text -----

Upon Completion

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

B & B
100%
China Success
Enterprises
Limited
100%
Byron Bay HoldingsLimited (note 1) E-SourceLimited (note 2) Vendor HoldingsLimited (note Jingle 3) Wong KwokYiu, Chris (note 4) ShareholdersPublic
6.77% 8.58% 60.02% 0.78% 0.31% 23.54%
Ms. Hyasinta Mr Lim
Atmaja King Hui
(note 6) (note 6)
Aptus 50% 50%
Mr. Wong Kim Pentagon
Ket Agents Ltd.
(note 6) (note 6)
75% 12.5% 12.5%
Existing Ms. Hyasinta Mr. Lim
Business Atmaja King Hui
(note 6) (note 6)
Target
50% 50%
100%
B & B Natural Mr. Wong Pentagon
Products (BVI) Kim Ket Agents Ltd.
Limited (note 6) (note 6)
75% 12.5% 12.5%
75% Rapid Progress
Profits Limited
25%
Hsing Long
----- End of picture text -----

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LETTER FROM THE BOARD

Notes:

These Aptus Shares are beneficially owned by the Chen Family 2002 Trust, a discretionary trust. The discretionary objects of which include the family members of Mr. Chen Vee Li, Felix, an executive Director. Mr. Chen Si Te, Frank, a non-executive Director, is the father of Mr. Chen Vee Li, Felix.
These Aptus Shares are beneficially owned by E-Source Limited, which is wholly owned by the Ma Family 2002 Trust, a discretionary trust. The discretionary objects of which include family members of Mr. Ma Wai Hung, Vincent, a non-executive Director.
Jingle Holdings Limited is wholly and beneficially owned by Mr. Ma Wai Hung, Vincent.
Mr. Wong Kwok Yiu, Chris is a non-executive Director.
The percentages stated above assume that the Employee Options outstanding as at the Latest Practicable Date will not be exercised and that there will not be any changes to the total issued share capital of Aptus as at the Latest Practicable Date prior to Completion (other than the issue of the Consideration Shares).
Mr. Wong Kim Ket, Ms. Hyasinta Atmaja, Mr. Lim King Hui and Pentagon Agents Ltd. are Independent Third Parties.

THE SALE AND PURCHASE AGREEMENT

The principal terms of the Sale and Purchase Agreement are as follows:

Parties to the agreement:

the Vendor as seller
Aptus as purchaser
the Warrantors as warrantors

Subject matter of purchase:

75% interest in the equity share capital of the Target. The Target is a company incorporated in the British Virgin Islands, which indirectly holds an effective 93.75% interests in the entire issued share capital of Hsing Long. Further information regarding Hsing Long is set out in the section headed “Information on Hsing Long” below.

Consideration:

The Purchase Price is HK$4,000,000. The Purchase Price will be satisfied by the allotment and issue of the Acquisition Consideration Shares to the Vendor or its nominee at approximately HK$0.021 per Aptus Share.

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LETTER FROM THE BOARD

The Acquisition Consideration Shares consisting 190,476,190 new Aptus Shares represent approximately 30.8% of the issued share capital of Aptus as at the Latest Practicable Date and approximately 23.6% of the enlarged issued share capital of Aptus immediately after completion of the Acquisition or approximately 12.3% of the enlarged issued share capital of Aptus immediately after the Completion, assuming that there will be no change in the issued share capital of Aptus from the Latest Practicable Date to Completion save for the issue of the Acquisition Consideration Shares and the Subscription Shares.

The Purchase Price and the Issue Price per Acquisition Consideration Share were arrived at after arms’ length negotiations among the parties to the Sale and Purchase Agreement with reference to the turnover and financial performance of Hsing Long and the net asset value of Aptus Shares.

The issue price per Acquisition Consideration Share represents

(i) a discount of approximately 82.5% to the closing price per Aptus Share of HK$0.12 as quoted on GEM on the Last Dealing Date;
(ii) a discount of approximately of 84.98% to the 5-day average closing price per Aptus Share of HK$0.1398 as quoted on GEM up to and including the Last Dealing Date;
(iii) a discount of approximately 86.37% to the 10-day average closing price per Aptus Share of HK$0.1541 as quoted on GEM up to and including the Last Dealing Date;
(iv) a discount of approximately 82.5% to the closing price per Aptus Share of HK$0.12 (the trading of Aptus Shares on the Stock Exchange were suspended after the Last Dealing Date) as quoted on GEM on the Latest Practicable Date; and
(v) a premium of approximately 20% over the net tangible asset value and net asset value of HK$0.0174 per Aptus Share as at 30 September, 2003 based on the latest audited financial results of Aptus.

−10 −

LETTER FROM THE BOARD

Conditions precedent:

Completion of the Sale and Purchase Agreement is conditional upon the fulfilment (or waiver, in certain cases) of various conditions precedent. The conditions precedent include, among others, the following:

(i) the Aptus Shares remaining listed and traded on GEM at all times from the date of the Sale and Purchase Agreement to completion of the Sale and Purchase Agreement, save for any temporary suspension not exceeding fourteen consecutive trading days, or such longer period as the Vendor may accept in writing, and no indication being received on or before completion of the Sale and Purchase Agreement from the SFC or the Stock Exchange to the effect that the listing of the Aptus Shares on GEM will or may be withdrawn or objected to (or conditions will or may be attached thereto) as a result of completion of the Sale and Purchase Agreement or in connection with the terms of the Sale and Purchase Agreement;
(ii) all consents which are required or appropriate for the entering into or the implementation or completion of the Sale and Purchase Agreement by the Vendor and Aptus or for the performance of their respective obligations under the Sale and Purchase Agreement having been obtained, including, without limitation, such consents (if appropriate or required) of the Shareholders and of the shareholders of the Vendor, the Stock Exchange and the SFC and all filings with any relevant governmental or regulatory authorities and other relevant third parties in Hong Kong, Cayman Islands or elsewhere which are required or appropriate for the entering into and the implementation of the Sale and Purchase Agreement having been made; all waiting periods required under the laws of Hong Kong, Cayman Islands or any other relevant jurisdictions having expired or terminated; all applicable statutory or other legal obligations having been complied with;
(iii) the Stock Exchange approving the listing of and permission to deal in the Acquisition Consideration Shares;

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LETTER FROM THE BOARD

(iv) no indication from the Stock Exchange indicating that it will treat the transactions contemplated by the Sale and Purchase Agreement and/or the Subscription as a reverse takeover or as an application for a new listing of Aptus;
(v) the warranties, representations and undertakings given by the Vendor and the warranties, representations and undertakings given by Aptus, in the Sale and Purchase Agreement remaining true and accurate in all material respects;
(vi) the Vendor having been satisfied in its absolute discretion on its financial due diligence on the consolidated accounts of Aptus for the period ended 30 September, 2003;
(vii) the Shareholders, if necessary, having approved the Sale and Purchase Agreement; and
(viii) the SFC granting the Whitewash Waiver.

The Vendor may waive compliance with the conditions described above save for condition (iii) above.

If the above conditions precedent are not fulfilled or waived (as provided in the Sale and Purchase Agreement) in writing on or before 30 June, 2004 (or such later date as may be agreed by the parties), the Sale and Purchase Agreement will terminate and none of the parties to the Sale and Purchase Agreement shall have any claim against the others for costs, damages, compensation or otherwise, save in respect of any prior breach.

As at the Latest Practicable Date, conditions (iv), (v) and (vi) have been satisfied. A deed of variation had been entered into by the relevant parties to the Transactions to extend the long stop date for the satisfaction of the conditions precedent to 30 August, 2004. An announcement was made in this regard on 21 June, 2004.

The Sale and Purchase Agreement and the Subscription Agreement are not interconditional. In the event that either one of the Subscription Agreement or the Sale and Purchase Agreement does not become unconditional, the Directors have been informed by the Vendor that it is their intention as at the Latest Practicable Date to proceed with the Sale and Purchase Agreement or the Subscription Agreement, as the case may be.

Information on Aptus

Aptus is a company incorporated in the Cayman Islands, and the issued Aptus Shares are listed on GEM. The Aptus Group is a total solutions provider and it targets at international and

−12 −

LETTER FROM THE BOARD

PRC pharmaceutical and healthcare companies. The existing business of Aptus Group includes the trading of pharmaceutical products and commercialisation services which target at international and PRC pharmaceutical and healthcare companies.

Information on the Vendor, Target and Hsing Long

The Vendor is an investment holding company incorporated in the British Virgin Islands. The only asset of the Target is a 93.75% indirect equity interest in Hsing Long.

Hsing Long was jointly founded by Mr. Wong Kim Ket and Mr. Lim King Hui. Mr. Wong Kim Ket is currently an executive director of Hsing Long. His formal educational background is in computer engineering and he also has a master degree in business administration from University of Oregon in the United States of America. His responsibilities include overall day-to-day management and operations, and implementation and control of new as well as existing strategies and businesses. He has more than 15 years of international trade and finance experience. Mr. Lim King Hui is an established trader in the palm oil industry with over 10 years experience with a major industry player. He graduated from University of Buffalo, New York, business school.

The Target is an investment holding company, which in turn indirectly holds 93.75% of the entire issued share capital of Hsing Long. The remaining 6.25% interest of the Target and Hsing Long are indirectly held by the Independent Third Parties. Hsing Long was incorporated in Singapore in 1996 which is principally engaged in the business of the trading of edible oil by-products mainly vegetable oil and by-products (a brief summary of edible oils is set out in the section headed “Edible Oils” herein) by sourcing crude palm oil from Indonesian plantation and selling it to refineries and processors in South East Asia, Indian sub-continent, Europe and in the PRC.

B & B acquired 75% of the equity interests of Hsing Long on 1 January, 2003 for a total consideration of HK$600,000 from independent third parties who are not connected person (as defined under the GEM Listing Rules) of Aptus and B & B.

Based on Hsing Long’s audited financial statements for the four years ended 31 December, 2003 and three months ended 31 March, 2004, its audited net profit/(loss) before taxation and extraordinary items, audited net profit/(loss) after taxation and extraordinary items, turnover and net asset value are as follows:

	Twelve months	Twelve months	Twelve months	Twelve months	Twelve months	Twelve months	Six months	Six months	Twelve	months	Three months	Three months
	ended 31/12/2000		ended 31/12/2001		ended 31/12/2002		ended 30/06/2003		ended 31/12/2003		ended 31/3/2004
	(Audited)		(Audited)		(Audited)		(Audited)		(Audited)		(Audited)
	S$	HK$	S$	HK$	S$	HK$	S$	HK$	S$	HK$	S$	HK$
Turnover	4,971,897 22,671,850		8,652,490 39,455,354		6,745,763 30,760,679		4,764,832	21,727,634	9,131,232 41,638,918		1,866,860	8,512,882
Net asset value	129,333	589,758	162,569	741,315	175,472	800,152	72,223	329,337	73,692	336,036	75,530	344,417
Profit/(loss) before
tax and
extraordinary
items	712	3,247	36,936	168,428	19,135	87,256	(30,588)	(139,481)	(28,989)	(132,190)	1,838	8,381
Taxation	65	296	3,700	16,872	6,232	28,418	(2,811)	(12,818)	(2,681)	(12,225)	–	–
Profit/(loss) after
tax and
extraordinary
items	647	2,951	33,236	151,556	12,903	58,838	(27,777)	(126,663)	(26,308)	(119,965)	1,838	8,381

−13 −

LETTER FROM THE BOARD

The financial statements of Hsing Long for the three years ended 31 December, 2003 and three months ended 31 March, 2004 have been set out in the Appendix II to this circular.

The Target, B & B Natural Products (BVI) Limited and Rapid Progress Profits Limited are investment holding companies and their accountants’ report have been set out in the Appendix IIIA, IIIB and IIIC to this circular.

Upon completion of the Sale and Purchase Agreement, Aptus will adopt the acquisition accounting method to consolidate the financial results of Hsing Long into the financial results of Aptus using Hong Kong Generally Accepted Accounting Principles.

THE SUBSCRIPTION AGREEMENT

On 23 March, 2004, the parties specified below entered into the Subscription Agreement which contains terms including those described below.

Parties to the agreement:

the Vendor as subscriber
Aptus as issuer

Consideration:

The consideration for the Subscription Shares is approximately HK$15,500,000 payable in one lump sum by the Vendor to Aptus in cash on completion of the Subscription Agreement.

The Subscription Shares represent approximately 119% of the issued share capital of Aptus as at the Latest Practicable Date and approximately 48% of the enlarged issued share capital of Aptus immediately after the Completion (assuming that there will be no change in the issued share capital of Aptus from the Latest Practicable Date to Completion save for the issue of the Acquisition Consideration Shares and the Subscription Shares).

The issue price of HK$0.021 per Subscription Share represents

(i) a discount of approximately 82.5% to the closing price per Aptus Share of HK$0.12 as quoted on GEM on the Last Dealing Date;
(ii) a discount of approximately of 84.98% to the 5-day average closing price per Aptus Share of HK$0.1398 as quoted on GEM for the 5-day period up to and including the Last Dealing Date;

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LETTER FROM THE BOARD

(iii) a discount of approximately 86.37% to the 10-day average closing price per Aptus Share of HK$0.1541 as quoted on GEM for the 10-day period up to and including the Last Dealing Date;
(iv) a discount of approximately 82.5% to the closing price per Aptus Share of HK$0.12 (the trading of the Aptus Shares on the Stock Exchange were suspended after the Last Dealing Date) as quoted on GEM on the Latest Practicable Date; and
(v) a premium of approximately 20% over the net tangible asset value and net asset value of HK$0.0174 per Aptus Share as at 30 September, 2003 based on the latest audited financial result of Aptus.

The Subscription Price was negotiated on arm’s length basis with reference to the net asset value of Aptus, between B & B and Aptus and the directors of B & B and Aptus believe that the terms of the Subscription are fair and reasonable and in the interests of their respective shareholders as a whole.

Conditions precedent:

Completion of the Subscription Agreement is conditional upon the fulfilment (or waiver, in certain cases) of various conditions precedent. The conditions precedent include, among others, the following:

(i) the Independent Shareholders in the EGM having approved (a) the Subscription Agreement; and (b) by a separate resolution the relevant Independent Shareholders having approved the Whitewash Waiver with such Shareholders abstaining as may be required to abstain by law or by the rules of the Stock Exchange and the Executive and Shareholders which involved in or interested in the Transactions be abstained for voting;
(ii) the Stock Exchange approving the listing of, and permission to deal in, the Subscription Shares;
(iii) the Executive granting the Whitewash Waiver;

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LETTER FROM THE BOARD

(iv) the Vendor having been satisfied in its absolute discretion on its financial due diligence on the consolidated accounts of Aptus for the period ended 30 September, 2003; and
(v) no indication from the Stock Exchange indicating that it will treat the transactions contemplated by the Sale and Purchase Agreement and/or the Subscription Agreement as a reverse takeover or as an application for a new listing of Aptus.

The Vendor may waive compliance with the conditions described above save for condition (ii) above, and the Vendor will not waive condition (iii) above unless the Vendor has demonstrated to the satisfaction of the Executive that in the event that it will be required to make a mandatory offer under the Takeovers Code as a result of the Subscription, it has sufficient financial resources to fulfil its obligations under Rule 26 of the Takeovers Code.

If the above conditions precedent are not fulfilled or waived (as provided in the Subscription Agreement) in writing on or before the date falling 90 days from the date of the Subscription Agreement (ie. 21 June, 2004) (or such later date as may be agreed), the Subscription Agreement will terminate and none of the parties shall have any claim against the others for costs, damages, compensation or otherwise, save in respect of any prior breach.

As at the Latest Practicable Date, conditions (iv) and (v) have been satisfied. A deed of variation had been entered into by the relevant parties to the Subscription Agreement to extend the longstop date for the satisfaction of the conditions precedent to 30 August, 2004. An announcement was made in this regard on 21 June, 2004.

DIRECTORS AND MANAGEMENT OF APTUS

All executive, non-executive and independent non-executive Directors (save for Mr. Ma Wai Hung, Vincent and Mr. Wong Kok Sun) will resign as Directors upon completion of the Subscription Agreement. Mr. Ma Wai Hung, Vincent will remain as a non-executive Director and Mr. Wong Kok Sun will remain as an executive Director. B & B proposes to nominate Mr. Lau Hin Kun and Mr. Fung King Him, Daniel as additional executive Directors, Mr. Tian He Nian as a non-executive Director and Mr. Tsui Wing Tak, Mr. Tang Chi Keung and Ms. Qi Mei as independent non-executive Directors.

−16 −

LETTER FROM THE BOARD

Mr. Lau Hin Kun , aged 45, has over twenty years of experience in the banking sector and accounting experience of both Hong Kong and the PRC. He has previously worked in Nanyang Commercial Bank, Limited, Charlie International Holdings Limited and Chiyu Banking Corporation Limited.

Mr. Fung King Him, Daniel , aged 34, holds a bachelor’s degree from the University of Wisconsin in the United States of America with double majors in Mathematics and Computer Science. He has previously worked in Lehman Brothers Asia Limited, HSBC Asset Management Limited and Platinum Securities Company Limited.

Mr. Tian He Nian , aged 64, is a native of Jiangsu Province, PRC, a member of the Chinese Communist Party, formerly the deputy head of the Department of United Front Work of the Central Government of China. He worked as a stenographer of the office of the Central Government Party from 1961 to 1965, and a member of the “social education” team in Tai Yuan, Sanxi Province and a cadre of People’s Educational Press from 1965 to 1979. From 1979 to 1985, he worked successively as deputy divisional head and deputy bureau head of the Central Office. From 1985 to 1990, he worked as the deputy head of the instructor delegation sent by the Central Government to Anhui Province and deputy head of the administration bureau of Central Propaganda Office. From 1990 to 1993, he was director of the Central Propaganda Office. From 1993 to 1994, he was a director of the office of the Department of United Front Work of the Central Government. From 1994 to 1997, he was concurrently deputy secretary-general and director of the office of the Department of United Front Work. From 1997 to 1998, he was secretary-general and director of the office of the Department of United Front Work. From May to September 1998, he was secretary-general of the said Department. From September 1998 to 2003, he was deputy head of the said Department, and the vice-chairman of China Overseas Association.

Mr. Tsui Wing Tak aged 35, holds a bachelor’s degree in economics from Macquarie University, Australia. He is a member of both the Hong Kong Society of Accountants and CPA Australia. He has over 11 years of experience in auditing, accounting and financing.

Ms. Qi Mei , aged 36, graduated from Gansu Industrial University in 1991, majored in Industrial and Corporate Management, after which she was assigned to Lian Cheng Aluminium Factory Lian Hai Zong He Development Corporation, an enterprise under the direct control of the Central Government, to work as chief accountant. She has worked for various real estates and securities companies and has vast financial and accounting experience in the PRC.

Mr. Tang Chi Keung, ACIB, AHKIB, MBA, DIP. FIN.(CUHK), aged 43, is a holder of Master Degree in Business Administration of the University of Wales, the United Kingdom, an Associate Member of The Chartered Institute of Bankers, the United Kingdom, and an Associate Member of The Hong Kong Institute of Bankers. He is a banking professional with extensive experience in various aspects of wholesale banking business in the PRC and Hong Kong. Currently Mr. Tang is a holding a management position with a major international bank in the PRC. Mr. Tang is also an experienced lecturer and has led many successful banking courses for various institutions in the PRC, Hong Kong and Macau.

−17 −

LETTER FROM THE BOARD

CHANGES TO THE SHAREHOLDING IN APTUS AS A RESULT OF THE TRANSACTIONS

The interest in Aptus of the substantial Shareholders, the Directors, and the public Shareholders immediately before and after Completion are as follows:

Byron Bay Holdings Limited E-Source Limited Jingle Holdings Limited Wong Kwok Yiu, Chris Public Shareholders B & B Total	Latest Practicable Date No. of Aptus Shares % 104,650,000 16.93 (Note 1) 132,650,000 21.45 (Note 2) 12,000,000 1.94 (Note 3) 4,800,000 0.78 (Note 4) 364,160,000 58.90 nil nil 618,260,000 100.00	Immediately after completion of the Acquisition but before completion of the Subscription No. of Aptus Shares % 104,650,000 12.94 132,650,000 16.40 12,000,000 1.48 4,800,000 0.59 364,160,000 45.03 190,476,190 23.56 808,736,190 100.00	Immediately after Completion No. of Aptus Shares % 104,650,000 6.77 (Note 6) 132,650,000 8.58 12,000,000 0.78 4,800,000 0.31 (Note 6) 364,160,000 23.54 (Note 6) 928,571,428 60.02 1,546,831,428 100.00	Immediately after Completion No. of Aptus Shares % 104,650,000 6.77 (Note 6) 132,650,000 8.58 12,000,000 0.78 4,800,000 0.31 (Note 6) 364,160,000 23.54 (Note 6) 928,571,428 60.02 1,546,831,428 100.00
				100.00

Notes:

These Aptus Shares are beneficially owned by the Chen Family 2002 Trust, a discretionary trust. The discretionary objects of which include the family members of Mr. Chen Vee Li, Felix, an executive Director. Mr. Chen Se Ti, Frank, a non-executive Director, is the father of Mr. Chen Vee Li, Felix.
These Aptus Shares are beneficially owned by E-Source Limited, which is wholly owned by the Ma Family 2002 Trust, a discretionary trust. The discretionary objects of which include the family members of Mr. Ma Wai Hung, Vincent, a non-executive Director.
Jingle Holdings Limited is wholly and beneficially owned by Mr. Ma Wai Hung, Vincent.
Mr. Wong Kwok Yiu, Chris is a non-executive Director.
The percentages stated above assume that the Employee Options outstanding as at the Latest Practicable Date will not be exercised and that there will not be any changes to the total issued share capital of Aptus as at the Latest Practicable Date prior to Completion (other than the issue of the Acquisition Consideration Shares and the Subscription Shares).
Upon the Completion, all executive, non-executive and independent non-executive Directors (save for Mr. Ma Wai Hung, Vincent and Mr. Wong Kok Sun) will resign as Directors. The shareholding interests which are directly or indirectly held by Mr. Chen Vee Li, Felix, Mr. Chen Si Te, Frank and Mr. Wong Kwok Yiu, Chris will be considered as the shareholding interests held by the public. Therefore, upon the Completion, approximately 30.62% of issued Aptus Shares will be held in the public hands.

−18 −

LETTER FROM THE BOARD

EDIBLE OILS

Edible oils are recognised as essential nutrients in human diet. They produce the most concentrated source of energy of any foodstuff, supply essential fatty acids, contribute greatly to the feeling of satiety after eating, are carriers for fat soluble vitamins and serve to make foods more palatable. During the past year, the global demand for edible oils has been increasing due to the natural population growth coupled with the fact that people nowadays are more health conscious thereby the demand for animal fat with relatively high cholesterol content has decreased. These changes have led to large scale productions of edible oils which has made dietary transition from animal fats possible.

Based on the aforesaid and the Directors’ awareness of the growing trend for health conscious foods in the general population, the Directors consider that the prospects of the edible oil business carried on by Hsing Long to be promising.

REASONS FOR THE ACQUISITION AND USE OF PROCEEDS

Aptus Group has recorded losses for the last two financial years and Aptus will continue its Existing Business with its prudent approach. While the Directors believe that Aptus Group’s current business has potential, its financial position imposes certain constraints. Given the economic and social problems in 2003, the Directors believe that the Acquisition will permit the Aptus Group to diversify its business to decrease its exposure to business and economic risks.

The business of Target and its subsidiaries are in the trading of edible oils (principally comprised of vegetable oils) and their by-products. Edible oils are an essential part of a consumer’s everyday life. The edible oils products of Hsing Long are based in Indonesia which, together with Malaysia, are the two major crude palm oil producing countries in the world. There are a number of players in the Indonesian and Malaysian edible oil trading industry. Hsing Long is inevitably facing competition from them. Nevertheless, as advised by the directors of B & B, leveraging on its established scale of operation, close relationship with a number of plantation suppliers in Indonesia and its experienced management team, Hsing Long is able to maintain and further expand its customers’ base. Since edible oil is a basic ingredient of some medical products (as the cream base of some medical products), the Directors consider that the relevant experience of Aptus in trading of the medical products will benefit the commercialisation of edible oil. The Directors consider that, therefore, the edible oil business is a horizontal extension of the business of the Aptus Group. In addition, given that Hsing Long has been in this business since 1996 and has demonstrated a growth trend in the trading volume since 1999, the Directors are of the view that such business will enhance the financial position of the Aptus Group and provide the Aptus Group with an opportunity to expand its business and to diversify its existing business risks. The Vendor intends to continue the Existing Business and will horizontally extend the current business of Aptus by the commercialization of edible oil. There is currently no intention for the redeployment of fixed assets for the commercialization of the edible oil business. Save for the Directors who shall resign on Completion, it is the Vendor’s intention that all other employees of Aptus shall continue to be employed by the Aptus Group upon Completion.

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LETTER FROM THE BOARD

In addition, the Subscription will provide cash to the Aptus Group to improve its liquidity and operating efficiency. The funds from the Subscription will be applied to improve the working capital of Aptus and to finance its business operation. The Directors currently do not intend to use the funds from the Subscription to repay outstanding loans of Aptus and will not change the use of proceeds of the business plan as stated in the Aptus’ prospectus and financial report. The Directors are of the view that the Subscription and the Acquisition together will be beneficial to and in the interest of Aptus Group and the Shareholders as a whole.

The Board considers that the terms of the Sale and Purchase Agreement are on normal commercial terms and are fair and reasonable to Aptus. The Purchase Price was determined on an arm’s length negotiation between Aptus and the Vendor with reference to Hsing Long’s turnover and its financial performance having considered the growth potential in the trading of edible oils. The growth potential of trading of edible oils is justified on (i) increase in turnover from S$6,745,763 for the year ended 31 December, 2002 to S$9,131,232 for the year ended 31 December, 2003 (equivalent to approximately HK$30.8 million to HK$41.6 million), representing a growth in turnover of approximately 35.4%; and (ii) the potential synergic effect on the Acquisition and the Existing Business of Aptus.

As disclosed in the above section, the turnover of Hsing Long has decreased from S$8,652,490 to S$6,745,763 (equivalent to approximately HK$39.5 million to HK$30.8 million) respectively for the financial period from 2001 to 2002. The drop in turnover for the period from 2001 to 2002 was due to the increase in price of edible oils and therefore the holding back in purchase by buyers. As a result, the profit margins and the profit of Hsing Long were squeezed. The decreasing trend of profit to loss was due to various contributing factors including (i) increase prices for edible oils thereby increase in cost and decrease in profit margin; (ii) the adverse economic effect as a result of the terrorist attacks in the United States of America on 11 September, 2001 leading to a decrease in buyers; and (iii) the adverse effect of Severe Acute Respiratory Syndrome leading to a decrease in buyers and the general downturn in worldwide economies leading to a decrease in sales. For the year ended 31 December, 2003, Hsing Long has recorded a gross profit of approximately 1.1%. The Board considers that despite the low gross profit margin generated by the edible oil business, the huge turnover by the edible oil business will provide a high profit potential for Aptus and therefore is attractive to Aptus.

Despite the loss of S$26,308 (equivalent to approximately HK$119,965) for Hsing Long for the twelve months ended 31 December, 2003 (resulting from the making of a provision of bad debt in the amount of S$30,262 (equivalent to approximately HK$137,995)), after discussion with the directors of B & B, the Directors are positive about the future return on the trading business of edible oil based on the potential synergic effect on the Acquisition and the Existing Business of Aptus. The Directors note that Hsing Long would be profitable for the twelve months ended 31 December, 2003 had it not been for the provision made for a bad debt in the amount of S$30,262 (equivalent to approximately HK$137,995). The Directors consider that with their cost control and experience in the commercialisation service, the trading of edible oil will provide an alternative source of income to the Aptus Group.

−20 −

LETTER FROM THE BOARD

In May 2003, Hsing Long has declared a dividend of S$75,472 (equivalent to approximately HK$344,152) to its shareholders. The dividend was paid to the then shareholders on November 2003. The declaration and payment of dividend will be subject to the discretion of the new Directors and will be dependent upon the Company’s earnings, financial condition, cash requirements and availability.

The Board also considers that the terms of the Subscription Agreement are on normal commercial terms and the terms of the Subscription Agreement and the Subscription Price are fair and reasonable to Aptus having considered that (i) a discount of approximately 82.5% to the closing price per Aptus Share of HK$0.12 as quoted on GEM on the Last Dealing Date; (ii) the subscription price of HK$0.021 represents a premium of approximately 20% over the net tangible asset value of HK$0.0174 per Aptus Share as at 30 September, 2003 based on the latest audited financial result of Aptus; and (iii) HK$15.5 million will be immediately available to Aptus Group as working capital which will improve the liquidity and the operating efficiency of the Aptus Group.

Following completion of the Subscription, Aptus intends to use the proceeds therefrom to expand its Existing Business and also the distribution of the edible oil business currently conducted by Hsing Long. Furthermore, the proceeds will also be applied to improve Aptus’ working capital.

B & B acquired a 75% equity interest in Hsing Long in 2003 for a total consideration of HK$600,000. B & B is expected to recognise a gain of HK$3,437,500 as a result of the Acquisition.

GENERAL OFFER IMPLICATION ON B & B

B & B has confirmed that neither itself nor parties acting in concert with it have in the six months ending on the Last Dealing Date purchased or sold any Aptus Shares nor will they deal in Aptus Shares until the EGM. None of them holds any Aptus Shares or has any other interest in the Aptus Shares on the Latest Practicable Date, other than pursuant to the Sale and Purchase Agreement and the Subscription Agreement.

Upon Completion, B & B and parties acting in concert with it will have acquired 60.02% of the issued share capital of Aptus. Under the Takeovers Code, upon Completion, B & B would be obliged, by virtue of it having acquired 30% or more of the issued share capital of Aptus, to make a general offer under Rule 26 of the Takeovers Code to purchase all the Aptus Shares (other than the Acquisition Consideration Shares) and any Aptus Shares already owned, or agreed to be acquired by B & B and parties acting in concert with it. As stated above, the Vendor has applied for (and completion of the Subscription Agreement is conditional upon) the grant of the Whitewash Waiver (unless otherwise waived). The Executive has agreed to grant the waiver subject to Independent Shareholders’ approval. Voting on the Whitewash Waiver will be conducted by poll.

−21 −

LETTER FROM THE BOARD

RELEVANT REQUIREMENTS OF THE GEM LISTING RULES

It is the intention of B & B to maintain the listing of Aptus on GEM after Completion.

Upon Completion, should there be less than 25% of issued Aptus Shares in public hands, B & B will take appropriate steps to ensure that 25% of issued Aptus Shares are in public hands. Accordingly, B & B will take appropriate steps, including considering the arranging for a sale of Aptus Shares or alloting new Shares after Completion to persons who are not connected persons (as defined in the GEM Listing Rules) of Aptus and B & B, and/or such other steps as may be appropriate, so as to restore the minimum percentage of securities of Aptus held in public hands in accordance with the GEM Listing Rules.

If the Stock Exchange believes that (i) a false market exists or may exist in the Aptus Shares; or (ii) there are too few Aptus Shares in public hands to maintain an orderly market, it will consider exercising its discretion to suspend trading in the Aptus Shares. In this connection, it should be noted that upon the Completion, there may be insufficient public float for the Aptus Shares and therefore trading in the Aptus Shares may be suspended until a sufficient level of public float is attained.

GENERAL

As at the date of this circular, the Board comprises three executive Directors, being Mr. Chen Vee Li, Felix, Mr. Wong Kok Sun, Mr. Lee Chan Wah, three non-executive Directors, being Mr. Ma Wai Hung, Vincent, Mr. Chen Si Te, Frank and Dr. Wong Kwok Yiu, Chris and two independent non-executive Directors, being Mr. Ma Ching Nam and Dr. Yau Yat Yin.

As at the date of this circular, the board of directors of B & B comprises three executive directors, being Madam Cheung Kwai Lan, Mr. Chan Tung Mei, Mr. Chan Ting, one non-executive director, Mr. Kyle Arnold Shaw Junior, and two independent non-executive directors, Professor Peter Chin Wan Fung and Mr. Du Ying Min.

APPLICATION FOR LISTING

An application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares to be allotted and issued pursuant to the terms of the Sale and Purchase Agreement and the Subscription Agreement.

EXTRAORDINARY GENERAL MEETING

A notice convening the EGM to be held at 20/F., Alexandra House, 16-20 Chater Road, Central, Hong Kong on 26 July, 2004 at 10:30 a.m. is set out on pages 133 to 135 of this circular at which resolutions will be proposed to consider and approve and ratify, inter alia,

(i) the entering into of the Sale and Purchase Agreement;

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LETTER FROM THE BOARD

(ii) the entering into of the Subscription Agreement; and
(iii) the application of the Whitewash Waiver.

Pursuant to the GEM Listing Rules and the Takeovers Code, approval from the Independent Shareholders is required for the Transactions and the Whitewash Waiver. The voting for the Transactions and the Whitewash Waiver will be conducted by poll at the EGM. No Shareholders, save for Directors, being Mr. Chen Vee Li, Felix, Mr. Wong Kok Sun, Mr. Lee Chan Wah, Mr. Ma Wai Hung, Vincent, Mr. Chen Si Te, Frank and Dr. Wong Kwok Yiu, Chris and their associates, who holds Aptus Shares, will abstain from voting at the EGM.

You will find enclosed a form of proxy for use at the EGM. If you are not able to attend the EGM in person, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon to the office of Registrar as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the EGM. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM should you so desire.

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

RECOMMENDATION

The Independent Board Committee has been set up to consider the terms of the Sale and Purchase Agreement, the Subscription Agreement and the Whitewash Waiver. The Independent Financial Adviser has been appointed to advise the Independent Board Committee regarding the terms of the Sale and Purchase Agreement, the Subscription Agreement and the Whitewash Waiver.

Your attention is drawn to the letter from the Independent Board Committee set out on page 25 of this circular. Your attention is also drawn to the letter of advice from the Independent Financial Adviser which confirms, among other things, their advice to the Independent Board Committee in respect of the terms of the Sale and Purchase Agreement, the Subscription Agreement and the Whitewash Waiver and the principal factors and reasons held by them in arriving at such advice. The text of the letter from the Independent Financial Adviser is set out on pages 26 to 48 at this circular.

−23 −

LETTER FROM THE BOARD

In addition, the Directors consider that the terms of the Sale and Purchase Agreement and the Subscription Agreement, the terms of the Transactions and the arrangement thereunder are fair and reasonable and on normal commercial terms so far as the Company and the Shareholders are concerned and entering into the Sale and Purchase Agreement and the Subscription and the Transactions are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM.

ADDITIONAL INFORMATION

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

Yours faithfully, For and on behalf of the Board of Aptus Holdings Limited Wong Kok Sun Director

−24 −

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [55 x 60] intentionally omitted <==

APTUS HOLDINGS LIMITED ( )

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8212)

9 July, 2004

To the Independent Shareholders

Dear Sir or Madam,

We refer to the circular dated 9 July, 2004 issued by Aptus (the “Circular”) of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed by the Board to constitute the Independent Board Committee to advise you in connection with the terms of the Sale and Purchase Agreement, the Subscription Agreement and the Whitewash Waiver and Tai Fook Capital has been appointed as the independent financial adviser to advise us on the Acquisition, the Subscription and the Whitewash Waiver.

Having considered the terms of the Sale and Purchase Agreement, the Subscription Agreement, the Whitewash Waiver and the advice of the Independent Financial Adviser in relation thereto as set out on pages 26 to 48 of the Circular, we concur with the view of the Independent Financial Adviser that the Acquisition, the Subscription and the Whitewash Waiver are in the interests of the Aptus Group and the Shareholders as a whole and the terms of each of the Subscription Agreement and the Sale and Purchase Agreement are on normal commercial terms and is fair and reasonable so far as the Independent Shareholders are concerned. We therefore recommend that you vote in favour of the resolutions to be proposed at the EGM to approve the Sale and Purchase Agreement, the Subscription Agreement and the Whitewash Waiver.

Yours faithfully,

Ma Ching Nam Yau Yat Yin Independent Board Committee

−25 −

LETTER FROM TAI FOOK CAPITAL

==> picture [51 x 51] intentionally omitted <==

9 July, 2004

To the Independent Board Committee Aptus Holdings Limited 30th Floor Sunshine Plaza 353 Lockhart Road Hong Kong

Dear Sirs,

MAJOR AND CONNECTED TRANSACTION AND WHITEWASH WAIVER APPLICATION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee in relation to the Transactions and the Whitewash Waiver, details of which are contained in the circular dated 9 July, 2004 (the “Circular”) to Shareholders of which this letter forms part. Terms used in this letter shall have the same respective meanings in the Circular unless the context otherwise requires.

On 23 March, 2004, Aptus entered into the Subscription Agreement with the Vendor in relation to the issue of the Subscription Shares. On the same date, Aptus also entered into the Sale and Purchase Agreement with the Vendor and the Warrantors in relation to the acquisition of a 75% interest in the issued share capital of the Target through the issue of the Acquisition Consideration Shares. The Subscription Agreement and the Sale and Purchase Agreement are not inter-conditional. As the Vendor and parties acting in concert with it will, hold approximately 54.42% of the enlarged issued share capital of Aptus immediately after completion of the Subscription (or approximately 60.02% upon completion of the Subscription and the Acquisition), a general offer obligation is triggered under Rule 26 of the Takeovers Code and the Vendor has applied to the Executive for the Whitewash Waiver. Moreover, as the Vendor will become a substantial Shareholder upon Completion, the Acquisition constitutes a connected transaction for Aptus under the GEM Listing Rules. In our capacity as the independent financial adviser to the Independent Board Committee, our role is to provide you with an independent opinion and recommendations as to whether the terms of the Transactions and the Whitewash Waiver are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM TAI FOOK CAPITAL

The Board comprises altogether eight Directors, being (i) three executive Directors, namely Mr. Chen Vee Li, Felix, Mr. Wong Kok Sun, Mr. Lee Chan Wah; (ii) three non-executive Directors, namely Mr. Ma Wai Hung, Vincent, Mr. Chen Si Te, Frank and Dr. Wong Kwok Yiu, Chris; and (iii) two independent non-executive Directors, namely Mr. Ma Ching Nam and Dr. Yau Yat Yin. Mr. Chen Vee Li, Mr. Wong Kok Sun and Mr. Lee Chan Wah have been involved in the discussions in respect of the Transactions and the Whitewash Wavier. Pursuant to Rules 17.47 (6)(a) of the GEM Listing Rules, independent board committee shall consist only of independent non-executive directors. Despite the fact that each of Mr. Ma Ching Nam and Dr. Yau Yat Yin has 400,000 outstanding share options of Aptus as at the Latest Practicable Date, none of them have a material interest in the Transactions. Accordingly, the Independent Board Committee, comprising Mr. Ma Ching Nam and Dr. Yau Yat Yin (being the independent non-executive Directors), has been appointed to give advice and recommendations to the Independent Shareholders regarding the Transactions and the Whitewash Waiver.

We were appointed as the independent financial adviser to the independent board committee of B & B in relation to the proposed material change to the general character or nature of its business resulting from the establishment of a joint stock limited company (the “B & B Transaction”), details of which were contained in the circular of B & B dated 16 December, 2003. The B & B Transaction is not related to the Transactions. Moreover, we only acted as the independent financial adviser to the independent board committee of B & B and no financial advice was given to B & B itself regarding the B & B Transaction. In our opinion, our previous engagement in the B & B Transaction will not affect the objectivity and independency of our advice regarding the Transactions.

In formulating our opinion, we have relied on the information and facts supplied to us by Aptus, management and directors of the Aptus Group, B & B and its subsidiaries and have assumed that all such information and facts and any representations made to us are true, accurate and complete as at the date hereof. We have also assumed that all information, representations and opinions contained or referred to in the Circular are fair and reasonable and have relied on them. We have sought and received confirmation from Aptus, management and directors of the Aptus Group, B & B and its subsidiaries that all relevant information has been supplied to us and that no material facts have been omitted and we are not aware of any facts or circumstances which would render the information provided and the representations made to us untrue, inaccurate or misleading.

We consider we have reviewed sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted an independent verification of the information nor have we conducted any form of in-depth investigation into the businesses and affairs of Aptus or any of its subsidiaries and associates.

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LETTER FROM TAI FOOK CAPITAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the Transactions and the Whitewash Waiver, we have considered the following principal factors and reasons:

I. Background information on the Aptus Group

1. Background

The Aptus Group is principally engaged in providing product commercialization services to international and domestic pharmaceutical and healthcare companies in the PRC, as well as the trading of pharmaceutical products. Commercialization services encompass direct marketing, product consulting and sales force management consulting services.

2. Financial information

The following sets out the financial results of the Aptus Group for the three years ended 30 September, 2003 and the six months ended 31 March, 2004. The related discussions of the financial performance of the Aptus Group are principally based on the “Chairman’s statement” in the relevant annual reports and interim report of Aptus.

Year ended 30 September, 2001 (Audited) HK$’000 10,595 –	Year ended 30 September, 2002 (Audited) HK$’000 12,409 8,108	Year ended 30 September, 2003 (Audited) HK$’000 1,503 15,651	Six months ended 31 March, 2004 (Unaudited) HK$’000 477 – 477 (711) – (711) (3,945)
10,595 5,125 – 5,125	20,517 4,602 (484) 4,118	17,154 (7,750) (36,060) (43,810)	477
			(711 –
			(711
209	(3,187)	(53,339)

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LETTER FROM TAI FOOK CAPITAL

Net current assets/(liabilities) Net asset value	As at 30 September, 2001 (Audited) HK$’000 9,646 16,255	As at 30 September, 2002 (Audited) HK$’000 43,540 64,111	As at 30 September, 2003 (Audited) HK$’000 (1,745) 10,772	As at 31 March, 2004 (Unaudited) HK$’000 (3,689) 6,827

2.1 Financial performance for the two years ended 30 September, 2001 and 2002

Despite the growth in total audited turnover by approximately HK$9.9 million contributed mainly by the launching of trading business of pharmaceutical products, audited net profit from the ordinary activities attributable to Shareholders decreased from approximately HK$209,000 in 2001 to an audited net loss of approximately HK$3.2 million in 2002, as a result of the increase in the overall administrative expenses.

2.2 Financial performance for the year ended 30 September, 2003

For the year ended 30 September, 2003, audited turnover from product commercialization services business recorded a decrease by approximately 87.9% to approximately HK$1.5 million when comparing with the financial results for the year ended 30 September, 2002. According to the 2003 annual report of Aptus, the decrease in the turnover from product commercialization services business was mainly due to two factors. Firstly, the Aptus Group had placed significant emphasis on its pharmaceutical products trading business and utilized majority of its resources in it. Secondly, as most of the Aptus Group’s customers are multi-national pharmaceutical companies, many of them had cancelled or reduced business activities and travel in the PRC during the outbreak of Severe Acute Respiratory Syndrome (“SARS”) and, as a result, many contracts under negotiation were therefore cancelled or delayed.

As stated above, the Aptus Group had focused on the expansion on the business of trading of pharmaceutical products in 2003 and an increase in audited turnover from trading business by approximately 93.0% to approximately HK$15.7 million was generated. However, an audited segment loss of approximately HK$36.1 million was recorded. Part of the loss was due to the outbreak of SARS, which caused the worsening of the overall economic environment and delays in the settlement of account receivables. Besides, as stated in the 2003 auditors’ report, due to the cancellation of purchase orders on certain inventories (“Inventories”) with alleged quality defects in the mainland China, a full provision of approximately HK$16 million was made against the Inventories.

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LETTER FROM TAI FOOK CAPITAL

As at 30 September, 2003, the Aptus Group had audited net current liabilities of approximately HK$1.7 million. The Aptus Group also recorded an audited net loss from the ordinary activities attributable to Shareholders of approximately HK$53.3 million for the year ended 30 September, 2003. According to the 2003 annual report, several measures had been contemplated to improve the Aptus Group’s financial position and its cash position. One of the measures was to strengthen the capital base of the Aptus Group through various fund raising exercises, including, but not limited to, a private placement and/or a rights issue of new Aptus Shares. Moreover, the Aptus Group also adopted a conservative business strategy to improve its financial performance by shifting its focus from trading of pharmaceutical products back to provision of products commercialization services, which would require relatively fewer resources with relatively higher profit margin.

2.3 Financial performance for the six months ended 31 March, 2004

An unaudited turnover of approximately HK$477,000 was generated from the provision of products commercialization services and the trading of pharmaceutical products was halted for the six months ended 31 March, 2004. The revenue generating ability of the Aptus Group was significantly weakened.

An unaudited net loss from the ordinary activities attributable to Shareholders of approximately HK$3.9 million was recorded for the six months ended 31 March, 2004. The unaudited net tangible assets value as at 31 March, 2004 was approximately HK$6.8 million, representing a decrease of approximately 36.6% from the year ended 30 September, 2003. The unaudited net current liabilities as at 31 March, 2004 further increased to approximately HK$3.7 million, with the current ratio (defined as current assets to current liabilities) further decreased from approximately 0.88 as at 30 September, 2003 to approximately 0.73 as at 31 March, 2004.

3. Future business plan

Taking into account the past financial performance of the Aptus Group as set out above, we concur with the Directors’ view that the existing business operation and development of the Aptus Group are restrained by liquidity problems. Therefore, it is necessary for the Aptus Group to raise fund to support and improve its on-going operations and the issue of new Aptus Shares is one of the practical ways. The Directors have also considered to strengthen the revenue source through acquisitions of certain established businesses with stable income. Moreover, in view of the recent recovery of the economy and the possessing of an existing developed sales system and network, the Directors consider to revamp the trading business if suitable products can be identified and integrated to its existing product portfolio.

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LETTER FROM TAI FOOK CAPITAL

4. Summary

The financial and operating performance of the Aptus Group has been deteriorating since it was listed on GEM in May 2002. The Aptus Group recorded audited and unaudited net losses from the ordinary activities attributable to Shareholders for the two financial years ended 30 September, 2003 and the six months ended 31 March, 2004 respectively. The Aptus Group also had a working capital shortage problem with unaudited net current liabilities of approximately HK$3.7 million as at 31 March, 2004. The principal business of the Aptus Group only generated an unaudited turnover of merely approximately HK$477,000 for the six months ended 31 March, 2004. As a result, the Directors have been considering ways including fund raising exercises and possible acquisitions, to improve the financial position, cash flow and business performance of the Aptus Group.

II. The Subscription

1. Background

On 23 March, 2004, Aptus entered into the Subscription Agreement in relation to the issue of 738,095,238 new Aptus Shares at HK$0.021 per Aptus Share, representing approximately 119% of the existing issued share capital of Aptus and approximately 54% of the enlarged issued share capital of Aptus immediately after the completion of the Subscription or approximately 48% of the enlarged issued share capital of Aptus immediately after the completion of the Transactions.

The subscriber of the new Aptus Shares is a wholly-owned indirect subsidiary of B & B and B & B is principally engaged in the distribution, production and trading of natural food products.

2. Reasons for the Subscription

Immediately upon completion of the Subscription, gross proceeds of approximately HK$15.5 million will be available to the Aptus Group to improve its cash position. As stated in the “Letter from the Board” in the Circular, Aptus intends to use the proceeds from Subscription to expand its Existing Business as well as the distribution of the edible oils business currently conducted by Hsing Long. Furthermore, the proceeds will also be applied to improve the working capital of Aptus. The Directors currently do not intend to use the funds from the Subscription to repay outstanding loans of the Aptus Group and will not change the use of proceeds of the business plan as stated in the prospectus and financial report of Aptus.

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LETTER FROM TAI FOOK CAPITAL

As mentioned in the paragraph headed “Background information on the Aptus Group” to this letter, the Aptus Group is facing serious financial difficulties. Its principal business has almost come to a halt. None of Existing Business is able to generate sufficient revenue to support its operation. For the six months ended 31 March, 2004, the Aptus Group only recorded a total unaudited turnover of approximately HK$477,000. The Aptus Group is also facing working capital shortage with unaudited net current liabilities of approximately HK$3.7 million as at 31 March, 2004. Therefore, the Aptus Group is in need of cash to fund its operation and we consider that the Subscription will improve the working capital of Aptus and relieve the cashflow pressure of the Aptus Group.

As advised by the Directors, the Aptus Group has also considered other fund-raising methods, including rights issue of new Aptus Shares and borrowings. However, the Directors consider that rights issue is not suitable as longer time is required and the amount of funds raised is uncertain. In addition, given its present financial position, it would be extremely difficult for Aptus to secure any additional credit facilities from financial institutions. Therefore, the Directors consider the Subscription is the most efficient way to relieve the immediate liquidity problem of the Aptus Group.

Besides, as stated in the “Letter from the Board” in the circular, the newly introduced Directors under the Subscription Agreement have broad experience in the finance sector and extensive knowledge in the PRC market. The Directors therefore believe that the newly introduced Directors will help the Aptus Group improve its existing business operation, re-develop its trading business and explore new business opportunities.

3. Subscription Price

Under the Subscription Agreement, Aptus will allot and issue 738,095,235 Subscription Shares at the Subscription Price of HK$0.021 per Aptus Share. The Subscription Price was negotiated on arm’s length basis with reference to the net asset value of the Aptus Group between B & B and Aptus. The Directors believe that the terms of the Subscription are fair and reasonable and in the interest of the Shareholders as a whole.

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LETTER FROM TAI FOOK CAPITAL

3.1 Comparison of the Subscription Price to market price

The following charts illustrate the historical closing prices and the trading volume of the Aptus Shares during the period from the first trading day in 2004 up to the Last Dealing Date (the “Period”). The Aptus Shares have been suspended since the Last Dealing Date.

==> picture [341 x 202] intentionally omitted <==

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

0.30
0.25
0.20
0.15
0.10
0.05
Subscription Price = HK$0.021
0.00
Jan-04 Feb-04 Mar-04
Market price per Aptus Share
----- End of picture text -----

==> picture [344 x 200] intentionally omitted <==

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

8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
Jan-04 Feb-04 Mar-04
----- End of picture text -----

Source: Website of Hong Kong Exchanges and Clearing Ltd.

The trading of the Aptus Shares was very thin during the Period. The average daily trading volume of the Aptus Shares for the Period was approximately 784,907 Aptus Shares, representing approximately 0.13% of the existing issued share capital of Aptus as at the Latest Practicable Date.

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LETTER FROM TAI FOOK CAPITAL

During the entire Period, the Aptus Shares were traded above its audited net tangible assets value per Aptus Share of approximately HK$0.0174 as at 30 September, 2003. However, in view of the deteriorating financial performance as reflected in the 2003 annual report and 2004 interim report, which were announced after the trading of Aptus Shares were suspended, it is likely that the then prevailing market price of Aptus Shares had not reflected its relatively poor fundamentals.

Set out below are the closing prices/average closing prices of the Aptus Shares as quoted on the Stock Exchange on the date/period during the respective periods and the discount of the Subscription Price to such prices.

		Discount to
	Closing	the closing
	price/average	price/average
Date/period	closing price	closing price
	(HK$)
As at the Last Dealing Date	0.1200	82.5%
5-day period up to and including
the Last Dealing Date	0.1398	84.98%
10-day period up to and including
the Last Dealing Date	0.1541	86.37%
30-day period up to and including
the Last Dealing Date	0.1990	89.45%
As at the Latest Practicable Date	N/A*	N/A*

* Trading of the Aptus Shares has remained suspended on the Latest Practicable Date.

Source: Website of Hong Kong Exchanges and Clearing Ltd.

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LETTER FROM TAI FOOK CAPITAL

Apart from the above analysis, we have identified the following companies listed on GEM which have completed and resulted in a change in control by way of cash subscription of new shares during the past 24 months:

			Closing price
			immediately
			preceding to
	Date of	Subscription	the date of	Discount to the
Company	announcement	price	announcement	closing price
		(HK$)	(HK$)
Recruit Holdings Limited	5 October, 2002	0.0165	0.026	36.5%
(formerly known as Panda-
Recruit Limited)
New Universe International	11 February, 2003	0.050	0.051	2.0%
Group Limited
Cyber On-Air Group Co Ltd	8 March, 2004	1.000	7.200	86.1%
		(Note 1)	(Note 2)
Infoserve Technology Corp	1 April, 2004	0.010	0.025	60.0%

Note 1: represented the subscription price per consolidated share Note 2: being the effective market price upon completion of the share consolidation

Since each of the above cash subscription has its own particular terms and considerations, the above analysis (the “Subscription Price Analysis”) mainly provides an overview of the level of the subscription prices relative to the then closing price of such shares. As illustrated in the table above, each of the respective subscription price represented a discount to the then closing price of such shares ranging from 2.0% to 86.1%. The discount of approximately 82.5% of the Subscription Price as compared to the closing price of the Aptus Shares on the Last Dealing Date lies within the range of the Subscription Price Analysis.

Although the Subscription Price represents a significant discount to the then prevailing market price prior to suspension in trading, due to (i) the thin trading volume of the Aptus Shares; (ii) the disclosure of loss making results after the trading of Aptus Shares was suspended; and (iii) the lack of a profitable operating business, we are of the view that the significant discount is acceptable after taking into account the Subscription Price Analysis.

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LETTER FROM TAI FOOK CAPITAL

3.2 Comparison of the Subscription Price to the net tangible asset value per Aptus Share

Based on the 2003 annual report and 2004 interim report of Aptus, the net tangible asset value of the Aptus Group was approximately HK$10.8 million and HK$6.8 million as at 30 September, 2003 and 31 March, 2004, representing a net tangible asset value per Aptus Share of approximately HK$0.0174 and HK$0.0110 respectively. The Subscription Price of HK$0.021 represents a premium of approximately 20.7% and 90.9% over the net tangible asset value per Aptus Share as at 30 September, 2003 and 31 March, 2004 respectively.

As advised by the Directors, since the existing business operation of Aptus is not profitable and there is a possible going concern problem resulting from its net current liabilities position, without the proceeds from the Subscription, the Aptus Group will continue to be operated under severe financial difficulties. Therefore, we consider the Subscription, of which the Subscription Price represents a premium over the net tangible asset value per Aptus Share as at 30 September, 2003 and 31 March, 2004, is beneficial to the Aptus Group and the Shareholders as a whole.

3.3 Summary of the term of Subscription Price

Having considered various factors including i) the thin trading volume of Aptus Shares; ii) the loss making results which may lead to a drop in the share price after resumption of trading; and iii) the Subscription Price represents a premium of approximately 20.7% and 90.9% over the net tangible asset value per Aptus Share as at 30 September, 2003 and 31 March, 2004 respectively, we consider the Subscription Price is fair and reasonable, despite the significant discount to the then prevailing market prices prior to suspension in trading.

4. Conclusion on the Subscription

As (i) the Subscription will immediately provide funding to the Aptus Group to improve its cash position; (ii) the introduction of new Directors under the Subscription Agreement will help the Aptus Group improve its existing business operation and explore new business opportunities; and (iii) the terms of the Subscription Price are fair and reasonable, we concur with the view of Directors that the Subscription will be beneficial to the Aptus Group and the Independent Shareholders as a whole.

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LETTER FROM TAI FOOK CAPITAL

III. The Acquisition

1. Background

On 23 March, 2004, Aptus entered into the Sale and Purchase Agreement with the Vendor and the Warrantors in relation to the acquisition of a 75% interest in the issued share capital of the Target. The consideration of HK$4 million for the acquisition of 75% equity interest in the Target shall be satisfied by the allotment and issue of 190,476,190 new Aptus Shares at an Issue Price of HK$0.021 per Aptus Share. The Acquisition Consideration Shares represent approximately 30.8% of the entire existing issued share capital of Aptus and approximately 23.6% of the enlarged issued share capital of Aptus immediately after completion of the Acquisition or approximately 12.3% of the enlarged issued share capital of Aptus immediately after completion of the Transactions.

As stated in the “Letter from the Board” in the Circular, the Target is an investment holding company effectively holding 93.75% of the entire issued share capital of Hsing Long and the remaining 6.25% equity interest in Hsing Long is indirectly held by Independent Third Parties. The only asset of the Target is a 93.75% indirect equity interest in Hsing Long. Edible oils are recognised as essential nutrients in our diet and are regarded as kinds of commodity products used in our daily life. The application of edible oils is mainly in the food and beverage industry. Hsing Long is principally engaged in the business of trading of a wide variety of edible oils (principally comprised vegetable oils) and/or their related by-products which includes crude palm oil, refined bleached and de-odorised stearin, palm kernel oil, palm fatty acid distillates, and crude coconut oil. Hsing Long sources such products mainly from Indonesia plantation and sells to its customers for further refining and processing. During the past years, the global demand for vegetable oils has been increasing due to the natural population growth coupled with the fact that people nowadays are more health conscious. It was reported that according to the 2003 statistics from the United States Department of Agriculture, the world vegetable oil consumption increased from approximately 80.7 metric million tons in 1998 to 93.2 metric million tons in 2002 (representing an annual growth rate of approximately 3.7%). Hsing Long is based in Indonesia which, together with Malaysia, are the two major crude palm oil producing countries in the world. There are a number of players in the Indonesian and Malaysian edible oil trading industry. Hsing Long is inevitably facing competition from them. Nevertheless, as advised by the directors of B & B, leveraging on its established scale of operation, close relationship with a number of plantation suppliers in Indonesia and its experienced management team, Hsing Long is able to maintain and further expand its customers’ base.

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LETTER FROM TAI FOOK CAPITAL

As advised by the directors of B & B, Hsing Long was jointly founded by Mr. Wong Kim Ket and Mr. Lim King Hui in 1996. Mr. Wong Kim Ket has extensive experience in international trades and Mr. Lim King Hui has been in the palm oil industry for more than 10 years. Both of them are principally responsible for the overall management and day-to-day operations of Hsing Long. For further information on Mr. Wong Kim Ket and Mr. Lim King Hui, please refer to the “Letter from the Board” in the Circular. Upon completion of the Acquisition, the directors of B & B and Aptus have confirmed that both Mr. Wong Kim Ket and Mr. Lim King Hui will continue to be the key management in responsible for the operation of Hsing Long. Apart from Mr. Wong Kim Ket, Hsing Long has five other directors, namely Madam Cheung Kwai Lan (an executive director of B & B), Mr. Chan Ting (an executive director of B & B), Mr. Kwan Yiu Ming, Patrick (a senior management of B & B), Mr. Fung King Him, Daniel (a proposed executive director of Aptus) and Mr. Lau Hin Kun (a proposed executive director of Aptus).

2. Financial information of Hsing Long

The financial information of Hsing Long (including its turnover, net profit/(loss) before taxation and extraordinary items, net profit/(loss) after taxation and extraordinary items and net asset value) are set out as follows:

					Three
			Six months		months
	Year ended	Year ended	ended	Year ended	ended
	31 December,	31 December,	30 June,	31 December,	31 March,
	2001	2002	2003	2003	2004
	(Audited)	(Audited)	(Audited)	(Audited)	(Audited)
	HK$	HK$	HK$	HK$	HK$
Turnover	39,455,354	30,760,679	21,727,634	41,638,918	8,512,882
Profit/(loss) before tax
and extraordinary
items	168,428	87,256	(139,481)	(132,190)	8,381
Taxation	16,872	28,418	(12,818)	(12,225)	—
Profit/(loss) after tax
and extraordinary
items	151,556	58,838	(126,663)	(119,965)	8,381

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LETTER FROM TAI FOOK CAPITAL

				As at	As at	As at	As at	As at
			31	December,	31 December,	30 June,	31 December,	31 March,
				2001	2002	2003	2003	2004
				(Audited)	(Audited)	(Audited)	(Audited)	(Audited)
				HK$	HK$	HK$	HK$	HK$
Net	asset	value		741,315	800,152	329,337	336,036	344,417

2.1 Financial performance for the years ended 31 December, 2001 and 2002

A decrease in audited turnover by approximately HK$8.7 million was recorded. As disclosed in the “Letter from the Board” in the Circular, the decrease was due to the increase in price of edible oils and therefore the purchases from buyers were held back. Besides, the adverse economic effect resulting from the terrorist attacks in the United States of the America on 11 September, 2001 also contributed to the decrease in turnover. As a result, the audited profit after tax and extraordinary items decreased from HK$151,556 for the year ended 31 December, 2001 to HK$58,838 for the year ended 31 December, 2002, representing a decrease in 61.2%.

2.2 Financial performance for the year ended 31 December, 2003 and the three months ended 31 March, 2004

An audited net loss of HK$126,663 was recorded for the six months ended 30 June, 2003, which was mainly due to the adverse effect of SARS and the provision of bad debts in the amount of approximately HK$137,995. However, as advised by the directors of B & B, due to the end of SARS in the second half of 2003 and the recovery of the economic environment, together with the growth in the edible oils market, Hsing Long experienced an improvement in performance in the second half of 2003. Based on the audited results of Hsing Long for the six months ended 30 June, 2003 and the full year ended 31 December, 2003, Hsing Long has recorded a net profit of HK$6,698 for the second half of 2003. For the three months ended 31 March, 2004, Hsing Long has further posted an audited net profit of HK$8,381.

3. Reasons for the Acquisition

As stated in the paragraph headed “Future business plan” in this letter, the Directors would like to utilize the developed resources in the Aptus Group such as its sales system and network to reactivate the trading business if there is opportunity. Since edible oil is a basic ingredient of some medical products (as the cream base of some medical products), the Aptus Group can apply its developed sales system and network and trading experience in the commercialization of edible oil. Therefore, the edible oil business is considered to be a horizontal extension of the business of the Aptus Group.

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LETTER FROM TAI FOOK CAPITAL

In addition, as disclosed in the paragraph headed “Future business plan” in this letter, the Directors were considering ways to strengthen the revenue source of the Aptus Group through acquisitions of certain other established businesses with stable income. Despite the fact that Hsing Long was loss making in 2003, it recorded audited net profits for the two years ended 31 December, 2002 and the three months ended 31 March, 2004, and an audited turnover of more than HK$30 million for each of the three years ended 31 December, 2003. It is also noted that the gross profit margins as recorded by Hsing Long during the past years were rather slim (being 1.53%, 1.87%, 1.10% and 1.23% for the three years ended 31 December, 2003 and three months ended 31 March, 2004, respectively). In general, we consider that profit margins for commodity trading companies are not expected to be high as price quotation in the market is rather transparent and it is impossible for traders to make substantial profits unless they are willing to take any price risk. We further discussed with the directors of B & B about its slim profit margin and are given to understand that Hsing Long has been operated with a prudent trading approach. In order to minimize the risks of price fluctuation and default by the customers, Hsing Long will only place purchasing orders with the plantation suppliers after the corresponding sales contracts are secured. The slim profit margins as recorded by Hsing Long during the past years were principally resulted from the nature of the trading business and its back-to-back trading approach. As regards Aptus, the audited turnover for each of the three years ended 30 September, 2003 was approximately HK$10.6 million, HK$20.5 million and HK$17.2 million respectively and the unaudited turnover for the six months ended 31 March, 2004 was approximately HK$0.5 million, except for posting an audited net profit of HK$0.2 million for the year ended 30 September, 2001, it recorded significant net losses for the rest of the periods.

Taking into account (i) Hsing Long has been engaged in the edible oil trading business (which is considered to be complimentary to the existing business of Aptus) since 1996; (ii) it has demonstrated a stable revenue for the past few years; and (iii) its audited total loss of HK$119,965 for the full year ended 31 December 2003 has been improved from the audited loss of HK$126,663 for the six months ended 30 June, 2003 and it has recorded an audited net profit of HK$8,381 for the three months ended 31 March, 2004, the Directors consider Hsing Long as a suitable target to strengthen the financial performance of the Aptus Group as well as to provide it with an opportunity to expand its business and diversify its existing business risks.

4. Terms of the Agreement

4.1 Basis of the Purchase Price

The Purchase Price of HK$4 million was arrived at after arms’ length negotiations among the parties to the Sale and Purchase Agreement with reference to the turnover and financial performance of Hsing Long. As stated

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LETTER FROM TAI FOOK CAPITAL

above, Hsing Long achieved an audited turnover of over HK$20 million for each of the financial period since 2001 and was profitable for the two years ended 31 December, 2002 and three months ended 31 March, 2004. For the six months ended 30 June, 2003, it suffered loss due to poor economic conditions but it gradually recovered in the second half of 2003. The loss for the year ended 31 December, 2003 was decreased slightly by HK$6,698 when comparing with the results for the six months ended 30 June, 2003.

By acquiring a 75% interest in the Target, Aptus will effectively own 70.31% interest in Hsing Long upon completion of the Acquisition. Therefore, the Purchase Price would imply a valuation (the “Valuation Price”) of approximately HK$5.7 million for the entire shareholding interest of Hsing Long. The Valuation Price represents a premium of approximately 1,555% to the net asset value of Hsing Long as at 31 March, 2004.

Hsing Long is principally engaged in the trading of edible oils and the related by-products. It suffered a loss of HK$119,965 for the year ended 31 December, 2003. For the two years ended 31 December, 2002, although it was profit making, it recorded a very low net profit margin of 0.38% and 0.19% respectively. The price-to-earnings ratio of the Valuation Price represents approximately 97 times of the profits of Hsing Long for the year ended 31 December, 2002. As there is no company listed on the Stock Exchange and other major overseas markets principally engaged in the trading of edible oil and no public information is available on other privately owned edible oil trading companies, we have used the Hang Seng Commercial/Industrial Index as a general reference for comparison purposes. The average price-to-earnings ratio of the Hang Seng Commercial/Industrial Index for the period from 1 July, 2003 to the Latest Practicable Date is approximately 17.34, which is much lower than the price-to-earnings ratio of the Valuation Price.

Even though (i) Aptus has been loss making since the year ended 30 September, 2002; (ii) it is operating under net current liabilities position; and (iii) it is imperative for Aptus to acquire a business similar to Hsing Long that can compliment the existing business of Aptus and provide stable source of revenue, in view of (i) the low profit margin of Hsing Long; (ii) Hsing Long was loss making in the recent year ended 31 December, 2003; (iii) the relatively high price-to-earnings ratio of the Valuation Price; and (iv) the significant premium of the Valuation Price over the net asset value of Hsing Long, we do not consider the basis of the Purchase Price, on its own, is fair and reasonable.

4.2 Funding of the Acquisition

According to the terms of the Sale and Purchase Agreement, the Purchase Price of HK$4,000,000 will be satisfied by the allotment and issue of the Acquisition Consideration Shares at HK$0.021 per Aptus Share.

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LETTER FROM TAI FOOK CAPITAL

Having considered that (i) the Acquisition Consideration represents approximately 62.4% of the audited consolidated cash and bank balances of the Aptus Group as at 30 September, 2003 and approximately 51.5% of the unaudited consolidated cash and bank balances of the Aptus Group as at 31 March, 2004; (ii) the Aptus Group had audited and unaudited net current liabilities of approximately HK$1.7 million as at 30 September, 2003 and approximately HK$3.7 million as at 31 March, 2004 respectively and faces a problem of working capital shortage; and (iii) the Aptus Group requires cash to support and develop its nearly halted operation, we consider it a prudent decision for Aptus to have agreed to settle the consideration by the issue of Acquisition Consideration Shares as such an arrangement would relieve the cashflow pressure of the Aptus Group.

4.3 Issue Price

The consideration for the Acquisition will be satisfied as to HK$4 million by the allotment and issue of 190,476,190 Acquisition Consideration Share at the Issue Price of HK$0.021 per Aptus Share. The Purchase Price and the Issue Price were arrived at after arms’ length negotiations among the parties to the Sale and Pruchase Agreement with reference to the turnover and financial performance of Hsing Long and the net asset value of the Aptus Group.

The Issue Price of HK$0.021 per Aptus Share is the same as the Subscription Price. Please refer to the paragraph headed “Subscription Price” for the analysis on the Issue Price and the Subscription Price.

5. Conclusion on Acquisition

Taking into consideration that (i) the Acquisition will be an effective way to provide a stable revenue source to the Aptus Group which has serious financial and operating difficulties; (ii) the Acquisition provides an opportunity for the Aptus Group to expand its business and to diversify its existing business risks; and (iii) the Acquisition would not impose immediate additional cashflow pressure on the Aptus Group, we are of the view the Acquisition will be beneficial to the Aptus Group and the Shareholders as a whole, although the Purchase Price, on its own, is not considered to be fair and reasonable.

IV. Financial effect of the Transactions

The following analysis is made based on the assumption that the outstanding Employee Options as at the Latest Practicable Date will not be exercised and that there will not be any changes to the total issued share capital of Aptus as at the Latest Practicable Date to Completion (other than the issue of the Acquisition Consideration Shares and the Subscription Shares).

1. Net tangible asset value

The consideration of the Subscription will be satisfied by HK$15,500,000 payable in cash by the Vendor. After the Subscription, the unaudited proforma

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LETTER FROM TAI FOOK CAPITAL

adjusted consolidated net tangible asset value per Aptus Share would increase to approximately HK$0.0165 from the unaudited consolidated net tangible asset value per Aptus Share of approximately HK$0.0110 as at 31 March, 2004, representing an increase of approximately 50.0%.

The consideration of the Acquisition will be satisfied as to HK$4 million by the issue of the Acquisition Consideration Shares. After the Acquisition, based on the audited accounts of Hsing Long as at 31 March, 2004 as set out in appendix II of the Circular, the unaudited proforma adjusted consolidated net tangible asset value per Aptus Share would decrease by 20.9% to approximately HK$0.0087 as compared to the unaudited consolidated net tangible asset value per Aptus Share of approximately HK$0.0110 as at 31 March, 2004.

In summary, after the Completion, the unaudited proforma adjusted consolidated net tangible asset value per Aptus Share would increase by approximately 36.4% as compared to that of 31 March, 2004, which is favourable to the Aptus Group.

2. Losses

The Aptus Group recorded audited net loss from the ordinary activities attributable to Shareholders of approximately HK$53.3 million for the year ended 30 September, 2003, and it further recorded an unaudited net loss from the ordinary activities attributable to Shareholders of approximately HK$3.9 million for the six months ended 31 March, 2004. Upon completion of the Acquisition, the Aptus Group’s profit and loss accounts would be affected by the following: (i) 75% of the financial performance of the Edible Oil Group; and (ii) a goodwill of approximately HK$3.76 million (subject to adjustment on the relevant pre-Completion profit of the Edible Oil Group and cost incurred in the Acquisition), which will be amortised in the future years.

The audited net loss per Aptus Share as at 30 September, 2003 was approximately HK8.63 cents. Assuming the Subscription had taken place on 1 October, 2002, the unaudited adjusted net loss per Aptus Share would decrease to approximately HK3.93 cents, representing an improvement of approximately 54.5% from the audited net loss per Aptus Share as at 30 September, 2003. Assuming the Acquisition had taken place on 1 October, 2002, the unaudited adjusted net loss per Aptus Share would decrease to approximately HK6.61 cents, representing an improvement of approximately 23.4% from the audited net loss per Aptus Share as at 30 September, 2003.

In summary, assuming the Subscription and the Acquisition had taken place on 1 October, 2002, the unaudited adjusted net loss per Aptus Share would decrease to approximately HK3.45 cents, representing an improvement of approximately 60.0% from the audited net loss per Aptus Share as at 30 September, 2003, which have an overall positive effect on the net loss per Aptus Share.

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LETTER FROM TAI FOOK CAPITAL

3. Gearing position

As at 31 March, 2004, as Aptus Group did not have any long term debt and therefore the gearing ratio (representing long-term debt to equity) of Aptus Group was zero. As both the Acquisition and the Subscription do not involve any long-term debt, there is no effect on the gearing ratio of the Aptus Group after the Completion.

The following sets out the calculation of the current ratios (defined as current assets over current liabilities) of the Aptus Group respectively after the Subscription, the Acquisition and the Completion, which is based on the figures stated in the section headed “Unaudited pro forma statement of assets and liabilities of the enlarged group” under appendix IV of the Circular.

			Upon	Upon
		As at 31	completion	completion
		March,	of the	of the	Upon
		2004	Subscription	Acquisition	Completion
		HK’000	HK’000	HK’000	HK’000
Current	assets	9,864	25,364	10,276	25,776
Current	liabilities	13,553	13,553	13,621	13,621
Current	ratio	0.73	1.87	0.75	1.89

As set out above, as at 31 March, 2004, the current ratio of the Aptus Group was approximately 0.73. Following the Subscription, the current ratio would be significantly improved by approximately 156.2% to approximately 1.87. After the Acquisition, the current ratio would be slightly increased by approximately 2.7% to approximately 0.75 as compared to the current ratio as at 31 March, 2004.

In summary, after the Completion, the current ratio of Aptus would be increased from approximately 0.73 to approximately 1.89. As such, in terms of gearing position, the Transactions are significantly beneficial to the Aptus Group.

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LETTER FROM TAI FOOK CAPITAL

4. Dilution of Public Shareholders’ shareholdings

The following table sets out the shareholding structure of Aptus immediately after the Acquisition and the Subscription:

Byron Bay Holdings Limited E-Source Limited Jingle Holdings Limited Wong Kwok Yiu, Chris B & B Public Shareholders Total	As at the Latest Practicable Date No. of Aptus Shares % 104,650,000 (Note 1) 16.93 132,650,000 (Note 2) 21.45 12,000,000 (Note 3) 1.94 4,800,000 (Note 4) 0.78 – – 364,160,000 58.9 618,260,000 100	Immediately after issue of Subscription Shares No. of Aptus Shares % 104,650,000 7.72 132,650,000 9.78 12,000,000 0.88 4,800,000 0.35 738,095,238 54.42 364,160,000 26.85 1,356,355,238 100	Immediately after issue of Subscription and Acquisition Consideration Shares No. of Aptus Shares % 104,650,000 6.77 (Note 5) 132,650,000 8.58 12,000,000 0.78 4,800,000 0.31 (Note 5) 928,571,428 60.02 364,160,000 23.54 (Note 5) 1,546,831,428 100

Notes:

These Aptus Shares are beneficially owned by the Chen Family 2002 Trust, a discretionary trust. The discretionary objects of which include the family members of Mr. Chen Vee Li, Felix, an executive director of Aptus. Mr. Chen Si Te, Frank, a non-executive Director, is the father of Mr. Chen Vee Li, Felix.
These Aptus Shares are beneficially owned by E-Source Limited, which is wholly owned by the Ma Family 2002 Trust, a discretionary trust. The discretionary objects of which include the family members of Mr. Ma Wai Hung, Vincent, a non-executive Director.
Jingle Holdings Limited is wholly and beneficially owned by Mr. Ma Wai Hung, Vincent.
Dr. Wong Kwok Yiu, Chris is a non-executive Director.
Upon the Completion, all executive, non-executive and independent non-executive Directors (save for Mr. Ma Wai Hung, Vincent and Mr. Wong Kok Sun) will resign as Directors. The shareholding interests which are directly or indirectly held by Mr. Chen Vee Li, Felix, Mr. Chen Si Te, Frank and Dr. Wong Kok Yiu, Chris will be considered as the shareholding interests held by the public. Therefore, upon the Completion, approximately 30.62% of the issued Aptus Shares will be held in the public hands.

As at the Latest Practicable Date, 58.90% of the issued share capital of Aptus was held by Public Shareholders (as defined in the above table). Upon the issue of the Subscription Shares, the aggregate shareholdings of the Public Shareholders will be diluted by approximately 32.05% to approximately 26.85% and will be further diluted by approximately 3.31% to approximately 23.54% after the Acquisition

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LETTER FROM TAI FOOK CAPITAL

Consideration Shares are issued. The related dilution effect so caused by the issuance of Subscription Shares and Acquisition Consideration Shares, in our opinion, is acceptable to the Public Shareholders, taking into account that (i) as stated in the paragraph headed “Funding of the Acquisition” in this letter, it is beneficial to acquire the Target by issuing Acquisition Consideration Shares instead of paying in cash; (ii) the Subscription will provide funding to relieve the net current liabilities problem of the Aptus Group; and (iii) the introduction of new Directors under the Subscription Agreement will help the Aptus Group improve its existing business operation.

5. Summary

Having considered that upon Completion (i) the unaudited proforma adjusted consolidated net tangible asset value per Aptus Share as at 31 March, 2004 would increase by approximately 36.4% from approximately HK$0.011 to approximately HK$0.015; (ii) the unaudited adjusted net loss per Aptus Share would decrease; (iii) the current ratio of the Aptus Group would be significantly improved from approximately 0.73 as at 31 March, 2004 to approximately 1.89, despite the dilution effect of approximately 35.36% in the shareholding of the Public Shareholders, we are of the view that the Subscription and the Acquisition have favorable financial effects to the Aptus Group as a whole.

V. The Whitewash Waiver

As at the Latest Practicable Date, B & B and parties acting in concert with it did not hold any Shares in Aptus. However, B & B and parties acting in concert with it will hold approximately 54.42% of the enlarged issued share capital of Aptus upon completion of the Subscription (or approximately 60.02% upon completion of the Subscription and the Acquisition). Pursuant to Rule 26 of the Takeovers Code, B & B and parties acting in concert with it would be obliged to make a general offer to acquire all the Aptus Shares other than those already owned or agreed to be acquired by B & B and parties acting in concert with it upon Completion, unless the Whitewash Waiver is granted.

According to the “Letter of the Board” in the Circular, all executive, non-executive and independent non-executive directors of Aptus (save for Mr. Ma Wai Hung, Vincent and Mr. Wong Kok Sun) will resign as Directors upon completion of the Subscription Agreement. Mr. Ma Wai Hung, Vincent and Mr. Wong Kok Sun will remain as the non-executive director and executive director of Aptus respectively. The proposed new Directors to be appointed to the Board are included in the section headed “Directors and management of Aptus” in the “Letter from the Board” in the Circular. Save for abovementioned, we have noted that the B & B currently (i) intends to maintain the existing business of the Aptus Group upon Completion, except for the Acquisition; and (ii) does not intend to introduce any major changes to the existing operating structure of the Aptus Group, or to discontinue the employment of any employees of the Aptus Group, or to redeploy any material fixed assets of the Aptus Group as a result of the Transactions.

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LETTER FROM TAI FOOK CAPITAL

An application has been made to the Executive for the Whitewash Waiver. Independent Shareholders should note that completion of the Subscription is conditional upon, among others, the granting of the Whitewash Waiver by the Executive unless otherwise waived by the Vendor. In view of (i) the provision of working capital by the Subscription; and (ii) the stable revenue source that the Aptus Group would secure from the Acquisition to improve the existing business performance, we consider the granting of the Whitewash Waiver to B & B fair and reasonable so far as Independent Shareholders are concerned.

VI. Recommendation

Having considered the principal factors and reasons as mentioned above, in particular that:

The existing business of the Aptus Group has been loss-making since the year ended 30 September, 2002, which led to the unaudited net current liabilities position of approximately HK$3.7 million as at 31 March, 2004;
The Subscription will provide cash to the Aptus Group to improve its cash position and the introduction of new Directors under the Subscription Agreement will help improve the existing business operation and explore new business opportunities for the Aptus Group;
Save that the Purchase Price, on its own, is not considered to be fair and reasonable, the Acquisition will contribute a stable revenue source to the Aptus Group as well as provide the Aptus Group with an opportunity to expand its business and to diversify its existing business and economic risks without cash outflow;
Although the Issue Price and Subscription Price represent a significant discount to the then prevailing market prices of the Aptus Shares before suspension in trading, in view of i) the thin trading volume of the Aptus Shares, ii) the loss making results which may lead to a drop in the market price of Aptus Shares after resumption of trading and iii) the premium of approximately 90.9% over the unaudited net tangible asset value per Aptus Share as at 31 March, 2004 that each of Issue Price and Subscription Price represents, we consider that each of the Issue Price and Subscription Price is fair and reasonable; and
Although there is a substantial dilution effect on the shareholding of the Public Shareholders upon Completion, we consider the potential enhancement in the net tangible asset value per Aptus Share, improvement of the revenue source and the strengthening of the working capital position of the Aptus Group outweigh the dilution effect,

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LETTER FROM TAI FOOK CAPITAL

we are of the opinion that the Acquisition (save for the Purchase Price, which, on its own, is not considered fair and reasonable), the Subscription and the Whitewash Waiver are in the interests of the Aptus Group and the Shareholders as a whole and the terms of each of the Subscription Agreement and the Sale and Purchase Agreement are on normal commercial terms and is fair and reasonable so far as the Independent Shareholders are concerned in view of the overall context of the Aptus Group’s persistent losses in recent years and its net current liabilities position. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Acquisition, the Subscription and the Whitewash Waiver.

Yours faithfully, For and on behalf of Tai Fook Capital Limited Willis Ting April Chan Executive Director Director

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

1. SHARE CAPITAL

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

Authorised:

Number of shares 20,000,000,000 Aptus Shares at the Latest Practicable Date	Amount HK$ 200,000,000

Issued and to be issued, fully paid or credited as fully paid: 618,260,000 Aptus Shares in issue at the Latest Practicable Date 190,476,190 Acquisition Consideration Shares to be issued 738,095,238 Subscription Shares to be issued	6,182,600 1,904,762 7,380,952
1,546,831,428 Aptus Shares in issue after Completion	15,468,314

As at the Latest Practicable Date, all existing Aptus Shares ranked pari passu in all respects including as to dividends, voting and interests in capital. The Acquisition Consideration Shares and the Subscription Shares, when allotted and issued, will rank pari passu in all respects with the Aptus Shares in issue on the date of allotment and issue of the Acquisition Consideration Shares and the Subscription Shares, including as to dividends, voting and interests in capital and shall be issued free from all options, liens, charges, claims, agreement, equities and encumbrances and other third party rights of any nature whatsoever and together with all rights attaching or accruing thereto including all dividends and distributions declared, made or paid on or after the Completion.

No part of the share capital of any other securities of the Company is listed or dealt in on any stock exchange other than the Stock Exchange and no application is being made or is currently proposed or sought for the Aptus Shares or the new Aptus Shares or any other securities of the Company to be listed or dealt in on any other stock exchange.

There has been no alteration in the capital of any member of the Group since 30 September, 2003, the date to which the latest published audited consolidated financial statements of the Aptus Group were made up, up to the Latest Practicable Date.

As at the Latest Practicable Date, Aptus had outstanding convertible notes of HK$5 million which entitled the holder of convertible notes (namely Interoverseas Consultancy Limited) to convert into 14,285,714 Aptus Shares at the conversion price of HK$0.35 per Aptus Share subject to adjustment. Aptus has 47,500,000 and 8,450,000 outstanding share options under the pre-IPO share option scheme and post-IPO share option scheme respectively. These options were granted to certain directors and employees of Aptus which entitled the holders to convert into 47,500,000 and 8,450,000 Aptus Shares at the exercise price of HK$0.1 or HK$0.5 for the pre-IPO share option scheme and HK$0.612 for the post-IPO share option scheme respectively.

Save for the convertible notes mentioned above, Aptus did not have any other convertible securities, options or warrants in issue as at the Latest Practicable Date.

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

2. FINANCIAL INFORMATION

(A) Summary of financial results of the audited consolidated results of Aptus for each of the three years ended 30 September, 2003

Year ended 30 September, 2003 2002 2001 HK$’000 HK$’000 HK$’000 (Audited) (Audited) (Audited) (Note 1) 17,154 20,517 10,595 (36,990) (12,660) (3,435) (19,836) 7,857 7,160 189 170 115 (2,088) (1,609) (772) (12,716) (9,581) (6,031) (19,342) − − (53,793) (3,163) 472 (14) – − (14) – − (53,821) (3,163) 472 – (185) (338) (53,821) (3,348) 134 482 161 75 (53,339) (3,187) 209 (HK8.63 cent) (HK0.59 cent) HK0.04 cent N/A N/A N/A	Year ended 30 September, 2003 2002 2001 HK$’000 HK$’000 HK$’000 (Audited) (Audited) (Audited) (Note 1) 17,154 20,517 10,595 (36,990) (12,660) (3,435) (19,836) 7,857 7,160 189 170 115 (2,088) (1,609) (772) (12,716) (9,581) (6,031) (19,342) − − (53,793) (3,163) 472 (14) – − (14) – − (53,821) (3,163) 472 – (185) (338) (53,821) (3,348) 134 482 161 75 (53,339) (3,187) 209 (HK8.63 cent) (HK0.59 cent) HK0.04 cent N/A N/A N/A	Year ended 30 September, 2003 2002 2001 HK$’000 HK$’000 HK$’000 (Audited) (Audited) (Audited) (Note 1) 17,154 20,517 10,595 (36,990) (12,660) (3,435) (19,836) 7,857 7,160 189 170 115 (2,088) (1,609) (772) (12,716) (9,581) (6,031) (19,342) − − (53,793) (3,163) 472 (14) – − (14) – − (53,821) (3,163) 472 – (185) (338) (53,821) (3,348) 134 482 161 75 (53,339) (3,187) 209 (HK8.63 cent) (HK0.59 cent) HK0.04 cent N/A N/A N/A
(19,836) 189 (2,088) (12,716) (19,342) (53,793) (14) (14) (53,821) – (53,821) 482	7,857 170 (1,609) (9,581) − (3,163) – – (3,163) (185) (3,348) 161	7,160 115 (772 (6,031 −
		472 − −
		472 (338
		134 75
(53,339) (HK8.63 cent) N/A	(3,187) (HK0.59 cent) N/A

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Notes:

The audited consolidated results for the year ended 30 September, 2001 were based on the audited financial statements and management accounts of the companies comprising the Group as if the current Group structure had been in existence throughout the period.
The calculation of basic earnings/(loss) per share is based on the net loss from ordinary activities attributable to shareholders for the year ended 30 September, 2003 of HK$53,339,000 (2002: net loss of HK$3,187,000; 2001: net profit of HK$209,000), and the weighted average number of 618,260,000 (2002: 542,304,000; 2001: 480,000,000) ordinary shares of the Company in issue during the year.

No diluted loss per share amount is shown for the years ended 30 September, 2002 and 2003 as the effects of the share options granted on 24 April, 2002 and 11 July, 2002 and the convertible notes issued on 29 August, 2003 and 30 September, 2003 by the Company were anti-dilutive or had no dilutive effect on basic loss per share for the years ended 30 September, 2002 and 2003.

No diluted earnings per share was shown for the year ended 30 September, 2001 as there was no dilutive events during the year.

There was no extraordinary/exceptional items noted for the three years ended 30 September, 2001, 2002 and 2003.

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

(B) Auditors’ report and financial statements

Set out below is the text of the qualified auditors’ report for the year ended 30 September, 2003 as extracted from the 2003 annual report of Aptus for information purpose only. The unqualified auditors’ reports for the year ended 30 September, 2001 and 30 September, 2002 are not included.

15th Floor Hutchison House 10 Harcourt Road Central Hong Kong

To the members

Aptus Holdings Limited

(Incorporated in the Cayman Islands with limited liability)

We have audited the financial statements on pages 24 to 63 which have been prepared in accordance with accounting principles generally accepted in Hong Kong.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

The Company’s directors are responsible for the preparation of financial statements which give a true and fair view. In preparing financial statements which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently. It is our responsibility to form an independent opinion, based on our audit, on those financial statements and to report our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

BASIS OF OPINION

We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants except that the scope of our work was limited as explained below.

An audit includes an examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company’s and the Group’s circumstances, consistently applied and adequately disclosed.

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

We planned our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free from material misstatement. However, the evidence available to us was limited as follows:

1. Scope limitation −acquisition of a subsidiary

As further detailed in notes 17 and 28(c) to the financial statements, the Group acquired a subsidiary for a cash consideration of HK$7.8 million during the year (the “Acquisition”). The evidence available to us in connection with the Acquisition was limited. Notwithstanding that we understand the acquired subsidiary has been in the pharmaceutical products distribution business for some two years, proper books and records in connection with the subsidiary’s activities prior to the Acquisition, including the acquired inventories set out in note 28(c) to the financial statements, were not available for our audit. Accordingly, we were unable to obtain sufficient evidence to audit the accounting for the Acquisition or to determine whether it is in accordance with statement of standard accounting practice 30 “Business Combinations”, or otherwise determine how the goodwill arising from the acquisition and the payments of HK$7.8 million should be accounted for in the financial statements, and the completeness of the subsequent sales of its inventories. As a result of this scope limitation, we were not able to perform the procedures we considered necessary to assess the transaction as a whole and, accordingly, the carrying value of the goodwill arising from the Acquisition, notwithstanding the related goodwill has been fully written off during the year, and the subsequent sales of its inventories. Any adjustment to either the goodwill and/or the net assets acquired arising from the Acquisition would have a consequential impact on the Group’s net assets as at 30 September, 2003 and its turnover and results for the year then ended.

2. Scope limitation −Purchases and corresponding payments, accounts payable, inventories and provision made

During the year ended 30 September, 2003, the Group recorded purchases of certain inventories of HK$15,958,000 in aggregate (the “Inventories”) in Mainland China. Because of alleged quality defects on the Inventories and the subsequent cancellation of purchase orders by a customer, full provision has been made by the directors against the Inventories. The aforesaid purchases and provision against the Inventories have been included in the Group’s cost of sales and, consequently, have been included in determining the Group’s net loss for the year ended 30 September, 2003. The directors have also advised us that as a result of the resignation of certain senior sales executives and the relocation of the Group’s office in Mainland China during the year, certain books

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

and records of the Group in relation to the foregoing purchases and the corresponding payments cannot be located. Due to the lack of adequate supporting documentation in connection with the purchases and their payments, we have not been able to obtain sufficient reliable evidence we consider necessary to satisfy ourselves that such purchases and corresponding payments, the provision made against the Inventories and relevant taxes should be recognised in the Group’s profit and loss account, nor have we been able to satisfy ourselves that the balance of the Inventories, the accounts and taxes payable so arising were fairly stated as at 30 September, 2003. Any adjustments found to be necessary in relation to these transactions would have a consequential impact on the Group’s net assets as at 30 September, 2003 and its results for the year then ended, and the related disclosures thereof in these financial statements.

In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion.

FUNDAMENTAL UNCERTAINTY RELATING TO THE GOING CONCERN BASIS

In forming our opinion, we have considered the adequacy of the disclosures made in note 2 to the financial statements concerning the adoption of the going concern basis on which the financial statements have been prepared. As explained in note 2 to the financial statements, the Group is currently undertaking a number of measures to relieve its current profitability and liquidity problems. The financial statements have been prepared on a going concern basis, the validity of which depends upon the successful completion of these measures and the attainment of profitable and positive cash flow operations. The financial statements do not include any adjustments that may be necessary should the implementation of these measures or the attainment of profitable and positive cash flow operations be unsuccessful. We consider that appropriate estimates and disclosures have been made in the financial statements concerning this situation and our opinion is not qualified in this respect.

DISCLAIMER OF OPINION

Because of the significance of each of the possible effects of the scope limitations in evidence available to us, as set out in points (1) and (2) under the basis of opinion section of this report, we are unable to form an opinion as to whether the financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 30 September, 2003 and of the loss and the cash flows of the Group for the year then ended and as to whether the financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

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APPENDIX I FINANCIAL INFORMATION ON THE APTUS GROUP

In respect alone of the limitations on our work as set out in the basis of opinion section of this report:

(i) we have not obtained all the information and explanations that we considered necessary for the purpose of our audit; and
(ii) we were unable to determine whether proper books of account had been kept.

Ernst & Young

Certified Public Accountants

Hong Kong 19 March, 2004

−55 −

APPENDIX I FINANCIAL INFORMATION ON THE APTUS GROUP

The following is the audited consolidated financial statements of Aptus for the year ended 30 September, 2003 together with accompanying notes, extracted from Aptus’s 2003 annual report:

CONSOLIDATED PROFIT AND LOSS ACCOUNT

Year ended 30 September, 2003

Notes TURNOVER 6 Cost of sales Gross profit/(loss) Other revenue and gains 6 Selling and distribution costs Administrative expenses Other operating expenses LOSS FROM OPERATING ACTIVITIES 7 Finance costs 8 Share of loss of a jointly-controlled entity LOSS BEFORE TAX Tax 11 LOSS BEFORE MINORITY INTERESTS Minority interests NET LOSS FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS 12 LOSS PER SHARE 13 −Basic −Diluted	2003 HK$’000 17,154 (36,990)	2002 HK$’000 20,517 (12,660) 7,857 170 (1,609) (9,581) – (3,163) – – (3,163) (185) (3,348) 161 (3,187) (HK0.59 cent) N/A
	(19,836) 189 (2,088) (12,716) (19,342) (53,793) (14) (14) (53,821) – (53,821) 482	7,857 170 (1,609 (9,581 –
		(3,163 – –
		(3,163 (185
		(3,348 161
	(53,339) (HK8.63 cent) N/A

−56 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

30 September, 2003

Notes NON-CURRENT ASSETS Fixed assets 14 Long term deposit 16 Interest in a jointly-controlled entity 18 CURRENT ASSETS Inventories 19 Accounts receivable 20 Prepayments, deposits and other receivables Cash and bank balances 21 CURRENT LIABILITIES Accounts payable 22 Accrued liabilities and other payables Tax payable Convertible notes 23 Finance lease payables 24 Bank overdraft, unsecured NET CURRENT ASSETS/(LIABILITIES) TOTAL ASSETS LESS CURRENT LIABILITIES MINORITY INTERESTS CAPITAL AND RESERVES Issued capital 25 Reserves 27(a)	2003 HK$’000 6,386 3,400 2,731	2002 HK$’000 14,253 6,800 –
	12,517 – 4,747 1,164 6,414 12,325 88 5,845 523 7,535 79 – 14,070 (1,745) 10,772 –	21,053
		12,309 8,087 4,895 25,182
		50,473
		6 3,404 523 – – 3,000
		6,933
		43,540
		64,593 482
	10,772	64,111

	6,183 4,589	6,183 57,928
	10,772	64,111

−57 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 30 September, 2003

Issued capital HK$’000 100 422 778 4,700 183 – –	Share premium account HK$’000 – 8,378 38,102 (4,700) 8,947 (5,767) –	Capital reserve HK$’000 (note 27(a)) 17,240 – – – – – –	Accu- mulated losses HK$’000 (1,085) – – – – – (3,187)	Accu- mulated losses HK$’000 (1,085) – – – – – (3,187)
6,183 –	44,960 –	17,240 –	(4,272) (53,339)	64,111 (53,339
6,183	44,960*	17,240*
6,183 –	44,960 –	17,240 –	(57,597) (14)	10,786 (14
6,183	44,960	17,240	(57,611)
6,183 –	44,960 –	17,240 –	(4,272) –	64,111 –
6,183	44,960	17,240	(4,272)

These reserve accounts comprise the consolidated reserves of HK$4,589,000 (2002: HK$57,928,000) in the consolidated balance sheet.

−58 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

Year ended 30 September, 2003

Notes CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax Adjustments for: Interest income 6 Finance costs 8 Share of losses of a jointly-controlled entity Depreciation 7 Loss on disposal of fixed assets 7 Goodwill amortisation and impairment 7 Impairment of fixed assets 7 Provision for doubtful debts 7 Provision for a long term deposit 7 Provision against inventories 7 Operating loss before working capital changes Increase in amount due from a jointly-controlled entity Increase in inventories Increase in accounts receivable Decrease/(increase) in prepayments, deposits and other receivables Increase/(decrease) in accounts payable Increase in accrued liabilities and other payables Cash used in operations Interest received Interest paid Interest element on finance lease rental payments Net cash outflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Advances to directors Purchases of fixed assets Proceeds from disposal of fixed assets Long term deposit paid Acquisition of a jointly-controlled entity 18 Acquisition of a subsidiary 28(c) Net cash outflow from investing activities	2003 HK$’000 (53,821) (8) 14 14 3,966 7 5,789 4,152 5,994 3,400 15,958	2002 HK$’000 (Restated) (3,163) (34) – – 2,409 – – – – – – (788) – (12,309) (2,241) (4,629) (105) 1,726 (18,346) 34 – – (18,312) 5,466 (9,410) – (6,800) – – (10,744)
	(14,535) (15) (1,638) (2,654) 3,731 82 2,441 (12,588) 8 (2) (12) (12,594) – (212) 118 – (195) (7,800) (8,089)	(788 – (12,309 (2,241 (4,629 (105 1,726
		(18,346 34 – –
		(18,312
		5,466 (9,410 – (6,800 – –
		(10,744

−59 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares prior to the public listing Proceeds from issue of shares on public listing Share issue expenses Proceeds from issue of shares upon exercise of over-allotment option Proceed from issue of a convertible note Capital element of finance lease rental payments Net cash inflow from financing activities NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances Bank overdraft, unsecured	2003 HK$’000 – – – – 5,000 (85)	2002 HK$’000 (Restated) 8,800 38,880 (5,767) 9,130 – –
	4,915 (15,768) 22,182 6,414 6,414 – 6,414	51,043 21,987 195 22,182 25,182 (3,000) 22,182

−60 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

BALANCE SHEET

30 September, 2003

Notes NON-CURRENT ASSETS Investments in subsidiaries 17 CURRENT ASSETS Prepayments Due from subsidiaries 17 Cash and bank balances CURRENT LIABILITIES Accrued liabilities and other payables Convertible notes 23 NET CURRENT ASSETS CAPITAL AND RESERVES Issued capital 25 Reserves 27(b)	2003 HK$’000 – – 10,997 5,544	2002 HK$’000 15,926 105 30,707 19,210
	16,541 2,900 7,535 10,435 6,106	50,022
		1,149 –
		1,149
		48,873
	6,106	64,799

	6,183 (77)	6,183 58,616
	6,106	64,799

−61 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

NOTES TO FINANCIAL STATEMENTS

30 September, 2003

1. CORPORATE INFORMATION

The principal activity of the Company is investment holding. During the year, the Group was principally involved in the provision of direct marketing, product consulting and sales force management services, and marketing and distribution of pharmaceutical products.

The registered office of the Company is located at Century Yard, Cricket Square, Hutchins Drive, P.O. Box 2681 GT, George Town, Grand Cayman, British West Indies.

2. BASIS OF PRESENTATION

As at 30 September, 2003, the Group had net current liabilities of approximately HK$1,745,000. The Group also recorded a net loss attributable to the shareholders of approximately HK$53,339,000 and reported a net decrease in cash and cash equivalents of HK$15,768,000 for the year ended 30 September, 2003.

In order to improve the Group’s financial position, immediate liquidity, cash flows and otherwise to sustains the Group as a going concern, the directors of the Company have adopted the following measures:

(a) Subsequent to the balance sheet date, the Group has obtained written consent from the holder of the Company’s convertible note of HK$5,000,000 (note 23(ii)) to reschedule and extend the repayment period of the convertible note for further one year upon their original maturity on 30 September, 2004.
(b) Pursuant to a loan agreement dated 30 December, 2003 and a supplementary agreement entered into between the Company and an independent third party, the Company has been granted a term loan of RM$2,476,500 (equivalent to approximately HK$5,060,000). The term loan is unsecured, bears interest at 6% per annum, was drawn down subsequent to the year end and is repayable on 30 June, 2005.
(c) The directors of the Company are considering varies alternatives to strengthen the capital base of the Company through various fund raising exercises, including, but not limited to, a private placement and a rights issue of new shares.
(d) The directors of the Company have been taking action to tighten cost controls over various general and administrative expenses.

In the opinion of the directors of the Company, in light of the measures taken to date and the expected outcome of other measures in progress as planned, the directors are satisfied that the Group will be able to meet its financial obligation as and when they fall due in the foreseeable future and be able to operate as a commercially viable concern. Accordingly, these financial statements have been prepared on a going concern basis.

The financial statements have not incorporated any adjustments that may be required if the above measures are not successful. Should the Group be unable to continue in business as a going concern, adjustments would have to be made to restate the values of assets to their recoverable amounts, to provide for any further liabilities which might arise and to reclassify non-current assets as current assets. The effect of any such adjustments has not been reflected in the financial statements.

3. IMPACT OF NEW AND REVISED HONG KONG STATEMENTS OF STANDARD ACCOUNTING PRACTICE

The following new and revised Hong Kong Statements of Standard Accounting Practice (“SSAPs”) are effective for the first time for the current year’s financial statements and have had a significant impact thereon:

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

−62 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

These SSAPs prescribe new accounting measurement and disclosure practices. The major effects on the Group’s accounting policies and on the amounts disclosed in these financial statements are summarised as follows:

SSAP 1 prescribes the basis for the presentation of financial statements and sets out guidelines for their structure and minimum requirements for the content thereof. The principal impact of the revision of this SSAP is that a consolidated statement of changes in equity is now presented on page 26 of the financial statements in place of the consolidated statement of recognised gains and losses that was previously required and in place of the Group’s reserves note.

SSAP 11 prescribes the basis for the translation of foreign currency transactions and financial statements. The principal impact of the revision of this SSAP on the consolidated financial statements is that the profit and loss accounts of overseas subsidiaries and a jointly-controlled entity are now translated into Hong Kong dollars at the weighted average exchange rates for the year, whereas previously they were translated at the exchange rates as at the balance sheet date. The adoption of the revised SSAP 11 has had no material effect on the financial statements.

SSAP 15 prescribes the revised format for the cash flow statement. The principal impact of the revision of this SSAP is that the consolidated cash flow statement now presents cash flows under three headings, cash flows from operating, investing and financing activities, rather than the five headings previously required. In addition, cash flows from overseas subsidiaries arising during the year are now translated into Hong Kong dollars at the exchange rates as at the dates of the transactions, or at an approximation thereto, whereas previously they were translated at the exchange rates at the balance sheet date, and the definition of cash equivalents for the purpose of the consolidated cash flow statement has been revised. Further details of these changes are included in the accounting policies for “Cash and cash equivalents” and “Foreign currencies” in note 4 and in note 28(a) to the financial statements.

SSAP 34 prescribes the recognition and measurement criteria to apply to employee benefits, together with the required disclosures in respect thereof. The adoption of this SSAP has resulted in no material change to the previously adopted accounting treatments for employee benefits. In addition, disclosures are now required in respect of the Company’s share option schemes, as detailed in note 26 to the financial statements. These share option schemes disclosures are similar to the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “Listing Rules”) disclosures previously included in the Report of the Directors, which are now required to be included in the notes to the financial statements as a consequence of the adoption of this SSAP.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

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

Basis of consolidation

The consolidated financial statements have been prepared using the merger basis of accounting as a result of the Group reorganisation (the “Group Reorganisation”), completed on 27 February, 2002 to rationalise the structure of the Group in preparation for the listing of the Company’s shares on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). On this basis, the Company has been treated as the holding company of its subsidiaries for the financial year presented rather than from the date of their acquisition. Accordingly, the consolidated results of the Group for the year ended 30 September, 2002 include the results of the Company and its subsidiaries with effect from 1 October, 2001 or since their respective dates of incorporation/establishment, where this is a shorter period.

In the opinion of the directors, the consolidated financial statements prepared on the above basis present more fairly the results and the state of affairs of the Group as a whole.

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

Minority interests represent the interests of outside shareholders in the results and net assets of the Company’s subsidiaries.

−63 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Subsidiaries

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

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

Joint venture companies

A joint venture company is a company set up by contractual arrangement, whereby the Group and other parties undertake an economic activity. The joint venture company operates as a separate entity in which the Group and the other parties have an interest.

The joint venture agreement between the venturers stipulates the capital contribution of the joint venture parties, the duration of the joint venture and the basis on which the assets are to be realised upon its dissolution. The profits and losses from the joint venture company’s operations and any distributions of surplus assets are shared by the venturers, either in proportion to their respective capital contributions, or in accordance with the terms of the joint venture agreement.

A joint venture company is treated as:

(a) a subsidiary, if the Company has unilateral control, directly or indirectly, over the joint venture company;
(b) a jointly-controlled entity, if the Company does not have unilateral control, but has joint control, directly or indirectly, over the joint venture company;
(c) an associate, if the Company does not have unilateral or joint control, but holds, directly or indirectly, generally not less than 20% of the joint venture company’s registered/paid-up capital and is in a position to exercise significant influence over the joint venture company; or
(d) a long term investment, if the Company holds, directly or indirectly, less than 20% of the joint venture company’s registered/paid-up capital and has neither joint control of, nor is in a position to exercise significant influence over, the joint venture company.

Jointly-controlled entities

A jointly-controlled entity is a joint venture company which is subject to joint control, resulting in none of the participating parties having unilateral control over the economic activity of the jointly-controlled entity.

The Group’s share of the post-acquisition results and reserves of jointly-controlled entities is included in the consolidated profit and loss account and consolidated reserves, respectively. The Group’s interests in jointly-controlled entities are stated in the consolidated balance sheet at the Group’s share of net assets under the equity method of accounting, less any impairment losses. Goodwill or negative goodwill arising from the acquisition of jointly-controlled entities is included as part of the Group’s interests in jointly-controlled entities.

The results of jointly-controlled entities are included in the Company’s profit and loss account to the extent of dividends received and receivable. The Company’s interests in jointly-controlled entities are treated as long term assets and are stated at cost less any impairment losses.

Goodwill

Goodwill arising on the acquisition of subsidiaries and a jointly-controlled entity represents the excess of the cost of the acquisition over the Group’s share of the fair values of the identifiable assets and liabilities acquired as at the date of acquisition.

Goodwill arising on acquisition is recognised in the consolidated balance sheet as an asset and amortised on the straight-line basis over its estimated useful life of five years. In the case of a jointly-controlled entity, any unamortised goodwill is included in the carrying amount thereof, rather than as a separately identified asset on the consolidated balance sheet.

−64 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

On disposal of subsidiaries or a jointly-controlled entity, the gain or loss on disposal is calculated by reference to the net assets at the date of disposal, including the attributable amount of goodwill which remains unamortised and any relevant reserves, as appropriate.

The carrying amount of goodwill is reviewed annually and written down for impairment when it is considered necessary. A previously recognised impairment loss for goodwill is not reversed unless the impairment loss was caused by a specific external event of an exceptional nature that was not expected to recur, and subsequent external events have occurred which have reversed the effect of that event.

Related parties

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

Impairment of assets

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

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

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

Fixed assets and depreciation

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

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

Leasehold improvements	Over the lease terms
Furniture and fixtures	20%
Computer equipment	20%
Motor vehicles	20%

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

Leased assets

Leases that transfer substantially all the rewards and risks of ownership of assets to the Group, other than legal title, are accounted for as finance leases. At the inception of a finance lease, the cost of the leased asset is capitalised at the present value of the minimum lease payments and recorded together with the obligation, excluding the interest element, to reflect the purchase and financing. Assets held under capitalised finance leases are included in fixed assets and depreciated over the shorter of the lease terms and the estimated useful lives of the assets. The finance costs of such leases are charged to the profit and loss account so as to provide a constant periodic rate of charge over the lease terms.

−65 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Assets acquired through hire purchase contracts of a financing nature are accounted for as finance leases, but are depreciated over their estimated useful lives.

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

Inventories

Inventories, which comprises finished goods held for resale, are stated at the lower of cost and net realisable value. Cost is determined on the first-in, first-out basis and includes all costs of purchases and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is based on estimated selling prices less any estimated costs necessary to make the sale.

Cash and cash equivalents

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

For the purpose of the balance sheet, cash and cash equivalents comprise cash on hand and at banks, including term deposits, and assets similar in nature to cash, which are not restricted as to use.

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the balance sheet date of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the profit and loss account.

Deferred tax

Deferred tax is provided, using the liability method, on all significant timing differences to the extent it is probable that the liability will crystallise in the foreseeable future. A deferred tax asset is not recognised until its realisation is assured beyond reasonable doubt.

Revenue recognition

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

(a) service income, when the relevant services are rendered;
(b) from the sale of goods, when the significant risks and rewards of ownership have been transferred to the buyer, provided that the Group maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold; and
(c) interest income, on a time proportion basis taking into account the principal outstanding and the effective interest rate applicable.

−66 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Foreign currencies

Foreign currency transactions are recorded at the applicable exchange rates ruling as at the transaction dates. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the applicable exchange rates ruling at that date. Exchange differences are dealt with in the profit and loss account.

On consolidation, the financial statements of overseas subsidiaries and a jointly-controlled entity are translated into Hong Kong dollars using the net investment method. The profit and loss accounts of overseas subsidiaries and a jointly-controlled entity are translated into Hong Kong dollars at the weighted average exchange rates for the year, and their balance sheets are translated into Hong Kong dollars at the exchange rates ruling as at the balance sheet date. The resulting translation differences are included in the exchange fluctuation reserve.

For the purpose of the consolidated cash flow statement, the cash flows of overseas subsidiaries are translated into Hong Kong dollars at the exchange rates ruling as at the dates of the cash flows. Frequently recurring cash flows of overseas subsidiaries which arise throughout the year are translated into Hong Kong dollars at the weighted average exchange rates for the year.

Prior to the adoption of the revised SSAPs 11 and 15 during the year, as explained in note 3 to the financial statements, the profit and loss accounts of overseas subsidiaries and a jointly-controlled entity and the cash flows of overseas subsidiaries were translated into Hong Kong dollars at the exchange rates ruling as at the balance sheet date. The adoption of the revised SSAP 11 has had no material effect on the financial statements. The adoption of the revised SSAP 15 has had no material effect on the amounts of the previously reported cash flows of the prior year.

Employee benefits

Retirement benefit schemes

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

Staff in the Group’s subsidiaries established in Mainland China are members of a central pension scheme operated by the local municipal government. These subsidiaries are required to contribute certain percentage of their covered payroll to the central pension scheme to fund the retirement benefits. The local municipal government undertakes to assume the retirement benefits obligations of all existing and future retired employees of these subsidiaries. The only obligation of these subsidiaries with respect to the central pension scheme is to meet the required contributions under the scheme. The contributions are charged to the profit and loss account as they become payable in accordance with the rules of the central pension scheme.

Share option schemes

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

−67 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

5. SEGMENT INFORMATION

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

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

(a) the services provision segment represents the provision of direct marketing services, product consulting services and sales force management services to local and international pharmaceutical and healthcare companies; and
(b) the trading segment represents the marketing and distribution of pharmaceutical and healthcare products.

In determining the Group’s geographical segments, revenues are attributed to the segments based on the location of the customers and assets are attributed to the segments based on the location of assets. Over 90% of the Group’s revenue and assets are derived from customers based in Mainland China and accordingly, no detailed analysis of the Group’s geographical segments is presented.

There were no intersegment sales and transfers among the business segments during the year.

Business segments

The following tables present revenue, results and certain assets, liabilities and expenditure information for the Group’s business segments.

Group

Segment revenue: Sales to external customers Segment results Unallocated income Unallocated expenses Finance costs Share of loss of a jointly- controlled entity Loss before tax Tax Loss before minority interests Minority interests Net loss from ordinary activities attributable to shareholders	Services provision 2003 2002 HK$’000 HK$’000 1,503 12,409 (7,750) 4,602	Trading 2003 2002 HK$’000 HK$’000 15,651 8,108 (36,060) (484)	Trading 2003 2002 HK$’000 HK$’000 15,651 8,108 (36,060) (484)	Consolidated 2003 2002 HK$’000 HK$’000 17,154 20,517 (43,810) 4,118 189 170 (10,172) (7,451) (53,793) (3,163) (14) – (14) – (53,821) (3,163) – (185) (53,821) (3,348) 482 161 (53,339) (3,187)	Consolidated 2003 2002 HK$’000 HK$’000 17,154 20,517 (43,810) 4,118 189 170 (10,172) (7,451) (53,793) (3,163) (14) – (14) – (53,821) (3,163) – (185) (53,821) (3,348) 482 161 (53,339) (3,187)
				189 (10,172) (53,793) (14) (14) (53,821) – (53,821) 482	170 (7,451
					(3,163 – –
					(3,163 (185
					(3,348 161
				(53,339)

−68 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Group

Services provision Trading 2003 2002 2003 2002 HK$’000 HK$’000 HK$’000 HK$’000 Segment assets 6,297 15,765 7,834 26,946 Interests in a jointly- controlled entity – – 2,731 – Unallocated assets Total assets Segment liabilities 1,690 2,048 973 193 Unallocated liabilities Total liabilities Other segment information: Depreciation and amortisation 1,957 1,628 2,058 – Unallocated amounts Impairment losses recognised in the profit and loss account – – 8,231 – Unallocated amounts Capital expenditure – 2,886 10,530 4,500 Unallocated amounts Other non-cash expenses – – 25,352 –	Consolidated 2003 2002 HK$’000 HK$’000 14,131 42,711 2,731 – 7,980 28,815 24,842 71,526 2,663 2,241 11,407 4,692 14,070 6,933	Consolidated 2003 2002 HK$’000 HK$’000 14,131 42,711 2,731 – 7,980 28,815 24,842 71,526 2,663 2,241 11,407 4,692 14,070 6,933
		71,526

		2,241 4,692
		6,933

	4,015 1,109	1,628 781
	5,124	2,409

	8,231 552	– –
	8,783	–

	10,530 376	7,386 2,024
	10,906 25,352	9,410

		–

The other non-cash expenses includes HK$7,552,000 relating to provision for a long term deposit and impairment of fixed assets.

−69 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

6. TURNOVER, OTHER REVENUE AND GAINS

Turnover represents the invoiced value of goods sold, after allowances for returns and trade discounts, and business tax; and the value of services rendered during the year.

An analysis of turnover, other revenue and gains is as follows:

Turnover Sale of goods Rendering of services Other revenue Interest income Rental income Other Gains Exchange gains/(losses), net	2003 HK$’000 15,651 1,503 17,154 8 140 43 191 (2) 189	2002 HK$’000 8,108 12,409
		20,517

		34 – 51
		85 85
		170

−70 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

7. LOSS FROM OPERATING ACTIVITIES

The Group’s loss from operating activities is arrived at after charging:

Notes Cost of inventories sold Cost of services provided Auditors’ remuneration Depreciation 14 Goodwill: 15 Amortisation for the year Impairment arising during the year Impairment of fixed assets 14 Provision for doubtful debts Provision for a long term deposit Provision for inventories Loss on disposal of fixed assets Staff costs (excluding directors’ remuneration −note 9): Wages and salaries Housing benefits Retirement benefits scheme contributions Minimum lease payments under operating leases: Land and buildings Equipment	2003 HK$’000 30,277 6,713 1,950 3,966 1,158 4,631 4,152 5,994 3,400 15,958 7 2,755 138 32	2002 HK$’000 8,027 4,633 634 2,409 – – – – – – – 3,333 – 153
	2,925	3,486
	1,388 106	1,021 70

The cost of inventories sold includes provision for inventories of HK$15,958,000 (2002: Nil).

The cost of services provided includes HK$2,437,000 (2002: HK$3,664,000) relating to staff costs, depreciation and operating lease rentals in respect of equipment, which are also included in the respective total amounts disclosed for each of these types of expenses above.

The impairment of fixed assets and provision for a long term deposit are included in other operating expenses.

The amortisation and impairment of goodwill for the year are included in “Other operating expenses” on the face of the consolidated profit and loss account.

8. FINANCE COSTS

Interest on bank overdrafts Interest on finance lease	Group 2003 2002 HK$’000 HK$’000 2 – 12 – 14 –	Group 2003 2002 HK$’000 HK$’000 2 – 12 – 14 –
		–

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

9. DIRECTORS’ REMUNERATION

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

Fees: Executive directors Non-executive directors Independent non-executive directors Other emoluments: Basic salaries, housing benefits, other allowances and benefits in kind Retirement benefits scheme contributions	Group 2003 2002 HK$’000 HK$’000 – – 31 120 30 120	Group 2003 2002 HK$’000 HK$’000 – – 31 120 30 120
	61 1,607 28 1,635	240
		2,004 32
		2,036
	1,696	2,276

The executive directors and non-executive directors received individual emoluments of approximately HK$318,000 (2002: HK$621,000), HK$110,000 (2002: HK$655,000), HK$710,000 (2002: HK$325,000), HK$528,000 (2002: HK$435,000), and nil (2002: HK$60,000) and nil (2002: HK$60,000).

The independent non-executive directors received individual emoluments of approximately HK$30,000 (2002: HK$60,000) and nil (2002: HK$60,000), respectively.

During the year ended 30 September, 2003, the Group received written consent from certain directors of the Company to waive remuneration of a total of HK$655,000 (2002: HK$354,000) payable to the directors. The remuneration waived for the current and prior years had been incorporated in the fees and other emoluments to directors as disclosed above. Save as the aforesaid, there was no arrangement under which a director waived or agreed to waive any remuneration during the current and prior years.

During the year, no emoluments were paid by the Group to the directors as an inducement to join, or upon joining the Group, or as compensation for loss of office (2002: Nil).

10. FIVE HIGHEST PAID EMPLOYEES

The five highest paid employees during the year included three (2002: two) directors, details of whose remuneration are set out in note 9 above. Details of the remuneration of the remaining two (2002: three) non-director, highest paid employees for the year are as follows:

Basic salaries, housing benefits, other allowances and benefits in kind Retirement benefits scheme contributions	Group 2003 2002 HK$’000 HK$’000 1,235 1,542 20 17 1,255 1,559	Group 2003 2002 HK$’000 HK$’000 1,235 1,542 20 17 1,255 1,559
		1,559

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

The remuneration of each non-director, highest paid employee fell within the Nil-HK$1,000,000 band during the year.

During the year, no emoluments were paid by the Group to the non-director, highest paid employees as an inducement to joint or upon joining the Group, or as compensation for loss of office (2002: Nil).

11. TAX

No Hong Kong profits tax has been provided as the Group did not generate any assessable profits in Hong Kong during the year (2002: Nil). Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates, based on existing legislation, interpretations and practices in respect thereof.

Group: Hong Kong Overseas Share of tax attributable to a jointly-controlled entity Tax charge for the year	2003 HK$’000 – –	2002 HK$’000 – 185
	– –	185
		–
	–	185

The principal components of the Company’s and the Group’s deferred tax liabilities/(assets) provided for/and not provided for in the financial statements at the balance sheet date were as follows:

Accelerated depreciation allowances Tax losses carried forward At 30 September	Group Provided Not provided 2003 2002 2003 2002 HK$’000 HK$’000 HK$’000 HK$’000 – – 824 – – – (1,488) – – – (664) –	Group Provided Not provided 2003 2002 2003 2002 HK$’000 HK$’000 HK$’000 HK$’000 – – 824 – – – (1,488) – – – (664) –
		–

The Group and the Company have no significant potential deferred tax liabilities for which provision has not been made.

12. NET LOSS FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS

The net loss from ordinary activities attributable to shareholders for the year ended 30 September, 2003 dealt with in the financial statements of the Company, was HK$58,693,000 (period from 26 November, 2001 (date of incorporation) to 30 September, 2002: HK$2,170,000) (note 27(b)).

13. LOSS PER SHARE

The calculation of basic loss per share is based on the net loss from ordinary activities attributable to shareholders for the year of HK$53,339,000 (2002: HK$3,187,000), and the weighted average number of 618,260,000 (2002: 542,304,000) ordinary shares of the Company in issue during the year.

No diluted loss per share amount is shown for the years ended 30 September, 2002 and 2003 as the effects of the share options granted on 24 April, 2002 and 11 July, 2002 and the convertible notes issued on 29 August, 2003 and 30 September, 2003, as further detailed in notes 26 and 23 to the financial statements, by the Company were either anti-dilutive or had no dilutive effect on the basic loss per share for the years ended 30 September, 2002 and 2003.

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

14. FIXED ASSETS

Group

Leasehold improvements HK$’000 Cost: At beginning of year 2,022 Additions 97 Disposals – At 30 September, 2003 2,119 Accumulated depreciation and impairment: At beginning of year 984 Provided during the year 583 Disposals – Impairment during the year recognised in the profit and loss account 552 At 30 September, 2003 2,119 Net book value: At 30 September, 2003 – At 30 September, 2002 1,038	Furniture and fixtures HK$’000 1,385 36 –	Computer equipment HK$’000 15,215 243 –	Motor vehicles HK$’000 147 – (147)	Total HK$’000 18,769 376 (147) 18,998 4,516 3,966 (22) 4,152 12,612 6,386 14,253
2,119 984 583 – 552 2,119	1,421 355 283 – – 638	15,458 3,170 3,085 – 3,600 9,855	– 7 15 (22) – –	18,998
				4,516 3,966 (22 4,152
				12,612
– 1,038	783 1,030	5,603 12,045	– 140

In the opinion of the directors, certain computer equipment are impaired as the Group had no business plan to utilise these assets and an impairment provision of HK$4,152,000 was made during the year. With respect to other fixed assets, the directors have performed an assessment as at 30 September, 2003. Based on a valuation report issued by BMI Appraisals Limited (“BMI”), an independent firm of professional valuers, the director considered that the recoverable amounts exceeds the carrying value of the other assets and therefore no indication of impairment was noted for all other fixed assets.

The net book value of the Group’s fixed assets held under finance leases included in the total amount of computer equipment at 30 September, 2003, amounted to HK$131,000 (2002: Nil).

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

15. GOODWILL

The amounts of the goodwill capitalised as an asset or recognised in the consolidated balance sheet, arising from the acquisition of a subsidiary, are as follows:

Group

Cost: Acquisition of a subsidiary (note 28(c)) and at 30 September, 2003 Accumulated amortisation and impairment: Amortisation provided during the year Impairment provided during the year At 30 September, 2003 Net book value: At 30 September, 2003	HK$’000 5,789
	1,158 4,631
	5,789
	–

The Group has recognised an impairment on the unamortised goodwill arising from the acquisition of Lucky Mountain Group Limited (“LMGL”), during the year, which was engaged in the distribution of pharmaceutical products in Mainland China. In the opinion of the directors, such impairment loss arose from the prevailing competitive market conditions in Mainland China and the Group’s financial difficulties. In light of such circumstances, it is unlikely that the Group will further develop the business of LMGL.

16. LONG TERM DEPOSIT

Long-term deposit Provision for impairment	Group 2003 2002 HK$’000 HK$’000 6,800 6,800 (3,400) – 3,400 6,800	Group 2003 2002 HK$’000 HK$’000 6,800 6,800 (3,400) – 3,400 6,800
		6,800

The balance represents the consideration (the “Consideration”) paid in respect of the acquisition (the “Acquisition”) of a 10-year exclusive distribution right (the “Distribution Right”) for five pharmaceutical products (the “Products”) in Mainland China. The consideration had been fully paid in the prior year. During the current year, the Group submitted the application for registration with the State Drug Administration Bureau (the “SDAB”) in Mainland China in relation to the distribution of the Products in Mainland China. The directors, based on the opinion from a Mainland China lawyer, do not expect the Group to encounter any problems in obtaining the relevant approvals from the SDAB.

Pursuant to the sale and purchase agreement (the “Agreement”) in respect of the Acquisition, in the event that the registration of any of the Products with the SDAB being rejected within two years from the date of the Agreement, which is from 24 June, 2002 to 23 June, 2004, the Group is entitled to a refund (the “Refund”) from the vendor of HK$1.36 million for each of the Products being rejected. A business associate of the vendor, an independent third party to the Group who is also the director and major shareholder of a listed company on the Stock Exchange, executed a guarantee for the Refund in favor of the Group. Since the registration process of the Products has not yet been completed as at 30 September, 2003, and the Consideration can be refunded from the vendor should the registration with SDAB of any of the Products be rejected. The Consideration was classified as a long term deposit as at 30 September, 2003.

−75 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

According to a valuation report issued by BMI, taking into account expected future sales of the Products, the valuation of the Distribution Right amounted to approximately HK$3.4 million as at 30 September, 2003. The directors considered that there is an indication of impairment for this project as a result of the expected reduction in development scale of the Products in view of the tight liquidity of the Group. Accordingly, the Group has recognised an impairment of HK$3,400,000 for this long term deposit as at 30 September, 2003.

17. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Due from subsidiaries Provision for impairment	2003 HK$’000 15,926 47,483 (52,412) 10,997	2002 HK$’000 15,926 30,707 –
		46,633

The amounts due from subsidiaries included in the Company’s current assets are unsecured, interest-free and have no fixed terms of repayment.

The table below lists the subsidiaries of the Company which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, results in particulars of excessive length.

		Nominal value
	Place of	of issued and	Percentage of
	incorporation/	paid-up share/	equity
	registration and	registered	attributable to
Name	operations	capital	the Company	Principal activities
Directly held
Aptus Group Limited	British Virgin	US$10,000	100	Investment holding
(“AGL”)	Islands	ordinary
Indirectly held
Albatross Overseas	British Virgin	US$1,000	100	Provision of product
Limited	Islands/Mainland	ordinary		consulting services
	China
Aptus Medical Group	Hong Kong	HK$117,933	100	Investment holding and
Limited		ordinary		provision of product
				consulting services
Peaceford International	British Virgin	US$1,000	100	Investment holding,
Limited	Islands/Mainland	ordinary		provision of product
	China			consulting and sales
				force management
				services and marketing
				and distribution of
				pharmaceutical products
LMGL	British Virgin	US$1,000	100	Marketing and distribution
	Islands/Mainland	ordinary		of pharmaceutical
	China			products

−76 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Nominal value Place of of issued and Percentage of incorporation/ paid-up share/ equity registration and registered attributable to Name operations capital the Company Principal activities Mainland China US$300,000 80 Provision of direct (formerly marketing services (“SHAL”) Note (i) Mainland China US$150,000 80 Provision of product (“BWML”) consulting services Note (ii)

Notes:

(i) SHAL is an equity joint venture company established by Aptus Medical Group Limited (“AMGL’’) and a partner in Mainland China for a period of 15 years commencing from the date of issuance of its business licence on 13 June, 2000.
(ii) BWML is an equity joint venture company established by AMGL and a partner in Mainland China for a period of 15 years commencing from the date of issuance of its business licence on 13 June, 2000.

SHAL and BWML have been accounted for as subsidiaries of the Group as the Group has unilateral control over the financial and operating policies of SHAL and BWML.

During the year, the Group acquired LMGL from an independent third party. Further details of this acquisition are included in note 28(c) to the financial statements.

18. INTEREST IN A JOINTLY-CONTROLLED ENTITY

Share of net liabilities Goodwill on acquisition Amount due from a jointly-controlled entity	Group 2003 2002 HK$’000 HK$’000 (14) – 2,730 –	Group 2003 2002 HK$’000 HK$’000 (14) – 2,730 –
	2,716 15	–
		–
	2,731	–

The amount due from a jointly-controlled entity is unsecured, interest-free and has no fixed term of repayment.

Particulars of the jointly-controlled entity is as follows:

		Place of	Percentage of	Percentage of
	Business	incorporation	Ownership	Profit
Name	structure	and operations	interest	sharing	Principal activity
Toowong International	Corporate	British Virgin	50.1	50.1	Distribution of
Laboratories Limited		Islands/Hong			pharmaceutical
(“Toowong”)		Kong			products

−77 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

The above investments in a jointly-controlled entity is indirectly held by the Company.

Pursuant to a sale and purchase agreement dated 28 July, 2003 entered into between the Group and Westport International Group Co., Ltd. (“Westport”), an independent third party, the Group acquired 50.1% of the issued share capital of Toowong (the “Toowong Acquisition”) from Westport. The consideration include: (i) US$25,000 (equivalent to approximately HK$195,000) paid in cash on 29 August, 2003; (ii) US$325,000 satisfied by the issue of a convertible note (equivalent to approximately HK$2,535,000) by the Company on 29 August, 2003 (note 23(i)); and (iii) the issue, at maximum, of 19,933,333 new shares (the “Consideration Shares”) of the Company of HK$0.01 each credited as fully paid. The market value of the Consideration Shares, issued at maximum number, amounted to approximately HK$2.7 million as at the date of approval of these financial statements. The amount of the Consideration Shares to be issued is determined, subject to adjustment, on the basis of sales derived by Toowong during a period of one year subsequent to the Toowong Acquisition. Up to the date of this financial statements, no Consideration Shares have been issued by the Company. Because the directors of the Company were unable to estimate reliably the future sales to be derived by Toowong and were therefore unable to accurately determine the Consideration Shares to be issued at the date of approval of these financial statements, the additional consideration to be settled by the Consideration Shares has not been accounted for at balance sheet date.

Pursuant to a shareholder agreement entered into between the Group and Westport on 29 August, 2003, Toowong is subject to the joint control of the Group and Westport and accordingly is accounted for as a jointly-controlled entity. The goodwill arising from the acquisition of Toowong by the Group amounted to HK$2,730,000 and no amortisation has been charged during the year as the completion of the acquisition was close to the balance sheet date and the impact to the financial statements was not material. Further details of the Toowong Acquisition are set out in the Company’s circular dated 19 August, 2003.

19. INVENTORIES

		Group
		2003	2002
		HK$’000	HK$’000
Finished	goods	–	12,309

As at 30 September, 2003, no inventories were stated at net realisable value (2002: Nil).

20. ACCOUNTS RECEIVABLE

Accounts receivable, which generally have credit terms of not more than 90 days, are recognised and carried at original invoiced amount less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.

An aged analysis of the Group’s accounts receivable at the balance sheet date, based on the date of goods delivered and services rendered, is as follows:

Within 90 days 91-180 days Over 180 days	Group 2003 2002 HK$’000 HK$’000 240 8,047 73 40 4,434 – 4,747 8,087	Group 2003 2002 HK$’000 HK$’000 240 8,047 73 40 4,434 – 4,747 8,087
		8,087

Subsequent to the balance sheet date, accounts receivable amounting to HK$4,747,000 as at 30 September, 2003 have been settled by the Group’s customers.

−78 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

21. CASH AND BANK BALANCES

At the balance sheet date, the cash and bank balances of the Group denominated in Renminbi (“RMB”) amounted to HK$323,000 (2002: HK$2,083,000). The RMB is not freely convertible into other currencies, however, under Mainland China’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.

22. ACCOUNTS PAYABLE

As at 30 September, 2003, the Group’s accounts payable were aged within 90 days, based on the date of goods and services received.

23. CONVERTIBLE NOTES

The Company has issued the following convertible notes:

Notes Westport Convertible Note (i) Interoverseas Convertible Note (ii)	Group 2003 2002 HK$’000 HK$’000 2,535 – 5,000 – 7,535 –	Group 2003 2002 HK$’000 HK$’000 2,535 – 5,000 – 7,535 –
		–

Notes:

(i) As set out in note 18, the Company issued a convertible note of US$325,000 (equivalent to approximately HK$2,535,000) to Westport (the “Westport Convertible Note”) in respect of the Toowong Acquisition. The Westport Convertible Note has been issued at 100% of its principal amount, bears interest at a rate of 3% per annum and is payable on 28 July, 2004. The convertible note is convertible into ordinary shares of the Company of HK$0.01 each at a conversion price of HK$0.35 per share, subject to adjustment, at any time before 28 July, 2004.
(ii) On 5 September, 2003, the Company entered into a subscription agreement with Interoverseas Consultancy Limited (“Interoverseas”), an independent third party. Pursuant to the subscription agreement, the Company issued a convertible note (the “Interoverseas Convertible Note”) in the principal amount of HK$5,000,000 to Interoverseas. The Interoverseas Convertible Note has been issued at 100% of its principal amount, bears interest at a rate of 3% per annum and is payable on 30 September, 2004. The Interoverseas Convertible Note is convertible into ordinary shares of the Company of HK$0.01 each at a conversion price of HK$0.35 per share, subject to adjustment, at any time before 30 September, 2004. In accordance with the conditional subscription agreement, Interoverseas was granted an option, whereby upon conversion of the Interoverseas Convertible Note, to require the Company to allot and issue up to HK$10 million worth of new shares of the Company. Further details are set out in note 26(c).

On 14 March, 2004, the Group obtained written consent from Interoverseas to reschedule and extend the repayment term of the Interoverseas Convertible Note for a further one year upon their original maturity on 30 September, 2004.

−79 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

24. FINANCE LEASE PAYABLES

The Group leased certain of its computer equipment during the year. These leases are classified as finance leases and have remaining lease terms of less than one year.

At 30 September, 2003, the total future minimum lease payments under finance leases and their present values were as follows:

Minimum lease payments 2003 2002 HK$’000 HK$’000 83 – 83 – (4) –	Minimum lease payments 2003 2002 HK$’000 HK$’000 83 – 83 – (4) –	Minimum lease payments 2003 2002 HK$’000 HK$’000 83 – 83 – (4) –	Present value of minimum lease payments 2003 2002 HK$’000 HK$’000 79 – 79 –
			–

	)	–
79		–

25. SHARE CAPITAL

Authorised: 20,000,000,000 ordinary shares of HK$0.01 each Issued and fully paid: 618,260,000 ordinary shares of HK$0.01 each	2003 HK$’000 200,000 6,183	2002 HK$’000 200,000

		6,183

The following changes in the Company’s authorised and issued share capital took place during the period from 26 November, 2001 (date of incorporation) to 30 September, 2003:

(i) On incorporation, the authorised share capital of the Company was HK$380,000 divided into 38,000,000 shares of HK$0.01 each.
(ii) On 27 February, 2002, one subscriber share of HK$0.01 was allotted and issued nil paid to the then shareholder.
(iii) On the same day, one share was allotted and issued nil paid to the then shareholder.
(iv) On 27 February, 2002, the authorised share capital of the Company was increased from HK$380,000 to HK$200,000,000 by the creation of a further 19,962,000,000 shares of HK$0.01 each.
(v) On 27 February, 2002, as part of the Group Reorganisation, the Company issued an aggregate of 10,000,000 shares of HK$0.01 each, credited as fully paid to the former shareholders of Aptus Group Limited (“AGL”), the then holding company of the subsidiaries listed in note 17 to the financial statements, in consideration for the acquisition of the entire issued share capital of AGL. The excess of the fair value of the shares of AGL, determined on the basis of the consolidated net assets value of AGL and its then subsidiaries at that date over the nominal value of the Company’s shares issued in exchange therefor, amounting to HK$15,826,000, was credited to the Company’s capital reserve as set out in note 27(b) to the financial statements below.

−80 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

(vi) On 27 February, 2002, an amount of HK$2, being a portion of the amount credited to the capital reserve of the Company on the issue of shares in exchange for the shares of AGL as set out in note (v) above, was applied to pay up, in full at par value, the two shares allotted and issued nil paid.
(vii) On 27 February, 2002, the Company allotted and issued a total of 42,240,000 shares of HK$0.01 each to certain investors (the “Pre-IPO Investors”) at a total consideration of HK$8,800,000.
(viii) On 8 May, 2002, the Company allotted and issued 470,000,000 shares to the holders of the shares, whose names appeared on the register of members of the Company at the close of business on 27 February, 2002, excluding the Pre-IPO Investors, in proportion to their then holdings, by way of capitalisation of the sum of HK$4,700,000 standing to the credit of the share premium account of the Company. This allotment and capitalisation were conditional on the share premium account being credited as a result of the Company’s new shares issued to the public.
(ix) On 8 May, 2002, 77,760,000 shares of HK$0.01 each were issued to the public at HK$0.50 each for a total cash consideration, before related issuing expenses, of HK$38,880,000.
(x) On 30 May, 2002, the Company allotted and issued a further 18,260,000 shares of HK$0.01 each at a price of HK$0.5 per share upon the exercise of the over-allotment option.

The following is a summary of the above movements in the authorised and issued share capital of the Company:

Notes Shares allotted and issued nil paid on incorporation (i) Increase in authorised share capital (iv) Shares issued as consideration for acquisition of the entire issued share capital of AGL (v) Application of capital reserve to pay up nil paid shares issued on incorporation (vi) Shares issued and credited as fully paid conditional on the share premium account of the Company being credited as a result of the Company’s share offer to the public (viii) Pro forma share capital as at 30 September, 2001 Issue of shares to the Pre-IPO Investors (vii) New issue on public listing (ix) Capitalisation of the share premium account (viii) Issue of additional shares on the exercise of over-allotment option (x) Balance at 30 September, 2002 and 2003	Number of authorised shares (’000) 38,000 19,962,000 – – –	Number of issued shares (’000) – – 10,000 – 470,000	Nominal value of shares issued HK$’000 – – 100 – –
	20,000,000 – – – –	480,000 42,240 77,760 – 18,260	100 422 778 4,700 183
	20,000,000	618,260	6,183

−81 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

26. SHARE OPTION SCHEMES

SSAP 34 was adopted during the year, as explained in note 3 and under the heading “Employee benefits” in note 4 to the financial statements. As a result, the following detailed disclosures relating to the Company’s share option scheme are now included in the notes to the financial statements. In the prior year, these disclosures were included in the report of the directors, as their disclosure is also a requirement of the Listing Rules.

The Company operates share option schemes for the purpose of recognising the contributions of certain directors and employees of the Group to the growth of the Group, by rewarding them with opportunities to obtain an ownership interest in the Company and to further motivate them and give an incentives to these persons to continue to contribute to the Group’s long term success and prosperity.

(a) Pre-IPO share option scheme

Pursuant to a pre-IPO share option scheme (the “Pre-IPO Scheme”) adopted by the Company on 24 April, 2002, the Company granted 47,500,000 share options, which entitled the holders to subscribe for a total of 47,500,000 ordinary shares of the Company during the period from 14 May, 2003 to 13 May, 2006. The subscription price per share payable upon exercise of the option, ranged from HK$0.10 to HK$0.50 each. During the year ended 30 September, 2003 and up to the date of approval of these financial statements, no share option has been granted or exercised under the Pre-IPO Scheme.

The following share options under the Pre-IPO Scheme were outstanding during the year and at the balance sheet date:

Name or category of
participants
Directors and chief executive
Chen Vee Li, Felix
Ma Wai Hung, Vincent
Wong Kok Sun
Lee Chan Wah
Chen Si Te, Frank
Alex Chow
Other employees
In aggregate
Total

Number of share
options under the
Pre-IPO Scheme
during the year
and at 30
September, 2003
Date of grant of
share options
under the Pre-
IPO Scheme
Exercise period of
share options
under the Pre-
IPO Scheme
Exercise price of
share options
under the Pre-
IPO Scheme*
HK$
18,000,000
24 April, 2002
14 May, 2003 to
13 May, 2006
0.50
18,000,000
24 April, 2002
14 May, 2003 to
13 May, 2006
0.50
1,250,000
24 April, 2002
14 May, 2003 to
13 May, 2006
0.10
500,000
24 April, 2002
14 May, 2003 to
13 May, 2006
0.10
250,000
24 April, 2002
14 May, 2003 to
13 May, 2006
0.10
9,000,000
24 April, 2002
14 May, 2003 to
13 May, 2006
0.10
47,000,000
500,000
24 April, 2002
14 May, 2003 to
13 May, 2006
0.10
47,500,000

The vesting period of the share options under the Pre-IPO Scheme is from the date of grant until the commencement of the exercise period.

The exercise in full of the share options under the Pre-IPO Scheme would, under the present capital structure of the Company, result in the issue of 47,500,000 additional ordinary shares of the Company at additional share capital of HK$475,000 and share premium of HK$18,675,000 (before issue expenses).

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

(b) Post-IPO share option scheme

Pursuant to the Post-IPO share option scheme (the “Post-IPO Scheme”) adopted by the Company on 24 April, 2002, the board of directors may, at their discretion, grant Post-IPO share options (the “Post-IPO Scheme Options”) to any directors and full-time employees of the Company and its subsidiaries. The Post-IPO Scheme became effective on 24 April, 2002 and will remain in force for ten years from that date.

The maximum number of unexercised Post-IPO Scheme Options currently permitted to be granted under the Post-IPO Scheme and any other share option scheme is an amount equivalent to, upon their exercise, 10% of the shares of the Company in issue at any time. The limit on the number of shares which may be issued upon exercise of all outstanding options granted under the Post-IPO Scheme and any other share option scheme must not exceed 30% of the shares of the Company in issue from time to time. The maximum number of shares issuable under the Post-IPO Scheme to each eligible participant in the Post-IPO Scheme within any 12-month period is limited to 1% of the number of shares of the Company in issue at any time.

The offer of a grant of the Post-IPO Scheme Options may be accepted in writing within 21 days from the date of the offer, upon payment of a nominal consideration of HK$1 in total by the grantee. The exercise period of the Post-IPO Scheme Options granted is determined by the board of directors, and shall not be more than ten years from the date of the grant of the Post-IPO Scheme Options. The Post-IPO Scheme does not require a minimum period for which the Post-IPO Scheme Options must be held nor a performance target which must be achieved before the Post-IPO Scheme Options can be exercised.

The subscription price will be determined by the board of directors, but may not be less than the highest of (i) the closing price of shares on the Stock Exchange on the date of grant of the Post-IPO Scheme Options; (ii) the average of the closing prices of the Company’s shares on the Stock Exchange for the five trading days immediately preceding the date of grant of the Post-IPO Scheme Options; and (iii) the nominal value of the Company’s shares on the date of offer.

In the prior year, 8,450,000 Post-IPO Scheme Options were granted to certain directors and employees, which entitled them to subscribe for a total of 8,450,000 ordinary shares of the Company. During the year ended 30 September, 2003 and up to the date of approval of these financial statements, no Post-IPO Scheme Options have been granted or exercised.

−83 −

APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

The following Post-IPO Scheme Options were outstanding during the year and at the balance sheet date:

Name or category of
participants
Directors
Chen Si Te, Frank
Wong Kwok Yiu, Chris
Yau Yat Yin
Ma Ching Nam
Other employees
In aggregate
Total

Number of
Post-IPO
Scheme
Options
during the
year and
at 30
September,
2003
Date of
grant of
Post-IPO
Scheme
Options
Exercise
period of Post-
IPO Scheme
Options
Exercises
price of
Post-IPO
Scheme
Options
The
Company’s
share price
at date of
grant of
Post-IPO
Scheme
Options***
HK$
HK$
400,000
11 July,
2002
11 July, 2002 to
10 July, 2012
0.612
0.550
400,000
11 July,
2002
11 July, 2002 to
10 July, 2012
0.612
0.550
400,000
11 July,
2002
11 July, 2002 to
10 July, 2012
0.612
0.550
400,000
11 July,
2002
11 July, 2002 to
10 July, 2012
0.612
0.550
1,600,000
6,850,000
11 July,
2002
11 July, 2002 to
10 July, 2012
0.612
0.550
8,450,000

The exercise price of the Post-IPO Scheme Options is subject to adjustment in the case of rights or bonus issues, or other similar changes in the Company’s share capital.
** The price of the Company’s shares disclosed as at the date of the grant of the Post-IPO Scheme Options is the Stock Exchange closing price on the trading day immediately prior to the date of the grant of the Post-IPO Scheme Options.

The exercise in full of the Post-IPO Scheme Options would, under the present capital structure of the Company, result in the issue of 8,450,000 additional ordinary shares of the Company at additional share capital of HK$84,500 and share premium of HK$5,087,000 (before issue expenses).

(c) Other share option scheme

As set out in note 23(ii), an option was granted to Interoverseas by the Company that, conditional upon conversion of the Interoverseas Convertible Note in full by Interoverseas, Interoverseas shall have the right to require the Company to allot and issue up to HK$10 million worth of additional new shares of the Company at a price of the lower of (i) HK$0.40 per share; (ii) the lowest price per share upon which the shares have been allotted and issued during the term of the Interoverseas Convertible Note (excluding allotments and issues under the Interoverseas Convertible Note); and (iii) the 10 day’s trading average price of the shares of the Company on the Stock Exchange immediately prior to the exercise of the option.

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

−84 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

27. RESERVES

(a) Group

The amounts of the Group’s reserves and the movements therein for the current and prior years are presented in the consolidated statement of changes in equity on page 26 of the financial statements.

The capital reserve of the Group arose as a result of the Group Reorganisation as set out in note 4 to the financial statements and represents the difference between the nominal value of the aggregate issued share capital and the share premium account of the subsidiaries acquired under the Group Reorganisation, over the nominal value of Company’s shares issued in exchange therefor.

(b) Company

At 26 November, 2001 (date of incorporation) Arising on Group Reorganisation (note 25(v)) Issue of shares prior to the public listing Issue of shares to the public Capitalisation of share premium account Issue of share upon exercise of over-allotment option Share issue expenses Net loss for the period At 30 September, 2002 and 1 October, 2002 Net loss for the year At 30 September, 2003	Share premium account HK$’000 – – 8,378 38,102 (4,700) 8,947 (5,767) –	Capital reserve Accumulated losses* HK$’000 HK$’000 – – 15,826 – – – – – – – – – – – – (2,170)	Capital reserve Accumulated losses* HK$’000 HK$’000 – – 15,826 – – – – – – – – – – – – (2,170)	Total HK$’000 – 15,826 8,378 38,102 (4,700) 8,947 (5,767) (2,170) 58,616 (58,693) (77)
	44,960 –	15,826 –	(2,170) (58,693)	58,616 (58,693
	44,960	15,826	(60,863)

The capital reserve of the Company arose as a result of the Group Reorganisation and represents the excess of the then combined net assets of the subsidiaries acquired, over the nominal value of the Company’s shares issued in exchange therefor.

28. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

(a) Change of presentation

SSAP 15 (Revised) was adopted during the current year, as detailed in note 3 to the financial statements, which has resulted in a change to the layout of the consolidated cash flow statement. The consolidated cash flow statement is now presented under three headings: cash flows from operating activities, investing activities and financing activities. Previously five headings were used, comprising the three headings listed above, together with cash flows from returns on investments and servicing of finance, and from taxes paid. The significant reclassifications resulting from the change in presentation are that interest received is now included in cash flows from operating activities. The presentation of the 2002 comparative consolidated cash flow statement has been changed to accord with the new layout.

−85 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

(b) Major non-cash transactions

(i) During the year, the Group entered into a finance lease arrangement in respect of fixed assets with a total capital value at the inception of the leases of HK$164,000 (2002: Nil).
(ii) As set out in notes 18 and 23 (i), the Group issued a convertible note amounting to HK$2,535,000 in respect of the acquisition of Toowong during the year, which did not result in any cash flow.

(c) Acquisition of a subsidiary

Notes Net assets acquired: Inventories Shareholder’s loan Shareholder’s loan waived Goodwill on acquisition 15 Satisfied by cash	2003 HK$’000 2,011 (1,899) 112 1,899 5,789 7,800 7,800	2002 HK$’000 – –
		– – –
		–

		–

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

		2003	2002
		HK$’000	HK$’000
Cash	consideration and outflow of cash and cash equivalents
in	respect of the acquisition of a subsidiary	7,800	–

On 16 October, 2002, the Group acquired a 100% interest in LMGL from an independent third party. LMGL is engaged in the distribution of pharmaceutical products in Mainland China. The purchase consideration for the acquisition was in the form of cash, with the full amount being paid on 16 October, 2002. Further details of the acquisition are set out in the Company’s circular dated 5 November, 2002.

Since its acquisition, LMGL contributed HK$2,011,000 to the Group’s turnover and HK$2,011,000 to the consolidated loss after tax and before minority interests for the year ended 30 September, 2003.

29. OPERATING LEASE ARRANGEMENTS

(a) As lessor

The Group sub-leases its office premises under operating lease arrangements, with leases negotiated for terms ranging from one to two years.

As 30 September, 2003, the Group had total future minimum lease receivables under non-cancellable operating leases with its tenants falling due within one year of HK$282,000 (2002: Nil).

−86 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

(b) As lessee

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

At 30 September, 2003, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

Land and buildings expiring: Within one year In the second to fifth years, inclusive Equipment expiring within one year	Group 2003 2002 HK$’000 HK$’000 1,249 1,378 – 875 1,249 2,253 12 40	Group 2003 2002 HK$’000 HK$’000 1,249 1,378 – 875 1,249 2,253 12 40
		2,253

		40

30. CONTINGENT LIABILITIES

(a) The Group has a contingent payable in respect of the consideration for the Acquisition to be satisfied by the issue of the Consideration Shares to Westport as further detailed in note 18 to the financial statements.
(b) As at the balance sheet date, the Company has given a guarantee to an independent third party in respect of a finance lease arrangement of a subsidiary of the Group. The related contingent liability of HK$78,000 has not been provided for in the Company’s financial statements.

Save as the foregoing, neither the Group, nor the Company had any significant contingent liabilities as at 30 September, 2003.

31. POST BALANCE SHEET EVENTS

(a) Pursuant to a loan agreement dated 30 December, 2003 and a supplementary agreements entered into between the Company and an independent third party, the Company has been granted a term loan of RM$2,476,500 (equivalent to approximately HK$5,060,000). The term loan is unsecured, bears interest at 6% per annum and is repayable on 30 June, 2005 (note 2).
(b) On 14 March, 2004, the Company has obtained written consent from Interoverseas to reschedule and extend the repayment term of the Interoverseas Convertible Note for further one year upon the original maturity on 30 September, 2004 (note 23 (ii)).

32. COMPARATIVE AMOUNTS

As further explained in note 3 to the financial statements, due to the adoption of certain new and revised SSAPs during the current year, the presentation of certain items in the financial statements has been revised to comply with the new requirements. Accordingly, certain comparative amounts have been reclassified to conform with the current year’s presentation.

33. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of directors on 19 March, 2004.

−87 −

APPENDIX I FINANCIAL INFORMATION ON THE APTUS GROUP

3. FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 31 MARCH, 2004 AND 31 MARCH, 2003

The following is the unaudited consolidated results of the Aptus Group for the three months and six months ended 31 March, 2004 together with accompanying notes, extracted from Aptus’s 2004 second quarterly report.

CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT

Six months ended 31 March, 2004 2003 (Unaudited) (Unaudited) HK$’000 HK$’000 477 13,442 (175) (9,431)	Six months ended 31 March, 2004 2003 (Unaudited) (Unaudited) HK$’000 HK$’000 477 13,442 (175) (9,431)	Three months ended 31 March, 2004 2003 (Unaudited) (Unaudited) HK$’000 HK$’000 359 5,239 (130) (3,783) 229 1,456 2 – (92) (1,152) (2,012) (2,508) (1,873) (2,204) (136) – (56) – (2,065) (2,204) – – (2,065) (2,204) – 43 (2,065) (2,161) HK0.33 cent HK0.35 cent N/A N/A	Three months ended 31 March, 2004 2003 (Unaudited) (Unaudited) HK$’000 HK$’000 359 5,239 (130) (3,783) 229 1,456 2 – (92) (1,152) (2,012) (2,508) (1,873) (2,204) (136) – (56) – (2,065) (2,204) – – (2,065) (2,204) – 43 (2,065) (2,161) HK0.33 cent HK0.35 cent N/A N/A
302 3 (138) (3,863) (3,696) (193) (56) (3,945) – (3,945) –	4,011 4 (1,873) (4,703) (2,561) – – (2,561) – (2,561) 130	229 2 (92) (2,012) (1,873) (136) (56) (2,065) – (2,065) –	1,456 – (1,152 (2,508
			(2,204 – –
			(2,204 –
			(2,204 43
(3,945) HK0.64 cent N/A −88 −	(2,431) HK0.39 cent N/A	(2,065) HK0.33 cent N/A

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

CONDENSED CONSOLIDATED BALANCE SHEET

Notes NON-CURRENT ASSETS Fixed assets Long term deposit Interest in a jointly-controlled entity CURRENT ASSETS Accounts receivable 9 Prepayment, deposits and other receivables Cash and bank balances CURRENT LIABILITIES Accounts payable 10 Accrued liabilities and other payable Tax payable Convertible notes 11 Finance lease payables Term loan 12 NET CURRENT LIABILITIES NET ASSETS CAPITAL AND RESERVES Issued capital Reserves	As at 31 March, 2004 (Unaudited) HK$’000 5,148 3,400 1,968	As at 30 September, 2003 (Audited) HK$’000 6,386 3,400 2,731 12,517 4,747 1,164 6,414 12,325 88 5,845 523 7,535 79 – 14,070 (1,745) 10,772 6,183 4,589 10,772
	10,516 38 2,057 7,769 9,864 34 2,956 523 5,000 40 5,000 13,553 (3,689)	12,517 4,747 1,164 6,414
		12,325 88 5,845 523 7,535 79 –
		14,070 (1,745
	6,827
	6,183 644	6,183 4,589
	6,827

−89 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

CONDENSED CASH FLOW STATEMENT

NET CASH OUTFLOW FROM OPERATING ACTIVITIES NET CASH OUTFLOW FROM INVESTING ACTIVITIES NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of the period CASH AND CASH EQUIVALENTS AT END OF YEAR	Six months ended 31 March, 2004 (Unaudited) HK$’000 (1,890) – 3,245 1,355 6,414 7,769	Six months ended 31 March, 2003 (Unaudited) HK$’000 (5,792) (7,957) (3,000) (16,749) 25,182 8,433

−90 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

At 1 October, 2002 Net loss for the period At 31 March, 2003 At 1 October, 2003 Net loss for the period At 31 March, 2004	Share capital HK$’000 6,183 – 6,183 6,183 – 6,183	Share premium HK$’000 44,960 – 44,960 44,960 – 44,960	Capital reserve HK$’000 17,240 – 17,240 17,240 – 17,240	Accumulated losses HK$’000 (4,272) (2,431) (6,703) (57,611) (3,945) (61,556)	Total HK$’000 64,111 (2,431) 61,680 10,772 (3,945) 6,827

−91 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

The condensed consolidated interim financial statements have been prepared in accordance with the Hong Kong Statement of Standard Accounting Practice (“SSAP”) No. 25 “Interim financial reporting” issued by the Hong Kong Society of Accountants.

2. BASIS OF CONSOLIDATION

The unaudited consolidated results of the Group for the three months and six months ended 31 March, 2004 include the results of the Company and its subsidiaries for the three months and six months ended 31 March, 2004.

All significant transactions and balances within the Group have been eliminated on consolidation.

3. PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies adopted for the preparation of these unaudited condensed consolidated interim financial statements are consistent with those used in the preparation of the Group’s audited financial statements for the year ended 30 September, 2003, except that the Group has adopted SSAP 12 (Revised) “Income Taxes” which prescribes new accounting measurements and disclosure practices. The adoption of this SSAP during the financial period does not have any significant effect on the Group’s unaudited consolidated results for the period and the prior period.

4. TURNOVER AND SEGMENT INFORMATION

Turnover represents the invoiced value of goods sold, after allowances for returns and trade discounts, and business tax; and the value of services rendered during the year.

In determining the Group’s geographical segments, revenues are attributed to the segments based on the location of the customers and assets are attributed to the segments based on the location of assets. Over 90% of the Group’s revenue and assets are derived from customers based in the PRC and accordingly, no detailed analysis of the Group’s geographical segments is presented.

−92 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

The following table presents revenue and results information for the Group’s business segment.

Services provision 2004 2003 HK$’000 HK$’000 477 575	Services provision 2004 2003 HK$’000 HK$’000 477 575	Trading 2004 2003 HK$’000 HK$’000 – 12,867	Trading 2004 2003 HK$’000 HK$’000 – 12,867	Consolidated 2004 2003 HK$’000 HK$’000 477 13,442	Consolidated 2004 2003 HK$’000 HK$’000 477 13,442

(711)	(387)	–	2,474	(711) 3 (2,988) (3,696) (193) (56) (3,945) – (3,945) –	2,087 4 (4,652
					(2,561 – –
					(2,561 –
					(2,561 130
				(3,945)	(2,431

5. LOSS BEFORE TAX

The Group’s loss before tax is arrived at after charging:

	Six months	ended
	31 March,
	2004	2003
	(Unaudited)	(Unaudited)
	HK$’000	HK$’000
Cost of inventories sold	–	9,220
Cost of services provided	175	211
Interest on convertible notes	111	–
Depreciation	1,238	1,537

6. TAX

No Hong Kong profits tax has been provided for the three months and six months ended 31 March, 2004 (three months and six months ended 31 March, 2003: Nil) as the Group did not generate any assessable profits in Hong Kong during these periods. Taxes on profit assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates, based on existing legislation, interpretations and practices in respect thereof.

The Group have no significant potential deferred tax liabilities for which provision has not been made.

−93 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

7. LOSS PER SHARE

The calculation of basic loss per share for the three months and six months ended 31 March, 2004 is based on the unaudited net loss from ordinary activities attributable to shareholders for the three months and six months ended 31 March, 2004 of approximately HK$2.1 million and HK$3.9 million respectively (three months and six months ended 31 March, 2003: net loss of approximately HK$2.1 million and HK$2.4 million respectively) and the weighted average of 618,260,000 shares in issue during the three months and six months ended 31 March, 2004 (three months and six months ended 31 March, 2003: 618,260,000 shares).

No diluted loss per share is shown for the three months and six months ended 31 March, 2003 and 2004 as the effect of the share options of the Company granted on 24 April, 2002 and 11 July, 2002 and the convertible note issued on 30 September, 2003 by the Company were either anti-dilutive or had no dilutive effect on the basic loss per share for these periods.

8. DIVIDEND

The Board does not recommend the payment of an interim dividend for the six months ended 31 March, 2004 (six months ended 31 March, 2003: nil).

9. ACCOUNTS RECEIVABLE

Accounts receivable, which generally have credit terms of not more than 90 days, are recognized and carried at original invoiced amount less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.

An aged analysis of the Group’s accounts receivable at the balance sheet date, based on the date of goods delivered and services rendered, is as follows:

Within 90 days 91-180 days Over 180 days	31 March, 2004 (Unaudited) HK$’000 38 – – 38	30 September, 2003 (Audited) HK$’000 240 73 4,434
		4,747

10. ACCOUNTS PAYABLE

At 31 March, 2004, the accounts payable were aged within 90 days, which was based on the date of goods and services received.

−94 −

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

11. CONVERTIBLE NOTES

The Company has issued the following convertible notes:

Notes Westport Convertible Note (i) Interoverseas Convertible Note (ii)	31 March, 2004 (Unaudited) HK$’000 – 5,000 5,000	30 September, 2003 (Audited) HK$’000 2,535 5,000
		7,535

(i) Pursuant to a deed of release entered by the Company and Westport dated 23 March, 2004, the Convertible Note had been redeemed by the Company.
(ii) On 5 September, 2003, the Company entered into a subscription agreement with Interoverseas Consultancy Limited (“Interoverseas”), an independent third party. Pursuant to the subscription agreement, the Company issued a convertible note (the “interoverseas Convertible Note”) in the principal amount of HK5,000,000 to Interoverseas. The Interoverseas Convertible Note has been issued at 100% of its principal amount, bears interest at a rate of 3% per annum and is payable on 30 September, 2004. The Interoverseas Convertible Note is convertible into ordinary shares of the Company of HK$0.01 each at a conversion price of HK$0.35 per share, subject to adjustment, at any time before 30 September, 2004. In accordance with the conditional subscription agreement, interoverseas was granted an option, whereby upon conversion of the Interoverseas Convertible Note, to require the Company to allot and issue up to HK$10 million worth of new shares of the Company.

12. TERM LOAN

			31 March,	30 September,
			2004	2003
			(Unaudited)	(Audited)
		Note	HK$’000	HK$’000
Term	loan	(i)	5,000	–

(i) Pursuant to a loan agreement dated 30 December, 2003 and a supplementary agreement entered into between the Company and an independent third party, the Company has been granted a term loan of RM$2,476,000 (equivalent to approximately HK$5,000,000). The term loan is unsecured and bears interest at 6% per annum.

−95 −

ACCOUNTANTS’ REPORT OF HSING LONG

APPENDIX II

The following is the text of a report, prepared for the purpose of inclusion in this circular, from the reporting accountants of Hsing Long, W. H. Tang & Partners CPA Limited, Certified Public Accountants, Hong Kong.

Level 7, Parkview Centre, 7 Lau Li Street, Causeway Bay, Hong Kong.

Tel : (852) 23426130 Fax : (852) 23426006

==> picture [65 x 44] intentionally omitted <==

The Directors

B & B Natural Products Limited Aptus Holdings Limited

Dear Sirs,

We set out below our report on the financial information relating to Hsing Long Trading Co. Pte Ltd. (“Hsing Long”) for the three years ended 31 December, 2001, 2002 and 2003 and three months ended 31 March, 2004 (the “Relevant Periods”) for inclusion in the circular of Aptus Holdings Limited dated 9 July, 2004 (the “Aptus Circular”) in connection with the proposed acquisition of a 70.31% equity interest in the Hsing Long by Aptus Holdings Limited (the “Proposed Acquisition”) pursuant to the Sale and Purchase agreement dated 23 March, 2004 between Precise Result Profits Limited (“Precise Result”) and Aptus Holdings Limited (“Sale and Purchase Agreement”).

The statutory financial statements of Hsing Long for the three years ended 31 December, 2001, 2002 and 2003 were prepared in accordance with accounting rules and regulations in Singapore (“Singapore GAAP”). The statutory financial statements of Hsing Long for the Relevant Periods were audited by T.S. TAY & Associates, Certified Public Accountants, certified public accountants registered in Singapore. For the purpose of this report, we have carried out an independent audit of the financial statements of Hsing Long for the Relevant Periods, in order to restate these financial statements to comply with accounting principles generally accepted in Hong Kong (“HK GAAP”) for inclusion in the financial information of Hsing Long and have carried out such additional procedures as we considered necessary in accordance with the Auditing Guideline “Prospectuses and the Reporting Accountant” issued by the Hong Kong Society of Accountants.

The financial information as set out in sections I to IV below (the “Financial Information”) has been prepared based on the audited financial statements of Hsing Long for the Relevant Periods. The directors of the Company are responsible for preparing the financial statements which give a true and fair view. In preparing the financial statements, it is fundamental that appropriate accounting policies are selected and applied consistently.

−96 −

ACCOUNTANTS’ REPORT OF HSING LONG

APPENDIX II

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

In our opinion, the Financial Information, for the purpose of this report, gives a true and fair view of the state of affairs of Hsing Long as at 31 December, 2001, 2002 and 2003 and 31 March, 2004, and of the results and cash flows of Hsing Long for the Relevant Periods.

I FINANCIAL INFORMATION

(a) Income Statement

The following is a summary of the income statements of Hsing Long for the Relevant Periods:

For the year ended 31 December, 2001 2002 2003 S$ S$ S$ 8,652,490 6,745,763 9,131,232 (8,520,333) (6,619,429) (9,030,554)	For the year ended 31 December, 2001 2002 2003 S$ S$ S$ 8,652,490 6,745,763 9,131,232 (8,520,333) (6,619,429) (9,030,554)	For the year ended 31 December, 2001 2002 2003 S$ S$ S$ 8,652,490 6,745,763 9,131,232 (8,520,333) (6,619,429) (9,030,554)	For the three months ended 31 March, 2004 S$ 1,866,860 (1,843,903) 22,957 192 (21,311) 1,838 1,838 – 1,838 1.84 cents
132,157 32,995 (128,216) 36,936 36,936 (3,700)	126,334 23,838 (131,037) 19,135 19,135 (6,232)	100,678 15,068 (144,735) (28,989) (28,989) 2,681	22,957 192 (21,311
			1,838
			1,838 –
33,236 33.24 cents	12,903 12.90 cents	(26,308) (26.31 cents)

−97 −

ACCOUNTANTS’ REPORT OF HSING LONG

APPENDIX II

(b) Balance Sheets

The following is a summary of the balance sheets of Hsing Long as at 31 December, 2001, 2002 and 2003 and 31 March, 2004:

2001 S$ – – 436,358	As at 31 December, 2002 2003 S$ S$ 1,059,877 544,956 – 3,347 269,632 174,058	As at 31 December, 2002 2003 S$ S$ 1,059,877 544,956 – 3,347 269,632 174,058	As at 31 March, 2004 S$ 10,991 – 79,389 90,380 – (14,850) – (14,850) 75,530 100,000 (24,470) 75,530 – 75,530
436,358 (153,823) (116,351) (3,615) (273,789)	1,329,509 (749,953) (396,632) (7,452) (1,154,037)	722,361 (541,429) (107,240) – (648,669)	90,380
			– (14,850 –
			(14,850
162,569	175,472	73,692
100,000 62,569 162,569 –	100,000 – 100,000 75,472	100,000 (26,308) 73,692 –	100,000 (24,470
			75,530 –
162,569	175,472	73,692

−98 −

ACCOUNTANTS’ REPORT OF HSING LONG

APPENDIX II

(c) Cash Flow Statement

The following is a summary of the cash flows of Hsing Long for the Relevant Periods:

For the year ended 31 December, 2001 2002 2003 S$ S$ S$ 154,950 (170,131) (20,556)	For the year ended 31 December, 2001 2002 2003 S$ S$ S$ 154,950 (170,131) (20,556)	For the year ended 31 December, 2001 2002 2003 S$ S$ S$ 154,950 (170,131) (20,556)	For the three months ended 31 March, 2004 S$ (94,680) 11 11 – – (94,669) 174,058 79,389
8,827 8,827 – – 163,777 272,581	3,405 3,405 – – (166,726) 436,358	454 454 (75,472) (75,472) (95,574) 269,632	11
			11
			–
			–
			(94,669 174,058
436,358	269,632	174,058

−99 −

ACCOUNTANTS’ REPORT OF HSING LONG

APPENDIX II

(d) Statements of Changes in Equity

The following is a summary of the statements of changes in equity of Hsing Long for the Relevant Periods:

Notes Total shareholder’s fund at 1 January Net (loss)/profit for the year/period 12 Dividends distribution 8 Total shareholder’s fund at 31 December/31 March	For the year ended 31 December, 2001 2002 2003 S$ S$ S$ 129,333 162,569 100,000 33,236 12,903 (26,308) – (75,472) – 162,569 100,000 73,692	For the three months ended 31 March, 2004 S$ 73,692 1,838 –
		75,530

−100 −

ACCOUNTANTS’ REPORT OF HSING LONG

APPENDIX II

II NOTES TO THE FINANCIAL INFORMATION

(Amount expressed in Singapore dollars unless otherwise stated)

1 PRINCIPAL ACCOUNTING POLICIES

The Financial Information has been prepared in accordance with HK GAAP and complies with accounting standards issued by the Hong Kong Society of Accountants. The Financial Information is prepared under the historical cost convention.

a. Revenue recognition

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

i. Sales of edible oil

Revenue and income arising from sales of edible oil is recognised upon completion of the sale when title passes to the purchaser.

ii. Interest income

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

b. Impairment of assets

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

If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised in the income statement whenever the carrying amount of an asset exceeds its recoverable amount.

i. Calculation of recoverable amount

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

ii. Reversals of impairment losses

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

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

c. Cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition, less bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management, and also advances from banks repayable within three months from the dates of advances.

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ACCOUNTANTS’ REPORT OF HSING LONG

APPENDIX II

d. Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable (i.e. more likely than not) that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate of amount required. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

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

e. Income tax

i. Income tax for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
ii. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous year.
iii. Deferred tax assets and liabilities arise from deductible and taxable temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the tax bases respectively. Deferred tax assets also arise from unused tax losses and unused tax credits.

All deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognised.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.

f. Employee benefits

i. Salaries, annual bonuses, annual leave entitlements, leave passage and the cost to the Company of non-monetary benefits are accrued in the year in which the associated services are rendered by employees of the Company. Where payment or settlement is deferred and the effect would be material, provisions are made for the estimated liability as a result of services rendered by employees up to the balance sheet date.
ii. Defined contribution retirement scheme is offered to employees of the Company. The scheme is operated by Hsing Long and the assets of which are generally held in separate trustee - administered funds. The scheme is generally funded by payments from Hsing Long.

The Company’s contributions to the defined contribution scheme are recognised as an expense in the income statement in the period to which the contributions relate.

iii. Employee termination benefits are recognised when, and only when, the Company demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal.

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ACCOUNTANTS’ REPORT OF HSING LONG

APPENDIX II

g. Foreign currencies

The Company maintain their books and records in the primary currencies of their operations (the “respective reporting currencies”).

In the financial statements of the Company, transactions in other currencies during the year are translated into the respective reporting currencies at the exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in other currencies are translated into the respective reporting currencies at the exchange rates ruling at the balance sheet date. Exchange gains and losses are dealt with in the income statement.

h. Management estimates

The presentation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

i. Segment reporting

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

The directors consider that the Company operates in one business segment being trading of edible oil. Accordingly, the Company uses geographical segment information as the primary reporting format for the purposes of these financial statements.

2 TURNOVER

				For the three
				months
				ended
	For the year ended 31 December,			31 March,
	2001	2002	2003	2004
	S$	S$	S$	S$
Amounts received and receivable in
respect of
sales of edible oil	8,652,490	6,745,763	9,131,232	1,866,860

−103 −

ACCOUNTANTS’ REPORT OF HSING LONG

APPENDIX II

3 SEGMENT INFORMATION

Segment information is presented in respect of Hsing Long’s geographical segments.

An analysis of Hsing Long’s turnover and results by geographical market is as follows:

For the year ended 31 December, 2001 2002 2003 S$ S$ S$ 8,652,490 6,745,763 9,131,232 8,652,490 6,745,763 9,131,232	For the year ended 31 December, 2001 2002 2003 S$ S$ S$ 8,652,490 6,745,763 9,131,232 8,652,490 6,745,763 9,131,232	For the year ended 31 December, 2001 2002 2003 S$ S$ S$ 8,652,490 6,745,763 9,131,232 8,652,490 6,745,763 9,131,232	For the three months ended 31 March, 2004 S$ 1,866,860
			1,866,860

36,936 36,936 – 36,936 (3,700)	19,135 19,135 – 19,135 (6,232)	(28,989) (28,989) – (28,989) 2,681	1,838
			1,838 –
			1,838 –
33,236	12,903	(26,308)	1,838

Analysis of carrying amount of segment assets and additions to property, plant and equipment and technical know-how, analysed by the geographical area in which the assets are located has not been presented as they are substantially situated in Singapore.

4 (LOSS)/PROFIT FROM OPERATIONS

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

				For the three
				months
				ended
	For the year ended 31 December,			31 March,
	2001	2002	2003	2004
	S$	S$	S$	S$
Crediting:
Interest income	8,827	3,405	454	11
Charging:
Staff costs (excluding directors’
emoluments) (note 5)	43,510	41,556	34,575	8,475
Auditors’ remuneration	2,000	2,700	3,790	–
Provision for doubtful debts	–	–	30,262	–
Interest expenses	–	–	–	–
Foreign exchange losses	–	10,370	3,419	100

−104 −

ACCOUNTANTS’ REPORT OF HSING LONG

APPENDIX II

5 DIRECTORS’ AND SENIOR EXECUTIVES’ EMOLUMENTS

a. Details of directors’ emoluments are set out below:

Fees Salaries, allowances, other allowances and benefits in kind Pension scheme contributions Total	For the year ended 31 December, 2001 2002 2003 S$ S$ S$ – – – 16,141 43,200 31,500 – – – 16,141 43,200 31,500	For the three months ended 31 March, 2004 S$ – – –
		–

The emoluments of the directors analysed by the number of directors and emolument ranges are as follows:

						For the
						three
						months
				Number of directors		ended
			For	the year ended 31 December,		31 March,
			2001	2002	2003	2004
Up	to	S$1,000,000	1	1	1	–

No directors waived the right to receive emoluments during the Relevant Periods.

b. Details of five highest paid individuals’ emoluments are set out below:

During the Relevant Periods, the five individuals whose emoluments were the highest in Hsing Long include one director or no director whose emoluments are included in note 5(a) above. The emoluments payable to the remaining one individual during the Relevant Periods are as follows:

							For the
							three
							months
				Number of individuals			ended
			For	the year ended 31 December,			31 March,
			2001		2002	2003	2004
Up	to	S$1,000,000	1		1	1	1

−105 −

ACCOUNTANTS’ REPORT OF HSING LONG

APPENDIX II

6 TAXATION

Overseas taxation has been calculated on the estimated assessable profits for the year at the rates prevailing in the respective jurisdictions.

				For the three
				months
				ended
	For the year ended 31 December,			31 March,
	2001	2002	2003	2004
	S$	S$	S$	S$
The Company and subsidiaries:
Overseas tax
– Provision for current year	3,700	6,232	(2,681)	–

A numerical reconciliation between accounting profit/(loss) and tax expenses is as follows:

(Loss)/Profit before taxation Calculated at the applicable tax rate Income not subject to taxation Expenses not deductible for taxation purposes Tax exemption Utilisation of unabsorbed tax losses Others Taxation charge	For the year ended 31 December, 2001 2002 2003 S$ S$ S$ 36,936 19,135 (28,989)	For the year ended 31 December, 2001 2002 2003 S$ S$ S$ 36,936 19,135 (28,989)	For the year ended 31 December, 2001 2002 2003 S$ S$ S$ 36,936 19,135 (28,989)	For the three months ended 31 March, 2004 S$ 1,838
	9,049 (5,921) – (2,177) – 2,749	4,210 (787) 10,197 (7,360) – (28)	(6,409) (4,880) 815 – 10,474 (2,681)	– – – – – –
	3,700	6,232	(2,681)	–

7 (LOSS)/EARNINGS PER SHARE

The calculation of basic (loss)/earnings per share is based on Hsing Long’s profit of S$33,236 and profit of S$12,903 and loss of S$26,308 and profit of S$1,838 for the years ended 31 December, 2001, 2002 and 2003 and three months ended 31 March, 2004, respectively.

Diluted loss per share amounts for the Relevant Periods has not been shown because there were no dilutive potential ordinary shares during the Relevant Periods.

−106 −

ACCOUNTANTS’ REPORT OF HSING LONG

APPENDIX II

8 DIVIDENDS

									For the three
									months
									ended
			For	the	year	ended	31	December,	31 March,
			2001			2002		2003	2004
			S$			S$		S$	S$
Final	dividend,	declared	–			75,472		–	–

9 CURRENT ASSETS AND LIABILITIES

a. Accounts receivable, net

An aging analysis of trade receivables is set out below:

0−30 days 31–60 days Over 1 year Less: Provision for doubtful debts	2001 S$ – – –	As at 31 December, 2002 2003 S$ S$ 1,009,076 544,956 50,801 – – 30,262	As at 31 December, 2002 2003 S$ S$ 1,009,076 544,956 50,801 – – 30,262	As at 31 March, 2004 S$ 10,991 – 30,262
	– –	1,059,877 –	575,218 (30,262)	41,253 (30,262
	–	1,059,877	544,956	10,991

The normal credit period granted by Hsing Long ranges up to 30 days from the date of invoice.

b. Accounts payable

An aging analysis of accounts payable is set out below:

0−30 days 31–180 days 181–360 days Over 1 year	2001 S$ 24,518 46,348 51,495 31,462 153,823	As at 31 December, 2002 2003 S$ S$ 719,610 541,429 – – – – 30,343 – 749,953 541,429	As at 31 March, 2004 S$ – – – –
			–

10 EMPLOYEE RETIREMENT BENEFITS

Employees of Hsing Long are also entitled to join the defined contribution schemes.

Under the defined contribution scheme, the employer is required to make contributions to the scheme at rates specified under the rules of the scheme. Where employees leave the scheme prior to the full vesting of the employer’s contributions, the amount of forfeited contributions is used to reduce the contributions payable by Hsing Long.

−107 −

ACCOUNTANTS’ REPORT OF HSING LONG

APPENDIX II

11 SHARE CAPITAL

Authorised: 100,000 Ordinary shares of S$1 each Issued and fully paid: 100,000 Ordinary shares of S$1 each	2001 S$ 100,000 100,000	As at 31 December, 2002 2003 S$ S$ 100,000 100,000 100,000 100,000	As at 31 March, 2004 S$ 100,000

			100,000

12 RESERVES

At 1 January, 2001 Profit for the year At 31 December, 2001 At 1 January, 2002 Profit for the year Dividends (note 8) At 31 December, 2002 At 1 January, 2003 Loss for the year At 31 December, 2003 At 1 January, 2004 Profit for the period At 31 March, 2004	Retained profits/ (Deficits) S$ 29,333 33,236
	62,569

	62,569 12,903 (75,472
	–

	– (26,308
	(26,308

	(26,308 1,838
	(24,470

−108 −

ACCOUNTANTS’ REPORT OF HSING LONG

APPENDIX II

13 NOTES TO THE CASH FLOW STATEMENT

a. Reconciliation of profit/(loss) before taxation to net cash (outflow)/inflow from operating activities

For the year ended 31 December, 2001 2002 2003 S$ S$ S$ 36,936 19,135 (28,989) (8,827) (3,405) (454)	For the year ended 31 December, 2001 2002 2003 S$ S$ S$ 36,936 19,135 (28,989) (8,827) (3,405) (454)	For the year ended 31 December, 2001 2002 2003 S$ S$ S$ 36,936 19,135 (28,989) (8,827) (3,405) (454)	For the three months ended 31 March, 2004 S$ 1,838 (11) 1,827 537,312 (633,819) (94,680) – (94,680) As at 31 March, 2004 S$ 79,389
28,109 412,042 (275,051) 165,100 (10,150)	15,730 (1,059,877) 876,411 (167,736) (2,395)	(29,443) 511,574 (497,916) (15,785) (4,771)	1,827 537,312 (633,819
			(94,680 –
	(170,131) (20,556) As at 31 December, 2002 2003 S$ S$ 269,632 174,058

b. Analysis of cash and cash equivalents

14 BANKING FACILITIES

Aggregate banking facilities as at 31 March, 2004 were US$9,000,000 (2003: US$1,000,000; 2002: US$NIL; 2001: US$NIL) of which the unused facilities amounted to US$9,000,000 (2003: US$1,000,000; 2002: US$NIL; 2001: US$NIL).

−109 −

ACCOUNTANTS’ REPORT OF HSING LONG

APPENDIX II

III SUBSEQUENT EVENTS

Prior to completion of the Proposed Acquisition, Aptus Holdings Limited will become the immediate holding company of Hsing Long upon completion of the Proposed Acquisition.

IV SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared for Hsing Long in respect of any period subsequent to 31 March, 2004.

Yours faithfully,

W. H. Tang & Partners CPA Limited

Certified Public Accountants Tang Wai Hung

Practising Certificate Number P03525

Hong Kong, 9 July, 2004

−110 −

ACCOUNTANTS’ REPORT OF TARGET

APPENDIX IIIA

The following is the text of a report, prepared for the purpose of inclusion in this circular, received from the reporting accountants, W.H. Tang & Partners CPA Limited.

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==> picture [65 x 45] intentionally omitted <==

The Directors B & B Natural Products Limited Aptus Holdings Limited

Dear Sirs,

Top Entrepreneur Profits Limited (“Target”) was incorporated in the British Virgin Islands on 22 January, 2004 with limited liability under the International Business Companies Act (Cap. 291) of the British Virgin Islands. Target is a non-wholly owned subsidiary of Precise Result Profits Limited (“Vendor”), a non-wholly owned subsidiary of B & B Natural Products Limited. Target is an investment holding company, which in turn indirectly holds 93.75% of the entire issued share capital of Hsing Long and directly holds 100% of the entire issued share capital of B & B Natural Products (BVI) Limited.

On 23 March, 2004, the Vendor entered into a Sale and Purchase agreement with Aptus Holdings Limited (“Aptus”) to dispose 75% equity interest in Target to Aptus. Upon the completion of the Sale and Purchase Agreement, Aptus will become the immediate holding company of Target.

Target has not carried out any business activities since its date of incorporation until 23 March, 2004, apart from issue of 8 shares at par of US$1 each for cash in the share capital of Target. Incorporation expenses amounting to approximately HK$5,500 were borne by the ultimate shareholder of Target. No audited financial statements have been prepared for Target up to the date of this report.

Yours faithfully,

W.H. Tang & Partners CPA Limited Certified Public Accountants

Tang Wai Hung Practising Certificate Number P03525

Hong Kong, 9 July, 2004

−111 −

ACCOUNTANTS’ REPORT OF B & B NATURAL

APPENDIX IIIB

The following is the text of a report, prepared for the purpose of inclusion in this circular, received from the reporting accountants, W.H. Tang & Partners CPA Limited.

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==> picture [65 x 44] intentionally omitted <==

The Directors B & B Natural Products Limited Aptus Holdings Limited

Dear Sirs,

B & B Natural Products (BVI) Limited (“B & B Natural”) was incorporated in the British Virgin Islands on 29 November, 2002 with limited liability under the International Business Companies Act (Cap. 291) of the British Virgin Islands. B & B Natural is a non-wholly owned subsidiary of Precise Result Profits Limited (“Vendor”), a non-wholly owned subsidiary of B & B Natural Products Limited. B & B Natural is an investment holding company, which in turn directly and indirectly holds 93.75% of the entire issued share capital of Hsing Long and directly holds 75% of the entire issued share capital of Rapid Progress Profits Limited (“Rapid”). In addition, Rapid holds 25% of the entire issued share capital of Hsing Long directly.

B & B Natural has not carried out any business activities since its date of incorporation, apart from issue of 1 share at par of US$1 each for cash in the share capital of B & B Natural. Incorporation expenses and other operating expenses amounting to approximately HK$30,000 were borne by the ultimate shareholder of B & B Natural. No audited financial statements have been prepared for B & B Natural up to the date of this report.

Yours faithfully,

W.H. Tang & Partners CPA Limited

Certified Public Accountants

Tang Wai Hung

Practising Certificate Number P03525

Hong Kong, 9 July, 2004

−112 −

ACCOUNTANTS’ REPORT OF RAPID

APPENDIX IIIC

The following is the text of a report, prepared for the purpose of inclusion in this circular, received from the reporting accountants, W.H. Tang & Partners CPA Limited.

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==> picture [65 x 45] intentionally omitted <==

The Directors

B & B Natural Products Limited Aptus Holdings Limited

Dear Sirs,

Rapid Progress Profits Limited (“Rapid”) was incorporated in the British Virgin Islands on 2 March, 2004 with limited liability under the International Business Companies Act (Cap. 291) of the British Virgin Islands. Rapid is a non-wholly owned subsidiary of B & B Natural Products (BVI) Limited (“B & B Natural”), a non-wholly owned subsidiary of B & B Natural Products Limited. Rapid is an investment holding company, which in turn directly holds 25% of the entire issued share capital of Hsing Long.

Rapid has not carried out any business activities since its date of incorporation, apart from issue of 8 shares at par of US$1 each for cash in the share capital of Rapid. Incorporation expenses amounting to approximately HK$5,500 were borne by the ultimate shareholder of Rapid. No audited financial statements have been prepared for Rapid up to the date of this report.

Yours faithfully,

W.H. Tang & Partners CPA Limited Certified Public Accountants

Tang Wai Hung

Practising Certificate Number P03525

Hong Kong, 9 July, 2004

−113 −

FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX IV

1. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS

The following unaudited pro forma statement of adjusted consolidated net tangible assets of the Enlarged Group based on the unaudited consolidated balance sheet of the Group as at 31 March, 2004, the audited balance sheet of Hsing Long as at 31 March, 2004 and adjusted to reflect, among other things, the effect of the completion of the Agreement.

	Immediately
	before
	Completion
	(Unaudited)	Adjustments	Pro forma
	HK$’000	HK$’000	HK$’000
	(Note 1)	(Note 2)	(Note 3)
Net tangible assets 6,827		15,742	22,569

Notes:
(1)	The unaudited pro forma adjusted consolidated net tangible asset value of the Group		immediately before
	Completion is calculated as follows:
			HK$’000
	Unaudited consolidated net assets of the Group as at 31 March, 2004		6,827
	Less: Intangible assets		–
	Unaudited pro forma adjusted consolidated net tangible asset	value
	of the Group immediately before Completion		6,827

(2)	Following the Completion, adjustments will be included as follows:
	Issue of New Shares as the consideration of the Acquisition		4,000
	Share of goodwill from the Acquisition		(3,758)
	Issue of Subscription Shares		15,500
			15,742

(3)	Unaudited pro forma adjusted consolidated net tangible asset
	value per Share immediately before Completion based on
	618,260,000 Shares in issue before Completion		HK$0.011

	Unaudited pro forma adjusted consolidated net tangible asset
	value per Share immediately following Completion based on
	1,546,831,428 Shares in issue following Completion		HK$0.015

−114 −

FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX IV

2. UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP

The following is a summary of the pro forma statement of unaudited adjusted consolidated assets and liabilities of the Enlarged Group based on the unaudited consolidated net assets of the Group as at 31 March, 2004 as extracted from its interim report for the six months ended 31 March, 2004, the audited net assets of Hsing Long as at 31 March, 2004 as set out in Appendix II to this circular, adjusted to reflect the effect of the Agreement.

Unaudited consolidated balance sheet of the Group as at 31 March, 2004 HK$’000 10,516 –	Audited balance sheet of Hsing Long as at 31 March, 2004 HK$’000 – –	Adjustment HK$’000 Notes – –	Total HK$’000 10,516 – 10,516 25,776 (13,621) 22,671 – (102) 22,569 22,569 – 22,569
10,516 9,864 (13,553) 6,827 – –	– 412 (68) 344 – –	– 15,500 (1) – 15,500 – (102) (2)	10,516
			25,776 (13,621 22,671 – (102
6,827	344	15,398
6,827 –	344 –	15,398 –	22,569 –
6,827	344	15,398

Notes:

The adjustment represents the issuing of Subscription Shares.
The adjustment represents the interest attributable to minority shareholders of the Group following the Acquisition.

−115 −

FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX IV

3. WORKING CAPITAL

Taking into account the financial resources available to the Enlarged Group including internally generated funds mainly derived from the provision of product commercialization services to international and domestic pharmaceutical and healthcare companies in the PRC by Aptus Group and the trading of edible oil by Hsing Long, the proceeds of the Subscription and the present available banking facilities of the Enlarged Group, the Directors are of the opinion that the Enlarged Group has sufficient working capital to satisfy its present requirements for the year ending on 30 June, 2005.

Ernst & Young, the auditors of the Company, have confirmed that the statement was made by the Directors after due and careful enquiry.

4. INDEBTEDNESS OF THE ENLARGED GROUP

As the close of business on 31 May, 2004, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Enlarged Group had total outstanding borrowings of approximately HK$10,016,000, comprising a term loan of RM$2,476,500 (equivalent to approximately HK$5,000,000), a convertible note of HK$5,000,000 (the “Convertible Note”) and finance lease obligation of approximately HK$16,000.

The Convertible Note bears interest at a rate of 3% per annum and is payable on 30 September, 2004. The Convertible Note is convertible into fully paid ordinary shares of the Company of HK$0.01 each at a conversion price of HK$0.35 per share, subject to adjustment, at any time before 30 September, 2004.

As at 31 May, 2004, to secure the banking facilities of Hsing Long, B & B Natural Products Limited has provided corporate guarantees for the amount of US$9,000,000 to the banks.

As at 31 May, 2004, the Enlarged Group had no material contingent liabilities.

Save as aforesaid or otherwise disclosed herein, and apart from intra-group liabilities, none of the companies in the Enlarged Group had at the close of business on 31 May, 2004 any outstanding mortgages, charges, debentures, or loan capital issued and outstanding or agreed to be issued, bank loans, overdrafts, or other similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptance credits, finance lease or hire purchase commitments, guarantees or other material contingent liabilities.

Foreign currency amounts have, for the purpose of this indebtedness statement, been translated into Hong Kong dollars at the applicable rates of exchange prevailing at the close of business on 31 May, 2004.

−116 −

FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX IV

5. MANAGEMENT DISCUSSION AND ANALYSIS OF RESULTS OF HSING LONG

Business Review

Hsing Long has been engaged in the business of the trading of edible oil and its by-products by sourcing crude palm oil from Indonesian plantation and selling it to refineries and processors in South East Asia, Indian sub-continent, Europe and the PRC. The Company has since inception in 1999, gradually built up its business connections and reputations required for operating in the trading business of edible oil. The turnover of Hsing Long increased from approximately S$6,745,763 for the year ended 31 December, 2002 to S$9,131,232 for the year ended 31 December, 2003 (equivalent to approximately HK$30.8 million to HK$41.6 million for the year ended 2002 and 2003 respectively), representing a growth in turnover of approximately 35.4%. The turnover of Hsing Long has decreased from S$8,652,490 to S$6,745,763 (approximately HK$39.5 million to HK$30.8 million) for the period from 2001 to 2002 respectively. The drop in turnover for the financial period from 2001 to 2002 was due to the increase in price of edible oils and therefore the holding back in purchases from buyers. As a result, the profit margins and the profit of Hsing Long were squeezed. The decreasing trend was due to various contributing factors including (i) increase in prices for edible oils; (ii) the adverse economic effect as a result of the terrorist attacks in the United States of America on 11 September, 2001; and (iii) the adverse effect of Severe Acute Respiratory Syndrome and the general downturn in worldwide economies.

Moving forward, Hsing Long is in a position to further expand its markets and client base while the PRC remains the growth market. The first few years of establishing a sound reputation within the oil trading industry is believed to have been attained. Hsing Long is considering moving into other edible oils to have a broader product base, to expand business relationship with existing clients while also exploring new market segments.

6. FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

In view of the economic and social problems in 2003, the Group proposed to adopt a more prudent strategy by diversifying its businesses to limit the Group’s exposure to business and economic risks. Going forward, the Group envisages to focusing mostly on the following areas:

Trading of edible oils;
Product Commercialization Services; and
Trading of healthcare related products.

−117 −

FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX IV

Trading of edible oils

Moving forward, Hsing Long is in a position to further expand its markets and client base while PRC remains the growth market. The first few years of establishing a sound reputation within the oil trading industry is believed to have been attained. Hsing Long is considering moving into other edible oils to have a broader product base, to expand business relationship with existing clients while also exploring new market segment.

Product Commercialization Services

The Group will continue to operate as a Contract Sales Organization (“CSO”), providing product commercialization services to its existing clienteles. In view of the proposed acquisition of Hsing Long, the commercialization services may not be the key income contributor to the Group, as most of the incomes are fee base income and they are seasonal.

Trading of healthcare related products

In the past, the Group adopted aggressive trading strategies. Nonetheless, the result was not satisfactory. As a result, the Group is proposing to adopt a more conservative approach. Meanwhile, Aptus is also reviewing it’s internal control policies, operational procedures. Should the Group’s internal policies and procedures be properly tighten up, the Group will slowly revamp its trading business in a more prudent manner.

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GENERAL INFORMATION

APPENDIX V

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Takeovers Code for the purpose of giving information with regard to the Aptus Group. The information in this circular relating to the Aptus Group has been supplied by Aptus.

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

the information contained in this circular (other than those relating to B & B and the Vendor and their intentions regarding the Aptus Group) is accurate and complete in all material respects and not misleading;
there are no other matters the omission of which would make any statement (other than those relating to B & B and the Vendor and their intentions regarding the Aptus Group) in this circular misleading; and
all opinions expressed in this circular (other than those relating to B & B and the Vendor and their intentions regarding the Aptus Group) have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

The information in this circular relating to B & B and the Vendor and B & B and the Vendor’s intention regarding the Aptus Group has been supplied by B & B and the Vendor.

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

the information contained in this circular (other than those relating to Aptus) is accurate and complete in all material respects and not misleading;
there are no other matters the omission of which would make any statement (other than those relating to Aptus) in this circular misleading; and
all opinions expressed in this circular (other than those relating to Aptus) have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

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APPENDIX V

2. SHARE CAPITAL OF THE COMPANY

The authorised and issued share capital of the Company as at the Latest Practicable Date and immediately after the allotment and issue of the Consideration Shares were and will be as follows:

Authorised:

Number of shares 20,000,000,000 Aptus Shares at the Latest Practicable Date	Amount HK$ 200,000,000

Issued and to be issued, fully paid or credited as fully paid: 618,260,000 Aptus Shares in issue at the Latest Practicable Date 190,476,190 Acquisition Consideration Shares to be issued 738,095,238 Subscription Shares to be issued	6,182,600 1,904,762 7,380,952
1,546,831,428 Aptus Shares issued immediately after Completion	15,468,314

3. DISCLOSURE OF INTERESTS

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

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of the Part XV of the SFO) (a) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (b) which were required, pursuant to section 352 of the SFO, to be entered in the register referred

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APPENDIX V

to therein; or (c) which were required to be notified to the Company and the Stock Exchange pursuant to Rules 5.40 to 5.58 of the GEM Listing Rules relating to securities transactions by Directors, were as follows:

(i) Ordinary Shares

	Number	of	Approximate	Approximate
	Aptus Shares held and		percentage to	percentage to
	nature of interests		existing issued	the enlarged
		Nature	share capital	issued share
	Number of	of	of the	capital of the
Name of Director	Aptus Shares	interests	Company	Company
			(%)	(%)
Chen Vee Li, Felix	104,650,000 (L)	Trust	16.93	6.77
	(Note 1)
Ma Wai Hung, Vincent	12,000,000 (L)	Interests of	1.94	0.78
	(Note 2)	controlled
		corporation
	132,650,000 (L)	Trust	21.45	8.58
	(Note 3)
Chen Si Te, Frank	104,650,000 (L)	Other	16.93	6.77
	(Note 1)
Wong Kwok Yiu, Chris	4,800,000 (L)	Beneficial	0.78	0.31
		interests

Notes:

These Aptus Shares are beneficially owned by Byron Bay Holdings Limited, which is owned by the Chen Family 2002 Trust, a discretionary trust the discretionary objects of which include the family members of Mr Chen Vee Li, Felix. Mr Chen Se Ti, Frank is the father of Mr Chen Vee Li, Felix.
These Aptus Shares are beneficially owned by Jingle Holdings Limited which is wholly and beneficially owned by Mr Ma Wai Hung, Vincent.
These Aptus Shares are beneficially owned by E-Source Limited, which is wholly owned by the Ma Family 2002 Trust, a discretionary trust the discretionary objects of which include the family members of Mr Ma Wai Hung, Vincent.
“L” denotes long positions in the Shares.

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APPENDIX V

(ii) Rights to acquire Aptus Shares or debentures

As at the Latest Practicable Date, the Directors had the following personal interests in options to subscribe for Aptus Shares:

	No. of options
	outstanding at
	the Latest				Exercise
	Practicable		Exercise	Period	Price of
Name of Director	Date	Begins		Ends	options
					(HK$)
Chen Vee Li, Felix	18,000,000	14 May,	2003	13 May, 2006	0.5
Ma Wai Hung,
Vincent	18,000,000	14 May,	2003	13 May, 2006	0.5
Chen Si Te, Frank	250,000	14 May,	2003	13 May, 2006	0.1
	400,000	11 July,	2002	10 July, 2012	0.612
Wong Kok Sun	1,250,000	14 May,	2003	13 May, 2006	0.1
Lee Chan Wah	500,000	14 May,	2003	13 May, 2006	0.1
Ma Ching Nam	400,000	11 July,	2002	10 July, 2012	0.612
Yau Yat Yin	400,000	11 July,	2002	10 July, 2012	0.612
Wong Kwok Yiu,
Chris	400,000	11 July,	2002	10 July, 2012	0.612

Save as disclosed herein, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (a) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (b) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) which were required to be notified to the Company and the Stock Exchange pursuant to Rules 5.40 to 5.58 of the GEM Listing Rules relating to securities transactions by Directors.

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APPENDIX V

(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO and substantial Shareholders

So far as is known to the Directors, as at the Latest Practicable Date, the following persons (not being Directors or chief executive of the Company) had, or were deemed to have, interests or short positions in the Aptus Shares or underlying Aptus Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or who were directly or indirectly interested in 10% or more of the nominal value of any class of the share capital carrying to vote in all circumstances at general meetings of any member of the Aptus Group:

		Approximate	Approximate
		percentage to	percentage to the
Name of	Number of	existing issued	enlarged issued
substantial	Aptus Shares	share capital of	share capital of
Shareholder	interested	the Company	the Company
		(%)	(%)
Dong Ming Jie Jacqueline	122,650,000 (L)	19.84	7.93
	(Note 1)
Byron Bay Holdings	104,650,000 (L)	16.93	6.77
Limited	(Note 2)
E-Source Limited	132,650,000 (L)	21.46	8.58
Chow Alex	39,000,000 (L)	6.30	2.52
	(Note 3)
Chung Yi Wen	39,900,000 (L)	6.45	2.58
Interoverseas Consultancy	137,937,714	22.31	8.92
Limited	(Note 4)
Cheung Kwai Lan	928,571,428 (L)	150.19	60.02
	(Note 5)
Chan Tung Mei	928,571,428 (L)	150.19	60.02
	(Note 5)
Best Frontier Investments	928,571,428 (L)	150.19	60.02
Limited	(Note 5)
B & B Natural Products	928,571,428 (L)	150.19	60.02
Limited	(Note 5)
China Success Enterprises	928,571,428 (L)	150.19	60.02
Limited	(Note 5)
The Vendor	928,571,428 (L)	150.19	60.02
	(Note 5)

Notes:

The 122,650,000 Aptus Shares interested include the 104,650,000 Aptus Shares beneficially owned by Byron Bay Holdings Limited and the 18,000,000 Aptus share options held by Mr Chen Vee Li, Felix. Mdm Dong Ming Jie, Jacqueline is the wife of Mr Chen Vee Li, Felix.
The 105,300,000 Aptus Shares interested include the 104,650,000 Aptus Shares beneficially owned by Byron Bay Holdings Limited and the 650,000 share options held by Mr Chen Si Te, Frank.
The 39,000,000 Aptus Shares interested include the 30,000,000 Aptus Shares beneficially owned by Mr Chow Alex and 9,000,000 share options held by him.

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APPENDIX V

These are the maximum number of Aptus Shares that can be allotted and issued pursuant to a convertible note in the amount of HK$5,000,000 issued by and an option granted by Aptus as disclosed in the announcement of Aptus dated 5 September, 2003.
5 Upon Completion, the Vendor will hold 928,571,428 Aptus Shares. B & B holds a 100% equity interest in China Success Enterprises Limited which holds a 100% equity interest in the Vendor. B & B is held as to 54.45% by Best Frontier Investments Limited which in turn is owned as to 99.89% and 0.11% by Madam Cheung Kwai Lan and Mr. Chan Tung Mei respectively. Accordingly, Madam Cheung Kwai Lan, Mr. Chan Tung Mei, Best Frontier Investments Limited, B & B and China Success Enterprises Limited are deemed to be interested in the Aptus Shares.
“L” denotes long positions in the Shares.

As at the Latest Practicable Date, the following persons (not being a member of the Aptus Group, a Director or chief executive of Aptus) were, directly or indirectly, interested in 10% or more of the issued share capital carrying rights to vote in all circumstances at the general meetings of the following members of the Enlarged Group:

Name of entity		Percentage of
which will become		interests in
subsidiary of Aptus		subsidiary
upon Completion	Name of shareholder	(approximate)
Target	The Vendor	75%
	Mr. Wong Kim Ket	12.5%
	Pentagon Agents Ltd. (Note 1)	12.5%
B & B Natural Products	Target	100%
(BVI) Limited
Rapid Progress	B & B Natural Products (BVI)	75%
Profits Limited	Limited
	Mr. Wong Kim Ket	12.5%
	Pentagon Agents Ltd. (Note 1)	12.5%
Hsing Long	B & B Natural Products (BVI)	75%
	Limited
	Rapid Progress Profits Limited	25%
	(Note 2)

Notes:

Pentagon Agents Ltd. is owned as to 50% by Ms. Hyasinta Atmaja and 50% by Mr. Lim King Hui.
Rapid Progress Profits Limited is owned as to 75% by B & B Natural Products (BVI) Limited, as to 12.5% by Mr. Wong Kim Ket and as to 12.5% by Pentagon Agents Ltd.

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any other person (other than the Directors or chief executive of Aptus) who had, or was deemed to have, interests or short positions in the Aptus Shares or underlying Aptus Shares which would fall to be disclosed to Aptus and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or who was directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Enlarged Group.

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APPENDIX V

4. MARKET PRICES

The table below shows the closing prices of Aptus Shares as recorded on the Stock Exchange on (i) the last day on which dealings took place in each of the six months immediately preceding the date of the Announcement and in each month before the Latest Practicable Date; (ii) 19 March, 2004, being the day on which trading in the Shares was suspended pending the publication of the Announcement; and (iii) the Latest Practicable Date.

Date	Share price
	HK$
31 October, 2003	0.336
28 November, 2003	0.350
31 December, 2003	0.250
30 January, 2004	0.240
27 February, 2004	0.218
19 March, 2004	0.120
31 March, 2004	suspended
30 April, 2004	suspended
31 May, 2004	suspended
Latest Practicable Date	suspended

The highest and lowest closing prices of the Aptus Shares as quoted on the Stock Exchange during the period between 23 October, 2003, being the date falling six months prior to the publication of the Announcement, and ending on the Latest Practicable Date were HK$0.41 on 23 October, 2003 and HK$0.120 on 19 March, 2004 respectively.

5. MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business) have been entered into by the Company or any of its subsidiaries after the date two years preceding the date of the Announcement and are or may be material:

agreement dated 11 October, 2002 entered into between Splendich Investment Company Ltd. as purchaser and Zou Zangxue as vendor in relation to the sale and purchase of the entire issued share capital of Lucky Mountain Group Limited and a shareholder’s loan of approximately RMB2,012,843 as at 31 August, 2002 for an aggregate consideration of HK$7,800,000;
agreement dated 28 July, 2003 entered into between Aptus Medical Group Limited as purchaser and Westport International Group Co., Ltd. as vendor in relation to the acquisition of 501 shares of US$1.00 each in Toowong Laboratories, representing 50.1% of the issued share capital of Toowong Laboratories for a consideration of up to US$1,500,000 (equivalent to approximately HK$11,700,000), which will be satisfied as follows: (i) as to US$25,000 in cash upon completion; (ii) as to US$325,000 by the issue of the convertible note to Westport; and (iii) up to US$1,150,000 by the allotment and issue of the consideration shares, credited as fully paid, at the issue price of HK$0.45 per share to Westport;

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GENERAL INFORMATION

APPENDIX V

agreement dated 5 September, 2003 entered into between Aptus and Interoverseas Consultancy Limited in relation to, among others, the HK$5,000,000 convertible note issued by Aptus to Interoverseas Consultancy Limited;
the Sale and Purchase Agreement;
the Subscription Agreement; and
a deed of variation dated 21 June, 2004 entered into between the Company, the Vendor and the Warrantors regarding the extension of the long-stop date for the satisfaction/fulfilment of the conditions precedent to the Sale and Purchase Agreement and the Subscription Agreement to 30 August, 2004.

6. SPONSOR’S INTERESTS

As at the Latest Practicable Date, neither Kingston Corporate Finance Limited (the “Sponsor”) nor its directors, employees or associates had any interest in the securities of the Company or any member of the Aptus Group, or any right to subscribe for or to nominate persons to subscribe for the securities of Aptus or any member of the Aptus Group.

7. COMPETING INTEREST

As at the Latest Practicable Date, none of the Directors, the management Shareholders (as defined in the GEM Listing Rules) nor their respective associates had any business or interest that competes or may compete with the business of the Aptus Group or any other conflicts of interest with the Aptus Group.

8. LITIGATION

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

9. SERVICE CONTRACTS

Each of the executive Directors has entered into a service contract with the Company for an initial term of three years commencing from 1 April, 2002, which will continue thereafter until terminated by either party giving not less than three months’ notice in writing to the other party.

Save as disclosed herein, as at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Aptus Group excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation).

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APPENDIX V

10. EXPERTS

(a) The following are the qualifications of the experts who have given opinion or advice which are contained in this circular:

Name

Qualification

Tai Fook Capital

a licensed corporation under the transitional arrangement to carry on type 6 (advising on corporate finance) regulated activities for the purposes of the SFO

W. H. Tang & Partners CPA Limited Certified Public Accountants

Ernst & Young Certified Public Accountants

(b) Each of Tai Fook Capital, W. H. Tang & Partners CPA Limited and Ernst & Young has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter, which has been prepared for inclusion in this circular and references to its name in the form and context in which it appears.

As at the Latest Practicable Date, Tai Fook Capital, W. H. Tang & Partners CPA Limited and Ernst & Young did not have any shareholding in any member of the Aptus Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Aptus Group.

11. MATERIAL CHANGES

Save for the following, the Directors are not aware of any material changes or material adverse changes in the financial or trading position or prospects of the Aptus Group since 30 September, 2003, the date to which the latest audited consolidated financial statements of the Aptus Group was made up:

2004 Interim Report

The Company announced on 14 May, 2004 the interim results of the Aptus Group for the six months ended 31 March, 2004 (the “2004 Interim Report”), details of which are set out in paragraph 3 headed “Financial information for the six months ended 31 March, 2004 and 31 March, 2003” herein. As reported in the 2004 Interim Report, the Aptus Group’s unaudited consolidated turnover and loss attributable to Shareholders were HK$477,000 and HK$3.9 million for the six months ended 31 March, 2004.

As reported in the 2004 Interim Report, pursuant to a loan agreement dated 30 December, 2003 and a supplementary agreement entered into between the Company and an independent third party, the Company has been granted a term loan of RM$2,476,500 (equivalent to approximately HK$5,000,000). The term loan is unsecured and bears interest at 6% per annum.

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GENERAL INFORMATION

APPENDIX V

The Acquisition

The Sale and Purchase Agreement dated 23 March, 2004 entered into between Aptus, the Vendor, Mr. Ma Wai Hung, Vincent and Mr. Wong Kok Sun in relation to, inter alias, the propose acquisition of a 75% equity interest in the Target, details of which are set out in the Company’s announcements dated 7 April, 2004 and 23 April, 2004 and the letter from the Board of this circular.

12. GENERAL

(a) The registered office of the Company is at Century Yard, Cricket Square, Hutchins Drive, P.O. Box 2681GT, George Town, Grand Cayman, British West Indies.
(b) The head office and principal place of business of the Company in Hong Kong is at 30th Floor, Sunshine Plaza, 353 Lockhart Road, Hong Kong.
(c) The Company’s branch share registrar and transfer office in Hong Kong is Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.
(d) The company secretary and qualified accountant of the Company is Mr. Lee Chan Wah, FCCA, AHKSA .
(e) The compliance officer of the Company is Mr. Chen Vee Li, Felix.
(f) The registered office of B & B is at Century Yard, Cricket Square, Hutchins Drive, P.O. Box 2681GT, George Town, Grand Cayman, Cayman Islands, British West Indies.
(g) The directors of the Vendor are Madam Cheung Kwai Lan and Mr. Chan Ting, and the directors of B & B are Madam Cheung Kwai Lan, Mr. Chan Tung Mei, Mr. Chan Ting, Mr. Shaw Kyle Arnold Junior, Mr. Peter Chin Wan Fung and Mr. Du Ying Ming. The controlling shareholder of B & B is Best Frontier Investments Limited, a company owned as to 99.89% and 0.11% by Madam Cheung Kwai Lan and Mr. Chan Tung Mei respectively.
(h) The Company’s audit committee (the “Audit Committee”) was established on 2 April, 2002 with written terms of reference based on the guidelines set out in “a guide for the formation of an audit committee” of the Hong Kong Society of Accountants. The primary duties of the Audit Committee are to review the Company’s annual reports and accounts, half-yearly reports and quarterly reports and to provide advice and comments thereto to the Board. The Audit Committee is also responsible for reviewing and supervising the financial reporting process and internal control procedures of the Aptus Group. The Audit Committee comprises two independent non-executive Directors, namely Mr. Ma Ching Nam and Dr. Yau Yat Yin and an executive Director, namely, Mr. Lee Chan Wah. Set out below are their background and directorships (present and past) of other companies listed on GEM, the main board of the Stock Exchange or other stock exchanges.

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APPENDIX V

MA Ching Nam , aged 50, is an independent non-executive director and joined Aptus Group in December 2001. Mr. Ma has been a practicing solicitor in Hong Kong and the United Kingdom for over 20 years and is also qualified to practice law in Singapore and Australia. He is currently a partner of King & Company, Solicitors and Notaries. Mr. Ma is a director of Tai Sang Bank Limited and a number of private property investment companies. Mr. Ma is a committee member for the Disciplinary Panel of Hong Kong Society of Accountants since 1999. He previously served as a member of some of the committees of the Law Reform Committee (1997-1998) and the Consumer Council (1997-2000).

Dr. YAU Yat Yin , aged 44, is an independent non-executive Director and joined Aptus Group in December 2001. She is a medical practitioner in Hong Kong and holds the qualifications of MBBS (Queensland), FRACR (Australia), FRCR (Hong Kong) and FHKAM (Radiology). Dr. Yau is currently the director of Medical Imaging and Nuclear Medicine of the Hong Kong Adventist Hospital, and in charge of PET-CT scan at the Cancer Centre of the Hong Kong Adventist Hospital. She is also the director of the PET-CT Scan Centre of the Baptist Hospital in Hong Kong. Dr. Yau is also an Honorary Clinical Assistant Professor at the University of Hong Kong.

LEE Chan Wah , aged 35, is an executive Director. He graduated from the Baptist University of Hong Kong with a bachelor degree in Finance. Mr. Lee is also a fellow member of the Association of Chartered and Certified Accountants and an associate member of the Hong Kong Society of Accountants. Prior to joining Aptus Group in July 2001, Mr. Lee had several years of experience in the fields of accounting and auditing. He is responsible for Aptus Group’s financial and treasury functions.

(i) The address of Tai Fook Capital Limited is at 25/F. New World Tower, 16-18 Queen’s Road Central, Hong Kong.
(j) The address of the Vendor is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

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APPENDIX V

13. ADDITIONAL DISCLOSURE OF INTERESTS AND DEALINGS IN SHARES

(1) As at the Latest Practicable Date, save as entering into the Sale and Purchase Agreement and the Subscription Agreement, the Vendor and its concert parties did not have any interest in Aptus Shares, and had no dealings in Aptus Shares by the Vendor and its concert parties during the period (the “Relevant Period”) beginning six months prior to 23 April, 2004 (being the date of the Announcement) and ending on the Latest Practicable Date.
(2) None of the Directors had dealt for value in the Aptus Shares during the Relevant Period and save for the disclosure as set out in the section 3(a) of this Appendix, none of the Directors had any shareholding interest in the Company as at the Latest Practicable Date.
(3) As at the Latest Practicable Date, none of the Directors had any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in the Vendor and its concert parties.
(4) There were no dealings in the shares of the Vendor and its concert parties by Aptus and the Directors during the Relevant Period and Aptus and the Directors had no shareholding interest in the Vendor and its concert parties as at the Latest Practicable Date.
(5) As at the Latest Practicable Date, none of (i) the subsidiaries of Aptus; (ii) the pension fund of Aptus or of any of its subsidiaries; nor (iii) any adviser to Aptus (as specified in class (2) of the definition of “associate” under the Takeovers Code), had any interest in the Aptus Shares.
(6) As at the Latest Practicable Date, no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with Aptus or with any person who is an associate of Aptus by virtue of classes (1), (2), (3) and (4) of the definition of “associate” in the Takeovers Code or the Vendor or with any person acting in concert with any of them, which may be an inducement to deal or refrain from dealing during the Relevant Period.
(7) As at the Latest Practicable Date, no Aptus Shares were managed on a discretionary basis by any fund managers connected with Aptus, nor did any such fund managers deal in any Aptus Shares during the Relevant Period.
(8) Save for the Subscription Agreement and the Sale and Purchase Agreement, as at the Latest Practicable Date, the directors of the Vendor and B & B had no interest in the Aptus Shares.
(9) Save for the Subscription Agreement and the Sale and Purchase Agreement, as at the Latest Practicable Date, none of the Vendor nor parties acting in concert with it had any interest in the Aptus Shares.
(10) Save for the Subscription Agreement and the Sale and Purchase Agreement, there were no dealings in the Aptus Shares by the Vendor and parties acting in concert with it during the Relevant Period.

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APPENDIX V

(11) Save for the Subscription Agreement and the Sale and Purchase Agreement, there were no dealings in the Aptus Shares by the directors of the Vendor and B & B during the Relevant Period.
(12) As at the Latest Practicable Date, there was no agreement, arrangement or understanding (including any compensation arrangement) exists between (i) the Vendor or any person acting in concert with it; and (ii) any director or recent Directors or Shareholders or recent Shareholders having any connection with or dependence upon the Subscription and the Acquisition.
(13) As at the Latest Practicable Date, there was no agreement, arrangement or understanding between any of the Directors and any other person which is conditional or dependent on Completion or otherwise connected with the Transactions.
(14) No benefit (other than statutory compensation) will be given to any Director as compensation for loss of office in any member of the Aptus Group or otherwise in connection with the Transactions and/or the Whitewash Waiver.
(15) As at the Latest Practicable Date, no person had irrevocably committed themselves to vote for or against the resolutions to be proposed at the EGM to approve the Transactions.
(16) Save as disclosed in this circular, there was no contract or arrangement entered into by any member of the Aptus Group subsisting at the Latest Practicable Date in which any Director was materially interested and which was significant to the business of the Aptus Group.
(17) Save as disclosed in this circular, none of the Directors had as at the Latest Practicable Date any direct or indirect interest in any assets which have been since 30 September, 2003, being the date to which the latest published audited consolidated financial statements of the Company were made up, acquired, disposed of by or leased to, any member of the Aptus Group, or are proposed to be acquired, disposed of by or leased to, any member of the Aptus Group.
(18) As at the Latest Practicable Date, there was no agreement, arrangement or understanding between the Vendor and any other persons for the transfer of the beneficial interests in the Consideration Shares to be acquired by the Vendor and its concert parties under the Subscription Agreement and the Sale and Purchase Agreement.
(19) The Vendor has indicated that it has no intention to transfer the Shares to a third party following Completion. No Directors holding any Shares will be permitted to vote on the Transactions and the Whitewash Waiver at the EGM.

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GENERAL INFORMATION

APPENDIX V

14. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the office of Michael Li & Co. at 14th Floor, Printing House, No. 6 Duddell Street, Central, Hong Kong from the date of this circular up to and including 26 July, 2004 and at the EGM:

(a) the memorandum and articles of association of the Company;
(b) the prospectus of the Company dated 30 April, 2002;
(c) the material contracts referred to in the paragraph headed “Material Contracts” in this appendix;
(d) the annual report of the Company for the last two financial years;
(e) the accountants’ report of Hsing Long, Target, B & B Natural Products (BVI) Limited and Rapid Progress Profits Limited prepared by W.H. Tang & Partners CPA Limited, the texts of which are set out in Appendices II, IIIA, IIIB and IIIC respectively to this circular;
(f) the written consents of Tai Fook, W. H. Tang & Partners CPA Limited and Ernst & Young referred to in the paragraph headed “Experts” in this appendix;
(g) the circular of B & B dated 9 July, 2004 in relation to the Transactions and the Whitewash Waiver;
(h) the letter of advice from Tai Fook Capital in relation to the Transactions and the Whitewash Waiver; and
(i) the service contracts as set out in the paragraph headed “Service contracts” in this appendix.

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NOTICE OF THE EGM

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APTUS HOLDINGS LIMITED ( )

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8212)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of Aptus Holdings Limited (the “ Company ”) will be held at 10:30 a.m. on 26 July, 2004 at 20/F., Alexandra House, 16-20 Chater Road, Central, Hong Kong for the purpose of considering and, if thought fit, passing, with or without modifications, the following resolutions which will be proposed as ordinary resolutions:

ORDINARY RESOLUTIONS

1. “ THAT

(a) the Subscription Agreement (as defined in the circular (the “ Circular ”) of the Company dated 9 July, 2004 despatched to the shareholders of the Company), a copy of each of the Subscription Agreement and the Circular is produced to the meeting marked “A” and “B” respectively and signed by the chairman of the meeting for the purpose of identification, and the transactions contemplated under or incidental to the Subscription Agreement be and are hereby approved and the directors of the Company be and are hereby authorised to take all steps necessary or expedient in their opinion to implement and/or give effect to the terms of the Subscription Agreement; and
(b) the directors of the Company be and are authorised to allot and issue the Subscription Shares (as defined in the Circular) to the Vendor (as defined in the Circular), pursuant to the terms of the Subscription Agreement free and clear of any pre-emption right of the shareholders of the Company.”
“ THAT
(a) the Sale and Purchase Agreement (as defined in the Circular), a copy of which is produced to the meeting marked “C” and signed by the chairman of the meeting for the purpose of identification, and the transactions contemplated under or incidental to the Sale and Purchase Agreement be and are hereby approved and the directors of the Company be and are hereby authorised to take all steps necessary or expedient in their opinion to implement and/or give effect to the terms of the Sale and Purchase Agreement; and

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NOTICE OF EGM

(b) the directors of the Company be and are authorised to allot and issue the Acquisition Consideration Shares (as defined in the Circular) to the Vendor, pursuant to the terms of the Sale and Purchase Agreement free and clear of any pre-emption right of the shareholders of the Company.”
“ THAT subject to the passing of the resolutions numbered 1 and 2 set out in the above, the Whitewash Waiver (as defined in the Circular) be and is hereby approved and that the directors of the Company be and are hereby authorised to do all things and acts and sign all documents which they consider desirable or expedient to implement and/or give effect to any matters relating to or in connection with the Whitewash Waiver.”

By Order of the Board Chen Vee Li Felix Chairman

Hong Kong, 9 July, 2004

Registered office:

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

Head office and principal place

of business in Hong Kong:

30th Floor Sunshine Plaza 353 Lockhart Road Hong Kong

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NOTICE OF EGM

Notes:

A form of proxy for use at the meeting is enclosed.
Any member entitled to attend and vote at a meeting of the Company shall be entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at a general meeting of the Company or at a class meeting. A proxy need not be a member. A proxy shall be entitled to exercise the same powers on behalf of a member who is an individual and for whom he acts as proxy as such member could exercise. In addition, a proxy shall be entitled to exercise the same powers on behalf of a member which is a corporation and for which he acts as proxy as such member could exercise if it were an individual member.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under seal or under the hand of an attorney duly authorised.
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 of that power or authority shall be deposited at Tengis Limited, Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, 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 the instrument proposes to vote and in default the instrument of proxy shall not be treated as valid. Delivery of an instrument appointing a proxy shall not preclude a member from attending and voting in person at the meeting or the poll concerned.
In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy or by representative, shall be accepted to the exclusion of the votes of the other joint holders; and for this purpose seniority shall be determined by the order in which the names stand in the register. Several executors or administrators of a deceased member in whose name any share stands shall for such purpose be deemed joint holders thereof.
The voting on resolutions numbered 1, 2 and 3 will be conducted by way of a poll.
On a poll, every person who is so present shall have one vote for every share held by him or in respect of which he is a proxy or representative.

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AI assistant

Sinopharm Tech Holdings Limited — Proxy Solicitation & Information Statement 2004

51300_rns_2004-07-12_a727ae79-3434-4c9e-b672-ba6785b85820.pdf

IMPORTANT

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

APTUS HOLDINGS LIMITED ( )

MAJOR AND CONNECTED TRANSACTIONS

INTRODUCTION

LETTER FROM THE BOARD

SUMMARY OF THE TRANSACTIONS

Before Completion

Upon Completion

THE SALE AND PURCHASE AGREEMENT

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Information on Aptus

Information on the Vendor, Target and Hsing Long

THE SUBSCRIPTION AGREEMENT

LETTER FROM THE BOARD

LETTER FROM THE BOARD

DIRECTORS AND MANAGEMENT OF APTUS

CHANGES TO THE SHAREHOLDING IN APTUS AS A RESULT OF THE TRANSACTIONS

EDIBLE OILS

REASONS FOR THE ACQUISITION AND USE OF PROCEEDS

LETTER FROM THE BOARD

GENERAL OFFER IMPLICATION ON B & B

RELEVANT REQUIREMENTS OF THE GEM LISTING RULES

GENERAL

APPLICATION FOR LISTING

EXTRAORDINARY GENERAL MEETING

RECOMMENDATION

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

Dear Sir or Madam,

Yours faithfully,

MAJOR AND CONNECTED TRANSACTION AND WHITEWASH WAIVER APPLICATION

LETTER FROM TAI FOOK CAPITAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

I. Background information on the Aptus Group

1. Background

2. Financial information

LETTER FROM TAI FOOK CAPITAL

2.2 Financial performance for the year ended 30 September, 2003

LETTER FROM TAI FOOK CAPITAL

3. Future business plan

II. The Subscription

1. Background

2. Reasons for the Subscription

LETTER FROM TAI FOOK CAPITAL

3. Subscription Price

3.3 Summary of the term of Subscription Price

4. Conclusion on the Subscription

III. The Acquisition

2. Financial information of Hsing Long

LETTER FROM TAI FOOK CAPITAL

4. Terms of the Agreement

4.1 Basis of the Purchase Price

4.2 Funding of the Acquisition

4.3 Issue Price

5. Conclusion on Acquisition

IV. Financial effect of the Transactions

1. Net tangible asset value

2. Losses

3. Gearing position

5. Summary

V. The Whitewash Waiver

VI. Recommendation

LETTER FROM TAI FOOK CAPITAL

1. SHARE CAPITAL

2. FINANCIAL INFORMATION

(B) Auditors’ report and financial statements

Aptus Holdings Limited

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

BASIS OF OPINION

1. Scope limitation −acquisition of a subsidiary

2. Scope limitation −Purchases and corresponding payments, accounts payable, inventories and provision made

Sinopharm Tech Holdings Limited Proxy Solicitation & Information Statement 2004